Aig Shared Services Corporation [Formerly: Chartis Technology and Operations Management Corporation ] vs. Commissioner of Internal Revenue

DECISION

RINGPIS-LIBAN,.L.:

The instant Petition for Review flied by petitioner AIG Shared Services Corporation prays that the Court grant its application for value-added tax (VAT) refund/ tax credit, and order respondent Commissioner of Internal Revenue to refund and/ or issue a tax credit certificate in favor of Petitioner in the amount of P43,912,521.20, allegedly representing excess and unutilized input VAT paid for the four ( 4) quarters of calendar year (CY) 2014.¹

THE PARTIES

Petitioner AIG Shared Services Corporation is a foreign corporation organized and existing under the laws of New York, U.S.A., which was duly licensed since September 13, 1977 under SEC No. 152 to operate a regional headquarters in the Philippines. 2 Its former corporate names were America~

International Underwriters Corporation-Regional Operating Headquarters, AIU Technology and Operations Management Corporation, and Chartis

Technology

and

Operations

Management

Corporation

(Philippines).3 Petitioner is registered with the Bureau of Internal Revenue (BIR) taxpayer under TIN 001-218-732-000.4 Respondent is the Commissioner of the BIR who holds office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.5 Respondent is vested with the power to decide tax cases, including claims for refunds and/ or tax credits pursuant to Section 4 of the 1997 National Internal Revenue Code, as amended.6

THE FACTS

On March 30, 2016, Petitioner flied its administrative claim for refund of its excess and unutilized input VAT in the amount of P43,912,521.20 for the 1st to 4th quarters of CY 2014.7 Petitioner flied the instant Petition for Review on August 24, 20168 On November 22, 2016, Respondent flied his Answer9, interposing the following special and affirmative defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 4.

On the basis of the foregoing allegations and in further support of the Specific Denials herein set forth, respondent respectfully alleges as his defense that: Petitioner is not entitled to its claim for refund considering its failure to satisfy the statutory and administrative requirements provided for by the tax code.

1.

Section 112(c) of the 1997 National Internal Revenue Code, as amended, provides as follows, to wi~

'SEC. 112. Refunds or Tax Credits oflnput 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; X X X

X

X

X

(D) 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

(120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) 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.' (Emphasis supplied) Pursuant to the afore-quoted prov1s1on of law, (1) the application for tax refund must be filed within two years after the close of the taxable quarter when the sales were made; (2) the CIR is given only a period of 120-day period from the date of submission of complete documents in support of the application within which to decide whether to grant the claim; (³) if the CIR failed to decide with the said 120-day period, the taxpayer may elevate the inaction to the Court of Tax Appeals. (⁴) The decision or inaction may be appealed within thirty (30) days with the CT A~

2.

It logically follows that a taxpayer must first submit the complete supporting documents before the 120-day period should commence. Stated otherwise, the administrative claim for refund must be supported by complete documents flled in accordance with Subsections (A) and (B) of Section 112 of the Tax Code.

3.

The requirements to submit complete documents in support of an application for refund was further clarified by RMC 54-2014. Accordingly, the application for VAT refund must be accompanied by complete supporting documents as specifically enumerated in Annex 'A' of the RMC. In addition, the taxpayer should attach a sworn statement/ affidavit (i) attesting to the completeness of the submitted documents; (ii) stating that the attached supporting documents are the only documents which the taxpayer will present to support the claim; and additionally, (iii) in the case of corporations or other juridical persons, there should be a sworn statement that the officer signing the affidavit (which should at the very least be the Chief Finance Officer) has been authorized by the company's Board of Directors. 4.

In a memorandum dated September 30, 2016, the revenue officer assigned to the application for tax refund by [P]etitioner observed that the supporting documents submitted were still lacking. Particularly, he noticed that certified true copies of sales invoices or official receipts were not presented by [P]etitioner.

Further, no substantiation in support of the application was made.

Thus, he recommended that the application for VAT Credit/ refund cannot be given due course. A copy of the memorandum is attached herewith as Annex '1' while the original is part of the BIR Records of this case, which will be forwarded to the Honorable Court. 5.

It cannot be overemphasized that failure to submit complete documents to support the application for refund, as required by the Tax Code, is fatal to a taxpayer's claim. Without the submission of documents to support the application, [R]espondent respectfully submits that the application for tax credit/ refund is invalid and a mere scrap of paper. 6.

However, assuming the documents it submitted together with its administrative claim for refund dated March 30, 2016 are admitted by [P]etitioner as its submission of complete documents, [R]espondent respectfully submits that only these documents, if ever they will be offered as evidence, can be considered by the Honorable Court in determining the propriety of [P]etitioner's claim, pursuant to the well-settled principle that matters not preliminary raised in the administrative level cannot be raised for the first time upon appeay

Petitioner has the burden to prove its entitlement to refund.

7.

In addition to the foregoing requirements, [R]espondent respectfully submits that in order to be entided to a refund or issuance of a Tax Credit Certificate (TCC) of input VAT due or paid attributable to zero-rated or effectively zero- rated sales, [P]etitioner must prove compliance with the following requisites:

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

2) that input taxes were incurred or paid; 3) that such input taxes are direcdy attributable to zero-rated or effectively zero-rated sales; 4) that input taxes were not applied against any output VAT liability; and 5) that the claim for refund was flied within the two- year prescriptive period 8.

In a claim for tax refund or tax credit, the applicant must prove not only entidement to the grant of the claim under substantive law.

It must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit. Hence, the mere fact that [P]etitioner's application for zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. Claims for refund are construed strictly against the taxpayer and in favor of the Government.

9.

It is said that taxes are essential to government's very existence hence, the dictum that 'taxes are the lifeblood of the government.' And because taxes are the lifeblood of the nation, the court has always applied the doctrine of strict interpretation in construing tax exemptions.

A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception. 10.

For this reason, the right of taxation cannot easily be surrendered, statutes granting tax exemptions are considered as a derogation of the sovereign authority. Since tax refunds a~ regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. 11.

Lasdy, the power of taxation is an inherent attribute of sovereignty; the government chiefly relies on taxation to obtain the means to carry on its operations. Taxes are essential to its very existence; hence, the dictum that 'taxes are the lifeblood of the government.' For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority and are stricdy construed against the person or entity claiming the exemption.

Claims for tax refunds, when based on statutes granting tax exemption or tax refund, partake of the nature of an exemption; thus, the rule of strict interpretation against the taxpayer-claimant similarly applies." Respondent transmitted the BIR Records of this case on November 23, 2016.10 The Court initially set this case for pre-trial conference on March 7, 2017n However, due to the filing of Respondent's Motion to Defer Pre-Trial Conference on March 2, 2017,12 the pre-trial conference was reset to, and held on, May 30, 2017.13 Respondent's Pre-Trial Brief was filed on February 13, 2017,14 while Petitioner's Pre-Trial Brief was submitted on March 3, 2017.15 The parties submitted their Joint Stipulation of Facts and Issues on June 9, 2017.16 In the Pre-Trial Order on June 27, 2017,17 the Court deemed the termination of the Pre-Trial.

Thereafter, trial proceeded.

During trial, Petitioner presented testimonial and documentary evidence. As part of its testimonial evidence, Petitioner offered the testimonies of the-Y"

following individuals: (1) Ms. Glaiza A. Baroro,18 Petitioner's Accountant III;

(2) Atty. Geronimo Randy Recinto,19 General Counsel for Petitioner; and (3) Mr. Edward L. Roguel,20 the Court-commissioned ICP A. 21 On October 9, 2017, Mr. Roguel submitted the ICPA Report.22 Petitioner filed its Formal Offer of Evidence on February 5, 2018. 23 Respondent submitted his Conunent (Re: Petitioner's Formal Offer of Evidence) on February 12,2018.24 In the Resolution dated April 17, 2018,25 Petitioner's exhibits were admitted excefl/Exhibits "P-117" "P-118" "P-119" "P-120" "P-120-d" "P- '1' ~ ' ' ' ' ' 123" "P-126" "P-131" "P-133" "P-134" "P-138" "P-139" "P-140" "P- ' ' ' ' ' ' ' ' 142-c" "P-145" "P-147" "P-148" "P-149-a" "P-150" "P-151" "P-152" "P- ' ' ' ' ' ' ' ' 153" "P-156" "P-158" "P-159" "P-164" "P-165-a" "P-172" "P-174" "P- ' ' ' ' ' ' ' ' 175-a", "P-176", "P-186", "P-190", and "P-1997", for failure to present the original for comparison; and Exhibits "P-615" and "P-1701", for not being found in the CD /USB submitted to this Court. On May 7, 2018, Petitioner filed its Motion for Reconsideration [(a) For Reconsideration of the Resolution dated 17 April 2018; and (b) To Recall Witness],26 praying, inter alia, to file an Amended Formal Offer of Evidence. Respondent did not file any objection/opposition thereon.27 In the Resolution dated July 2, 2018,28 the Court reconsidered its Resolution dated April 17, 2018. At the hearing held on July 17, 2018,29 the Court granted Petitioner ten (1 0) days, or until July 27, 2018, to file its Supplemental Formal Offer of Evidence. Thus, on July 25, 2018, Petitioner

/V"

18 /d., pp. 183 to 245, Exhibit "P-192"; id. at Note 2, pp. 505, and 507 to 508, Minutes of the hearing held on, and Order dated, August 29, 2017; id. at Note 1, pp. 492 to 497, Exhibit "P-192-b"; id. at Note 2, pp. 732 to 732-b, Minutes of the hearing held on, and Order dated, January 16, 2018.

filed its Supplemental Formal Offer of Evidence.30 Respondent submitted his Comment/Opposition (Re: Supplemental Formal Offer of Evidence) on August 2, 2018_3' In the Resolution dated October 17, 2018,32 the Court only admitted Exhibits "P-193-d" and "P-193-e". Consequendy, Petitioner ftl.ed a Motion for Reconsideration (Re: Resolution dated 17 October 2018),33 to which Respondent failed to comment thereon.34 Thus, in the Resolution dated January 3, 2019,35 the Court granted the said Motion for Reconsideration (Re: Resolution dated 17 October 2018), and admitted Petitioner's Exhibits "P-117'', "P-119", "P-120", "P-123", "P-126", "P-133" "P-134" "P-138" "P-140" "P-145" "P-147" "P-148" "P-150" "P- ' ' ' ' ' ' ' ' 151" "P-152" "P-153" "P-156" "P-158" "P-159" "P-164" "P-165-a" "P- ' ' ' ' ' ' ' ' 172", "P-176", "P-186", and "P-190". In the meantime, during the hearing held on October 18, 2018,36 Respondent's counsel manifested that she did not receive a report from the Revenue Examiner who conducted the audit and hence, she would not present any evidence.

On January 31, 2019, Respondent ftl.ed his Memorandum,37 while Petitioner's Memorandum was filed on February 8, 2019. 38 The instant case was deemed submitted for decision on February 19, 2019.39

THE ISSUE

The parties stipulated the following sole issue for this Court's resolution, 40 to wit:

30 31 32 33 "Whether or not [P]etitioner is entided to a refund or the issuance of a tax credit certificate for its unutilized/ excess inpu~ ld., pp. 2792 to 2804.

ld., pp. 2806 to 2814.

ld., pp. 2818 to 2823.

ld., pp. 2827 to 2932.

VAT payments for the 1st to 4th Quarters of CY 2014, amounting to a total of FORTY-THREE MILLION NINE

HUNDRED 1WELVE THOUSAND FIVE HUNDRED

1WENTY-ONE

PESOS

AND

1WENTY

CENTAVOS

(Php43,912,521.20)."

THE ARGUMENTS OF THE PARTIES

Petitioner argues that the administrative and judicial claims were seasonably flied; that it is VAT -registered; that it is engaged in VAT zero-rated sales; that it paid input VAT during the 1st to 4th quarters of CY 2014 from its domestic purchases of goods and services; that Petitioner's input VAT for CY 2014 has not been applied against output taxes; and Petitioner's input VAT is direcdy attributable to its zero-rated sales for CY 2014. On the other hand, Respondent argues that the law requires that only "creditable input taxes" which are "direcdy attributable" may be refunded. Respondent further avers that Petitioner failed to prove that all of its clients are non-resident foreign corporations doing business outside the Philippines.

THE RULING OF THE COURT

We partially grant the instant Petition for Review. Section 112(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 9337,41 provides: "SEC. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-rated or Ejfective!J 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)(l), (2) and (b) and Section lOS(B)(l) 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 whery 41 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be direcdy 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

XXX

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. 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 provision, jurisprudence has laid down certain requisites which the taxpayer-applicant must comply with to successfully obtain a credit/ refund of input VAT.

Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

1. the claim is fl.led with the BIR within two (2) years after the close of the taxable quarter when the sales were made;42

2. that in case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of one hundred twenty (120) days, the judicial claim has been filed with this Court, within thirty (30) days from receipt of the decision or after the expiration of thy

said 120-day period;43 With reference to the taxpayer's registration with the BIR:

3. the taxpayer is a VAT -registered person;44 In relation to the taxpayer's output VAT:

4. the taxpayer is engaged in zero-rated or effectively zero-rated sales;45

5. for zero-rated sales under Sections 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations;46 As regards the taxpayer's input VAT being refunded:

6. the input taxes are not transitional input taxes;47

7. the input taxes are due or paid;48

8. the input taxes have not been applied against output taxes during and in the succeeding quarters;49 and

9. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales.

However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be direcdy and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. 50

Petitioner's and Judicial

Timely Filed.

Administrative

C:laims were The first requisite pertains to the filing of the refund claim for tax credit or refund of input VAT before the BIR, which is within two (2) years from the close of the quarter when the sales were made. The instant claim covers the four (4) quarters of <:Y 2014. Counting two

(2) years from the respective close of the said quarters, the following table,...../ 43 Steag State Power, Inc. {Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 44 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra.

45 /d.

46/d.

47 /d.

48/d.

49 /d. at Note 44.

50 ld.

indicates the pertinent last days for the filing of an administrative claim for the said four (4) quarters, to wit:

Close of the Taxable

Last Day to File

CY2014

Period

Quarter

Administrative Claim

January 1, 2014 to March 1st Quarter 31,2014 March 31,2014 March 31,2016 April1, 2014 to June 30, 2nd Quarter 2014 June 30, 2014 June 30, 2016 July 1, 2014 to September 3rd Quarter 30,2014 September 30, 2014 September 30, 2016 October 1, 2014 to 4th Quarter December 31, 2014 December 31,2014 December 31, 2016 Considering that Petitioner's administrative claim [Application for Tax Credits/Refunds (BIR Form No.1914)], covering the said four (4) quarters, was flied with the BIRon March 30, 2016,51 the same was timely made. The sewnd requisite is to the effect that the judicial claim must have been flied within thirty (30) days from receipt of Respondent's decision or after the expiration of the 120-day period under the afore-quoted Section 112(C). Considering that there is no indication that Respondent issued a decision relative to Petitioner's administrative claim, the determination of the 120+30- day periods, as applied to this case, is shown as follows: End of 120 days for End of 30 days

Date of Filing of

the CIR to decide from expiration of

Administrative Claim

the claim the 120 davs March 30, 2016 July 28, 2016 August 27, 2016 Since the instant Petition for Review was filed on August 24, 2016, Petitioner's judicial claim was likewise seasonably flied. Such being the case, Petitioner fulfilled the above-stated first and second requisites.

Petitioner is a VAT -registered

Person

Petitioner likewise complied with the third requisite considering that it is a VAT registered taxpayer.~ 51/d. at Note 2, pp. 853 to 866, see Exhibits "P-8" and "P-8-a". 52 1d., pp. 799 to 800, Exhibits "P-4" and "P-5".

Vatable

Petitioner's

Zero-rated

or

Effectively Zero-rated Sales/

Receipts for CY 2014 Only

Amounts to P10,852,469.06 In its Quarterly VAT Returns for the four quarters of CY 2014, Petitioner declared an amount of !'2,131,262,124.17 total sales/receipts which included zero-rated sales/receipts of !'2,086,692,750.89, broken down as follows:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Total

(Exhibit "P-9")

(Exhibit "P-10")

(Exhibit "P-11")

(Exhibit "P-12")

Sales/Receipts

I' 14,045,332.87

I'

9,578,528.61

I'

10,839,724.33 I' 10,105,787.47

I'

44,569,373.28

Zero-Rated

Sales/Receipts

442,612,125.26 501,953,349.75 366,270,294.38 775,856,981.50 2,086,692, 750.89

Total Sales/Receipts

I' 456,657,458.13 I' 511,531,878.36 I' 377,110,018.71 I' 78_5,962_,768.')i' ~ 2,131,262,124.12_ Petitioner submits that as a Regional Operating Headquarters (ROHQ), it renders qualifying services, including business planning and coordination, corporate finance advisory, training and personal management, technical support, and data processing and communication, to its affiliates in the Asia- Pacific region and other foreign marketsY In CY 2014, Petitioner allegedly rendered such services to a total of seventy-five (75) clients. Seventy-four (74) of those clients are non-resident foreign clients doing business outside the Philippines and one (1) client is a domestic corporation registered with the Philippine Economic Zone Authority (PEZA).54 Petitioner posits that since the services it rendered to its non-resident foreign clients doing business outside the Philippines were paid for in US Dollars (USD) inwardly remitted to the Philippines through the Petitioner's account with the East West Banking Corporation (East West Bank) and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), the same are classified as VAT zero-rated sales55. Likewise, Petitioner maintains that the services it rendered to AIG Shared Services -Business Processing, Inc., a PEZA-registered entity, are considered export sales and are effectively VAT zero-rated. 56 Sale of services to an entity registered

with the PEZA/

Indeed, sales of services to entities registered with PEZA are subject to zero percent (0%) VAT, the pertinent provision of Section 1 08(B) (3) of the NIRC of 1997, as amended, states: "SEC. 108. Value-added Tax on Safe of Services and Use or Lease of Properties. -

XXX

XXX

XXX

(B)

Transactions Su!Ject to Zero Percent (0%) Rate_ - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) rate:

XXX

XXX

XXX

(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;" (Emphasis supplied) The special law specific to this case is Republic Act (RA) No. 7916, as amended by RA No. 8748, otherwise known as "The Special Economic Zone Act of 1995", which provides that an ecozone is considered a separate customs territory, and the business establishments operating within the ecozone are entided to certain fiscal incentives. Sections 8 and 23 of RA No. 7916, as amended by RA No. 8748, provide:

"SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Tenitory.- The ECOZONE shall be managed and operated by the PEZA as separate customs territory. The PEZA is hereby vested with the authority to issue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department of Trade and Industry and/ or the Department of Finance." "SECTION 24. Exemption form National and Local Taxes. - Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. xxx" (Emphasis supplied)/

Since the ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT -registered person in the Philippine customs territory to an entity registered and operating within the ecozone are considered exports to a foreign country subject to zero percent (0%) VAT. This was elucidated by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.), Inc., 51 to wit: 57 "This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT -exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (⁵%) preferential tax rate on gross income of PEZA- registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. xxx An ECOZONE or a Special Economic Zone has been described as - xxx [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (lEs), export processing zones (EPZs), free trade zones and tourist/ recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory.

Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory.

Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise~ G.R. No. 150154, August 9, 2005.

Paae lEi of 40 The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10%) VAT58. (Emphasis supplied) In the present claim, Petitioner presented the Certification dated January 16, 2014 issued by PEZA which is valid for the year 2014,59 stating that AIG Shared Services- Business Processing, Inc. is a PEZA-registered Ecozone (IT) Export Enterprise with Registration Certificate No. 03-03-IT dated January 29, 2003 as amended on December 4, 2013 and that it was a qualified enterprise for the purpose of VAT zero-rating of its transactions with local suppliers of goods, properties, and services in accordance with Sections 4.106-6 and 4.108-6 of Revenue Regulations (RR) No. 16-2005, the Consolidated Value-Added Tax Regulations of 2005.

Thus, Petitioner's sales of services to AIG Shared Services - Business Processing, Inc. for the four quarters of CY 2014 qualify for VAT zero-rating, pursuant to Section 108(B)(3) of the NIRC of 1997, as amended. However, the same must still be substantiated by VAT zero-rated official receipts (ORs) issued in accordance with Sections 113(A)(1) and (2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(l) and (2), (B)(1) and (2)(c) of RR No. 16-2005, which are all quoted hereunder: "Sec. 113. Invoiting and Accounting Requirements for VAT- registered Persons.- (A) Invoicing Requirements. - A VAT -registered person shall

ISSUe:

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

(2) A VAT official receipt for every lease of goods or properties, and for every sale. barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt/ 58 Now at 12% VAT rate.

(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%) value-added tax, the term 'zero-rated sale' shall be written or printed prominendy on the invoice or receipt; xxx

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" (Underscoring ours) "SEC. 4.113-1. Invoicing Requirements.-

(A)

A Vat-registered person shall issue: -xxx

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

(2) A VAT official receipt for every lease of goods or properties, and for evecy 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 invoice/ 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 (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx" (Underlining supplied) In addition to the above requirements, the ORs must be duly registered with the BIR as prescribed under Section 237, in relation to Section 238, both of the NIRC of 1997, as amended, to wit: that "SEC. 23 7. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: xxx" "SEC. 238. Printing of Receipts or Sales or Commenial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." After a careful perusal of Petitioner's VAT zero-rated OR,60 it reveals the same complies with the invoicing requirements pursuant to th(/

CTA C;u;g No. 9438 foregoing provisions. Thus, petitioner generated zero-rated receipts for CY 2014 from services rendered to AIG Shared Services - Business Processing, Inc. in the amount off'7,401,860.71 61 ($166,655.35). Sale of services to non-resident foreign entities Section 1 OS (B) (2) of the NIRC of 1997, as amended, states that: "SEC. 108.-Value-added Tax on Sale of Services and Use or Lease of Properties. - (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) rate:

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

(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" Based on the foregoing provision, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), under Section 108(B)(2) of the NIRC of 1997, as amended, to wit:

1. The ree1p1ent of the services is a foreign corporation, and the aforesaid corporation is doing business outside the Philippines, or is a non-resident person not engaged in business who is outside the Philippines when the services were performed; 6~ 61 td. at Note 2, p. 891, see Exhibit "P-21". 62 Site/ Philippines Corporation (Formerly Clientlogic Phi/s., Inc.) vs. Commissioner of Internal Revenue, G.R. No. 201326, February 8, 2017; Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205, January 22, 2007; Accenture, Inc. vs. Commissioner of Internal Revenue, G.R. No. 190102, July 11, 2002.

I

2 3 4 5 6 7 8

2. The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules;63

3. The services fall under any of the categories under Section 108(B)(2),64 or simply, the services rendered should be other than "processing, manufacturing or repackinggoods';65 and

4. The services must be performed in the Philippines66 by a VAT- registered person.

In compliance with the first essential element of proving that its client- affiliates are non-resident foreign corporations doing business outside the Philippines, petitioner presented the related Certifications of Non-Registration of Company issued by the Philippine Securities Exchange Commission (SEC), printed screenshots of foreign government websites and consularized foreign registration which were summarized by the Court-commissioned Independent CPA (ICP A) as follows:67

Consularized

Government

SEC

Name of Company

Customer's Name per

Foreign

website

Certificate

Official Receipt of Non-

Registration

Screens hots registration .\IG .WAC AIG AP.\C HOLDINGS PTE.

HOLDINGS PTE.

LTD.

LTD.

P-117-a

P-42

AIG AUSTRALIA

Lilv!ITED;

INTERCO:VfP ANY

AIG AUSTRALIA

CLEARING HOUSE

LIMITED

NY-AUS 0106

P-IIS-a

P-118-b

P-43

,\IG BUSINESS

AIG BUSINESS

PARTNERS

PARTNERS

KABUSHIKI ~\ISH,\

~\BUSHIKI KAIS~\

P-44

AIG

DENMARK/DANISH

AIG CLAIMS, INC.

BRANCH

P-120-a

P-120-b P-45, P-45-a

AIG

.\IG DENMARK/D,\NISH

DENMARK/DANISH

P-121-a, P-121-

BRANCH

BR.\NCH b,P-121-c P-121-d

P-46

AIG EMPLOYEE

,\IG EMPLOYEE SERVICES INC.

SERVICES INC.

P-122-a

P-47

J\IG EUROPE

Lilv!ITED I CHAR TIS

J\IG Europe Limited

P-123-a,P-123-b, EUROPES.A.

HQ

P-123-c P-48, P-48-a

AIGEUROPE

C~\RT!S EUROPE

LIMITED-

SADIREKTION FUR

DIREKTION FOR

DEUTSCHL\ND

P-124-d

P-49

63 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao~ Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), G.R. No. 152609, June 29, 2005.

64 Commissioner of Internal Revenue vs. American Express international, Inc. (Philippine Branch), supra. 65 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra.

66 Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra; Commissioner of Internal Revenue vs. American Express international, Inc. (Philippine Branch), supra. 67 /d. at Note 2, pp. 570 to 571, Exhibit "P-194", Annex B. /1

DEUTSCHLAND a

9 |. | LIMITED - GREECE LIMITED - GREECE P-50 io || AIG EUROPE AIG EUROPE a⁶ |

SERVICES LIMITED SERVICES LIMITED P-126-a P-51

AIG GLOBAL CHARTIS GLOBAL

CLAIMS SERVICES, SERVICES 11 INC. | COMPANY P-127-b P-52

AIG GLOBAL

RECOVERY

SERVICES INC/ AIG

AIG GLOBAL GLOBAL

RECOVERY RECOVERY

12 |. | SERVICES INC SERVICES P-53

AIG GLOBAL AIG GLOBAL

REINSURANCE REINSURANCE

13 OPERATIONS OPERATIONS P-54

AIG GLOBAL AIG GLOBAL

14 SERVICES INC SERVICES INC P-130-a P-55; P-55-a

AIG GLOBAL AIG GLOBAL

SERVICES SERVICES

15 MALAYSIA MALAYSIA P-131-b, P-131-c P-56 ‘AIG INSURANCE AIG INSURANCE

COMPANY CHINA COMPANY CHINA

16 |. | LIMITED LIMITED P-132-a P-57; P-57-a

+ AIG INSURANCE

COMPANY OF

CANADA; CHARTIS

AIG INSURANCE INSURANCE

COMPANY OF COMPANY OF

17 CANADA CANADA P-133-a P-58

18 HOLDINGS KK HOLDINGS KK P-134-a P-59

19 |. | AIG KOREA INC. AIG KOREA INC.

AIG MALAYSIA AIG MALAYSIA

INSURANCE INSURANCE

20 BERHAD BERHAD P-136-a P-61; P-61-a

AIG AIG

METROPOLITANA METROPOLITAN

CIA DE SEGUROS Y CIA DE SEGUROS Y

21 |. | REASEGUROS S.A. REASEGUROS SA P-197 P-62

| | AIG PAPUA NEW AIG PAPUA NEW

22 GUINEA GUINEA P-63

AIG PROPERTY AIG PROPERTY

CASUALTY GLOBAL CASUALTY GLOBAL

23 SERVICES INC SERVICES INC P-180-b P-64 r AIG SERVICES

LATIN AMERICA SL

SUCURSAL

AIG SERVICES COLOMBIA/ AIG

LATIN AMERICA SERVICES LATIN

24 S.L. AMERICA SLL. P-65

AIG SHARED AIG GLOBAL

SERVICES (M) SDN SERVICES

25 BHD MALAYSIA P-142-a, P-142-b P-142-¢ P-67; P-67-a

AIG SHARED AIG SHARED

SERVICES CORP - SERVICES CORP.-

26 IRELAND BRANCH IRELAND BRANCH P-143-a

AIG SOUTH AFRICA

LTD

AIG TAIWAN

INSURANCE CO.,

LTD

| al.

AIG SOUTH AFRICA

LTD P-144-a

AIG VIETNAM

INSURANCE

COMPANY LIMITED

8 al

AIG TAIWAN

INSURANCE CO., LID. P-145-a AIG VIETNAM P-146-a, P-146- INSURANCE b, P-146-c, P- COMPANY LIMITED 146-d P-146-e

- P-68

-144- P-69

ATU INSURANCE

COMPANY - JAPAN

AMERICAN

GENERAL LIFE

INSURANCE

COMPANY

AMERICAN HOME

ASSURANCE

COMPANY, UAE

AMERICAN HOME

ASSURANCE JAPAN

AHA JAPAN

AIG INSURANCE

NEW ZEALAND

LIMITED

AMERICAN

INTERNATIONAL

Pil

al al jal.

34 ;

BRANCH OF AIG

SIGORTA IN

GEORGIA RO#979 /

CHARTIS EUROPE

S.A., GEORGIA

AIU INSURANCE

COMPANY - JAPAN

AMERICAN

GENERAL LIFE

INSURANCE

COMPANY

AMERICAN HOME

ASSURANCE

COMPANY, UAE

AMERICAN HOME

ASSURANCE JAPAN

AHA JAPAN

AIG INSURANCE

NEW ZEALAND

LIMITED

INTERNATIONAL

GROUP KK

BRANCH OF AIG

SIGORTA IN

GEORGIA RO#979

CHARTIS

AZERBAIJAN

INSURANCE CO.

CHARTIS CHILE

COMPANIA

SEGUROS

GENERALES §.A.

38

CHARTIS EUROPE

S.A. - FINLAND

CHARTIS CHILE

COMPANIA

SEGUROS

GENERALES S.A

AIG CYPRUS

LIMITED

CHARTIS EUROPE

S.A. - FINLAND

CHARTIS EUROPE

41 SA - BELGIUM

CHARTIS EUROPE

42. SA - FRANCE

CHARTIS EUROPE

43 SA - ITALY

CHARTIS EUROPE

P-147-a P-72

P-73

P-149-a P-74

P-154-a

P-156-c

P-198

P-156-a, P-156-b P-81 P-157-a, P-157- b, P-157-c

CHARTIS EUROPE

SA - BELGIUM

CHARTIS EUROPE

SA - FRANCE

CHARTIS EUROPE

SA - ITALY

CHARTIS EUROPE

P-158-a, P-158- b, P-158-c, P- 158-d P-158-e P-83 P-160-a, P-160-b

44 SA - NETHERLANDS SA - NETHERLANDS

CHARTIS EUROPE AIG EUROPE

SA - PORTUGAL LIMITED SUCURSAL

45 BRANCH EM PORTUGAL

CHARTIS EUROPE CHARTIS EUROPE

46 SA - SPAIN SA - SPAIN

CHARTIS EUROPE

SA - SWITZERLAND

BRANCH

CHARTIS EUROPE

47 P-161-a, P-161-b

CHARTIS EUROPE

SA - SWITZERLAND

BRANCH P-89

CHARTIS EUROPE

SA- POLAND

CHARTIS EUROPE

SA-SWEDEN

P-90

P-78; P-78-a P-79; P-79-a P-80; P-80-a P-157-d P-82; P-82-a P-84; P-84-a P-85; P-85-a P-87; P-87-a P-88; P-88-a

SA- CZECH SA- CZECH

REPUBLIC REPUBLIC

CHARTIS EUROPE AIG EUROPE

SA- IRELAND LIMITED IRELAND

CHARTIS EUROPE CHARTIS EUROPE

SA- POLAND

CHARTIS EUROPE

SA SWEDEN

P-167-a, P-167-b P-168-a, P-168- b, P-168-c

CHARTIS

INSURANCE HONG

KONG LTD.

CHARTIS

INSURANCE HONG

KONG LTD.

P-91; P-91-a P-169-a, P-169-b P-169-c

CHARTIS

INSURANCE LTD.,

Pil

CHARTIS

INSURANCE LTD.,

P93 |

-94

P-95

| we

—

|_| SRI LANKA SRI LANKA

CHARTIS — CHARTIS

KAZAKHSTAN KAZAKHSTAN

INSURANCE INSURANCE

54 COMPANY COMPANY

CHARTIS KENYA CHARTIS KENYA

INSURANCE INSURANCE

55 COMPANY LIMITED COMPANY LIMITED | P-172-a

CHARTIS MEMSA ! CHARTIS MEMSA INSURANCE CO. INSURANCE CO LTD. OMAN LTD OMAN

56 BRANCH BRANCH

CHARTIS MEMSA CHARTIS MEMSA

INSURANCE CO. INSURANCE CO.

LTD. QATAR LTD. QATAR

57 BRANCH BRANCH

t CHARTIS NEW CHARTIS NEW

HAMPSHIRE HAMPSHIRE

INSURANCE CO, INSURANCE CO, 58 |. | PAKISTAN BRANC PAKISTAN BRANC

CHARTIS NEW CHARTIS NEW

HAMPSHIRE HAMPSHIRE

INSURANCE INSURANCE

COMPANY, COMPANY,

BAHRAIN

BAHRAIN

CHARTIS NORTH

AMERICA

CHARTIS SIGORTA

AS.

CHARTIS NORTH

AMERICA

CHARTIS SIGORTA

AS

CHARTIS

SINGAPORE

INSURANCE PTE

LTD

CHARTIS US ;

CHARTIS US

DOMESTIC A&H ;

CHARTIS US SRV

DEPTS

CHARTIS

SINGAPORE

INSURANCE PTE

LTD

CHARTIS US ;

CHARTIS US

DOMESTIC A&H ,

CHARTIS US SRV

DEPTS

P-179-a, P-179- b, P-179-c, P- 179-d P-179-e

P-180-a

GUAM INSURANCE

ADJUSTERS INC.

CHARTIS

UZBEKISTAN

P-181-a

CJSC AIG

GUAM INSURANCE

ADJUSTERS INC.

AIG TRAVEL

ASSIST, INC.

_|

INTERCOMPANY

CLEARING HOUSE

NY- TRAV 0270

P-96

P-97

P-98

P-99

P-100

P-101

P-102

P-103

P-104; P- 104-a; P- 105-b

P-105

P-106

P-107; P- 107-a

P-108

P-109 _|

CHARTIS

INSURANCE

INDONESIA

LEXINGTON

CHARTIS

INSURANCE

INDONESIA

LEXINGTON,

LEXINGTON

INSURANCE

COMPANY

P-185-a, P-185- b, P-185-c, P- 185-d

NATIONAL UNION

FIRE INSURANCE

COMPANY

P-110

P-111; P-

NATIONAL UNION

FIRE INSURANCE

COMPANY

73

NEW HAMPSHIRE

ICH (fao NEW

HAMSPSHIRE

INSURANCE INSURANCE

THAILAND THAILAND P-188-b

PRIVATE CLIENT PRIVATE CLIENT

UNITED UNITED

| GUARANTY GUARANTY

CORPORATION CORPORATION P-190-a

111-a =

P-113

P-114

P-115

74

,\MERIC.\N

INTERNATIONAL

.\IG CORP HRNY;

.\IG CORPORATE

O&S OPERATIONS

DEVELOPl\!ENT;

.o\IG INC.,EMPLOYEE RELATIONS DEPT.;

CI-L\RTIS

ENTERPRISE D,\TA l\HN.o\GEl\!ENT;

GLOB.\L FINANCE

GROUP

O&S

P-191-a

P-191-b

P-116

To be considered as non-resident foreign corporation doing business outside the Philippines, the entity must be supported at the very least by both

SEC

Certificate

of non-registration of corporation/partnership and Certificates/ Articles of foreign incorporation/ association/ registration or any other proof of foreign incorporation/ association/ registration. These two (2) documents are necessary. The SEC's negative certification establishes that the recipient of the service has no registered business in the Philippines (i.e., not engaged in trade or business within the Philippines). On the other hand, the

Certificates/ Articles

of foreign incorporation/ association/ registration prove two things: (1) that the recipient of the service is indeed foreign, and (2) it is engaged in business in the country of incorporation/association/registration (i.e., a showing of a continuity of commercial dealings and intention to establish a continuous business). In this regard, the Court cannot give credence or probative value to the printed screenshots of foreign government websites database which can also be easily manipulated, considering that none from the said foreign governments attested to the authenticity of the said websites and as to the registration of the purported petitioner's foreign clients found therein. Hence, out of the Petitioner's seventy-four (⁷ 4) clients, the following entities cannot be considered as non-resident foreign corporations doing business outside the Philippines, based on the following stated reasons, to wit: 1 2 3

a. Without proof of foreign registration and supported only by SEC

Certification of Non-Registration of Company:

SEC Certificate of

Name of Company

Customer's Name per Official

Non-Registration

Receipt of Company

(Exhibit No.)

AIG APAC HOLDINGS PTE.

AIG .\P.\C HOLDINGS PTE.

LTD.

LTD.

P-42

AIG EMPLOYEE SERVICES INC.

AIG EMPLOYEE SERVICES INC.

P-47

AIG EUROPE Lll\!ITED-

CI-Lo\RTIS EUROPE SA-

I

DIREKTION FOR

DIREKTION FUR

DEUTSCHLAND

DEUTSCHLAND

P-49

/1

4 | GREECE GREECE P-50

LIMITED LIMITED

CHARTIS GLOBAL SERVICES

SERVICES, INC. COMPANY

AIG GLOBAL RECOVERY

AIG GLOBAL RECOVERY SERVICES INC/ AIG GLOBAL

SERVICES INC RECOVERY SERVICES P-53

eecamns [aeemammenn |

OPERATIONS OPERATIONS P-54

52 9 | AIG GLOBAL SERVICES INC AIG GLOBAL SERVICES INC P-55; P-55-a 65 6 5 7 se

AIG INSURANCE COMPANY OF

CANADA; CHARTIS

AIG INSURANCE COMPANY OF | INSURANCE COMPANY OF

CANADA CANADA P-58

0 1 | AIG JAPAN HOLDINGS KK AIG JAPAN HOLDINGS KK P-59

AIG MALAYSIA INSURANCE AIG MALAYSIA INSURANCE

P-61; P-61-a

2 | BERHAD BERHAD

3 | AIG PAPUA NEW GUINEA AIG PAPUA NEW GUINEA p-

AIG PROPERTY CASUALTY AIG PROPERTY CASUALTY

GLOBAL SERVICES INC P-64

AIG SERVICES LATIN AMERICA

AIG SERVICES LATIN AMERICA | SL SUCURSAL COLOMBIA/ AIG S.L. SERVICES LATIN AMERICA S.L. P- AIG SHARED SERVICES CORP - | AIG SHARED SERVICES CORP.-

6 | IRELAND BRANCH IRELAND BRANCH P-68

7 | AIG SOUTH AFRICA LTD AIG SOUTH AFRICA LTD

AIU INSURANCE COMPANY - AIU INSURANCE COMPANY -

APAN APAN

AMERICAN GENERAL LIFE AMERICAN GENERAL LIFE

INSURANCE COMPANY INSURANCE COMPANY P-73

P-72

AMERICAN HOME ASSURANCE | AMERICAN HOME ASSURANCE

COMPANY, UAE COMPANY, UAE P-74

GLOBAL SERVICES INC

— = = is —_— |e _— iwat pp 9 — — mw 20

AMERICAN INTERNATIONAL AMERICAN INTERNATIONAL

GROUP KK GROUP KK

BRANCH OF AIG SIGORTA IN

GEORGIA RO#979 / CHARTIS

EUROPE S.A., GEORGIA BRANCH OF AIG SIGORTA IN

BRANCH GEORGIA RO#979

CHARTIS AZERBAIJAN CHARTIS AZERBAIJAN | papr94 | INSURANCE CO. INSURANCE CO. P-79; P-79-a PORTUGAL BRANCH SUCURSAL EM PORTUGAL P-87; P-87-a CHARTIS EUROPE Sa - CHARTIS EUROPE SA - Ly

SWITZERLAND BRANCH SWITZERLAND BRANCH P-89

CHARTIS EUROPE Sa- AIG EUROPE LIMITED aS EK

CHARTIS INSURANCE LTD., SRI | CHARTIS INSURANCE LTD., SRI yg

LANKA LANKA

CHARTIS KAZAKHSTAN CHARTIS KAZAKHSTAN

28 | INSURANCE COMPANY INSURANCE COMPANY

21

Bo

2 2 23 4 5 2 26

CHARTIS KENYA INSURANCE CHARTIS KENYA INSURANCE

9 | COMPANY LIMITED COMPANY LIMITED P-97

CHARTIS MEMSA INSURANCE CHARTIS MEMSA INSURANCE

P-95

P-96

30 | CO. LTD. OMAN BRANCH CO LTD OMAN BRANCH P-98

CHARTIS MEMSA INSURANCE CHARTIS MEMSA INSURANCE

31 | CO. LTD. QATAR BRANCH CO. LTD. QATAR BRANCH P-99

CHARTIS NEW HAMPSHIRE CHARTIS NEW HAMPSHIRE

INSURANCE CO, PAKISTAN INSURANCE CO, PAKISTAN P-100

Vin

32

BRANC

BRANC

CHAR TIS NEW l-LI.J\!PSHIRE CHAR TIS NEW HJ\J\!PSHIRE INSURo\NCE COJ\!P"\NY.

INSURo\NCE COJ\!PANY, 33

BAHRAIN

B.\HRAIN

P-101

34

CfL\RTIS NORTH "\MERICA

CHJ\RTIS NORTH AMERICA

P-102

35 CfL\RTIS SIGORT,\ AS.

CfL\RTIS SIGORTA AS

P-103

36

CfL\RTIS UZBEKIST"\N

CHJ\RTIS UZBEKISTAN

P-106

37

CJSC AIG

CJSC AIG

P-107; P-107-a GU,\M INSURo\NCE ADJUSTERS

GUAM INSURANCE ADJUSTERS

38 INC.

INC.

P-108

INTERCOMPANY CLEARING

39 ,\IG TRo\ VEL ,\SSIST, INC.

HOUSE NY- TRA V 0270

P-109

UNITED GU.\Ro\NTY

UNITED GUARANTY

40

CORPORo\TION

CORPORATION

P-115

----------------

b. Without SEC Certification of Non-Registration of Company and supported only by Consularized Foreign Registration: 41 42 43

Consularized

Name of Company

Customer's Name per Official

Foreign

Receipt

Registration

(Exhibit No.)

CHAR TIS EUROPE SA- POL\ND CfL\RTIS EUROPE SA- POLAND P-167-a, P-167-b

NATIONAL UNION FIRE

NATIONAL UNION FIRE

INSURo\NCE COi\!P,\NY

INSURANCE COMPANY

P-187-a

c. Supported only by SEC Certification of Non-Registration of Company and the name indicated therein is different from petitioner's client name

Name of Company

Customer's Name per Official per SEC Certificate

Exhibit

Name of Company

Receipt of Non-

No.

Registration of

Companv

AIG BUSINESS

PARTNERS

AIG BUSINESS

KABUSHIKI

AIG BUSINESS PARTNERS

PARTNERS

KAISfL\

KABUSHIKI KAISfL-\

KABUSHI KAISHA

P-44

,\i\IERIC.\N

AIG INSURo\NCE

HOJ\IE NEW

NEW ZEAL \ND

.\IG INSURANCE NEW

ZEAL\ND (RQ

44

LIMITED

ZEAL\ND LIMITED

030)

P-76

45 .\IG CYPRUS LIJ\l!TED

AIG CYPRUS LIMITED

CfL\RTIS CYPRUS

P-81

d. Supported by SEC Certification of Non-registration of Company and Consularized Foreign Registration but the name indicated in the latter document is different from petitioner's client nam~

46 47 48 49 50 51 52 53 54

SEC

Consularized Foreign

Certificate

Registration of Non-

Registration

Name of the

Customer's Name per of Company

Exhibit

Company indicated

Name of Company

Official Receipt

(Exh. No.)

No.

in the document

AIG

AIGEUROPE

DEN!VIARK/DANISH

DANSK FILIAL AF

AIG

BRANCH

P-121-a,

AGEUROPE

DEN!VIARK/DANISH P-121-b,

LIMITED UNITED

BR.\NCH

P-46

P-121-c

KINGDOM

AMERJCAN

,\IG

INTERN"\ TIONAL

DENi\L\.RKjD,\NISH

ADJUSTMENT

AIG CLAIMS, INC.

BRANCH

P-45, P-45-a

P-120-a

COJ\!P,\NY, INC.

PRJV"\TE CLIENT

PRIVATE CLIENT

CHARTIS CAPEX,

GROUP

GROUP

P-114

P-189-a

INC.

CHARTIS US;

CHARTIS US;

CI-L\RTIS US

CI-L\RTIS US

DOMESTIC .\&H;

DOMESTIC A&H;

CHARTIS US SRV

CHAR TIS US SRV

NHIG HOLDING

DEPTS

DEPTS

P-105

P-180-a

CORP.

AIG Europe Limited

UK filial i Sverige (formerly Chartis P-168-a,

Europe Limited UK

CH.\RTIS EUROPE

CI-L\RTIS EUROPE

P-168-b, filial i Sverige)

SA-SWEDEN

SA SWEDEN

P-93

P-168-c

AIG Europe Limited

P-158-a, (Belgium branch) P-158-b, [formerly Chartis CI-L\RTIS EUROPE S.\

CI-L\RTIS EUROPE

P-158-c,

Europe Limited]

-BELGIUM

SA- BELGIUM

P-83

P-158-d

AIG Europe Limited

sivuliike (formerly -157-a,

Chartis Europe

CI-L\RTIS EUROPE

CHARTIS EUROPE

P-157-b, Limited sivuliike) SA - F!NL\ND

SA - FINL\ND

P-82; P-82-a P-157-c

e. Supported by SEC Certification of Non-Registration of Company and documents which cannot be considered as valid proof of foreign incorporation/ registration

SEC

Certificate of

Non-

Customer's Name per

Purported Proof of Foreign

registration

Name of Company

Official Receip!

Incorporation/Registration

of Company.

CI-L\RTIS EUROPE S.\- CI-L\RTIS EUROPE S,\- FR.\NCE FR.\NCE

P-159-a

P-84; P-84-a

AMERlCAN HOJ\IE

.\l\IERICAN HOi\IE ASSUR.\NCE JAPAN "\SSURANCE JAPAN (AH}, ],\PAN (.\HA V.PAN) P-150-a to P-150-e

P-75

f. Supported by SEC Certification of Non-Registration of Company and Consularized Foreign Registration but without English translatiofY 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Name of Company

"".IG GLOBAL SERVICES 55

MALAYSIA

">\IG SHARED SERVICES (1\1) 56

SDNBHD

CfL>\RTIS CHILE COI\!P.>\NIA 57 SEGUROS GENERALES S.A.

Customer's Name per

Official Receipt

"".IGGLOBAL

SERVICES

1\L>\L>\YSL-\

AIGGLOBAL

SERVICES

1\L>\L\YSIA

CHAR TIS CHILE

COMPANIA

SEGUR OS

GENERALES S.,>\

SEC Certificate

Consularized of Non-

Foreign

Registration of

Registration

Company

P-131-b, P-131- c

P-56

P-142-a, P-142- b P-67; P-67-a

P-198

P-80; P-80-a Thus, only the following clients of Petitioner are considered as non- resident foreign corporation doing business outside the Philippines, to wit:

Consularized

SEC Certificate of

Name of Company

Customer's Name per Official

Foreign

Non-Registration

Receipt

Registration of Company

(Exhibit:)

(Exhibit:)

.\IG AUSTRALIA LIMITED;

INTERCOi\!PANY CLEARING AIG "".USTR.ALIA LIMITED

HOUSE NY-AUS 0106

P-118-a

P-43

P-123-a, i\IG EUROPE LIMITED / P-123-b, CfL>\R.TIS EUROPE S.A.

,>\IG EUROPE LIMITED HQ P-123-c P-48, P-48-a

AIG INSURANCE

COi\!PANY CHINA AIG INSUR.".NCE COMP.>\NY

LIMITED

CHINA LIMITED

P-132-a

P-57; P-57-a AIG KOREA INC.

AIG KOREA INC.

P-135-b

P-60

"".IG i\!ETROPOLITANA

AIG METROPOLITAN CIA DE

CIA DE SEGUROS Y

SEGUROS Y REASEGUROS

RE,>\SEGUROS S.A.

SA

P-197

P-62

AIG TAIW,>\N INSUR.\NCE

AIG TAIWAN INSURANCE

CO., LTD.

CO., LTD.

P-145-a

P-70

AIGVIETNAM

INSURANCE COi\!P,\NY AIG VIETNAM INSUR.".NCE P-146-a, P-146-b,

LIMITED

COMPANY LIMITED

P-146-c, P-146-d P-71; P-71-a CfL\RTIS EUROPE S.\- IT,\LY CfL".RTIS EUROPE SA- ITALY P-160-a, P-160-b P-85; P-85-a

CfL\RTIS EUROPE SA -

CfL".RTIS EUROPE SA- NETHER.L".NDS

NETHERLANDS

P-161-a, P-161-b

P-86

CHARTIS EUROPE S"\ -

SPAIN

CfL>\RTIS EUROPE SA- SP.>\IN

P-163-a

P-88; P-88-a CfL>\RTIS EUROPE S.".·

CfL>\RTIS EUROPE SA-

CZECH REPUBLIC

CZECH REPUBLIC

P-165-b

P-90

CfL\RTIS INSURANCE

CfL\RTIS INSUR.".NCE HONG HONG KONG LTD.

KONG LTD.

P-169-a, P-169-b

P-94

CfL".RTIS SINGAPORE GL-\RTIS SING.\PORE P-179-a, P-179-b, P-104; P-104-a; P- INSUR.\NCE PTE LTD INSUR.\NCE PTE LTD P-179-c, P-179-d 104-b CHAR TIS US ; CfL\RTIS US CHARTIS US; CfL\RTIS US DOMESTIC ,\&H;

DOMESTIC .\&H; CfL\RTIS

CfL\RTIS US SRV DEPTS

USSRVDEPTS

P-180-a

P-105

CfL\RTIS INSUR.\NCE CfL\RTIS INSUR.\NCE P-185-a, P-185-b,

INDONESL\

INDONESL\

P-185-c, P-185-d

P-110

LEXINGTON; LEXINGTON

LEXINGTON

INSUR.\NCE COMPANY

P-186-a

P-111; P-111-a ~ 73 74

NEW I-1.:\MPSHIRE

INSURANCE TI-L\IL>\ND

Al\!ERICAN

INTERN"\ TION"\L GROUP

ICH (fao NEW HAMSPSHIRE

INSURANCE THAIUND)

P-188-a

P-113

AIG CORP HRNY;

">\IG CORPORATE O&S

OPE~\TIONS

DEVELOPI\!ENT;

AIG INC.,El\IPLOYEE RELATIONS DEPT.;

CHARTIS ENTERPRISE DATA

1\L\NAGEI\!ENT;

GLOBAL FIN.\NCE O&S

P-191-a

P-116

Anent the second essential element and in relation to the fifth requisite for the granting of input VAT refund, Petitioner presented the Certifications68 of bank inward remittances issued by East West Banking Corp for the period January 1 to December 31, 2014 purportedly showing the remittances of its foreign clients/ affiliates.

Considering that said Certifications establish the fact of payment ''in acceptable foreign currency and accounted for in accordance with the roles and regulations of the BSP'~ 69 Petitioner is considered to have complied with the above-stated second essential element, as well as, to the fifth requisite for the grant of the claim for refund.

In any event, equally important to consider is that the said foreign currency remittances referred to under Section 108(B)(2) must be duly supported by VAT zero-rated ORs in accordance with Section 113(A)(2), (B) (1 ), (2) (c) and (3) in relation to Section 23 7 and 238 of the NIRC of 1997, as amended, and implemented by Section 4.113-1(A)(2), B(1) and (2)(c) of RR No. 16-05 which 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 information stated in the said provisions, as quoted earlier. In the instant case, aside from the Certifications of bank inward remittances, Petitioner also presented its Schedule of Zero-Rated Sales70 and the related 0Rs71 purportedly supporting its total declared zero-rated sales/ receipts for the CY 2014 of 1"2,086,692,750.89. A scrutiny of the aforesaid documents shows that Petitioner's sales of services to its client -affiliates considered as non-resident foreign corporations doing business outside the Philippines, which are duly supported by VAT zero- rated ORs and certifications of bank inward remittances, amounted to 1"273,388,511.77 (US$6,175,261.30) for CY 2014, detailed as followy

INWARD

REMITTANCE

AMOUNT AMOUNT REFERRENCE

COMPANY NAME | O.R. NO. DATE IN PHP IN USD EXHIBIT NO. EXHIBIT

FIRST QUARTER OF CY 2014

AIG AUSTRALIA

LIMITED 2027 28-Heb-14 3,752,352.32 84,485.80 P-627 C203067RBK022514 P-1165 a ED) BPO-1868 24-Jan-14 2,258,369.51 51,802.63 P-230 160115094229000 P-1164

CHARTIS EUROPE

S.A. BPO-1929 28-Feb-14 243,348.75 5,479.10 P-291 160129094372000 P-1164 585.00

AIG

METROPOLITANA

CIA DEE SEGUROS

Y REASEGUROS

S.A. 1958 -Jan- 23,850.45 P-560 1°60107433775000 P-1165 INSURANCE 2014 21-Keb-14 1,438,577.86 32,396.55 P-614 0552000049]M P-1165

COMPANY $06408503EE01/

LIMITED 2064 28-Mar-14 1,503,930.93 33,681.05 oe I 663 50777000851'C P-1165 | p20 _|

CHARTIS KUROPL 9194100021FC

SA-TTALY p-272 3266200028KC P-1164 1,501.50 | _P-273 32662000281'C

3609300296KC /

23-Jan-14 410,331.74 9,389.16 P-226 G1440220110101 >-1164 28-Feb-14 824,669.40 18,856.58 P-290 1°60220299968000 P-1164

CHARTIS EUROPE

SA -

NUSTHERLANDS

CHAR TEIS EUROPE

SA - SPAIN

CHARTIS EUROPE,

SA- CZECH

BPO-1864

BPO-1928

REPUBLIC BPO-1860 14-Jan-14 17,985.45 404.95 p-222 031710001 31F'C P-1164 CHARTIS BPO-1882 F 173,214.60 er 900.00 P-244 1560122538308000 A P-1164

INSURANCE

HONG KONG

Lr. ae 21-Feb-14 13,868.54 INSURANCE PTE 2038 14-Mar-14 5,189,000.58 | 116,883.43 | _P-638 3400049F'C P-1165 1951 02-Jan-14 7,960,931.19 184,756.01 P-553 8863600357FC P-1165

LEXINGTON

INSURANCE 5687800008 KC /

COMPANY BPO-1858 10-Jan-14 2,549,181.81 58,959.88 P-220 5689200008FC P-1164 BPO-1914 | 07-Feb-14 901,426.54 20,296.00 | P-276 68473000301C P1164 NEW HAMPSHIRE 2061 27-Mar-14 5,660,407.00 | 127,484.64 | —_ P-660 C463544RBK032614 | P-1165

INSURANCE

‘THAILAND (ICI 2000 03-Keb-14 2,481,412.84 55,870.06 | P- a E Hee aro 182700000 Pst 1164 Po fF 63,587,777.91 | 1,423,852.49 |

SECOND QUARTER OF CY 2014

AIG INSURANCE

COMPANY CHINA $064161057F001 /157

LIMITED a 19-Jun-14 645,259.52 14,399.90 a 790 8100161 FC P-1165 262,304.92 5,995.50 | prio | 710 05: May-14 185,327.42 4,095.00 210 05-May-14 220,851.45 2014041700075920 P-1165 = ee 2oraosaso00806s4 | p.1165 2233 50.Jun14 | 254,508.48 | 508.48 | p.g29 | 2234 30-Jun-14 58,346.69 1,337.00 P-830 201405 2300080625 P-1165 2107 05-May-14 126,157.50 2,835.00 P-706 2014062000059091 P-1165

AIG TAIWAN

INSURANCE CO., LID.

2108 101,352.75 | _228200[ pro | |

Fron _| $0641061817501/

$064147059AB01/04

os | sonore | rysesou9 | aseone| pan | same | pares | 2235 30-Jun-14 1,136,591.29 25,631.60 P-831 3600177FC P-1165 061959900|062514 / 2232 30-Jun-14 21,805,802.36 487,561.45 P-828 F60625107144000 P-1165 2185 09-Jun-14 14,135,149.41 314,331.35 P-781 3094655120/1 P-1165 INSURANCE PTE 2227 30-Jun-14 5,882,817.24 132,666.92 P-823 2014062300038110 P-1165

Lib

2091 22-Apr-14 5,816,717.06 | 128,532.22 | ___P-690 3544099779/1 P-1165 ee eee 54,295,929.52 | 1ainsa928| | | 31-Jul-14 3,744,215.94 84,436.90 | P-871 H60728053166000 03-Sep-14 5,567,925.30 | 126,753.01 | _P-936 1°60822493045000 P-1165 2236 10-Jul-14 5,131,606.65 | 113,280.50 | _P-832 60702066243000

$064178064B801 /077

2237 10-Jul-14 380,219.21 8,512.00 P-833 7100181FC P-1165 BPO-2072 28-Jul-14 1,798,513.77 40,950.00 P-434 8970000063 P-1166 2293 11-Aug-14 73,990.56 1,708.00 P-888 219056A1401 P-1165 2

AIG VIETNAM

INSURANCL

COMPANY

LIMITED

CHARTS

INSURANCE,

HONG KONG

Lb.

CHARTIS

SINGAPORE

THIRD QUARTER OF CY 2014

AIG AUSTRALIA

LIMTVED

AIG EFUROPH

LIMITED /

CHARTYIS EUROPE

AIG INSURANCE

COMPANY CHINA

LIMITED

2261 p.857 casero |

2262 1606303443700

263 Se ee ee ee . 160709 163686000

P-1165

I

P-1165

i 2264

2326 1165

2343 P1165

2351 P1165

2382 | 11-Sep-14 P1165

2357 | 15-Sep-14

1D. .

2329 29-Aug-14 420,814.88 9,570.50 P-923 201408260002556

AIG VIEINAM

Forays | soma] eor00s| vow | “sono INSURANCE 2325 27-Aug-14 2,917,436.89 66,730.63 P-919 2330450001 ?-1165

AIG TAIWAN

INSURANCE CO., 2-1165

P-1165

»-1165 COMPANY 2370 29-Sep-14 1,291,364.79 29,390.20 P-963 $06426701D361D01 LIMITED 2269 23-Jul-14 1,163,608.23 26,663.80 | P-865 $06420312A8401 CHARIS 2259 19-Jul-14 4,452,090.03 101,253.12 P-855 C2481110CP071614 ONG. KON | s0-Augi4 | 3,423,459.43 | 78,464.15 | poze | 237323019 ||P HONG KONG 2334 30-Aug-14 3,423,459.43 78,464.15 P-928 237323019 -1165 2367 3,182,423.72 72,573.76 P-960 26538825 P-1165

I

I

]

P-1165

P-1165

1

SINGAPORE

INSURANCE PIT!

LYD

NEW HAMPSHIRE

INSURANCE

THAILAND (CH

WD. ;

2271 3,852,278.17 88,268.62 | _ P-867 20140716000787743 | P-1165

CITARTIS >

2330 29-Aug-14 6,052,671.13 137,784.52 P-924 201 4082000038500 2335 01-Sep-14 19,537,626.55 447,277.16 P-929 85542002401'C P-1165 ox,s5,63s.78 | 18590527} |

FOURTH QUARTER OF CY 2014

AIG AUSTRALIA 2573 24-Dee-14 20,818,194.78 | 469,098.33 | P-1163 F6121405507000 21165 LIMITED 2467 17-Nov-14 17,136,161.44 | 392,853.09 | P-1060 F61030290287000 P-1165 AIG MUROPE 2461 31-Oct-14 93,751.20 2,088.00 | P-1054 $06430008E5.\01 P-1165

P-1165

I

HL

I.IMITED I

CIIARTIS EUROPE

S.A 2503

ATCi TNSURANCI•:

COMPANY Cl IIN1\

2457 I.IMI'J'ED 2566 ,\](;KOREA INC:.

2449 2538

AIGTAIWAN

2387 INSURANCE CO., J:J'D.

2470 2495

AIG \'IE'INAM

INSURANCE

C<>MPANY

LJMI'J'ED

2440

TOTAL

24-Nov-14

29-Ckt-14

24-D~.:c-14

24-Dec-14

13-D~.:c-14 07-0ct-14

07-Nov-14

22-Nov-14

29-0ct-14 108,590.37 2,422.00 1'-1095

S064325059 1'301

273,825.13 6,241.74

P-1050

1'61 027057710000 428,919.42 9,590.00 1'-1156 1'61218034329000

I'D DTSOOOOO 1 060 14

45,667,836.52 1,019,598.94 1'-1 042 1110001410290076 807,982.23 17,985.91 1'-1128 2014121000071636 696,166.45 15,957.97

P-980

2014092900094150 371,059.43 8,449.12

P-1 063

2014103000071993 445,251.83 10,071.80

P-1087

2014112000076517 1,168,426.76 26,470.46 1'-1 033

7924000289JS

88,016,165.56 1,980,827.36 273,388,511.77 6,175,261.30 As for the third essential element, records show that Petitioner is an ROHQ licensed 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 development72•

P-1165

P-1165

1'-1165 1'-1165

P-1165

P-1165

1'-1165 1'-1165

P-1165

Pursuant to the service agreements73 entered into between Petitioner and its non-resident foreign client-affiliates doing business outside the Philippines, the services provided by Petitioner for the subject period of claim, included among others, information technology (IT) services, administrative and other certain services to assist the AIG group of companies. These services clearly fall within the scope of "services other than processing, manufacturing or repacking of goods", hence, complying with the third essential element. Lasdy, as to the fourth essential element, out of the aforementioned service agreements, only the following have a provision as to where the services are to be performed by the Petitioner, to wit:

SERVICE PROJECT

COMPANY NAME

SERVICE AGREEMENT

LOCATION

Exhibit

Chartis Technology and Operations

"f\Ianagement Corporation

(Philippines)

Ground, 61h, 7th and grh Floors, The

Paragon Corporate Center

P-186,

Madrigal Business Park

Docket,

LEXINGTON /LEXINGTON

Alabang, Muntinlupa City, Vol. 6, p.

INSURANCE COMPANY

Statement of Work

Philippines

2615 ~ 72 /d. at Note 2, pp. 796 to 798, Exhibits "P-1" to "P-3".

73 Exhibits "P-123"

11P-132" "P-135" "P-137" "P-145" "P-146" "P-160"

11P-161" "P-163"

11P-165" "P-

'

I

I

I

I

I

I

I

I

I

169", "P-179",

11P-185

11 , "P-186", "P-188", and 11P-152".

No other document was presented by Petitioner to prove that the services it rendered to its other non-resident foreign client-affiliates doing business outside the Philippines were performed in the Philippines. In fine, only Petitioner's sales of services to "Lexington/Lexington Insurance Company" in the amount of !'3,450,608.35 (US$79,255.88) qualifies for VAT zero-rating under Section 108(B)(2), in relation to Section 113(A)(2), (B)(1), (2)(c) and (3), both of the NIRC of 1997, as amended. Accordingly, out of the !'2,086,692,750.89 zero-rated sales/receipts declared in Petitioner's 2014 Quarterly VAT Returns, only the amount of P1 0,852,469.06 qualifies for VAT zero-rating, in compliance with the fourth and fifth requisites:

INWARD

REMITTANCE

COMPANY

O.R.

AMOUNT

AMOUNT

REFERENCE

NAME

NO.

DATE

INPHP

INUSD

EXHIBIT

NO.

EXHIBIT

Zero-rated Sales under Section 108(0), '2) of the NIRC of1997, as amended

BPO-

5687800008 PC I

LEXINGTON

1858 10-]an-14 2,549,181.81 58,959.88

P-220

5689200008FC

l'-1164

INSURi\NCE

BPO-

07-Feb-

COMPANY

1914 14 901,426.54 20,296.00

P-276

6847300030FC

P-1164

Subtotal

3,450,608.35 79,255.88 Zero-rated Sales under Section 108(B)(3) of the NIRC of1997, as amended

AIG Shared

Services-

Business

Processing,

BPO-

06-Feb-

Inc.

1916 14 7,401,860.71 166,655.35

P-278

8970000063 l'-1166

TOTAL

10,852,469.06 245,911.23 Having found that Petitioner had VAT zero-rated sales/receipts on!J in the total amount ofP10,852,469.06 for the subject period of claim, there is only a partial compliance with fourth and fifth requisites for the grant of refund or tax credit of input VAT in the instant case. The Court shall then proceed to determine whether Petitioner complied with the remaining requisites pertaining to the input VAT being claimed for refund or issuance of a tax credit certificate

Claimed

Input

VAT

Not

Transitional Input Taxes

The claimed input taxes do not appear to be transitional input taxes, as understood under Section 111 (A) of the NIRC of 1997, as amended, to wi/ !

"SEC. 111. Transitional/ Presumptive Input Tax Credits. - (A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person who elects to be a VAT- registered person shall, subject to the filing of an inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax." Transitional input tax credit operates to benefit newly VAT -registered persons, whether or not they previously paid taxes in the acquisitions of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer.74 Since there is no showing that the claimed input VAT are transitional input VAT, Petitioner has complied with the sixth requisite for the grant of an input VAT refund.

Input VAT Being Claimed

were Due or Paid In its Quarterly VAT Returns for CY 2014, Petitioner reflected available input VAT in the total amount of .P50,253,294.16, arising from its amortization of input VAT on purchases of capital goods exceeding .P1 million, domestic purchases of goods other than capital goods and domestic purchases of services. Since Petitioner had likewise incurred an output tax due for the same period amounting to .P5,348,324.79, Petitioner's excess input tax amounted only to 1"44,904,969.37, computed as follows: 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter

(Exhibit "P-

(Exhibit 11P-

(Exhibit up.

(Exhibit 11P-9")15

10")76

1PJ)77

12")711

Input Tax Deferred on Capital

Goods exceeding Pl ~fillion from

Previous Quarter

I'

3,213,881.34 I' 3,062,741.41 79 I' 2,752,398.26 3,528,541.31 74 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 158885 and 170680, April 2, 2008.

75 /d. at Note 2, pp. 870-871.

76 /d., pp. 872-873.

77 ld., pp. 874-875.

78 /d., pp. 876-877.

79 The input VAT carried over was lower by 1>19,148.93.

CY 2014

3,213,881.34 ~

Add: Input Tax on Capital Goods

exceeding Pl ~fillion Purchased this

Quarter

Less: Input Tax on Purchases of

Capital Goods exceeding Pl ~fillion deferred for the succeeding period ~\mortization of Input Tax on Capital Goods exceeding 1'1 l\lillion

Add· Current Input Tax on:

Domestic Purchases of Goods

Other than Capital Goods 179,825.06 3,081,890.34

I'

311,816.06 1,655,621.41 136,315.43 1,150,397.17 1,820,604.46 3,287,142.12 2,752,398.26 3,528,541.31 4,851,647.18 4,851,647.18

I'

446,658.58 374,254.12 497,498.59 1,649,376.28 332,205.86 422,514.93 583,310.82 2,993,653.02

Domestic Purchase of Services

12,320,419.12 11,218,322.86 8,418,766.01 13,652,756.87 45,610,264.86

Total Available Input Tax

1'14,287 ,856.59 1'11,997,187 .30 9,215,535.06 14,733,566.28 50,253,294.16

Lus: Output Tax Due

1,685,439.94 1,149,423.43 1,300,766.92 1,212,694.50 5,348,324.79

Excess Input Tax

1'12,602,416.65 1'10,847, 763.87 7,914,768.14 13,520,871.78 44,904,969.37 Out of the excess input VAT of P44,904,969.37 for CY 2014, Petitioner is claiming refund only in the amount of P43,912,521.20 alleging that the same is attributable to its zero-rated sales of services for the same period. In support of its claim for refund/issuance of tax credit certificate, Petitioner submitted its Summary List of Purchase Transaction ReliefB0 and the related suppliers' official receipts and invoices, and other documents81 , which were all examined by the ICP A.

The results of the ICP A's verification of Petitioner's reported input VAT of P50,253,294.16 are summarized as follows: 82

Findings

Total Input VAT with No Noted Exceptions

With Noted Exceptions:

1. Purchase of service supported by V~>\ T OR which did not show the VAT amount separately

2. Invoices/ official receipts which are out of period

3. Invalid supporting documents

4. No original copies of the supporting documents examined

5. Incorrect TIN

6. No TIN indicated

7. Purchase of services duly supported by VAT offtcial receipts but with alteration

on the TIN of the Company

80 Exhibits "P-2002 to P-2013".

81 Exhibits "P-1169 to P-2001".

82 Jd. at Note 2, pp. 566 to 567, Exhibit "P-194".

Input VAT

I' 44,215,699.38 15,544.39 1,133,647.80 3,478,882.99 3,188.57 139,615.72 50,425.20 374,624.42

Reference to

!CPA Report

-Exhibit P-

194

Exhibit

P-1169 to P-1869

(except for Exhibits

Annex H

under Annex 0)

Annex I

P-1870 to P-1874

Anne~J

P-1875 to P-1915

AnnexK

P-1916 to P-1996

~-\.nnex L

P-1997

Annex M

P-1998 to P-1999

AnnexN

P-2000 to P-2001

P-1201 to P-1204; P- 1295 to P-1208; P- 1360 to P-1362; P-

Annex 0

1410 to P-1419; P- 1466 to P-1471; P- / !

8. No supporting documents

Subtotal

Total Input VAT per Returns as accounted for by the !CPA 841,665.65 6,037,594.74 1'50,253,294.1283 1513 to P1514; P-1568 to P-1583; P-1647 to P-1652; P-1698 toP- 1755; P-1812; and P- 1837

Annex P

As correcdy found by the ICP A, the claimed input tax due or paid of 1>6,037,594.74 should be disallowed for not being properly substantiated by VAT invoices (for domestic purchases of goods) and official receipts (for domestic purchases of services) as prescribed under Sections 11 O(A) and 113(A) and (B), 237 and 238 of the NIRC of 1997, as amended, in relation to Sections 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-05, as amended. Furthermore, Petitioner's claimed input tax paid in the amount of 1>960,387.95 related to its domestic purchases of services, should likewise be disallowed because the supporting official receipts do not show the VAT component separately from the purchase amount, which is in violation of the earlier quoted Section 113(B)(2)(a) of the NIRC of 1997, as amended, as implemented by Section 4.113-1(B)(2)(a) ofRR No. 16-05, as amended. Below is the breakdown of the additional input VAT disallowance ofJ>960,387.95:

Document Type

Document

Input

Supplier's Name and Number

Date

VAT

Exhibit No.

RUBICON PRINT AND GR..\PHICS INC.

OR 7814

10-]an-14

I'

1,178.64

P-1172

:VL-\RSMAN DRYSDALE TR..-\ VEL, INC.

OR 354246

10-Jan-14

4,267.99

P-1225

:\L-\RSMAN DRYSDALE TR..-\ VEL, INC.

OR 354245

10-Jan-14

467.70

P-1226

NEXUS TECHNOLOGIES INC.

OR 49421

12-Feb-14

341,966.94

P-1231

FUJI XEROX PHILIPPINES, INC.

OR199411

14-Feb-14

903.44

P-1260

FUJI XEROX PHILIPPINES, INC.

OR199410

07-Feb-14

2,471.66

P-1261

I

:\L-\RSlvL-\N DRYSDALE TR..-\ VEL, INC.

OR356191

07-Feb-14

4,730.94

P-1262

l\L\RSlvL-\N DRYSDALE TR..-\ VEL, INC.

OR 356190

07-Feb-14

540.00

P-1263

l\L-\RSl\L-\N DRYSDALE TR..-\ VEL, INC.

OR 356192

07-Feb-14

2,169.01

P-1264

i\L\RS:\L-\N DRYSDALE TR..-\ VEL, INC.

OR 356620

21-Feb-14

108.00

P-1265

l\L-\RSi\L-\N DRYSDALE TR..-\ VEL, INC.

OR 356622

21-Feb-14

8,685.61

P-1266

l\L\RSlvL'\.N DRYSDALE TR..-\ VEL, INC.

OR 356622

21-Feb-14

160.43

P-1266

MARSi\L'\.N DRYSDALE TR..-\ VEL, INC.

OR 356621

21-Feb-14

4,860.00

P-1267

RG l\IEDITRON INC

OR05042

13-l\lar-14 34,821.43

P-1301

INNOVE COMMUNIC.\TIONS INC.

OR 411475

10-l\lar-14 15,388.82

P-1309

INNOVE CO!\!l\IUNIC.-\TIONS INC.

OR 412166

14-l\lar-14 15,221.49

P-1310

COLL'\.BERA SOLUTIONS PRIV,-\TE

LIMITED

OR 0581

08-Apr-14

13,046.40

P-1354

FUJI XEROX PHILIPPINES, INC.

OR 204987

25-i\pr-14 1,836.86

P-1355

FUJI XEROX PHILIPPINES, INC.

OR 204988

25-Apr-14

2,196.45

P-1356

COLL\BER..-\ SOLUTIONS PRIV"-\TE

LIMITED

OR 0624

30-May-14

5,097.60

P-1403

PRIME TECHNOLOGY SPECIALISTS INC

OR 8104

16-May-14

10,418.81

P-1404

~ 83 With minor difference of !>.04 as compared to the reported amount of !>50,253,294.16.

OE RILEY & ASSOCIATES INC.

WVC DEVELOPMENT CORPORATION

FUJI XEROX PHILIPPINES, INC.

FUJI XEROX PHILIPPINES, INC. OR 209127 FUJI XEROX PHILIPPINES, INC.

FUJI XEROX PHILIPPINES, INC.

MARSMAN DRYSDALE TRAVEL, INC. 24-Jun-14 MARSMAN DRYSDALE TRAVEL, INC.

COLLABERA SOLUTIONS PRIVATE

LIMITED OR 0691 31-Jul-14 33,052.80 P-1487 OE RILEY & ASSOCIATES INC. OR 0042 37,404.10 | __P-1507 MARSMAN DRYSDALE TRAVEL, INC. OR 363643 P-1508 FUJI XEROX PHILIPPINES, INC. OR 214036 801.23 | P-1565 P3OPLE4U, INC. OR 0738 58,602.85 | _P-1643 FUJI XEROX PHILIPPINES, INC. OR 221752 10-Oct-14 1,836.86 INCORPORATED OR 1541 19-Dec-14 3,582.00 P-1806 Po ora 860,387.95] Thus, based on the foregoing, Petitioner complied with the seventh requisite, 4¢, the input VAT was due or paid, but only to the extent of P43,255,311.47, computed as follows:

Total Input VAT per Quarterly VAT Returns for CY 2014 P 50,253,294.16 Per ICPA Report P 6,037,594.74 Per this Court’s further verification 960,387.95 Total Disallowances P 13,338,755.65 Valid Input VAT Due or Paid P43,255,311.47

Input VAT Not Applied Against

Any Output Tax During and in

the Succeeding Quarters is Only P37,906,986.68 Deducting the output tax liability for 2014 of Petitioner from these available input VAT yields an excess input VAT due or paid amounting to P37,906,986.68, as shown below:

Valid Input VAT Due or Paid P 43,255,311.47 Less: Output VAT Due for 2014 5,348,324.79

I Excess Valid Input VAT Due or Paid

P37 ,906,986.68 j Although the said amount of P37 ,906,986.68 formed of the input VAT claim of P43,912,521.20 carried-over by Petitioner in its succeeding Quarterly VAT Returns,84 the same remained unutilized until it was deducted as 'VAT Refund/TCC Claimed" in its Quarterly VAT Return for the first quarter of CY 2016.85 Therefore, the subject claim no longer formed part of the excess input VAT of PS5,476,003.61 86 as of the end of the first quarter of CY 2016. Hence, Petitioner is, in effect, deemed to have fulfilled the eighth requisite for the refund/tax credit of input VAT.

Determined

Excess

Input

Taxes Due or Paid Must Still

be Allocated to the Valid

Zero-rated

Zero-rated

Ascertain

Amount

or

Effectively

Sales/Receipts to

the

Refundable

To reiterate, the ninth reqwstte is to the effect that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be direcdy and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume.

As stated earlier, for the CY 2014, Petitioner's reported total sales/ receipts consisted of both zero-rated sales/ receipts and VA Tables sales/ receipts. However, considering that Petitioner's input VAT cannot be direcdy identified with specific sales, We shall allocate the excess valid input VAT ofP37,906,986.68 proportionately on the basis of the volume of its sales, as follows:

Valid Zero-Rated Sales/Receipts Per this Court's Verification I' 10,852,469.06 Divided by the Total Sales/Receipts per 2014 Quarterly 'VAT Returns 2,131,262,124.17 Multjplied by Valid Excess Input VAT Due or Pajd

X

37,906,986.68 Excess Valid Input VAT Due or Paid Allocated to Zero-Rated Sales/Receipts

I'

193,023.84 L._ - -· -· -- - - -- -· - - - - - Such being the case, Petitioner has refundable excess input VAT in the amount of P193,023.84 which can be attributed to its valid zero-rated sales/receipts amounting to P10,852,469.06/

WHEREFORE, in light of the foregoing discussions, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, Respondent is ORDERED to refund or to issue a tax credit certificate in favor of Petitioner in the amount of P193,023.84, representing the latter's unutilized excess input VAT attributable to its zero-rated sales/receipts for the four (4) quarters ofCY 2014.

WE CONCUR:

0!::-r 0 ~ ...-) • <.._ MA. BELEN M. RINGPIS-LIBAN Auodate J UJ·tite ERL~.UY

Associate Justice

'ustice

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.

' ERL~P.UY AJJodate juJtia

Chairpmon

CERTIFICATION

Pursuant to Section 13 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.

Presiding Justice

•