Court of Tax Appeals · Special Second Division

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

CTA Case No. 9496 February 12, 2019

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SPECIAL SECOND DIVISION

DEUTSCHE

KNOWLEDGE CTA CASE NO. 9496

SERVICES PTE., L TO.,

Petitioner,

Members:

-versus-

CASTANEDA, JR., Chairperson, and

MANAHAN, JJ.

COMMISSIONER OF INTERNAL

Promulgated:

REVENUE,

J/ 7: n

a ·At •

FEB 1 z 2019 L

Respondent.

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

DECISION

CASTANEDA, JR., J.:

THE CASE

This is a Petition for Review¹ filed on November 21, 2016 by Deutsche Knowledge Services Pte., Ltd. to seek the refund or issuance of tax credit certificate

(TCC)

in the amount of P27,065,518.44, allegedly representing its excess and unutilized input value-added tax (VAT) attributable to zero-rated sales for the second (2nd) quarter of calendar year (CY) 2014.

THE FACTS

Petitioner

Deutsche

Knowledge

Services

Pte., Ltd.

is established as a regional operating headquarters (ROHQ) in the !<-

Philippines 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. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer, with Taxpayer Identification No. (TIN) 238-763-115-000. 2 Petitioner is licensed

by the Securities and

Exchange

Commission (SEC) 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.3 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue 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 the BIR National Office Building, Agham Road, Diliman, Quezon City.

In the 2nd quarter of CY 2014, petitioner claims to have rendered services in the Philippines to persons engaged in businesses conducted outside the Philippines, the payments for which were made in Euro and other acceptable foreign currency and accounted for in accordance with the rules and regulations of Bangko Sentral ng Pilipinas (BSP).4 Petitioner filed its original VAT Return for the 2nd quarter of CY 2014 with the BIR through electronic filing and payment system (eFPS) on July 21, 2014,5 alleging that it accumulated excess input tax in the total amount of P27,178,784.99. And out of this total amount, P27,065,518.44 is purportedly attributable to its zero-rated sales, which remained unutilized and/or unapplied against its output VAT liability.6 ~

CfA CASE NO. 9496

On June 24, 2016, petitioner filed with the BIR Large Taxpayers Regular Audit Division 3 (LTRAD 3) an application for tax credit/refund (BIR Form No. 1914) of its excess and unutilized input VAT for the 2nd quarter of CY 2014 in the amount of P27,065,518.44.7 There being no action taken by respondent on petitioner's administrative claim for refund, petitioner filed the present Petition for Review before the Court on November 21, 2016. Respondent filed his Answer8 on December 6, 2016, and interposed the following special and affirmative defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 4.

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

The amount of P27,065,518.44 allegedly representing excess and unutilized input VAT on alleged purchases of goods and services attributable to zero- rated sales for the 2nd quarter of calendar year 2014, was not properly documented.

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.

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 ?c-

and Development Corporation

vs.

Commissioner of

Internal Revenue, G.R. 145526, 16 March 2007:

XXX

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:

XXX

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 comply 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 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 Mino/co Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211}." pt- Respondent filed his Pre-Trial Brief on December 20, 2016, while petitioner's Pre-Trial Brief10 was filed on January 27, 2017. The pre-trial conference was held on February 2, 2017.11 The parties filed their Joint Stipulation of Facts and Issues12 on March 9, 2017, which the Court approved in its Pre-Trial Order13 dated March 20, 2017.

Petitioner

presented Ms.

Rachel

Concepcion14

and Mr.

Emmanuel Y.

Mendoza15,

the Court-commissioned Independent

Certified Public Accountant (ICPA), as its witnesses. On July 17, 2017, petitioner filed its Formal Offer of Evidence.16 Meanwhile, respondent's counsel manifested that the case has no report of investigation and upon motion, the parties were granted a period of thirty (30) days within which to file their respective memoranda.17 The Court declared the case submitted for decision as of March 6, 2018,18 considering respondent's Memorandum19 filed on February 15, 2018 and petitioner's Memorandum20 filed on March 2, 2018. Hence, this decision.

THE ISSUES

The parties submitted the following issues21 for the Court's resolution:

Whether or not petitioner is entitled to its claim for refund of or issuance of TCC for excess or unutilized input VAT in the amount of P27,065,518.44 for the 2nd quarter of CY 2014. ~

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

A. Whether or not petitioner incurred input VAT on its purchases of goods and services attributable to zero- rated sales for the 2nd quarter of CY 2014. B. Whether or not petitioner had zero-rated sales during the 2nd quarter of CY 2014, the consideration for which were 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 incurred by petitioner for the 2nd quarter of CY 2014 is duly supported by VAT invoices and official receipts. D. Whether or not the input VAT incurred by petitioner for the 2nd quarter of

CY

2014 amounting to P27,065,518.44 was applied against any output VAT or carried over to succeeding taxable periods. E. Whether or not petitioner's administrative and judicial claims for input VAT refund were filed within the periods prescribed under the Tax Code.

DISCUSSION

Pertinent to the resolution of the present case are the provisions of Sections 112(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, which provide: "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, Cfv apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the 8angko Sentral ng Pilipinas (8SP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales.

XXX

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. 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-quoted provision, in order to be entitled to a refund or tax credit of unutilized input VAT attributable to zero- yL rated or effectively zero-rated sales, the following requisites must be satisfied:

1. that the taxpayer is VAT-registered;

2. that the claim for refund was filed within the prescriptive period;

3. that 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.

Petitioner is a

VAT-

registered entity It is undisputed that petitioner is a VAT-registered taxpayer, with Taxpayer Identification No. 238-763-115-000 and BIR Certificate of Registration No. OCN 9RC0000270209. 22 Petitioner's administrative and judicial claims were timely filed Pursuant to Section 112(A) of NIRC of 1997, as amended, the application for refund or tax credit of unutilized excess input VAT must be filed within two years after 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 2014, which closed on June 30, 2014. Counting two years from the said date, petitioner had until June 30, 2016, within which to file its administrative claim for refund or tax credit. Thus, petitioner's administrative claim for the said quarter was seasonably filed on June 24, 2016.

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 one hundred twenty (120) days from the ]4..-

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 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 30 days.

Accordingly, from filing of petitioner's administrative claim on June 24, 2016, respondent had 120 days or until October 22, 2016 to decide on petitioner's claim. Since respondent failed to act on the said claim, petitioner had until November 21, 2016, the last day of the 30-day period, within which to file its judicial claim. Clearly, petitioner likewise timely filed its judicial claim via Petition for Review on November 21, 2016.

Petitioner had zero-rated sales during the second quarter of CY 2014 With regard to the third requisite, i.e., the existence of zero- rated sales, petitioner claims that it rendered services to non-resident entities not engaged in trade or business in the Philippines, the payments for which were made in Euro and other acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.

As such, these sales are subject to zero percent (0°/o) VAT pursuant to Section 108(8)(2) of the NIRC of 1997, as amended, which states: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

(B) Transactions Subject to Zero Percent (0%)

Rate.

- The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0°/o) rate: ~

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

(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 v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.23, 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 satisfied: 1.

the services must be other than processing, manufacturing or repacking of goods; 2.

the payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and 3.

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

Petitioner

is licensed by the

Securities

and

Exchange

Commission to do business as a regional operating headquarters (ROHQ) in the Philippines, pursuant to the Omnibus Investments Code of 1987, as amended by Republic Act (RA) No. 8756, and its implementing rules and regulations, particularly, 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; p-

training and personnel development; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 24 Such services are not in the same category as "processing, manufacturing or repacking of goods". Clearly, petitioner complied with the first requisite. In compliance with the third requisite, petitioner presented the following documents to prove that its clients/affiliates are non- resident foreign corporations doing business outside the Philippines:

1. SEC Certifications of Non-Registration of Company; 25

2. IntraGroup Service Agreements;26

3. Company

Registration

Documents

(Certificate

of Registration/Certificate of Incorporation/ Association); 27

4. AMinet Company Profile Fact Sheets; 28 and

5. Deutsche Bank Comprehensive List of Shareholdings 2013.29 However, said documents are insufficient to prove that petitioner's client is a non-resident foreign corporation doing business outside the Philippines.

The

Certificates

Registration/Foreign

Incorporation/

Association as well as the List of Shareholdings only prove that the named entities therein were incorporated/organized/domiciled abroad. However, they do not establish that such entities are not doing business in the Philippines. The SEC Certificates of Non-Registration show that the named entities therein are not registered corporations/partnerships in the Philippines. However, it does not necessarily follow that when an entity is not registered here, it is also a non-resident foreign corporations doing business outside the Philippines.lz-

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 C/ientlogic Phils., Inc.) v. Commissioner of Internal Revenue0, the Supreme Court held that while Sitel's documentary evidence, which included Certifications issued by the Securities and Exchange Commission and Agreements between Sitel and its foreign clients, may have established that Sitel rendered services to foreign corporations and received payment therefor through inward remittances, the said documents failed to specifically prove that such foreign clients were doing business outside the Philippines or have a continuity of commercial dealings outside the Philippines. Meanwhile, the Court 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 Group. 31 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 addition, the business registration documents attached to their counterpart AMinet Company Profile Facts Sheets are not duly authenticated.

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

SEC Certification Authenticated of Non-

Company

Registration

(Exhibit)

DB Consorzio S. Cons. a.r.l.

P-5

NONE

DB Energy Trading LLC

P-5.1

NONE

DB International (Asia) Limited

P-5.2

NONE

DB Services New Jersey, Inc.

DBOI Global Services Private Limited

DBOI Global Services UK Limited

Deutsche Asia Pacific Holdings Pte Ltd

Deutsche Asset Management Korea Company Limited

Deutsche Bank (China) Co. Ltd., Shanghai Branch

Deutsche Bank (Malaysia) Berhad

Deutsche Bank (Suisse) SA

Deutsche Bank Aktiengesselschaft Asia Pacific Head

Office

Deutsche Bank Aktiengesselschaft, Filiale Amsterdam Deutsche Bank Aktiengesselschaft, Filiale Bangkok Deutsche Bank Aktiengesselschaft, Filiale Brussel Deutsche Bank Aktiengesselschaft, Filiale Cayman

Islands

Deutsche Bank Aktiengesselschaft, Filiale Dubai

(DIFC)

Deutsche Bank Aktiengesselschaft, Filiale Ho-Chi-Min Deutsche Bank Aktiengesselschaft, Filiale HongKong Deutsche Bank Aktiengesselschaft, Filiale Jakarta Deutsche Bank Aktiengesselschaft, Filiale

Johannesburg

Deutsche Bank Aktiengesselschaft, Filiale Labuan Deutsche Bank Aktiengesselschaft, Filiale London Deutsche Bank Aktiengesselschaft, Filiale Mumbai

Deutsche Bank Aktiengesselschaft_L Filiale New York

Deutsche Bank Aktien_g_esselschaftL Filiale Paris Deutsche Bank Aktien_g_esselschaft, Filiale Prag_ Deutsche Bank Aktiengesselschaft, Filiale Seoul Deutsche Bank Aktiengesselschaft, Filiale Singapur Deutsche Bank Aktiengesselschaft, Filiale Taipei Deutsche Bank Aktiengesselschaft, Filiale Wein

Deutsche Bank Aktiengesselschaft Filiale Zurich

Deutsche Bank Aktiengesselschaft Inlandsbank

Deutsche Bank Luxembourg S.A. Deutsche Bank Netherland N.V.

Deutsche Bank PGK AG

Deutsche Bank Securities Inc.

Deutsche Bank Societa per Azioni

Deutsche Bank Trust Company Americas

Deutsche Bank Company Delaware

Deutsche Bank Trust Corporation

Deutsche Bank Sociedad Anonima Espanola

Deutsche Group Services Pty Limited

Deutsche Investment Management Americas Inc. Deutsche Securities Inc.

Deutsche Securities Korea Co.

Deutsche Trustees Malaysia Berhad

DWS Holding and Service GmbH

DWS Investment S.A.

P-5.³

NONE

P-5.⁴

NONE

P-5.⁵

NONE

P-5.⁶

P-7

P-5.⁷

NONE

P-5.⁸

NONE

P-5.⁹ P-7.1 P-5.¹⁰

NONE

P-5.¹¹ P-7.2 P-5.¹²

NONE

P-5.¹³

NONE

P-5.¹⁴

NONE

P-5.¹⁵

NONE

P-5.¹⁶

NONE

P-5.¹⁷

NONE

P-5.¹⁸ P-7.3 P-5.¹⁹

NONE

P-5.²⁰

NONE

P-5.²¹

NONE

P-5.²² P-7.11 P-5.²³

NONE

P-5.²⁴ P-7.4 P-5.²⁵

NONE

P-5.²⁶

NONE

P-5.²⁷ P-7.5 P-5.²⁸ P-7.6 P-5.²⁹

NONE

P-5.³⁰

NONE

P-5.³¹

NONE

P-5.32 P-7.7 P-5.33

NONE

P-5.34

NONE

P-5.35

NONE

P-5.36 P-7.8 P-5.37

NONE

P-5.38

NONE

P-5.39

NONE

P-5.40

NONE

P-5.41

NONE

P-5.42 P-7.9 P-5.43

NONE

P-5.44 P-7.10 P-5.45

NONE

P-5.46

NONE

P-5.47

NONE

P-5.48

NONE

CfA CASE NO. 9496

000 "Deutsche Bank"

PT Deutsche Securities Indonesia

RREEF Management GmbH

RREEF Management L.L.C.

P-5.49

NONE

P-5.50

NONE

P-5.51

NONE

P-5.52

NONE

Consequently, only the sales of services by petitioner to entities which are duly supported by the two 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. In relation to the second requisite, Sections 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), (B)(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services issue a VAT official receipt which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. -

A VAT-registered

person shall issue:

XXX

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

(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: $t.-

XXX

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

XXX

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and" (Emphasis supplied) "SECTION 4.113-1. Invoicing Requirements.- (A) A VAT-registered person shall issue:-

XXX

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

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

(c) If the sale is subject to zero percent (0°/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) Pursuant to the foregoing 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.

To prove that it rendered services to its non-resident foreign clients/affiliates and was paid in Euro duly accounted for in accordance with the rules and regulations of the 8SP for the second quarter of CY 2014, petitioner presented its Schedule of Zero-Rated Sales32, and the related official receipts33, sales invoices34, and bank inward remittances. 35 Upon scrutiny of the documents submitted, the Court finds that out of the P1,400,103,099.7736 zero-rated sales declared per VAT Return for the second quarter of CY 2014, only the amount of €19,028,312.32 with peso equivalent of P1,146,413,520.86, as detailed below, qualifies for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended:

OR

OR Exh.

Customer's Name

No.

Ref.

Deutsche Securities Inc.

5258

P-12-3

Deutsche Bank Aktiengesellschaft,

Filiale Sinqapur

5264

P-12-5

32 Annex 1 of Exhibit "P-12" (ICPA Report). 33 Exhibits "P-12-1" to "P-12-184", CD 34 Exhibits "P-12-1a" to "P-12-184a", CD. 35 Exhibits "P-12-1b" to "P-12-184b", CD. 36 Exhibit "P-30-4", Line 17, CD.

Inward

OR Amount in

Remittance

Valid Zero-rated

Euro

Exh. Ref

Sales in Php

109 714.89

P-12-36

6 754 632.86 257 171.95

P-12-56

15 820 755.45

Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5265 | p-12-6 421,607.37 P-12-6B 25,936,526.51 Deutsche Bank Aktiengesellschaft, Filiale Singapur 268 | P-12-7 Lo 131,460.94 P-12-7B —_ 8,072,957.18 Deutsche Group Services Pty Limited 5271 | P-12-10 __ 70,115.65 P-12-10B | _4,312,199.70 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5272 | P-12-11 24,704.96 P-12-11B 1,518,852.59 Deutsche Bank Aktiengesellschaft, | Filiale Hongkong P-12-12 94,278.01 | P-12-12B 5,796,180.19 | Deutsche Bank Aktiengesellschaft, | Filiale London P-12-17 1,839,056.20 P-12-17B 112,925,848.28 Deutsche Bank Aktiengesellschaft, l Filiale New York P-12-18 421,558.95 P-12-18B 25,885,506.95 Deutsche Bank Securities, Inc. P-12-19 161,455.54 P-12-19B _9,914,054.73 Deutsche Bank (Malaysia) Berhad P-12-23 23,606.23 P-12-23B 1,447,934.60 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office P-12-26 215,918.00 P-12-26B 13,243,755.67 | | Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office P-12-27 1,194,457.68 P-12-27B 73,264,413.69 Deutsche Bank Aktiengesellischaft, Filiale Seoul P-12-29 a __ 28,760.30 P-12-29B __1,767,361.71 Deutsche Asia Pacific Holdings Pte Ltd pohe30 8,882.34 P-12-30B 545,832.54 Deutsche Bank Aktiengeselischaft, Filiale London P-12-34 1,182,412.81 P-12-34B 73,026,573.07 Deutsche Bank Aktiengesellschaft, | Filiale Singapur _ 5315 | P-12-43 280,595.65 P-12-43B 16,755,982.49 Deutsche Bank Aktiengesellschaft, Filiale Hongkong _ 5316 | P-12-44 428,926.65 P-12-44B 25,613,680.89 Deutsche Securities Inc. 5321 | P-12-46 107,897.61 P-12-46B 6,438,499.64 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5323 | pri2-48_| 134,100.98 P-12-48B 8,002,115.25 Deutsche Bank Aktiengesellschaft, Asia | [ Pacific Head Office 5324 | P-12-49 217,354.46 P-12-49B 12,970,042.73 Deutsche Bank Aktiengesellschaft,

Filiale Seoul

| Deutsche Bank Aktiengeseilschaft, Filiale New York 5326 P-12-50 | 40,521.94 P-12-50B | _2,425,256.75 Deutsche Bank (Malaysia) Berhad 5328 | P-12-52 23,606.23 P-12-52B 1,412,843.72 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5331 P-12-53 24,704.96 | P-12-53B 1,478,603.22 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office | 5332 P-12-54 1,133,813.70 P-12-54B 67,850,348.39 Deutsche Bank Aktiengesellschaft, ~ | Filiale New York 5333 P-12-55 i 422,725.00 P-12-55B 25,296,958.86 Deutsche Bank Aktiengeseilschaft, Filiale Hongkon | 5336 P-12-57 i _ 99,185.92 P-12-57B | 5,935,542.34 Deutsche Bank Aktiengeseilschaft, | P-12-62 28,760.30 P-12-62B 1,722,722.67 Deutsche Bank Aktiengesellschaft, Asia Filiale London 5345 | P-12-64 | 82,852.00 P-12-64B _ 4,947,249.51 a | Deutsche Bank Securities, Inc. 5346 -12-65 183,901.95 P-12-63B 10,981,133.01 Deutsche Bank Aktiengesellschaft, | Filiale London |_9353 4 P1270 {— 66,066.40 | — P-12-70B 3,931,923.43 Deutsche Bank Aktiengesellschaft, | Filiale London 5358 | P-12-72 2,813,596.51 P-12-72B | 167,450,414.11 Deutsche Securities Inc. 5369 P-12-81 538,670.98 P-12-81B 32,150,044.16 Deutsche Securities Inc. 5370 | P-12-82 107,897.61 P-12-82B _6,439,762.03 | Deutsche Bank Aktiengesellschaft, Filiale Singapur 5390 | p-12-102 | 24,704.96 P-12-102B_ | 1,465,207.64 Deutsche Bank Aktiengesellschaft, Filiale Hongkon 9391 | P-12-103 99,185.92 P-12-103B 5,892,984.44 Pacific Head Office 5392 | P-12-104 217,354.46 P-12-104B 12,913,793.12 Deutsche Bank Aktiengesellschaft, | a t— Filiale Singapur. 5405 | P-12-116 132,435.12 | _P-12-116B 7,868,436.39 Deutsche Bank Aktiengesellschaft, Filiale London 5408 | P-12-119 | —_1,140,999.21 | __p-12-119B_ | 67,790,777.10 | g

Deutsche Bank Aktiengesellschaft,

Filiale Seoul

Deutsche Bank (Malaysia) Berhad

Deutsche Bank Aktiengesellschaft,

Filiale New York

Deutsche Bank Securities Inc. Deutsche Bank Aktiengesellschaft,

Filiale Hongkong

Deutsche Bank Aktiengesellschaft, Asia

Pacific Head Office

Deutsche Group Services pty Limited Deutsche Group Services pty Limited Deutsche Bank Aktiengesellschaft,

Filiale Sinaapur

Deutsche Bank Aktiengesellschaft,

Filiale London

Deutsche Asia Pacific Holdings Pte Ltd

Deutsche Group Services pty Limited Deutsche Group Services pty Limited TOTAL VALID ZERO;.RATED SALES 5418 5420 5421 5421 5428 5432 5436 5437 5438 5450 5455 5267 5330

P-12-126

28 760.30

P-12-126B

1 709 570.64

P-12-128

23,606.23

P-12-128B

1403 202.26

P-12-129

500,922.34

P-12-129B

29 775 841.26

P-12-129

155 670.00

P-12-129B

9 253 340.97

P-12-136

369 116.84

P-12-136B

21 941 054.65

P-12-140

792,843.63

P-12-140B

47 128 235.63

P-12-178

248,659.11

P-12-178B

14 780 802.53

P-12-179

70 115.65

P-12-179B

4 167 816.64

P-12-142

257 843.25

P-12-142B

15 326 726.46

P-12-150

1 646 757.94 P-12-lSOB 98 586 582.75

P-12-155

17,764.68 P-12-lSSB 1 063 519.46

P-12-158

310 779.13

P-12-158B

19 092 482.72

P-12-168

70 452.88

P-12-168B

4 216 637.28 19 028.31.2.32 1,146A13,520.8& On the other hand, the remaining amount of P253,689,578.94 shall be denied VAT zero-rating due to the following reasons:

Inward

OR

OR Exh.

OR Amount

Remittance

Disallowed

No.

Ref in Euro

Exh. Ref.

Zero-rated Sales

Overclaimed zero-rated sales (Amount per inward remittance in Php is lower than the claimed zero-rated sales) Deutsche Securities Inc.

5258

P-12-3

109 714.89

P-12-3B

p 1 011.04 Deutsche Group Services pty Limited 5271

P-12-10

70 115.65 P-12-lOB 7 600.98 Deutsche Bank Aktiengesellschaft, Filiale

Singapur

5272

P-12-11

24 704.96

P-12-11B

502.70 Deutsche Bank Aktiengesellschaft, Filiale

Hongkonq

5273

P-12-12

94 278.01

P-12-12B

1 918.37

Deutsche Bank (Malaysia) Berhad

5289

P-12-23

23 606.23

P-12-23B

3 337.24 Deutsche Bank Aktiengesellschaft, Asia

Pacific Head Office

5292

P-12-26

215 918.00

P-12-26B

30 524.55 Deutsche Bank Aktiengesellschaft, Asia

Pacific Head Office

5293

P-12-27

1194 457.68

P-12-27B

168 861.68 Deutsche Bank Aktiengesellschaft, Filiale

Seoul

5297

P-12-29

28,760.30

P-12-29B

12 941.71

Deutsche Asia Pacific Holdinqs Pte Ltd

5298

P-12-30

8 882.34

P-12-30B

3 996.92 Deutsche Bank Aktiengesellschaft, Filiale

London

5302

P-12-34

1182 412.81

P-12-34B

134 238.15 Deutsche Bank Aktiengesellschaft, Filiale

New York

5326

P-12-50

40 521.94

P-12-SOB

6 895.62

Deutsche Bank (Malaysia) Berhad

5328

P-12-52

23 606.23

P-12-52B

4 017.08 Deutsche Bank Aktiengesellschaft, Filiale Sing_CIQ_ur 5331

P-12-53

24 704.96

P-12-53B

4,204.04 Deutsche Bank Aktiengesellschaft, Filiale

Seoul

5342

P-12-62

28 760.30

P-12-62B

3 727.94 Deutsche Bank Aktiengesellschaft, Filiale

London

5353

P-12-70

66 066.40

P-12-70B

783.41 Deutsche Bank Aktiengesellschaft, Filiale

London

5358

P-12-72

2 813 596.51

P-12-72B

51 821.91 Deutsche Securities Inc.

5369

P-12-81

538 670.98

P-12-81B

769/154.84 Deutsche Securities Inc.

5370

P-12-82

107 897.61

P-12-82B

72 383.12 Deutsche Bank Aktiengesellschaft, Filiale

Sinqapur

5390

P-12-102

24 704.96

P-12-102B

4 039.07

Deutsche Bank Aktiengesellschaft, Filiale Hongkon 5391 | P-12-103 99,185.92 P-12-103B (5,773.84 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5392 | P-12-104 217,354.46 P-12-104B 12,652.64 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5405 | P-12-116 132,435.12 P-12-116B 7,708.32 | Deutsche Bank Aktiengesellschaft, Filiale London 5408 | P-12-119 | 1,140,999.21 P-12-119B 109,382.66 Deutsche Bank Aktiengesellschaft, Filiale | Seoul 5418 | P-12-126 28,760.30 P-12-126B 854.16 Deutsche Bank (Malaysia) Berhad 5420 | P-12-128 23,606.23 P-12-128B 701.09 Deutsche Bank Aktiengesellschaft, Filiale New York 5421 | P-12-129 500,922.34 P-12-129B 99,989.73 Deutsche Bank Securities, Inc. 5421 | P-12-129 155,670.00 P-12-129B 201,098.21 Deutsche Bank Aktiengeselischaft, Filiale Hongkong 5428 | P-12-136 369,116.84 P-12-136B | 880,314.35 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5432 | P-12-140 792,843.63 P-12-140B 1,678,829.37 Deutsche Group Services Pty Limited 5436 | P-12-178 248,659.11 P-12-178B 601,587.47 Deutsche Group Services Pty Limited 5437 _| P-12-179 70,115.65 P-12-179B 9,516.34 Deutsche Bank Aktiengeselischaft, Filiale Singapur 5438 | P-12-142 257,843.25 P-12-142B 596,764.54 Deutsche Bank Aktiengesellschaft, Filiale London 5450 | P-12-150 | 1,646,757.94 P-12-150B 2,355,716.25 Deutsche Asia Pacific Holdings Pte Ltd 5455 | P-12-155 17,764.68 P-12-155B 821.08 Deutsche Group Services Pty Limited 5330 | P-12-168 70,452.88 P-12-168B 19,491.54 Sub-total P 7,863,162.96 Without supporting zero-rated official receipt Deutsche Bank Aktiengesellschaft, Filiale New York 5261 47,602.32 P —2,928,409.04 Sub-total P 2928,409.04 Supported by photocopied official receipt Deutsche Group Services Pty Limited 340,145.38 P-12-183B P 20,423,242.58

Sub-total

ORs issued were not in the name of Deutsche Bank Aktiengesellschaft, Inlandsbank (issued to DB AG Domestic Bank, Deutsche Bank Aktiengesellschaft,

Inlandsbank

|| P 20,423,242.58 = Deutsche Bank Aktiengesellschaft,

Inlandsbank

Deutsche Bank Aktiengesellschaft,

Inlandsbank

Deutsche Bank Aktiengesellschaft,

Inlandsbank

Deutsche Bank Aktiengesellschaft,

Inlandsbank

Deutsche Bank Aktiengesellschaft,

Inlandsbank

Deutsche Bank Aktiengesellschaft,

Inlandsbank 5384 P-12-96

Deutsche Bank Aktiengesellschaft, Inlandsbank 5385 P-12-97 7,717.99 Deutsche Bank Aktiengesellschaft,

Inlandsbank 5393 | P-12-105

5371 35,096.88 | __P-12-83B P_2,171,871.45 5372 7,608.08 |__P-12-84B 470,804.58 5373 386,522.37 | _P-12-85B 23,686,256.00 5374 | P-12-86 37,309.95 | _P-12-86B _2,308,821.04 5375 91,970.24 | _P-12-87B_ | _—_5,691,318.95 5376 227,988.06 | _P-12-88B 14,108,398.17 1 231,958.88 | _P-12-91B 14,325,525.33 P-12-92B 2,193,661.92 P-12-93B __1,018,718.00 5382 P-12-94B 2,118,943.54 16,421.21 | _P-12-95B __1,014,155.87 -12- 16,118.48 | _P-12-96B _ 997,446.68 -12- P-12-97B 476,654.58 - 88,761.44 | _P-12-105B 5,481,808.90 a <>

Deutsche Bank Aktiengesellschaft, 132,843.97 | Deutsche Bank Aktiengesellschaft, Inlandsbank 5395 | P-12-107 P-12-107B 8,105,504.00 Deutsche Bank Aktiengesellschaft, Inlandsbank 5396 | P-12-108 34,309.93 P-12-108B _2,070,771.02 Deutsche Bank Aktiengesellschaft, e307 | Inlandsbank 5397 | P-12-109 240,552.18 P-12-109B _ 14,518,493.15 faa Inlandsbank 5398 | P-12-110 7,717.99 P-12-110B 465,818.21 Deutsche Bank Aktiengesellschaft, | soo | perzann | 1649508.

Inlandsbank 5399 ; P-12-111 16,495.08 P-12-111B 995,558.24 aus] mana - Inlandsbank 5400 | P-12-112 35,519.77 P-12-112B 2,143,790.75 | ma Inlandsbank 401 | P-12-113 16,421.21 P-12-113B 991,099.83 Inlandsbank 5406 | P-12-117 27,719.44 P-12-117B 1,715,339.38 a Inlandsbank 5407 59,038.79 P-12-118B 3,590,036.48

Inlandsbank 5412

P-12-122 88,761.44 P-12-122B 5,357,184.28 Deutsche Bank Aktiengesellschaft, asta | Inlandsbank 5423 | P-12-131 P-12-131 976,597.77 | Deutsche Bank Aktiengesellschaft, | nia | Inlandsbank 24 | P-12-132 7,717.99 P-12-132 459,002.22 Deutsche Bank Aktiengesellschaft, Inlandsbank 425 | P-12-133 16,495.08 P-12-133 980,990.94 Deutsche Bank Aktiengesellschaft,

Inlandsbank

Deutsche Bank Aktiengesellschaft,

Inlandsbank

P-12-118

P-12-134

5426 ay

N

nn Sa) wn uw ay

Sub-total

P-12-134

- 240,552.18 7 | P-12-135 34,309.93 P-12-135 14,306,054.40 2,040,470.89 P134,781,096.57 Sales to entities not considered as non-resident foreign corporations doing business outside the Philippines (without proof of foreign registration/incorporation | DBConsorzio S.Cons.ar =| 5274 | sd, 728.64 P 291,709.44 Dons S.don.etl 5, 4,750.64 284,290.60 4,750.64 | 282,528.79 DB Energy Trading LLC [5261 | 28,52 (1,754.50) | DB Energy Trading LLC sig | | aa | 26,423.03 DB Energy Trading LLC 5415 | Laz t.ze | 22,781.00 DB International (Asia) Limited 5253 FL 43,512.94 | 837,188.81 DB International (Asia) Limited 5253 | | 3,512.94 | 837,188.78 DB International (Asia) Limited 5308 af Be 543.78 835,219.19 DB International (Asia) Limited 5387 13,543.78 817,432.95 DB Services New Jersey, Inc. 5261 | | 7142.59 | 677,541.00 | DB Services NewJersey, Inc. | 5318 || =| 9,261.69 | 553,068.86 DB Services New Jersey, Inc.

DBOI Global Services Private Limited

DBOI Global Services UK Limited

Deutsche (Suisse) SA

Deutsche Asset Management (Korea)

Company Limited

Deutsche Asset Management (Korea)

Company Limited

4,914.15 5386 5386 a ssa] | 5378 5,067.35 4,142.60 4,255.58 3,915.78 439,399.28 301,749.66 4,143,269.52 302,514.13 216,430.74 311,945.09 5,190,405.31 19,573.24 245,029.03 __ 246,963.68 113,701.06 1,606,930.85 253,461.03 260,373.60

Deutsche Asset Management (Korea)

Company Limited

Deutsche Asset Management (Korea)

Company Limited

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai

Branch

Deutsche Bank (China) Co. Ltd., Shanghai