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

DECISION

CASANOVA, J.:

This is a Petition for Review¹ filed on June 30, 2015 by petitioner

Deutsche

Knowledge

Services

Pte.

Ltd.

against respondent Commissioner of Internal Revenue to seek the refund or issuance of a Tax Credit Certificate (TCC) in the amount of P23,816,670.55, allegedly representing its excess and unutilized input Value Added Tax (VAT) on purchases of goods and services attributable to zero-rated sales for the second quarter of calendar year (CY) 2013. Petitioner is the Philippine branch of a multinational company organized and existing under and by virtue of the laws of Singapore, with registered office address at One Raffles Quay, #17-10 South Tower, Singapore 048583.² It was registered with the Bureau o~

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Internal Revenue (BIR) on June 16, 2005 as a VAT-registered taxpayer with Taxpayer Identification No. (TIN) 238-763-115-000. 3 Petitioner is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines by the Securities and Exchange Commission (SEC) on April 25, 2005, pursuant to the Omnibus Investment Code of 1987, as amended by Republic Act (RA) No. 8756 and its implementing rules and regulations, 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 maintenance;

data processing and communication and business development.4 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at 5th Floor, BIR Building, Diliman, Quezon City. On February 27, 2015, petitioner filed with the BIR-Large Taxpayers Regular Audit Division 3, an application for tax credit/refund of its excess and unutilized input VAT for the second quarter of CY 2013 in the amount of P23,816,670.55.5 There being no action taken by respondent on petitioner's administrative claim for refund or issuance of TCC, petitioner filed the present Petition for Review before the Court on June 30, 2015. On July 16, 2015, respondent filed his Answer6 interposing the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSESe:

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

4.

Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau.

5.

The amount of P23,816,670.55 allegedly representing excess and unutilized input VAT on alleged purchases of goods and services allegedly attributable to zero-rated sales for the 2nd quarter of CY 2013 was not properly documented.

6.

In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit. 7.

Petitioner must show that it has complied with the provisions of Section 229 of the NIRC of 1997 on the prescriptive period for claiming tax refund/credit. 8.

There is no record of petitioner ever submitting complete documents to substantiate its administrative claim for refund. Such is a requirement, otherwise, the administrative body will have sufficient reason to deny the claim. As held by the Honorable Supreme Court in the case of

Atlas

Consolidated

Mining and Development

Corporation vs. Commissioner of Internal Revenue, G.R 145526, 16 March 2007:

'Petitioner's contention that non- compliance with Revenue Regulations 3-88 could not have adversely affected its case in the CTA indicates a failure on its part to appreciate the nature of the proceedings in that court. First, a judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim. Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claims. In this case, it was necessary for petitioner to show the CTA not only that it was entitled under substantive law to the grant of its claims but also that it - DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR satisfied all the documentary and evidentiary requirements for an administrative claim for refund or tax credit. Second, cases filed in the CTA are litigated de novo. Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim.

(emphasis and underscoring supplied) The implementing rule for these complete documents required by law is RMO No. 53-98. Annex B-1 of said RMO lists all the required documents as follows:

VALUE-ADDED TAX

(For audit involving Claim for Refund I TCC) A.) Requirements from Taxpayer I. Requirements mention (sic) in Annex B II. Additional General Requirements 1) 3 copies

of 'Application

for

VAT

Credit/Refund'

2)

Summary

List

of

Local

Purchases

specifying the following:

XXX

XXX

XXX

3) Photocopies of VAT purchase invoices for purchase of goods and official receipts for purchase of services. (The invoices/official receipts must be arranged according to the summary list) 4) Summary of importations made during the period with the following details~

XXX

XXX

XXX

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

5) Photocopies of invoices, import entry documents, official receipts or confirmation receipts evidencing payment of VAT.

(Segregate documents paid by cash from those paid by tax debit memo) 6} VAT returns filed for the quarter showing that the amount applied for refund/TCC has been reflected as a deduction from the total available input tax, as well as VAT Return for the succeeding quarter 7) Certification of taxpayer showing the amount of Zero-rated Sales, Taxable Sales and

Exempt Sales

8) A statement showing the amount and description of the sale of goods and services, name of persons or entities (except in case of exports) to whom the goods or services were sold and date of the transaction, where the applicant's zero-rated transactions are regulated by certain government agency. 9) Articles of Incorporation - for first time filers

10) Sales Contract/Agreement

11) BOI Certificate of Registration

12) BIR Certificate of Registration

13) Certification from BOI, DOF, BOC, EPZA, etc., that subject taxpayer has not filed similar claim for refund covering the same period. 14) Sworn statement that ending inventory as of the close of the period covered by the Claim has been used directly or indirectly in the products subsequently exported as supported by export documents, if the applicant is 100°/o exporter.,_

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

15) Documents of liquidation evidencing the actual utilization of the raw materials in the manufacture of goods at least 70°/o of which has been actually exported, if the applicant is an indirect exporter.

16) Copy of the ITR and Certified Financial

Statement, if applicable.

17) Beginning and ending inventory of raw materials, work-in-process, finished goods, supplies and materials.

Additional Specific Requirements

1) For Zero-Rated Sales of Services (contractors, mining, etc)

a. Authenticated copy/ies of the contract/s showing the person/s for whom the services were rendered, amount of consideration, description of the services and documents evidencing actual payments.

b. Photocopies of official receipts and billings together with a summary of the date of billing, name of principal, official receipt number, date of receipt, amount in foreign currency and the corresponding value thereof, date of remittance, name of bank, bank credit memo number and amount remitted in pesos.

c.

Bank credit memoranda and certificate from the BSP with information similar to 1-c (export sales) As stated above, the first documentary requirement is that provided in Annex B of the same RMO. Annex B provides for more requirements as follows:

VALUE-ADDED TAX

A) Requirements from Taxpayers 1) Proof of claimed tax credits 2) Proof of Tax Compliance Certificates applied~

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

3) Xerox copy of used Tax Credit Certificate (TCC) with annotation of issued TDM at the back, if applicable 4) Proof of payment of deficiency tax, if any a) current year I period b) previous year I period 5) Certification of the appropriate government agency as to taxpayer's entitlement to tax incentives, if applicable 6) Xerox copies of the Official Receipts evidencing

VAT

payment on imported purchases, if applicable 7) Proof of exemption under special law, if applicable 8)

Certification

of the appropriate regulatory agency as to the exempt or zero-rated sales of the taxpayer under its regulatory supervision, if applicable

9) Certificate

of

Registration

issued by the appropriate regulatory agency, together with the conditions attached to such registration, if applicable

10) Proof of 'Approval for Effective Zero-Rating of

Sales', if applicable 11) Sample invoice I s for 'Export/Exempt Sales', if applicable 12) Proof that the acceptable foreign currency exchange proceeds on export/ sales foreign currency denominated sales had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), if applicable.

Far from complying with the checklist of requirements, petitioner merely stated that it submitted complete documents in support of its administrative claim for refund. This is not a claim for erroneously or illegally collected taxes where petitioner has the discretion of choosing the evidence it deems fit to prove its case. This is a claim for excess but legally collected, unutilized input taxes. It does not have to prove its case because the law already acknowledges it is entitled to refund. Thus, it merely has to substantiate the export sales and the excess/unutilized amount of input taxes attributable to the said export sales. Hence, petitioner's failure to complys--

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR with the duly mandated legal requirements in such claims for refund/tax credit warranted the denial by inaction of the administrative claim.

The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of the government for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people (Mactan Cebu International Airport Authority vs.

Marcos, 261 SCRA 667, 690).

Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that claims for refund are required to be done within certain time frames. In the instant petition, the failure of petitioner to comply with such periods is fatal to its cause.

Moreover, petitioner's failure to submit documents supporting its claim for refund makes its administrative claim for refund pro-forma. This pro-forma administrative claim should not be taken as proper compliance with the requirements of the law that an administrative claim for refund should have been filed prior to the institution of a judicial claim for refund. Thus, without a validly and duly filed administrative claim for refund, the Honorable Court is without jurisdiction to entertain the Petition for Review. Petitioner's failure to comply with a condition precedent prior to the institution of its petition for review makes it dismissible for absence of jurisdiction on the part of the Honorable Court.

The claimant has the burden of proof to establish the factual basis of his claim for tax credit or refund. After all tax refunds, like tax exemptions, are construed strictly against the taxpayer (Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332, both cited in Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5392 promulgated October 30, 1998).

Partaking of the nature of exemptions, claims for refund are strictly construed against the claimant and_

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR cannot be allowed unless granted in the most explicit and categorical language (Sps. Aguilar vs. Commissioner of Internal Revenue, et al., CA G.R.SP No. 16432, March 30, 1999). Being in the nature of tax exemptions, these claims are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the claimant and liberally in favor of the taxing authority (Commissioner of Internal Revenue vs. Procter and Gamble Philippines Manufacturing Corporation, 204 SCRA 377).

Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211)." The Pre-Trial Conference was resee on October 29, 2015. Respondent's Pre-Trial BriefS was filed on August 11, 2015; while petitioner's Pre-Trial Brief9 was filed on September 24, 2015. The parties filed their Joint Stipulation of Facts and Issues10 on December 17, 2015, which was approved by the Court in its Pre-Trial Order11 dated January 21, 2016. Petitioner presented as its witnesses, Ms. Rachel Concepcion12 and Independent Certified Public Accountant (ICPA) Katherine 0. Constantino.13 On April 28, 2016, petitioner filed its Formal Offer of Evidence14, offering Exhibits "P-1" to "P-753", inclusive of submarkings, as its documentary evidence.

Respondent

filed his

Comment

(Re:

Petitioner's Formal Offer of Evidence)15, on May 2, 2016.~

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

In the Resolution 16 dated June 1, 2016, the Court admitted petitioner's Exhibits except for Exhibits "P-7.8", "P-8", "P-8.1", "P-8.2", "P-12" "P-13" "P-14" "P-16" "P-17'' "P-18" "P-19" "P-20" "P-21"

I

I

I

I

I

I

I

I

I

"P-22", "P-23" to "P-78", "P-80" to "P-95", "P-98" to "P-109", "P-112" to "P-208", "P-210", "P-79", "P-96" to "P-97", "P-110" to "P-111", "P- 209", "P-254" to "P-694", "P-211" to "P-217", "P-218" to "P-253", "P- 753", "P-8.³", "P-8.⁴", "P-8.⁵", "P-8.⁶", "P-8.⁷", "P-8.⁸", "P-8.⁹", "P- 8.¹⁰", "P-8.¹¹", "P-8.¹²", "P-8.¹³", "P-8.¹⁴", "P-8.¹⁵", "P-8.¹⁶", "P- 8.¹⁷", "P-8.¹⁸", "P-8.¹⁹", "P-8.²⁰", "P-8.²¹", "P-8.²²", "P-8.²³", "P- 8.²⁴", "P-8.²⁵", "P-8.²⁶", "P-8.²⁷", "P-8.²⁸", "P-8.²⁹", "P-8.³⁰", "P- 8.³¹", "P-8.³²", "P-8.³³", "P-8.³⁴" and "P-8.³⁵". Considering the manifestation of respondent's counsel that there is no report of investigation submitted by the Revenue Officer and upon motion, the parties were granted a period of thirty (30) days within which to file their respective memoranda.17 On July 26, 2016, respondent filed his Memorandum18, while petitioner filed its Omnibus Motion (1) For leave of Court to submit evidence; (2) To admit evidence; and (3) To defer submission of Petitioner's Memorandum19 on July 29, 2016 sans respondent's, comment thereto.20 In the Resolution21 dated August 16, 2016, the Court granted petitioner's motion to defer submission of its memorandum. In the Resolution22 dated October 20, 2016 the Court granted petitioner's Motion for leave to submit evidence; and partially granted petitioner's Motion to admit evidence. On December 29, 2016, petitioner filed its Memorandum23 through registered mail and the same was received by the Court on January 11, 2017. In a Resolution24 dated January 17, 2017, the case was submitted for decision.

The parties stipulated the following issues 25 : .fL.

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Whether or not petitioner is entitled to the claim for refund of or issuance of TCC for its alleged excess or unutilized input VAT in the amount of P23,816,670.55 for the 2nd quarter of CY 2013.

The main issue may be broken down into the following sub- issues:

A. Whether or not petitioner incurred input VAT on its alleged purchases of goods and services attributable to zero-rated sales for the 2nd quarter of CY 2013. B. Whether or not petitioner had zero-rated sales during the 2nd quarter of CY 2013, the consideration for which were allegedly paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.

C. Whether or not the input VAT allegedly incurred by petitioner for the 2nd quarter of CY 2013 is duly supported by VAT invoices and official receipts. D. Whether or not the input VAT allegedly incurred by petitioner for the 2nd quarter of CY 2013 amounting to P23,816,670.55 was applied against any output VAT or carried over to succeeding taxable periods. E. Whether or not petitioner's administrative and judicial claims for refund of or issuance of TCC for its alleged excess and unutilized input VAT on purchases of goods and services attributable to its zero-rated sales were filed within the period prescribed under the Tax Code. The provisions of the NIRC of 1997, as amended, relevant to the case at hand are Sections 110(8) and 112(A) and (C), which, respectively, read:

"SEC. 110. Tax Credits. -:.

X X X

X X X

X X X

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

"(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: Providect howeve~; 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."26 "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: Providect 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 8angko Sentral ng Pilipinas (8SP): Providect 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: Providect finally, That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and nonzero- rated sales."

X X X

X X X

X X X

"(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~

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR 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 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."

Pursuant to the above provisions, in order 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 complied with:

1.

that the taxpayer is VAT-registered; 2.

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

3.

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

4.

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: The taxpayer is a VAT-registered entity It is undisputed that petitioner is registered with the BIRon June 16, 2005 as a VAT taxpayer with TIN 238-763-115-000 and with BIR Certificate of Registration No. OCN 9RC0000270209. 27

Second Requisite: Timeliness

of administrative and judicial claims-e-.

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Applying Section 112(A) of the NIRC of 1997, as amended, the two (2)-year prescriptive period in filing administrative claim is reckoned from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the second quarter of CY 2013, which closed on June 30, 2013. Counting two years from the said date, petitioner had until June 30, 2015, within which to file its administrative claim for refund. Thus, petitioner's administrative claim filed on February 27, 201528 was timely filed. As to the timeliness of petitioner's judicial claim, Section 112(C) of the NIRC of 1997, as amended, provides that the Commissioner of Internal Revenue (CIR) has 120 days from the date of submission of the complete documents in support of the application for refund or tax credit certificate within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the Court of Tax Appeals within thirty (30) days from receipt of the decision of the CIR. However, if, after the 120-day period, the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the Court of Tax Appeals within thirty (30) days. However, starting June 21, 2014 when Revenue Memorandum Circular (RMC) No. 54-2014 took effect, the 120-day period shall be reckoned from the date the administrative claim was filed and the taxpayer-claimant is required to submit complete supporting documents and attest to the completeness of the same at the time of filing the claim.

At this point, it is relevant to refer to the pronouncement of the Supreme Court in the case of Pilipinas Total Gas, Inc. vs Commissioner of Internal Revenue29• In the said case, the Supreme Court went to discuss that RMC No. 54-2014 dated June 11, 2014 mandates that the application for VAT refund or tax credit must be accompanied by complete supporting documents, and a statement under oath attesting to the completeness of the submitted documents, which are the only documents the taxpayer will present to support the claim; that upon submission of the administrative claim and its supporting documentsr.e_

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR the claim shall be processed and no other documents shall be accepted or required from the taxpayer in the course of its evaluation and a decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer, to wit: "It bears mentioning at this point that the foregoing summation of the rules should only be made applicable to those claims for tax credit or refund filed prior to June 11, 2014, such as the claim at bench. As it now stands, RMC 54-2014 dated June 11, 2014 mandates that: The application for VAT refund/tax credit must be accompanied by complete supporting documents as enumerated in Annex "A" hereof. In addition, the taxpayer shall attach a statement under oath attesting to the completeness of the submitted documents (Annex B). The affidavit shall further state that the said documents are the only documents which the taxpayer will present to support the claim. If the taxpayer is a juridical person, there should be a sworn statement that the officer signing the affidavit (i.e., at the very least, the Chief Financial Officer) has been authorized by the Board of Directors of the company.

Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer. The application for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayer I claimant.

Thus, under the current rule, the reckoning of the 120-day period has been withdrawn from the taxpayer by .e.---

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

RMC 54-2014, since it requires him at the time he files his claim to complete his supporting documents and attest that he will no longer submit any other document to prove his claim. Further, the taxpayer is barred from submitting additional documents after he has filed his administrative claim."

Since petitioner's administrative claim was filed after June 11, 2014, the rules under RMC No. 54-2014 shall apply. Thus, the 120-day period shall be reckoned from the date the administrative claim was filed.

Applying the foregoing, upon the filing of its administrative claim on February 27, 2015, respondent had 120 days or until June 27, 2015 to decide on the petitioner's claim. Since respondent failed to act on the said claim, petitioner had until July 27, 2015, the last day of the thirty (30)-day period, within which to file its judicial claim. Clearly, petitioner, timely filed its judicial claim via a Petition for Review on June 30, 2015.

Third Requisite: Existence of

zero-rated or effectively zero- rated sales Petitioner asserts that its sales of services to its various nonresident foreign clients, 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. -

X X X

X X X

X X X

"(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:~

X X X

X X X

X X X

CfA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

"(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.30, the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended, the following requisites must be met:

1. the services must be other than processing, manufacturing or repacking of goods;

2. 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 requisite. Petitioner is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines by the SEC on April 25, 2005, pursuant to the Omnibus Investment Code of 1987, as amended by Republic Act (RA) No. 8756, and its implementing rules and regulations, 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 maintenance; data processing and communication and business development.31 Such services are not in the same category as "processing, manufacturing or repacking of goods" 'I!L

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

In compliance with the third requisite, petitioner presented the following documents showing that its clients/affiliates are non-resident foreign corporations doing business outside the Philippines:

1. SEC Certifications of Non-Registration of Company32;

2. IntraGroup Service Agreements33;

3. Company Registration Documents (Certificate of Registration/ Certificate of Incorporation/ Association )34;

4. AMinet Company Profile Fact Sheets35; and

5. Deutsche Bank Comprehensive List of Shareholdings 201336• However, each of the aforesaid documents, standing alone, is inadequate proof that petitioner's client is, indeed, a non-resident foreign corporation doing business outside the Philippines. The

Certificates

of

Registration/Foreign

Incorporation/

Association, as well as the List of Shareholdings, only prove that the named entities therein were incorporated/organized/domiciled abroad. They, however, do not establish that such entities are not doing business in the Philippines.

Also, while the SEC Certificates of Non-Registration show that the named entities therein are not registered corporations/partnerships in the Philippines, the same do not, however, prove that such entities are non-resident foreign corporations doing business outside the Philippines. Likewise, the Service Agreements only show the names and addresses of petitioner's clients to whom it renders services but the same do not establish that such clients are non-resident foreign corporations doing business outside the Philippines. In the case of Site/ Philippines Corporation (formerly Clientlogic Phils./ Inc.) vs. Commissioner of Internal Revenue,37 the Supreme Court already 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, mav. '""

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR have established that Sitel rendered services to foreign corporations and received payment therfor through inward remittances, 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. Hence, 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

of

Foreign

Incorporation/ Association/Registration and that there is no other indication that the recipient of the services is doing business in the Philippines.

This Court, however, cannot give credence to the purported foreign business registration print-outs retrieved from the AMinet database which is a database set up by Deutsche Bank Global (the Head Office located in Germany). The said documents are not sufficient to establish the fact that the service recipients are non- resident foreign corporations doing business outside the Philippines, as they may be considered 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.

In this case, the following table shows whether petitioner complied with the third requisite as it presented admitted evidence of the said SEC Certificate of Non-Registration and Certificates of Registration/ Foreign Incorporation/ Association for each of the recipients of the services rendered by petitioner:

Certificate of

Name of Client/ Affiliate

SEC Certificate of

Registration/

Non-Registration

Incorporation I

Association

Bankers International Corporation

P-5

None

DB Consorzio S. Cons. A.R.L.

P-5.1

None

DB Energy Trading LLC

P-5.2

None

DB Investment Partners Inc.

P-5.3

None

DB Services New Jersey, Inc P-5.4

None

Deutsche Asia Pacific Holdings Pte. Ltd. P-5.5

P-7

Deutsche Asset Management (Korea) Company Limited

P-5.6

None

Deutsche Bank (Malaysia) Berhad

P-5.7 P-7.1

Deutsche Bank (Suisse) SA

P-5.8

None

Deutsche Bank Aktiengensellschaft

None

P-7.7 I P-7.9

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Deutsche Bank Aktiengesellschaft, Asia Pacific Head

Office

Deutsche Bank Aktiengesellschaft, Filiale Amsterdam Deutsche Bank Aktiengesellschaft, Filiale Bangkok Deutsche Bank Aktiengesellschaft, Filiale Dubai (DIFC) Deutsche Bank Aktiengesellschaft, Filiale Ho Chi-Minh City Deutsche Bank Aktiengesellschaft, Filiale Hongkong Deutsche Bank Aktiengesellschaft, Filiale Karachi Deutsche Bank Aktiengesellschaft, Filiale Labuan Deutsche Bank Aktiengesellschaft, Filiale London Deutsche Bank Aktiengesellschaft, Filiale New York Deutsche Bank Aktiengesellschaft, Filiale Paris Deutsche Bank Aktiengesellschaft, Filiale Prag Deutsche Bank Aktiengesellschaft, Filiale Riad Deutsche Bank Aktiengesellschaft, Filiale Seoul Deutsche Bank Aktiengesellschaft, Filiale Singapur Deutsche Bank Aktiengesellschaft, Filiale Tokyo Deutsche Bank Aktiengesellschaft, Filiale Wien Deutsche Bank Aktiengesellschaft, Filiale Zurich Deutsche Bank Aktiengesellschaft, Inlandsbank

Deutsche Bank AS

Deutsche Bank Luxembourg S.A.

Deutsche Bank National Trust Company

Deutsche Bank Netherland N.V.

Deutsche Bank PBC Spolka Akcyjna

Deutsche Bank Polska Spolka Akcyjna

Deutsche Bank Privat-UND Geschaftskunden

Aktiengesellschaft

Deutsche Bank Securities Inc

Deutsche Bank Societa per Azioni

Deutsche Bank Trust Company Americas

Deutsche Bank, Sociedad Anonima Espanola

Deutsche Group Services Pty Limited

Deutsche Investment Management Americas, Inc. Deutsche Securities Inc.

Deutsche Securities Korea Co.

Deutsche Trust Company Limited Japan

Deutsche Trustees Malaysia Berhad

DWS Holding & Service GmbH

DWS Investment S.A.

000 Deutsche Bank

PT. Deutsche Securities Indonesia

RREEF Management GmbH

RREEF Management LLC

P-5.10 P-7.2 P-5.11

None

P-5.12

None

P-5.13

None

P-5.14

None

P-5.15 P-7.3 P-5.16

None

P-5.17

None

P-5.18 P-7.11 P-5.19 P-7.4 P-5.20

None

P-5.21

None

P-5.22

None

P-5.23 P-7.5 P-5.24 P-7.6 P-5.25

None

P-5.26

None

P-5.27

None

P-5.28

None

P-5.9

None

P-5.29

None

P-5.30

None

P-5.31

None

P-5.32

None

P-5.33

None

P-5.34

None

P-5.35

·None

P-5.³⁶

None

P-5.³⁷

None

P-5.38

None

P-5.39

None

P-5.40

None

P-5.41 P-7.10 P-5.42

None

P-5.43

None

P-5.44

None

P-5.45

None

P-5.46

None

P-5.47

None

P-5.48

None

P-5.49

None

P-5.50

None

Correspondingly, only the sales of services by petitioner to entities which have the said two (2) required documents will be treated as subject to the 0°/o VAT rate, pursuant to Section 108(8)(2) of the NIRC of 1997, as amended . .,.

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Corollary to the second requisite, Sections 113(A)(2), (8)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), 8(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. -

A VAT-registered

person shall issue:

XXX

XXX

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

XXX

XXX

XXX

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

XXX

XXX

XXX

"(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx" (underlining supp/ied),eL-

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

SEC. 4.113-1.

Invoicing Requirements.- (A) A VAT-registered person shall issue: -

XXX

XXX

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 obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That:

XXX

XXX

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; (underlining supplied) Pursuant to the foregoing prov1s1ons, 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 . .P-

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

To prove that it 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 second quarter of CY 2013, petitioner submitted in evidence its VAT zero-rated official receipts (ORs) with attached invoices38 issued to its alleged non-resident foreign clients and Certificate of Inward Remittance39 issued by Deutsche Bank AG Manila.

Upon scrutiny of the documents submitted, the Court finds that out of the P1,105,734,437.7940 zero-rated sales declared per VAT Return for the second quarter of CY 2013, only the amount of €9,725,820.10 with peso equivalent of P522,720,069.53, as detailed below, qualifies for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended:

O.R.

Customer's Name

Exhibit

O.R. Date No.

Deutsche Bank Aktiengesellschaft,

Filiale London

P-28

8-Apr-13

Deutsche Bank Aktiengesellschaft,

Filiale New York

P-32

10-Apr-13

Deutsche Bank Aktiengesellschaft,

Filiale London

P-33

10-Apr-13

Deutsche Securities Inc.

P-38

10-Apr-13

Deutsche Bank Aktiengesellschaft,

Filiale London

P-49

16-Apr-13

Deutsche Bank Aktiengesellschaft,

Filiale Sinqapur

P-50

16-Aor-13

Deutsche Bank (Malaysia) Berhad

P-51

16-Aor-13

Deutsche Bank (Malaysia) Berhad

P-54

17-Aor-13

Deutsche Bank Aktiengesellschaft,

Filiale Hongkong

P-61

18-Apr-13

Deutsche Bank Aktiengesellschaft,

Asia Pacific Head Office

P-62

18-Aor-13

Deutsche Bank Aktiengesellschaft,

Filiale Sinqaour

P-64

19-Apr-13

Deutsche Bank Aktiengesellschaft,

Filiale London

P-65

19-Aor-13

Deutsche Securities Inc.

P-67

19-Aor-13

Deutsche Bank Aktiengesellschaft,

Asia Pacific Head Office

P-68

19-Apr-13

Deutsche Bank Aktiengesellschaft,

Asia Pacific Head Office

P-77

23-Apr-13

Deutsche Asia Pacific Holdings Pte

Ltd

P-78

23-Aor-13

Deutsche Bank Aktiengesellschaft,

Filiale Seoul

P-80

23-Apr-13

38 Exhibits "P-23" to "P-78" and "P-80" to "P-95". 39 Exhibits "P-21".

40 Exhibit "P-3".

O.R.

Amount

Amount

Number

(in Euro)

(in Peso)

3149 979 193.36 52 546 825.37 3153 43 122.42 2 321 653.31 3154 494 390.96 26 617 346.81 3159 140 139.92 7 544 945.51 3171 1 095,610.50 59 152 624.44 3172 235 086.13 12,692 431.81 3173 845.12 45 628.50 3176 18.724.73 1 016 742.35 3183 108,135.00 5 818 146.39 3184 220 953.04 11,888 261.26 3186 734,597.25 39 447,431.61 3187 2 422 044.20 130,019 216.95 3189 40 260.24 2 161 950.73 3190 31 677.30 1 701,052.01 3199 1 633,881.00 87 688,873.76 3200 2.811.39 150 884.69 3202 28 739.60 1 542,427.60

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Deutsche Bank Aktiengesellschaft,

Filiale New York

P-83

24-Apr-13

Deutsche Bank Aktiengesellschaft,

Filiale London

P-87

25-Apr-13

Total

Fourth and Fifth Requisites:

Petitioner had input taxes attributable to its zero-rated sales 3205 483 452.03 25 898 211.00 3209 1 012 155.91 54 465 415.43 9,725 820.10 522,720,069.53 Having resolved that petitioner had valid VAT zero-rated sales for the second quarter of CY 2013 in the amount of P522,720,069.53, we proceed to determine the amount of input VAT attributable thereto. In its Quarterly VAT Return for the second quarter CY 2013, petitioner declared input VAT of P24,020,395.21 on its current purchases of goods and services, of which the amount of P23,816,670.55 is the subject of the present claim, as shown below:

Amount

Input tax on Purchase of Capital Goods not exceeding

P1M (Line 188)

p 130,605.62 Input tax on Domestic Purchases of Goods other than

Capital Goods (Line JBF)

208,138.23 Input tax on Domestic Purchase of Services (Line 18J) 23 277,651.34 Input tax on Services rendered by Non-residents (Line

18L)

404,000.02

Total Input Taxes on Current Purchases

p 24,020,395.21

Divide by Total Declared Sales

1/115 192J44.62

Multiply by Declared Zero-rated Sales

1,105 734A37.79 Input VAT claimed for refund/TCC p 23,816,670.55 In support of its input VAT on current purchases of goods and services amounting to P24,020,395.21, petitioner presented various official receipts and invoices41 issued by its suppliers and BIR Forms No. 1600 with payment confirmations42, which were all examined by the Court-commissioned Independent Certified Public Accountant (ICPA), Ms. Katherine 0. Constantino of Constantino Guadalquiver & Co. In her Report, the ICPA noted the following exceptions: 4~

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

OTHER FINDINGS

PURCHASE OF GOODS

1.

Purchase of goods supported by VAT REG. TIN Invoices without VAT breakdown 2.

Purchase of goods supported by VAT REG. TIN I TIN NO. V Invoices with date not within the quarter of claim 3.

Purchase of goods supported by VAT REG. TIN Invoices with date not within the quarter of claim, with incomplete Petitioner's address and without VAT breakdown 4.

Purchase of goods supported by a Certified True Copy VAT REG. TIN Invoice with date not within the quarter of claim and with incomplete Petitioner's address 5.

Purchase of goods supported by VAT REG. TIN Invoice with date not within the quarter of claim and without VAT breakdown shown in the support

Subtotal

PURCHASE OF SERVICES

1.

Purchase of services supported by VAT REG. TIN. I TIN NO. V ORs with date not within the quarter of claim 2.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim 3.

Purchase of services supported by VAT REG. TIN. ORs with altered date without countersiqn 4.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and with wrong Petitioner's address 5.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and without VAT shown in the support 6.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and with VAT claimed that is more than the VAT shown in the support but equal to our independent computation 7.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and with VAT shown in the support but not placed in the "12% VAT' line 8.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and such date was altered but countersigned and the claimed input VAT are more than the VAT shown in the supporting documents and our independent computation 9.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and such date was altered but countersigned and the claimed input VAT are less than the VAT shown in the supporting documents and our independent computation 10.

Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter, with incomplete Petitioner's name and with VAT claimed that is more than the VAT shown in the support but equal to our independent computation 11.

Purchase of services supported by VAT REG. TIN. ORs with incorrect Petitioner's TIN, without Petitioner's address and the claimed input VAT are less than the VAT shown in the supporting documents and our independent computation 12.

Purchase of services supported by VAT REG. TIN. ORs without BIR permit number and printing date indicated in the support and incorrect Petitioner's TIN

Reference

Amount

Annex9-i p 659.92 Annex9-j 14,780.67 Annex9-k 6,037.50 Annex9-l 3,460.71 Annex9-m 1,462.31 p 26,401.11 Annex9-n p 88,515.17 Annex9-o 36,071.52 Annex9-p 9,360.00 Annex9-q 39,267.70 Annex9-r 214.29 Annex9-s 1,574.86 Annex9-t 1,814.04 Annex9-u 36,846.67

Annex9-v

33,907.41 Annex9-w 12,895.92 Annex9-x 158,361.40 Annex9-y 214.08 - 13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Purchase of services supported by VAT REG. TIN. I TIN NO. V OR with incomplete Petitioner's address and the claimed input VAT are more than the VAT shown in the supporting documents and our independent computation Purchase of services supported by VAT REG. TIN. ORs with claimed input VAT that is greater than the VAT shown in the supporting documents but less than our independent computation Purchase of services supported by Certified True Copy VAT REG. TIN. ORs without BIR permit number and printing date indicated in the support Purchase of services supported by photocopy VAT REG. TIN. OR with VAT claimed that is more than the VAT shown in the support but equal to our independent computation Purchase of services supported by VAT REG. TIN. I TIN No. ORs with note that states "Not to be used for claim of

In_Qut Tax"

Purchase of services supported by VAT REG. TIN. OR with incomplete Petitioner's name, with incorrect Petitioner's TIN., with date not within the quarter of claim, and with VAT claimed that is more than the VAT shown in the support but equal to our independent computation Purchase of services supported by documents other than

VATORs

Purchase of services supported by VAT REG. TIN. ORs where the claimed input VAT is different from schedule- VAT shown in the official receipts is lower than the VAT in the schedule and the computed amount. This pertains to excess claim of input tax.

Purchase of services supported by VAT REG. TIN. ORs where the claimed input VAT shown in the official receipt is different from schedule- the VAT shown in the receipts and the independent computation is lower than the schedule. This pertains to excess claim of input tax. Purchase of services supported by VAT REG. TIN. ORs where the claimed input VAT shown in the official receipt is different from schedule- the VAT shown in the receipts and the independent computation is lower than the schedule (independent computation differs from official receipt and schedule amount). This pertains to excess claim of input tax.

Subtotal

PURCHASE OF CAPITAL GOODS NOT EXCEEDING ONE

{1) MILLION

1.

Purchase of capital goods not exceeding one (1) million supported by VAT REG. TIN Invoices with date not within the quarter of claim.

Subtotal

Purchases of services without supporting documents

Grand Total

Annex9-z 24,340.71 Annex9-aa 34,896.33 Annex9-ab 804.12 Annex9-ac 420.00 Annex9-ad 527,848.28 Annex9-ae 9,360.00 Annex9-aF 331,602.81 Annex9-c 28,385.72 Annex9-d 1,390.76 Annex9-e 1,645.74 I' 1,379,737.53 Annex9-ag p 910.72

I'

910.72

I'

250,312.38 p 1,657 361.74 The above-noted exceptions found by the ICPA in the amount of P1,657,361.74 should be disallowed for not being 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.a...-

CTA CASE NO, 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

Further verification of the ICPA report, together with the supporting documents, reveals that the additional input VAT of P10,174,946.65, shall, likewise, be disallowed for the reasons stated below:

Exhibit No.

Supplier |

OR No.

| Amount

52-2013.

1. Purchases of goods supported by VAT invoices w/ATPs dated between Jan. 1, 2011 to Jan, 17, 2013 not stamped "valid until October 31, 2013 only" in violation of RMC No.

P-254

P-340

1618 OFFICE SOLUTIONS INC.

AVLS ALL VISUAL & LIGHTS

3903 P 541.07 035393 41,078.57

MERCURY DRUG CORPORATION

283-93672 1,020.19 MERCURY DRUG CORPORATION 283-93673 485.20 P-391 MERCURY DRUG CORPORATION 283-94066 590.45 P-392 MERCURY DRUG CORPORATION 283-94067 332.28

QUARTZ BUSINESS PRODUCTS CORP

493693

QUARTZ BUSINESS PRODUCTS CORP

THE FLOWER FARM CORPORATION

THE FLOWER FARM CORPORATION

| THE FLOWER FARM CORPORATION

P-612

P-613

127783 127782 64885 68,307.59 267.86 439.29 1020054538 34,821.43

P-627 DISTINCTIVE BLINDS & OFFICE

P-628 GB DISTRIBUTORS, INC.

GB DISTRIBUTORS, INC.

|__| Subtotal

52-2013.

2. Purchases of services supported by VAT ORs w/ATPs dated between Jan. 1, 2011 to Jan, 17, 2013 not stamped "valid until October 31, 2013 only" in violation of RMC No.

P-311 ACCENTURE, INC.

P-312 ACCENTURE, INC.

12684 1020054537 5,357.14 P 176,792.48 461,940.00 656,059.01 P-313 ACCENTURE, INC. 104,745.00 P-315 ADVENTURE INTERNATIONAL TOURS 200-00019813 17,072.40 P-320 ARISTEDES TAN 3118 16,236.71 | ASIAPEOPLEWORKS! INC. 501 1,075.24 ASIAPEOPLEWORKS! INC. 569 3,343.90

P-325

P-326

P-327

P-328

ASIAPEOPLEWORKS! INC.

ASIAPEOPLEWORKS! INC.

ASIAPEOPLEWORKS! INC.

ASIAPEOPLEWORKS! INC.

566 568 590 1,455.13 1,455.98 3,415.18 ASIAPEOPLEWORKS! INC.

ATLANTICA FIRE SAFETY SYSTEMS

BANIQUED & BANIQUED

ASIAPEOPLEWORKS! INC. 3,053.86 ASIAPEOPLEWORKS! INC. 2,696.78 P-331 ASIAPEOPLEWORKS! INC. 0635 3,015.58 P-332 ASIAPEOPLEWORKS! INC. 0682 1,658.88 | P-333 ASIAPEOPLEWORKS! INC. 0680 1,678.72

P-350 BAYANTEL AC 337550363

7,800.00 BANIQUED & BANIQUED 7,800.00 943625 P-346 BAYANTEL A/C 337550509 956682 182.04 P-347 BAYANTEL A/C 342578098 943140 19,200.00 P-348 BAYANTEL A/C 342578098 | 956681 9,600.00 P-349 Bayantel A/C 345079866 942869 182.04 942870 182.04 hen

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

P-351 BUSINESSWORKS, INC.

P-352 BUSINESSWORKS, INC.

P-353

P-354

P-355

P-356

P-400

P-404

P-405

i

P-426 PREMIUM SECURITY & INVESTIGATI

P-427 PREMIUM SECURITY & INVESTIGATI

BUSINESSWORKS, INC.

HEADSTRONG PHILIPPINES INC.

HEADSTRONG PHILIPPINES INC.

HEADSTRONG PHILIPPINES INC.

3596 17,688.00

3597 8,250.00

3599 5,940.00

2135 83,383.90

2146 419,385.80 231,288.00 NET PACIFIC, INC.

NEXT STEP TRAINING AND

NEXT STEP TRAINING AND

NEXT STEP TRAINING AND

OVE ARUP AND PARTNERS

OVE ARUP AND PARTNERS

OVE ARUP AND PARTNERS

PAUL CALVIN DELI

PAUL CALVIN DELI

PREMIUM SECURITY & INVESTIGATI

PREMIUM SECURITY & INVESTIGATI

PREMIUM SECURITY & INVESTIGATI

PREMIUM SECURITY & INVESTIGATI

PREMIUM SECURITY & INVESTIGATI

PREMIUM SECURITY & INVESTIGATI

INNOVE AC 830635288

GLOBE TELECOM A/C 45413292

CHITTICK FIRE & SECURITY

CHITTICK FIRE & SECURITY

CHITTICK FIRE & SECURITY

CHITTICK FIRE & SECURITY

CIBI INFORMATION, INC.

P-357 HEWLETT-PACKARD PHILIPPINES 7,466.34 P-358 HEWLETT-PACKARD PHILIPPINES 130168 6,799.76 P-359 HOSPITALITY INTERNATIONAL, INC 8154 3,602.48 P-360 HOSPITALITY INTERNATIONAL, INC 8155 17,714.29 | P-361 HOSPITALITY INTERNATIONAL, INC 8156 17,142.86 HOSPITALITY INTERNATIONAL, INC 8184 55,637.27 IBM PHILIPPINES, INC. 24293 244,584.72 P-364 IBM PHILIPPINES, INC. 24812 81,734.40 P-366 INDRA Philippines Inc 2150 17,142.86 P-370 JEBSEN & JESSEN COMMUNICATIONS 1771 6,569.28 P-372 JOHN CLEMENTS CONSULTANTS, INC 114775 154,782.24 JOHN CLEMENTS CONSULTANTS, INC 114934 375,822.96 115168 153,093.94 P-396 12007 19,071.43 P-397 MISNET EDUCATION INC. 11898 38,142.86 13306 P-401 NEXT STEP TRAINING AND 0184 12,504.00 P-402 NEXT STEP TRAINING AND 0186 18,230.00 P-403 NEXT STEP TRAINING AND 0187 26,544.00 0193 5,943.39 12,612.00 0194 0197 12,000.00 8,040.00 3388 23,640.00 152,896.14

3395 102,640.63

3416 20,115.00

3417 85,533.86

0911 9,245.36

0919 2,970.00

69576 29.66 69633 8,540.71 69749 84.29 69825 41.76 65012 9,214.13 69974 69972

PREMIUM SECURITY & INVESTIGATI 69975

69990 P-453 REALFORM FURNITURE SHOP 1253 8,451.36 P-454 GLOBE TELECOM A/C 49622252 2305003 1,488.95

P-455 INNOVE AC 830635288

P-456 INNOVE AC 106886134

0373458 2298496 32120 CIBI INFORMATION, INC.

P-473

32213 834.43 714.79 107.70 13.19 30,617.18 3,981.64 180.00

CITYWAY PRINTING SERVICES

92 P-472 CITYWAY PRINTING SERVICES 91 1,072.71 | 3,367.98 oa

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

P-474

CITYWAY PRINTING SERVICES

P-475

CITYWAY PRINTING SERVICES

P-476

CITYWAY PRINTING SERVICES

P-478

DESIGN & CREATIVE LOGIC INC

P-482

DEVELOPMENT DIMENSIONS

P-483

DEVELOPMENT DIMENSIONS

P-484

DHL EXPRESS (PHILIPPINES) CORP

P-485

DHL EXPRESS (PHILIPPINES) CORP

P-486

DHL EXPRESS (PHILIPPINES) CORP

P-487

DHL EXPRESS (PHILIPPINES) CORP

P-488

DHL EXPRESS (PHILIPPINES) CORP

P-489

DHL EXPRESS (PHILIPPINES) CORP

P-490

DHL EXPRESS (PHILIPPINES) CORP

P-491

DHL EXPRESS (PHILIPPINES) CORP

P-492

DHL EXPRESS (PHILIPPINES) CORP

P-493

DHL EXPRESS (PHILIPPINES) CORP

P-494

DHL EXPRESS (PHILIPPINES) CORP

P-495

DHL EXPRESS (PHILIPPINES) CORP

P-496

DHL EXPRESS (PHILIPPINES) CORP

P-497

DHL EXPRESS (PHILIPPINES) CORP

P-498

DHL EXPRESS (PHILIPPINES) CORP

P-499

DHL EXPRESS (PHILIPPINES) CORP

P-500

DHL EXPRESS (PHILIPPINES} CORP

P-501

DHL EXPRESS (PHILIPPINES) CORP

P-523

REALFORM FURNITURE SHOP

P-524

REALFORM FURNITURE SHOP

P-527

REUTERS LIMITED

P-542

FUJI XEROX PHILIPPINES INC

P-543

FUJI XEROX PHILIPPINES INC

P-544

FUJI XEROX PHILIPPINES INC

P-545

FUJI XEROX PHILIPPINES INC

P-546

FUJI XEROX PHILIPPINES INC

P-547

FUJI XEROX PHILIPPINES INC

P-548

FUJI XEROX PHILIPPINES INC

P-549

FUJI XEROX PHILIPPINES INC

P-550

FUJI XEROX PHILIPPINES INC

P-551

GLOBAL CITY CAR LEASE &

P-552

GLOBAL CITY CAR LEASE &

P-553

GLOBAL CITY CAR LEASE &

P-554

GLOBAL CITY CAR LEASE &

P-555

GLOBAL CITY CAR LEASE &

P-556

GLOBAL CITY CAR LEASE &

P-557

GLOBAL CITY CAR LEASE &

P-558

GLOBAL CITY CAR LEASE &

P-559

GLOBAL CITY CAR LEASE &

P-560

GLOBAL CITY CAR LEASE &

P-561

GLOBAL CITY CAR LEASE &

P-562

GLOBAL CITY CAR LEASE &

P-563

GLOBAL CITY CAR LEASE &

P-564

GLOBAL CITY CAR LEASE &

P-565

GLOBAL CITY CAR LEASE &

P-566

GLOBAL CITY CAR LEASE &

P-567

GLOBAL CITY CAR LEASE &

P-573

SALVADOR & ASSOCIATES

P-574

SALVADOR & ASSOCIATES

P-575

SALVADOR & ASSOCIATES

P-576

SALVADOR & ASSOCIATES

P-577

SANTA FE MOVING AND RELOCATION

P-586

SGV & CO.

P-587

SGV & CO.

111 6,181.61 112 9 173.08 113 5 566.22 4021 2 335.71 14158 25 845.56 14157 12 922.28 2243603 33.60 2243606 1 615.00 2243608 7 947.00 2243605 1 335.78 2243604 33.60 2258227 1 359.00 2258226 103.02 2258225 1052.00 2260678 6 503.00 2262391 92.38 2265204 33.60 2265203 33.60 2265207 3 342.00 2265206 1 258.00 2265202 81.66 2265205 1 827.00 2178042 3 537.47 2178043 67.20 1254 1472.04 1255 360.00 37144 221 565.69 178371 7 346.22 178370 26 233.77 178378 10 874.48 179702 12 095.64 179834 25 562.46 179833 11 028.84 179839 90.05 179842 21.73 179841 37 426.14 9464 27 385.51 9475 25 623.43 9482 746.29 9484 35 539.81 9483 14,902.07 9501 197.68 9502 55 162.18 9505 25,795.34 9525 171046.96 9524 309.64 9541 4,606.39 9542 6,464.04 9549 27 530.14 9547 11 458.71 9548 12 990.75 9553 25 094.89 9563 32 369.74 7317 10 183.08 7318 5 092.29 7407 10 254.29 7408 11174.77 8757 641.40

MK00005708

49 060.25

MK00005709

29 070.00

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

P-588

SGV & CO.

P-589

SGV &CO.

P-590

SGV & CO.

P-591

SGV &CO.

P-592

SGV & CO.

P-593

SGV & CO.

P-595

SGV & CO.

P-597

SQ RESOURCES INC.

P-598

SQ RESOURCES INC.

P-599

SQ RESOURCES INC.

P-600

SQ RESOURCES INC.

P-601

SQ RESOURCES INC.

P-602

SQ RESOURCES INC.

P-603

SQ RESOURCES INC.

P-604

SQ RESOURCES INC.

P-605

Taurus Electrical Services

P-606

Taurus Electrical Services

P-607

Taurus Electrical Services

P-608

Taurus Electrical Services

P-609

TECOMA CORPORATION

P-615

TOWERS WATSON PHILIPPINES INC.

P-616

TOWERS WATSON PHILIPPINES INC.

P-617

TOWERS WATSON PHILIPPINES INC.

P-619

ZUNIEGA OLASO MACAPUNDAG

P-620

ZUNIEGA OLASO MACAPUNDAG

P-621

ZUNIEGA OLASO MACAPUNDAG

P-624

ACCENTURE INC.

Subtotal

MK00006664

2 908.09

MK00006663

228 300.00

MK00006662

129 722.49

MK00008289

3L600.00

MK00009280

5 985.21

MK00008724

2L550.00

MK00009279

3 600.00 52025 32 436.00 52026 3,261.15 52027 5,961.78 52028 18 510.99 52037 2 052.00 52458 6,732.00 52481 59 657.58 52467 9,540.00 0088 12 931.43 0089 431 047.72 0095 61 460.52 0092 19 640.33 01571 32 894.31 24963 1 800.00 24964 85 440.00 24128 2 160.00 1530 120.00 1531 13 920.00 1538 3 495.00 12682 105 435.18 , 6,169. 488.66

3. Purchases of services supported by VAT ORs without the TIN of petitioner

P-255

6-24 PROPER1Y HOLDINGS INC.

3666 p 2 305 615.20

P-462

ePLDT INC.

14910 1 237 846.28

Subtotal

p 3 543 461.48

4. Purchase of service supported by VAT OR but with alteration on the year of the date

P-377

Johnson Controls IFM Phils. Co 3313 p 98 258.05

Subtotal

p 98.258.05

5. Purchases of services supported by VAT ORs but with notation "not to be used for claim/not valid as source of input tax"

P-623

ACCENT MICRO TECHNOLOGIES INC

69277 p 2 148.33

P-386

LANTRO PHILS INC

0405 7 962.48

P-387

LANTRO PHILS INC

0436 6 723.21

Subtotal

, 16,834.02

6. Purchases of services supported by VAT ORs but without the SIR Authority to Print

P-631

PLDT

PBMOR001227204

p 235.13

P-632

PLDT

PELOR000858865

4.27

P-633

PLDT

PBMOROO 1253406

235.13

P-634

PLDT

PELOR000892057

4.27

P-635

PLDT

PELOR000892059

4.27

P-636

PLDT

PBMOR001253408

235.13

P-637

PLDT

PELOR000892061

582.86

P-638

PLDT

PBMOR001253410

32 057.14

P-639

PLDT

PELOR000892062

2.72

P-642

PLDT

PELOR000892069

6.43

P-643

PLDT

PBMOR001253417

353.57

P-644

PLDT

PELOR000892056

4.27

P-645

PLDT

PBMOR001253405

235.13

P-648

PLDT

PBMOR001227201

235.13

P-649

PLDT

PELOR000858862

4.27

P-650

PLDT

PELOR000859370

4.27

P-651

PLDT

PBMOR001227205

235.13

P-652

PLDT

PELOR000859371

582.86

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

P-653

PLDT

P-654

PLDT

P-655

PLDT

P-656

PLDT

P-657

PLDT

P-658

PLDT

P-659

PLDT

P-660

PLDT

P-661

PLDT

P-662

PLDT

P-663

PLDT

P-664

PLDT

P-667

PLDT

P-668

PLDT

P-671

PLDT

P-672

PLDT

P-673

PLDT

P-674

PLDT

P-675

PLDT

P-676

PLDT

Subtotal

PBMOR001227206

32 057.14

PELOR000858868

2.70

PBMOR001253411

149.89

PBMOR001253416

151.09

PELOR000859381

6.43

PBMOR001227215

353.57

PELOR00085936 7

4.27

PBMMOROO 1227202

235.13

PELOR000859368

2.87

PBMOR001227203

157.84

PELOR000859375

1.91

PBMOR001227210

105.13

PELOR000892065

1.91

PBMOR001253414

105.13

PELOR000892060

4.27

PBMOR001253409

235.13

PELOR000892058

2.87

PBMOR001253407

157.84

PELOR000892070

6.43

PBMOR001253418

353.57 p 69,117.10

7. Purchases of capital goods not exceeding P1M supported by VAT invoices w/ATPs dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation of RMC No. 52-2013.

P-262

ACCENT MICRO TECHNOLOGIES INC

147619 p 482.14

P-263

ACCENT MICRO TECHNOLOGIES INC

147508 2 410.71

P-264

ACCENT MICRO TECHNOLOGIES INC

147735 6 292.99

P-265

ACCENT MICRO TECHNOLOGIES INC

147736 3 199.11

P-266

ACCENT MICRO TECHNOLOGIES INC

147734 1 446.43

P-267

ACCENT MICRO TECHNOLOGIES INC

147740 42.86

P-268

ACCENT MICRO TECHNOLOGIES INC

147739 42.86

P-269

ACCENT MICRO TECHNOLOGIES INC

147617 193.71

P-270

ACCENT MICRO TECHNOLOGIES INC

147795 964.29

P-271

ACCENT MICRO TECHNOLOGIES INC

147796 2 410.71

P-272

ACCENT MICRO TECHNOLOGIES INC

148086 4 821.43

P-273

ACCENT MICRO TECHNOLOGIES INC

147618 42.86

P-274

ACCENT MICRO TECHNOLOGIES INC

147989 42.86

P-275

ACCENT MICRO TECHNOLOGIES INC

147942 696.43

P-276

ACCENT MICRO TECHNOLOGIES INC

148087 964.29

P-277

ACCENT MICRO TECHNOLOGIES INC

147379 42.86

P-278

ACCENT MICRO TECHNOLOGIES INC

148645 6,292.99

P-279

ACCENT MICRO TECHNOLOGIES INC

149080 482.14

P-280

ACCENT MICRO TECHNOLOGIES INC

149081 482.14

P-281

ACCENT MICRO TECHNOLOGIES INC

148946 1,607.14

P-282

ACCENT MICRO TECHNOLOGIES INC

149082 42.86

P-283

ACCENT MICRO TECHNOLOGIES INC

148893 2,089.29

P-284

ACCENT MICRO TECHNOLOGIES INC

149294 4,821.43

P-285

ACCENT MICRO TECHNOLOGIES INC

149301 696.43

P-286

ACCENT MICRO TECHNOLOGIES INC

149133 12,585.98

P-287

ACCENT MICRO TECHNOLOGIES INC

149640 42.86

P-288

ACCENT MICRO TECHNOLOGIES INC

149642 6 292.99

P-289

ACCENT MICRO TECHNOLOGIES INC

149641 39 051.36

P-290

ACCENT MICRO TECHNOLOGIES INC

149298 2 410.71

Subtotal

p 100994.86

Grand Total

P10,174,946.65 Thus, out of petitioner's total reported input VAT on current purchases of P24,020,395.21 for the second quarter of 2013, only the,..

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR amount of P12,188,086.82 represents its valid input VAT, as computed hereunder:

Total Input VAT on Current Purchases per Returns

p 24,020,395.21

Less: Disallowances

Per ICPA's findings P1,657,361.74 Per Court's further verification 10,174,946.65 11,832,308.39

Valid Input VAT

P12, 188,086.82 However, a portion of the P12,188,086.82 shall be applied against the reported output VAT liability of P1,134,996.8244 • Consequently, only the remaining input VAT of P11,053,090.00 can be attributed to the entire zero-rated sales amounting to P1,105,734,437.79 and only the input VAT of P5,225,189.50 is attributable to the valid zero-rated sales of P522,720,069.53, computed as follows:

Valid Input VAT

Less: Output tax due

Excess Input VAT

Divide by Total Declared Zero-Rated Sales

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 12,188,086.82 1,134,996.82 P11,053,090.00 1,105,734,437.79 522,720_L069.53 p 5,225,189.50 Although the claimed input VA Twas carried-over by petitioner in its succeeding Quarterly VAT Returns45, the same remained unutilized until it was deducted as "VAT Refund/TCC Claimed" 46 in its Amended Quarterly VAT Return for the first quarter of CY 2015. Thus, the excess input VAT of P155,729,598.4847 as of the end of the first quarter of 2015, which was carried-over to the succeeding second quarter of 2015, no longer included the subject claim. 4A

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR

WHEREFORE, premises considered, the Petition for Review is PARTIALLY GRANTED. Accordingly, let a tax refund or a Tax Credit Certificate be issued in favor of petitioner in the reduced amount of P5,225,189.50, representing its unutilized and excess input VAT attributable to zero-rated sales for the attributable to zero-rated sales for the second quarter of CY 2013.

WE CONCUR:

~~~c.~~.-~~ J({ANITO C. CASTANEDi(,tiJR.:

Associate Justice

CAESAR A. CASANOVA

Associate Justice

~~/'·/'11~ CATHERINET.MANAHAN

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. ~c:t.1M'"4 c. (J;:;t-~~ / ~ JUANITO C. CASTANED~, jR.

Associate Justice

Chairperson, Second Division

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.

OSARIO

Presiding Justice