Court of Tax Appeals · Third Division

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

CTA Case No. 9794 January 24, 2022

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

Quezon City

Third Division

REMA TIP TOP PHILIPPINES, INC., CTA CASE NO. 9794

Petitioner,

-versus-

Members:

UY, Chairperson,

RINGPIS-LIBAN, and

MODESTO-SAN PEDRO,JJ.

COMMISSIONER OF INTERNAL

Promulgated:

REVENUE,

Respondent.

JAN 2 4 2022

x---------------------------------------------------------~---~~-~~-~-:~--~------x

DECISION

RINGPIS-LIBAN, J.

THE CASE

The Petition for Review prays that the Court render judgment ordering respondent to refund petitioner the amount of !>1,377,618.64, allegedly representing input value added tax (VAT) attributable or properly allocated to zero-rated sales made in the 4 1h quarter of the taxable year 2015.¹

THE PARTIES

Petitioner Rema Tip Top Philippines, Inc. is a domestic corporation duly organized and existing under Philippine laws.² It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification Number (TIN) 008- 042-655-000, with address at Unit 502 Richmonde Plaza, Ortigas, San Miguel Ave., Brgy. San Antonio, Ortigas Center, Pasig.³ ~

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Respondent is the Commissioner of Internal Revenue, who is the officer duly appointed and empowered by law to act on claims for refund or credit, with office address at the S'h Floor, BIR National Office Building, Agham Road, Dillman, Quezon City.4

ANTECEDENTS (ADMINISTRATIVE LEVEL)

On December 27, 2017, petitioner filed its Application for Tax Credits I Refunds (BIR Form No. 1914), with Revenue District Office (RDO) No. 43 in the amount of !'1,377,618.64, for the period from October 1, 2015 to December 31, 2015, pursuant to Section 112(A) of the Tax Code.5 Subsequently, on March 2, 2018, petitioner received a Notice of Denial for VAT Refund I Credit of even date issued by Revenue District Officer Rufo B. Ranario,6 informing petitioner that the claim for refund on input tax allowable on local purchases and importation is denied for failure to comply with some of the requirements listed under Annex "A" of Revenue Memorandum Circular (RMq No. 54-2014: (1) Certified true copy of Audited Financial Statements;

(2) Schedule of zero-rated sales with complete details; (3) Certified true copy of import entry and internal revenue declarations duly validated by bank with official receipt (OR); and (4) Certified true copy of Bureau of Customs (BOq receipts.

PROCEEDINGS BEFORE THIS COURT

Petitioner filed the present Petition for Review on April2, 2018.7 On June 11, 2018, respondent filed his Answer.8 The Pre-Trial Conference was set and held on September 18, 2018.9 Petitioner's Pre-Trial Brief and Respondent's Pre-Trial Brief were both filed on September 17,2018.10 On October 3, 2018, the parties presented their Joint Stipulation of Facts and Issues.

11 The Pre-Trial Order was subsequently issued on November 5, 2018 1 / 4 Par. 1.01, Joint Stipulation of Facts and Issues (JSFI), Docket- Vol. 3, p. 1044. 'Exhibits "P-1" and "P-1-A", Docket- Vol. 3, p. 1373.

6 Exhibit "P-36", Docket- Vol. 3, p. 1457.

7 Docket- Vol. I, pp. 10 to 38.

8 Docket- Vol. 2, pp. 995 to 999.

9 Notice of Pre-Trial Conference dated June 21, 2018, Docket - Vol. 3, pp. I 002 to I 003; Minutes of the hearing held on, and Order dated, September 18, 2018, Docket- Vol. 3, pp. I 041 and 1043, respectively.

10 Docket- Vol. 3, pp. 1008 to 1035, and 1038 to 1040, respectively.

11 Docket- Vol. 3, pp. 1044to 1057.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Respondent transmitted the BIR Records for this case on November 6, 2018. 13 Petitioner posted a Motion for Correction of Pre-Trial Order on November 12, 2018.

14 Respondent failed to file his comment thereon.15 In the Resolution dated February 22, 2019,16 the Court granted the said Motion for Correction and ordered the amendment of the Pre-Trial Order dated November 5, 2018. Thus, the Amended Pre-Trial Order was issued on March 4, 2019.17 During trial, petitioner presented documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Ms. Jennilyn U. Gaanan,18 a Director, Treasurer, and Chief Financial Officer of petitioner; and (2) Ms. Ma. Theresa Romey Dela Roca,19 the Court-commissioned

Independent Certified Public Accountant (ICPA) 20

The !CPA's Report was submitted on February 4, 2019. 21 Petitioner filed its Formal Oj(er of Documentary Exhibits on April 4, 2019.22 Respondent, however, failed to file his comment thereon.23 In the Resolution dated June 26, 2019,24 the Court admitted petitioner's exhibits, except for: (1) Exhibit "P-2", for failure of the document formally offered and identified, to correspond with the document actually marked; and (2) Exhibits "P-8" and "P- 8-1", for failure to present originals for comparison. Petitioner filed its Motion on July 12, 2019/5 praying that the original printout of BIR Payment (BIR Form 0605) for Annual Registration Fee for 2015 of petitioner, attached and marked as "Exhibit P-2" be admitted as evidence for the purposes for which it is being offered. Respondent failed to ftle his comment on the said Motion. 26 In the Resolution dated December 13,,.v"

12 Docket- Vol. 3, pp. 1063 to 1069.

13 Docket- Vol. 3, p. 1078.

14 Docket- Vol. 3, pp. 1086 to 1088.

15 Per Records Verification Report dated January 28, 2019 issued by the Judicial Records Division of this Court, Docket- Vol. 3, p. 1218.

16 Docket- Vol. 3, pp. 1274 to 1275.

17 Docket- Vol. 3, pp. 1317 to 1323.

18 Exhibit "P-41", Docket- Vol. 3, pp. 1128 to 1149; Minutes of the hearing held on, and Order dated, January 24, 2019, Docket- Vol. 3, pp. 1216 to 1217.

19 Exhibit "P-50", Docket- Vol. 3, pp. 1279 to 1307; Minutes of the hearing held on and Order dated, March 5, 2019, Docket- Vol. 3, pp. 1324, and 1326 to 1327, respectively.

20 Oath of Commission dated December 4, 2018, Docket- Vol. Ill, p. 1113; Minutes of the hearing held on, and Order dated, December 4, 2018, Docket- Vol. Ill, pp. 1112, and 1114 to 1115, respectively.

21 Exhibit "P-42", Docket- Vol. 3, pp. 1220 to 1240.

22 Docket- Vol. 3, pp. 1351 to 1370.

23 Per Records Verification Report dated May 3, 2019 issued by the Judicial Records Division ofthis Court, Docket- Vol. 3, p. 1498.

24 Resolution dated June 26,2019, Docket- Vol. 4, pp. 1501 to 1503.

25 Docket- Vol. 4, pp. 1521 to 1524.

26 Per Records Verification Report dated September 20, 2019 issued by the Judicial Records Division of this Court, Docket- Vol. 4, p. 1543.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

2019,27 the Court granted petitioner's Motion and accordingly admitted Exhibit "P-2".

On October 6, 2020, respondent posted a Manifestation/8 whereby his counsel waived the right to present witness in this case, and in line therewith, averred that the case be submitted for resolution. Correspondingly, in its Resolution dated October 13, 2020,29 the Court cancelled the presentation of respondent's evidence, and granted the parties thirty (30) days from notice to file their respective memorandum.

Petitioner's

Memorandum

was posted on December 9, 2020.30 Respondent, however, failed to ftle his memorandum.31 On January 15,2021, this case was deemed submitted for decision.32

THE ISSUES RAISED BY THE PARTIES

The parties have agreed that the issues to be resolved by this Court are as follows:

"2.01. Whether or not the Honorable Court of Tax Appeals has jurisdiction over the case.

2.02. Whether or not Petitioner is entitled to a refund of Input VAT attributable or properly allocated to zero-rated sales made in the fourth quarter of taxable year 2015 in the aggregate amount of One Million Three Hundred Seventy-Seven

Thousand Six Hundred Eighteen and 64/100 Pesos

(P1,377 ,618.64) pursuant to Section 112 of National Internal Revenue Code of 1997."33 Petitioner's arguments:

Petitioner argues that it is entitled to a refund of input VAT attributable to zero-rated sales made in the 4'h quarter of taxable year 2015, based on the following grounds: (a) the instant petition was filed within the reglementary period under Section 112(C) of the Tax Code; (b) under Section 106(A)(2)(a)(5) 27 Docket- Vol. 4, pp. 1545 to 1546.

28 Docket- Vol. 4, pp. 1553 to 1554.

29 Docket- Vol. 4, p. 1557 to 1558.

30 Docket- Vol. 4, pp. 1559 to 1590.

31 Per Records Verification Report dated January 12,2021 issued by the Judicial Records Division of this Court, Docket- Vol. 4, p. 1596.

32 Resolution dated January 15, 2021, Docket- Vol. 4, p. 1598

33 Statement of the Issues, JSFI, Docket- Vol. 3, pp. 1044 to 1045.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue of the Tax Code, sales by a VAT-registered taxpayer to enterprises registered with the Philippine Economic Zone Authority (PEZA) or the Board of Investments (BOI) are subject to zero-rated VAT; and (c) petitioner has complied with the requirements for the claim for refund under Section 112(A) of the Tax Code.

Additionally, petitioner contends that in any case, the purpose of the submission of the documents is to allow respondent to determine whether it is entitled to a refund; that it is the taxpayer who has the right and the burden of proving any and all documents that would support his claim for tax credit or refund; and that as long as the requisites to be entitled to a tax credit certificate or refund of excess input VAT attributable to zero-rated sales are present, such application should be granted.

Respondent's counter-arguments:

Respondent counter-argues that there is no valid claim for refund due to the non-submission of complete documents under RMC No. 54-2014, and in the absence of a valid claim for refund, there is nothing for the respondent to act on, and consequently, there is also nothing to appeal before the Court; that the Petition for Review was filed out of time; that assuming m:guendo that there is a valid claim for refund, it is imperative for the petitioner to prove its compliance with the requirements for tax credit/ refund of unutilized input VAT under the National Internal Revenue Code (NIRC) of 1997, as amended; that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the entity claiming the exemption; and that petitioner failed to sufficiently prove and demonstrate that the subject tax was erroneously or illegally collected.

THE COURT'S RULING

Requisites under the law for the refund or issuance of tax credit certificate of input VAT Pursuant to the provisions of Section 112(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 9337 34, jurisprudence has laid down certain requisites which must be complied with by the taxpayer-applicant to successfully obtain a credit/ refund of input VAT. Said requisites are classified into certain categories, to wit: ~ 34 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.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

As to the timeliness ~(the filing qfthe administrative andjudicial claims:

1. the claim is filed with the BIR within two years after the close of the taxable quarter when the sales were made;35

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 120 days from the date of submission of complete documents in support of the application, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120-day period;36 With r~ference to the taxpq_ver's registration with the BIR·

3. the taxpayer is a VAT -registered person;37 In relation to the taxpqJer's output VAT:

4. the taxpayer is engaged in zero-rated or effectively zero-rated sales;38

5. for zero-rated sales under Sections 106(A)(2)(a)(1), (2) and (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;39 As regards the taxpqJer's input VAT being r~funded:

6. the input taxes arc not transitional input taxes;40

7. the input taxes arc due or paid;41

8. 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;42 any 35 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010. 36 Steag State Power, Inc. (Formerly State Power Development Corporation) vs.Commissioner of Internal Revenue, G.R. No. 205282, January 14, 20 19; Rohm Apollo Semiconductor Philippines vs. Commissioner of internal Revenue, G.R. No. 168950, January 14,2015. 37 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.

38 /d.

39 /d.

40 /d.

41 /d.

42 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; and San Roque Power Corporation vs. Commissioner of Internal Revenue, supra.

CrA Case No. 9794 Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Page 7 of 41

the input taxes have not been applied against output taxes d .

d . th d' 43 unng an 1n e succee mg quarters. · Relative thereto, it must be emphasized that in cases ftled before this Court, which are litigated de novo, party-litigants must prove every minute aspect of their case.44 Thus, it behooves petitioner to show compliance with each of the foregoing requisites. As a corollary, the absence of any of the said requisites is a valid ground to deny the refund claim.

Petitioner's

administrative and judicial claims were timely filed.

The first requisite pertains to the filing of a claim for tax refund or tax credit of input VAT before the BIR, within two (2) years from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. Thus, petitioner's last day for filing of its administrative claim for the 4'h quarter of 2015 fell on December 31, 2017.

Records show that petitioner filed its Application for Tax Credits I Refunds (BIR Form No. 1914) on December 27, 2017.45 Hence, petitioner complied with the said first requisite.

The second requisite is to the effect that in case of full or partial denial of the refund claim rendered within a period of one hundred twenty (120) days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be ftled with this Court within thirty (30) days from receipt of the decision. Notably, respondent is deemed to have acted on petitioner's administrative claim within the said one hundred twenty (120)-day period from December 27, 2017 (which should have ended on April 27, 2018), when the BIR, Revenue District Officer Rufo B. Ranario, issued Notice of Denial for VAT Refund I Credit dated March 2, 2018. Considering that petitioner received the ,..v' 43 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.

44 Edison (Bataan) Cogeneration Corporation vs. Commissioner of Internal Revenue, etseq., G.R. Nos. 201665 and 201668, August 30, 20 17; Commissioner of Internal Revenue vs. Philippine National Bank, G.R. No. 180290, September 29, 2014; Commissioner of Internal Revenue vs. United Salvage and Towage (?hils.), Inc., G.R. No. 197515, July 2, 2014; Dizon vs. Court of Tax Appeals, eta/., G.R. No. 140944, April 30, 2008; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526, March 16, 2007; and Commissioner of Internal Revenue vs. Manila Mining Corporation, G.R. No. 153204, August 31, 2005.

45 Exhibits "P-1" and "P·l·A", Docket- Vol. 3, p. 1373.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue said Notice on the date it was issued,46 the former had until May 27, 2018, within which to appeal the same.

The present Petition for Review was ftled on April 2, 2018.47 Therefore, the Court has jurisdiction over the present case. Petitioner is a VAT-registered person.

As for its compliance with the third requisite, petitioner has fulfilled the same by presenting its BIR Certificate of Registration No.

OCN

3RC0000758904 with TIN 008-042-655-000, indicating that it is liable to VAT, among other taxes. 48 Petitioner had zero-rated sales or effectively zero-rated sales during the 4h quarter of 2015.

The fourth and fzfth requisites require that the taxpayer is engaged in zero- rated or effectively zero-rated sales and for zero-rated sales under Sections 106(A)(2)(a)(1), (2) and (b), and 108(B)(1) and (2) of the Tax Code, the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the Bangko Sentra! ng Pi!ipinas (BSP) rules and regulations. In its amended Quarterly VAT Return49 for the 4'h quarter of 2015, petitioner reported total sales/receipts in the amount of !>18,861,067.96, which included zero-rated sales/receipts in the amount ofP14,548,005.68, as follows:

Vatable Sales/Receipts

p 4,313,062.28

Zero-Rated Sales/Receipts

14,548,005.68

Total Sales/Receipts

p 18,861,067.96 Petitioner claims that the bulk of its reported zero-rated sales is composed of sales to enterprises registered with PEZA and BOI; and the rest thereof are sales made to non-resident foreign corporations (NRFC) in foreign currency, and in exchange for transportation equipment. 5~

46 Par. 3.09, Petition for Review, Docket- Vol. I, p. 13; Annex "A", Petition for Review, Docket- Vol. I, pp. 30 to 3 I; Q&A Nos. 23 to 26, Exhibit "P-453", Docket- Vol. II, pp. 608 to 609.

47 Docket-Vol. l,pp. 10to38.

48 Exhibit "P-I 5'', Docket- Vol. 3, p. 1409.

49 Exhibit "P-3", Docket- Vol. 3, pp. 1382 to 1383.

50 Refer to No.3 lA, Exhibit "P-50", Docket- Vol. 3, p. 1292.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

In her Report, the Court-commissioned ICPA, Ms. Ma. Theresa R. DeJa Roca of Dela Roca & Associates, CP As, accounted petitioner's total zero-rated sales in the amount of P14,548,005.68, as follows: 51

Zero-rated Sales

Amount

Sales to BOI-registered entity p 44,855.96 Sales to PEZA-registered entities 13,792,692.39 52

Sales to NRFC

170,091.1753 Net gain on the exchange of a transportation equipment54

Total

Sales of goods and services to entities registered with PEZA and BOI whose products are 100% exported 540,366.16 P14,548,005.68 Petitioner maintains that its sales of goods and services to entitles registered with PEZA and BOI during the 4'h quarter of 2015 are subject to zero percent (0%) VAT, pursuant to Section 106(A)(2)(a)(S) of the NIRC of 1997, as amended.

Section 106(A)(2)(a)(S) of the NIRC of1997, as amended, states: "SEC. 106. Value-Added Tax on Sale of Goods or Properties.- (A) Rate and Base ofT ax.- xxx

XXX

(2) The following sales by VAT -registered persons shall be subject to zero percent (0%) rate:

(a) Export Sales. - The term 'export sales' means:

XXX

51 Table IX of No. 14, Exhibit "P-42", Docket- Vol. 3, p. 1233. 52

Coral Bay Nickel Corporation

I'

920,197.48

Taganito HPAL Nickel Corporation

12,872,494.91 Total sales to PEZA-re2istered entities 1'13,792,692.39 53

Evonik Methionine Sea Pty Ltd

1'122,008.10 Tip Top Japan, Inc.

3,100.35

Veolia Water TechnoJoaies Deutschland

44,982.72 Total sales to NRFC P170,091.17

/V'

54 No. 17, Exhibit "P-42", Docket- Vol. 3, p. 1234.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

(5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws; and

XXX

(c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." (Boldfming supplied) Relative thereto, the applicable provision of law on petitioner's sale of services to PEZA registered entities is Section 1 08(B) (3) of the NIRC of 1997, as amended, which provides as follows:

"SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - (A) Rate and Base ofT ax.- xxx

XXX

(B) Transactions Subjed 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

(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; (Boldfacing supplied) Relative thereto, Sections 4.106-5(a)(5) and 4.108-5(b)(3) of Revenue Regulations (RR) No. 16-2005, as amended by RR No. 4-2007, also provide: "SEC. 4.106-5. Zero-Rated Sales of Goods or ProDerties. -

-XXX

The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a) Export sales.- 'Export Sales' shall mean:

XXX

XX~

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

(5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws.

'Considered export sales under Executive Order No. 226'shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, fitrther, That pursuant to EO 226 and other special laws, even without actual exportation, the following shall be considered constructively exported:

(1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RAJ Nos. 7916, as amended, 7903, 7922 and other similar export processing zones; (3) sale to enteprises du!J registered and accredited with the Subic Bqy Metropolitan Authority pursuant to RA 7227; (4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); (5) sales to diplomatic missions and other agencies and/ or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not.

For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee: and Provided, finally, that sales of goods, properties or services made by a VAT-registered supplier to a HOI- registered manufacturer/producer whose products are 100% exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently re- issued by the BOI.

XXX

(c) Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement" - Sales of goods or property to 1'11' Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue persons or entities who are tax-exempt under special laws, e.g. sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to R.A. No. 7227, sales to enterprises duly registered and accredited with the Philippine Economic Zone Authority (PEZA) or international agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate." (Emphases added) "SEC. 4.108-5. Zero-Rated Sale of Services.-

XXX

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

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;" (Bol4facing supplied) One of the special laws mentioned in the above proVlS!On, which specifically applies to this case, is RA No. 7916, as amended by RA No. 8748, otherwise known as "The Special Economic Zone Act of 1995". Sections 8 and 24 thereof respectively provide as follows:

"SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory.- 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." (Emphases supplied) "SECTION 24. Exemption from National and Local Taxes. - Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on busines/ Rema Tip Top Philippine~ Inc. vs. Commissioner of Internal Revenue establishments operating within the ECOZONE. (Emphases supplied) XXX. , 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 an Ecozone are considered exports to a foreign country subject to 0% VAT. This was elucidated by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.), Inc., 55 to wit: "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 (IEs), 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. rl

55 G.R. No. 150154, August 9, 2005.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise?

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%) VAT.56 (Emphases added) On the other hand, pursuant to Revenue Memorandum Order (RMO) No. 9-2000,57 sales of goods, properties or services made by a VAT-registered supplier to a BOI registered entity whose products are 100% exported shall be accorded automatic VAT zero-rating, subject to the following reportorial and documentary requirements, prescribed under Section 3 thereof, vir: "SECTION.3. Sales of goods, properties or services made lry a VAT registered supplier to a BOI registered exporter shall be accorded automatic zero-rating, i.e., without necessity of app!Jing for and securing approval of the application for zero-rating as provided in Revenue Regulations No.l-95, sttbjert to the following amditions: (1) The supplier must be VAT -registered;

(2) The BOT-registered buyer must likewise be VAT- registered;

(3) The buyer must be a

BOT-registered

manufacturer/producer whose products are 100% exported. For this purpose, a Certification to this effect must be issued by the Board of Investments (BOI) and which certification shall be good for one year unless subsequently re-issued by the BOI;

(4) The HOI-registered buyer shall furnish each of its suppliers with a copy of the aforementioned BOI Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said HOI-registered buyers; and

/Y

56 Now at I 2% VAT rate.

57 SUBJECT:

Tax Treatment of Sales of Goods, Properties and Services Made by VAT-registered Suppliers to SOl-registered Manufacturers-Exporters With 100% Export Sales.

Rema Tip Top Philippine~ Inc. vs. Commissioner of Internal Revenue

(5) The VAT-registered supplier shall issue for each sale to

BOI-registered

manufacturer/exporters a duly registered VAT invoice with the words 'zero-rated' stamped thereon in compliance with Sec. 4.108-1 (5) of Revenue Regulations No. 7-95. The supplier must likewise indicate in the VAT -invoice the name and BOI-registry number of the buyer." (Emphasis added) Based on the foregoing, sales of goods and services by a VAT -registered taxpayer, such as petitioner, to entities located in the ECOZONEs, as well as to BOI-registered entities whose products are 100% exported, are considered "export sales" subject to VAT zero-rating pursuant to Sections 106(A)(2)(a)(5) and 108(B)(3) of the NIRC of 1997, as amended, and as implemented by Sections 4.1 06-5(a) (5) and 4.108-5 of RR No. 16-2005, as amended. A. Sales to HOI-registered entity.

Petitioner avers that its sales to FCF Minerals Corp., an enterprise registered with the BOI and whose products are 100% exported are subject to 0% VAT, pursuant to Section 106(A)(2)(a)(5) of the NIRC of 1997, as amended, in relation with Section 4.106-5 of RR No. 16-2005 and Section 3 of RMO No. 9-2000.

As extracted from petitioner's Schedule of Sales,58 the zero-rated sales in the amount of 1'44,855.96, as detailed below, pertains to its sales of goods to FCF Minerals Corp.:

Sales Invoice (SI)

Customer Name

No.

Date

Amount

Exhibit

FCF Minerals Corp.

1022 November 2, 2015 p 38,308.00

"P-953"

FCF Minerals Corp.

1040 December 1, 2015 6,547.96

"P-964"

Total

P44,855.96 However, as ascertained by the ICPA, the petitioner was unable to secure an original copy or a certified true copy but obtained only a photocopy of the BOI Certification 59 for FCF Minerals Corp. as support for zero-rating.60 Examination of petitioner's formally offered exhibits disclosed that the same was among those denied 61 admission by the Court through Resolution62 dated June 26, 2019./ "Annex A, Exhibit "P-42-2", Docket- Vol. 3, pp. 1466 to 1467.

59 Exhibits "P-8" to "P-8-1 ", Docket- Vol. 3, pp. 1395 to 1397; "P-906" to "P-906-B".

60 No. 13, Exhibit "P-42", Docket- Vol. 3, p. 1233.

61 Exhibits "P-8" to "P-8-1 ", Docket- Vol. 3, pp. 1395 to 1397.

62 Par. 2, Docket- Vol. 4, pp. 1501-1503.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Moreover, further perusal of the denied BOI Certificate shows that the exported sales of FCF Minerals Corp. pertains to its sales for the year 2014 which was prior to the period of claim despite its validity for the year 2015.63 Hence, the whole amount of P44,855.96 pertaining to its sales without BOI Certification to the effect that FCF Minerals Corp. is a BOT-registered entity whose products are 100% exported for the 4'h quarter of 2015, shall be denied VAT zero-rating.

B. Sales to PEZA-registered entities.

To prove that its clients are duly registered with the PEZA, petitioner submitted various Certifications issued by the said agency. Listed below are the clients of petitioner for the 4'h quarter of 2015, with the corresponding proof of VAT zero-rating:

ProofofVAT

Certification

Name of Client

zero-rating

Exhibit64

Period

Coral Bay Nickel Corporation

Certificate No.

"P-9", "P-9-A",

(CBNC)

2015-1214

and "P-9-B"

for the year 2015

Taganito HPAL Nickel

Certificate No.

Corporation (THPAL)

2015-0414

((P-1 0"

for the year 2015 Accordingly, petitioner's sales to the aforementioned entities for the 4'h quarter of 2015 qualify for VAT zero-rating pursuant to Sections 106(A)(2)(a)(5) and 108(B)(3) of the NIRC of 1997, as amended, provided that the same are properly supported by VAT zero-rated Sis [for sales of goods J and official receipts (ORs) [for sales of services] in accordance with Section 113(A) and (B) of the NIRC of 1997, as amended, which provides: "SEC. 113. Invoiling and Accounting Requirements for VAT- registered Persom. - (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. ~

63 Exhibits "P-8-1 ",Docket- Vol. 3, pp. 1396 to 1397; "P-906-A" to "P-906-B".

64 Docket- Vol. 3, pp. 1398 to 1402.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

(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:

(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from value-added tax, the term 'VAT -exempt sale' shall be written or printed prominendy on the invoice or receipt;

(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;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and ( 4) In the case of sales in the amount of One thousand pesos (P1 ,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client."

The foregoing provisions are further implemented by Section 4.113-1 (A) and (B) of RR No. 16-2005, as amended, which are all quoted hereunder: "SEC. 4.113-1.

Invoicing Requirements. /

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

(A) 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. 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 rontained 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:

(a) The amount of tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt;

(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;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT -exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The ,.#

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) In the case of sales in the amount of one thousand pesos (P1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) of this Section."

In addition to the above requirements, the Sis and ORs must be duly registered with the BIR as prescribed under Section 23 7, in relation to Section 238 of the NIRC of 1997, as amended, viz: "SEC. 237. lJsuance 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 sale 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

XXX

SEC. 238. Printing of Receipts or Sales or Commercial 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."

To prove compliance with the VAT invoicing requirements under the aforementioned law and regulations, petitioner submitted various Sis in support of its zero-rated sales to PEZA-registered entities, which were duly examined by the ICPA, extracted and summarized from petitioner's Schedule of Sales,65 as followsjv' 65 Annex A, Exhibit "P-42-2", Docket- Vol. 3, pp. 1466 to 1467.

CfA Case No. 9794 Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Page 20 of 41

SI

Name of Customer

No.

Date

Amount

Exhibit

Coral Bay Nickel

"P-974"

Taganito Hpal Nickel

"P-930" to

Corporation

0895 2015 3,212,318.00

"P-930-C"

Taganito Hpal Nickel

November 23,

Corporation

1030 2015 587,682.00

"P-956"

Taganito Hpal Nickel

November 5,

Corporation

BS 0008

2015 1,900,000.00

"P-975"

TOTAL

P13, 792,692.39 - Upon examination of the submitted sales invoices in support of petitioner's sales of goods and services to PEZA-registered entities, the amount of P11,470,298.91, as detailed below, shall be denied VAT zero-rating due to the following reasons:

SI

Name of Customer

No.

Date

Amount

0892-0895 October 13, 2015 3,212,318.00

"P-930 C"

Sale of services not supported by VAT OR

/V

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Taganito Hpal Nickel

Thus, out of the zero-rated sales to PEZA-registered entities in the total amount of P13,792,692.39, only the amount of P2,322,393.48,66 qualify for VAT zero-rating pursuant to Section 106(A)(2)(a)(S) of the 1997 NIRC, in relation to Sec. 4.106-S(c) ofRR No. 16-2005. C. Sales to NRFC.

Petitioner states that for sales to NRFC, one of the requirements to qualify as zero-rated sale is that the payments by or collections from these NRFC pertaining to the sale should be made in foreign currency.67 Pertinent to the determination of whether the sale of services to NRFC qualify for VAT zero-rating, Section 108(B)(2) of the NIRC of 1997, as amended, 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%) 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 S entral 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 non-resident 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);" 66 1'13,792,692.39 less 1'11,470,298.91.

67 No. 15, Exhibit "P-42", Docket- Vol. 3, p. 1233.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Based on the foregoing provision, certain essential elements must be present in order for a sale or supply of services to be subject to VAT rate of 0% under Section 1 OS (B) (2) of the NIRC of 1997, as amended, to wit:

1. The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed;68

2. The services fall under any of the categories under Section 108(B)(2),69 or simply, the services rendered should be other than "processing, manufacturing or repacking goods"/0

3. The services must be performed in the Philippines

71 by a VAT-

registered person; and

4. The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules.72 Relative to the .first essential element, to prove that its clients are NRFC for purposes of VAT zero-rating under Section 1 OS (B) (2) of the NIRC of 1997, as amended, petitioner must establish that: (1) the client was established under the laws of a foreign country; and, (2) it is not engaged in trade or business in the Philippines. To be sure, there must be sufficient proof of both of these requirements to establish that the clients are foreign corporations AND are not doing business in the Philippinesn Thus, petitioner must submit for each NRFC client, at the very least, both: (1) the SEC Certificate of Non-Registration of Corporation/Partnership; and (2) Proof of Certificate/ Articles of Foreign Incorporation/ Association showing the state/province/ country where the entity was organized.74 68 Site/ Philippines Corporation (Formerly Clientlogic Phils. 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 11,2012. 69 Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), G.R. No. 152609, June 29, 2005.

7° Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra.

71 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner C!f Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra.

72 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner ~f Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra.

73 Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte. Ltd., G.R. No. 234445, July 15, 2020.

74 !d.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

The SEC Certificate of Non-Registration shows that the foreign client is not engaged in trade or business in the Philippines. On the other hand, the Certificate/ Articles of Foreign Incorporation/ Association proves that the client was established under the laws of a foreign country. Together, these two

(2) documents prove the two (2) conditions necessary to establish the NRFC status of a client.

Upon review of the records, it is shown that petitioner failed to present the two (2) required documents to prove the NRFC status of its foreign clients. Thus, petitioner failed to comply with the first essential element. With regard to the second essential element, no evidence was presented by petitioner to prove that the services it rendered fall under any of the categories under Section 108(B)(2). As such, petitioner failed to comply with the second essential element as it was not able to establish that the services it provided to its clients are not in the same category as "processing, mantifacturing or repacking rf goods".

Neither did petitioner show proof that the purported services rendered were performed in the Philippines. As such, the third essential element was also not complied with.

As regards the fourth essential element, peuuoner presented bank statements from HSBC, payment advice and an emaif5 purportedly showing the foreign currency remittances of its clients to petitioner. Section 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Section 4.113-1 (A)(2), (B)(1) and (2)(c) of RR No. 16-2005, provides 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 BIR-registered VAT official receipt. Pursuant thereto, the foreign currency payments referred to under Section 1 OS (B) (2) of the NIRC of 1997, as amended, must be supported by BIR-registered VAT zero-rated official receipts.

In the instant case, the alleged sales of services to NRFC were either supported by VAT zero-rated OR, but dated outside the period of claim, or not supported by VAT zero-rated ORs in violation with Section 113(A)(2) of the NIRC of 1997, as amended, in relation to Section 4.113-1(A)(2) of RR No. 16- 2005. As such, it cannot be verified whether the purported foreign currency remittances actually pertain to the alleged zero-rated sales of services. Thus, petitioner, likewise, failed to comply with the fourth essential element that the ~

75 Exhibits "P-I 085" to "P-I 087".

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue services were paid in acceptable foreign currency and accounted for 1n accordance with the rules and regulations of the BSP. Considering the foregoing, petitioner fell short of establishing that the amount of 1'170,091.17 declared sales of services to NRFC76 for the 4'h quarter of 2015, as detailed below, qualify for VAT zero-rating under Section 108(B)(2) of the NIRC of 1997, as amended:

Name of Customer

Reference

Evonik Methionine Sea Pty Ltd.

Sl No. 0883 Tip Top Japan Inc.

SINo. 1038

Veolia Water Technologies Deutschland

OR No. 1012 D. Net gain on the exchange of a transportadon equipment

Date

Amount

October 13, 2015 I' 122,008.10 December 1, 2015 3,100.35 January 18,2016 44,982.72

TOTAL

1'170,091.17 The ICP A's verification disclosed that the alleged zero-rated sale in the amount of 1'540,366.16 pertains to the net gain on the exchange of a transportation equipment with Mr. Joseph Antonio Tomas Cruz77 As correctly pointed out by the ICPA, the nature of the sale or exchange transaction in the amount of 1'540,366.16 does not qualify as a zero-rated sale.78 In sum, out of the total reported zero-rated sales ofP14,548,005.68, only the sales of goods to PEZA-registered entities in the amount of 1'2,322,393.48, as computed below, qualify for VAT zero-rating for the 4'h quarter of taxable year 2015:

Zero·rated Sales

Per Return

Disallowance

Valid Zero-Rated

Exhibit

"P-923"

"P-962"

"P-977"

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

As for the fifth requisite, which is to the effect that petitioner must prove that the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations under Sections 106(A)(2)(a)(1), (2) and (b), and 108(B)(1) and (2), all of the NIRC of 1997, as amended, since the legal basis for petitioner's zero-rated sales of 1'2,322,393.48 is Section 106(A)(2)(a)(S) of the NIRC of 1997, as amended, the instant case need not comply with the said fifth requisite. In this connection, while petitioner alleges that it has sales of services to certain NRFC, the Court need not determine whether there was compliance with the same fifth requisite, since it was not duly proven, as above shown, that the said sales of services qualify for VAT zero-rating under Section 108(B)(2) of the NIRC of 1997, as amended.

Having found that petitioner had valid zero-rated sales on!J in the total amount of 1'2,322,393.48 for the subject period of claim, the Court shall proceed to determine whether petitioner complied with the following remaining requisites:

a. sixth requisite: the input taxes are not transitional input taxes;

b. seventh requisite: the input taxes are due or paid;

c. eighth requisite: 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 directly and entirely attributed to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and

d. ninth requisite: the input taxes have not been applied against output taxes during and in the succeeding quarters. The input VAT being claimed do not appear to be 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 wit: "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, ~ CfA Case No. 9794 Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Page 26 of 41

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. 79 Since there is no showing that the claimed input taxes are transitional input taxes, petitioner has complied with the sixth requisite for the grant of an input VAT refund. Not ail of the input VAT being claimed are due or paid.

The seventh requisite for the successful prosecution of an input VAT refund claim is to the effect that the input VAT being refunded should be due or paid. The fulftllment of this requisite is fully dependent on the compliance with the invoicing and substantiation requirements under the law, as earlier quoted.

Petitioner submitted various invoices, ORs and importation documents80 to support the payment of input taxes. Said documents were examined by the ICP A in order to verify petitioner's compliance with the said substantiation and invoicing requirements.

For the 4'h quarter of taxable year 2015, petitioner claims a total amount of P1,574,758.55 allowable input VAT arising from its domestic purchases and importation of goods other than capital goods, and domestic purchases of services.

Summarized below are petitioner's domestic purchases and importation of goods other than capital goods and domestic purchases of services in the total amount of P13,122,987.83, and the corresponding input taxes, for the 4'h quarter of taxable year 2015 in the total amount of P1 ,574,758.55:

Amount of

I

Purchases and

Amount of

Importations

Input VAT

Domestic Purchases of Goods Other

than Capital Goods (Line 21E/F) p 88,373.65 p 10,604.84 I Importation of Goods Other than

Capital Goods (Line 21 G /H)

882,569.15 105,908.30

Domestic Purchase of Services

(Line 21I/J)

671,889.72 80,626.77_ y

79 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 158885 and 170680, April 2, 2008.

80 Exhibits "P-I 00" to "P-880" and submarkings.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Others (Line 21 N/0)

11,480,155.31 1,377,618.64 81

Total

P13,122,987.83 P1,574,758.55 Petitioner claims that out of the total domestic purchases and importation of goods other than capital goods, and domestic purchases of services in the total amount of :P13,122,987.83, with corresponding input VAT in the amount of :P1,574,758.55, domestic purchases and importations as reflected in "Others (Line 21 N/0)" of the Quarterly VAT Return for the 4'h quarter of taxable year 2015 in the total amount of :P11,480,155.31, with corresponding input VAT amount of :P1,377,618.64 should be granted for refund.

Domestic purchases and importation of goods other than capital goods, and domestic purchase of services in the total amount of :P11,480,155.31, with corresponding input VAT of :P1,377,618.64 as reported in "Others (Line 21 N/0)" in the Quarterly VAT Return for the 4'h quarter of taxable year 2015 was determined by petitioner82 to be composed of purchases directly attributable to zero-rated sales, and purchases allocable to zero-rated sales, as follows:

4•• Quarter of 2015

Purchases

Input VAT

Allocated to Zero-Rated Sales

1."11,244,780.48 1."1,349,373.66

Directly Attributable to Zero-Rated Sales

235,374.83 28,244.98 Total attributable or allocated to Zero-

Rated Sales

1."11,480,155.31 1."1,377 ,618.64 However, upon verification by the Court, it is found that petitioner failed to prove that certain domestic purchases and importation of goods other than capital goods, and domestic purchase of services in the total amount of :P235,374.83, with corresponding input VAT amount of :P28,244.98, were "direct!J attributable" to zero-rated sales made during the 4'h quarter of taxable year 2015. Thus, the Court is constrained to consider the whole amount of :P13,122,987.83 as petitioner's total domestic purchases and importation of goods other than capital goods, and domestic purchase of services, with corresponding input VAT amount of :P1,574,758.55, subject to proportional allocation between VATable, VAT-exempt and VAT zero-rated sales pursuant to Section 112(A) of the NIRC of 1997, as amended, as will be determined momentarily.

Of the total amount of :P1,574,758.55 input VAT arising from domestic purchases and importation of goods other than capital goods, and domestic purchases of services subject to allocation, the ICP A was only able to vouch input VAT in the amount of :P1,556,546. 94, as shown belowjv" 81 No figures reported in the Quarterly VAT Return for the 4'h quarter of TY 2015. Amounts were computed by the undersigned.

82 Paragraphs 17 and 18, Petition for Review, Docket- Vol. I, pp. 18 to 19.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Input VAT on vouched purchases I" 375,410.9483 ln__Q]Jt VAT on importations 1,181,136.00 84 Total vouched input VAT on purchases and importations by the !CPA 1"1,556,546.94 Less: Reported input VAT on domestic purchases and importations 1,574,758.55 Unaccounted input VAT

I"

18,211.61 Therefore, the unaccounted input VAT amounting to P18,211.61, which were not supported with VAT ORs or invoices, shall be disallowed for failure to substantiate the same.

As per ICPA's Schedules of Vouched Purchases85 and Importations86, out of the P1,556,546.94 total vouched purchases and importations, the input VAT in the amount of P33,546.05 shall be disallowed for failure to meet the invoicing requirements under Sections 110(A), 113(A) and (B), and 237 of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-2005, as amended, summarized by the Court as follows:

Amount of

Amount

Purchases/

Exhibit

Date

Payee

Importations

input VAT I. Input VAT on domestic Purchases of Goods and Services

I

1. Supported by out of period OR, collection receipts, cash slip or service invoice

"P-728"

09/23/2015

KIMLY MERCHANDISING

p 223.25 p 26.79

"P-729"

09/26/2015

METRO SURIGAO SHOPPING

6,014.00 721.68

CENTER

"P-246"

09/30/2015

K1MLY MliRCIL\NDISING

107.17 12.86

"P-256"

09/28/2015 PI JILIPPINI·: PORTS A UTI IOR!lY 10.67 1.28

"P-103"

07/18/2015

GAC PI IILJPPINI·:S INC

20,108.67 2,413.04

Subtotal

1'26,463. 76 I' 3,175.65

2. Supported by undated Sis or parking ticket

"P-798"

NO DATI•:

S,\NI'ORD M.\RKI'.'l'INC p 442.42 p 53.09 C!JitP<liL\TION

"P-358"

NO DATE

KI~!III·:I·: RE,\I."IY CORPORATION 8.92 1.07

"P-370"

NO Di\TE

KIMIJJ·:I·: Rl·:.ll."IY CORI'OR,\TION 8.92 1.07 "P-87t"HH

NO DATE

I'ETRON

66.09 7.93

"P-458"

NO DAm

CEHU PORT AUTHORITY

8.92 1.07

"P-371"

NO DA'J'J·:

COODHOPE I IARDWARE

435.75 52.29

Subtotal

I' 971.02

I'

116.52

3. Supported by documents other than S/ or OR

"P-632"

10/26/2015 RN G!ISOI.INI·: SERVICE STATION p 133.92 p 16.07

"P-287"

10/08/2015 TETRt\ SAI.I·:S ,\ND SERVICES INC 17,155.83 2,058.70

"P-320"

10/10/2015 1'1 Ill. SP,\N ,\SL\ C\RRJI-:R CORP 514.17 61.70

"P-247"

10/06/2015 KIMI.Y MI-:RC:IIANDISING 2,227.67 267.32 /1 83 Total "AMOUNT OF INPUT" Column, Annex C, Exhibit "P-42-4", Docket~ Vol. 3, p. 1477. 84 Total "INPUT VAT AMOUNT" Column, Annex D, Exhibit "P-42-5", Docket~ Vol. 3, p. 1478. 85 Annex C, Exhibit "P-42-4", Docket~ Vol. 3, pp. 1471 to 1477. 86 Annex D, Exhibit "P-42-5", Docket~ Vol. 3, p. 1478. 87 Expressed in month/day/year.

88 Actual exhibit pertains to a different transaction.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue ew a re nn a a re ee ee oe

METRO SURIGAO SHOPPING

CENTER ENC

"p-321" 10/02/2015 7,910.92 949.31 ” »~_ u pan 10/03/2015 | SMART. COMMUNICATIONS INC 2,043.16 245.18 "P-858" to . os on ;

"p-858-1 I" 10/03/2015 | SMART’ COMMUNICATIONS INC 4,807.00 576.84 "P.869" to "D869." 10/03/2015 SMART COMMUNICATIONS INC 4,978.33 "P-860" to vpeps a gepe . .

").860-B" 10/03/2015 SMART COMMUNICATIONS INC 1,071.43 "P-611" 11/20/2015 | D' MOTORISTS PITSTOP, INC.

D MICHAEL CO INDUSTRIAL

“) 4

11/18/2015 | ZEUGINY ENTERPRISES INC

) . tb ".510" 11/23/2913. | DIDIPIO COMMUNTIY 597.40 128.57 1,325.58 159.07 1,660.75 199.29 67.83 1,607.17 192.86

DEVELOPMENT CORPORATION

*pesa” | _ 11/12/2015 | PLDT 30,288.58 3,634.63 Dp. "

vpaetan | 11/02/2015} SMART COMMUNICATIONS INC 4,464.29 535.71 "P-862" to : ee TIC ATONE IC paca. | 11/02/2015 | SMART COMMUNICATIONS INC 714.29 85.71 “pos | 11/02/2018 _| SMART COMMUNICATIONS ING 1,718.60 206.23 *p-86a"___| 11/02/2015 _| SMART COMMUNICATIONS INC 4,978.33 597.40 "p.865" | 11/02/2015 _| SMART COMMUNICATIONS ING 4,945.98 593.52 "p-866" | 11/02/2015 _| SMART COMMUNICATIONS ING 4,464.29 535,71 oo — _— "P612" 12/01/2015 | RN GASOLINE SERVICE STATION 1,228.42 147.41 ee ee Subtotal P98,306.54 11,796.77 4, Supported by SI with stamped "This document ts not valid for claiming input taxes."

10/06/2015 | ISIDRA C. OTARA P 223.25 P 26.79

CG & Fy SHELL SELECT

"DL " *

11/16/2015 | CONVENIENCE STORE 101.75 12.21 Sibel | 525.00 | 59.00

5. Supported by photocopy documents only

"P-172"/ MIEFRO SURIGAO SHOPPING

"Pt72-A" 10/23/2015 CENTER INC P 5,970.33 P 716.44 "P-606" 11/16/2015 | TOYOTA SHAW ING 2,592.83 311.14

"P-669"/ METRO SURIGAO SHOPPING

"p.g69-A" | 11/20/2015 | ConryeR, INC. 8,660.49 1,039.26

METRO SURIGAO SHOPPING

D> _ “

P-680 11/05/2015 CENTER, INC. 384.83 70.18

"P-681"/ METRO SURIGAO SHOPPING

"D681 A" 11/05/2015 | CuNtiR. INC. 8,266.67 992.00

"P693"/ METRO SURIGAO SHOPPING

"p.693.A" 11/13/2015 | CENTER. INC. 6,051.75 726.21 11/04/2015 | ‘THE BELLEVUE MANILA 12,053.58 1,446.43 "p.342"/ 5 METRO SURIGAO SHOPPING , “P3494” 12/12/2015 CENTER 6,612.92 793.55 "p-351"/ MIRO SURIGAO SHOPPING "P.350"/ METRO SURIGAO SHOPPING "p350_\" 12/04/2015 | Gainryyep 7,150.33 858.04 12/05/2015 | ‘TOYOTA MANDAUE 780.00 93.60 42/18/2015 | UY & DE GUZMAN LAW OFFICL 40,000.00 4,800.00 es P 105,425.90 12,651.11

6. VAT-exempt transactions "P-631" 10/23/2015 | CCG GRAPHIC DESIGN STUDIO P 55.00

TOP SPRING PURIFIED

"P-766" 10/19/2015 | DRINKING WATER & DIST 200.00

SERVICES

VOP SPRING PURIITIED

"P-792" 10/22/2015 | DRINKING WATER & DIST 400.00

SERVICLS

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue a war a er ee nee ee ee ee eee nee "p.296" 10/21/2015_| SAGUISA'S EATERY 120.00 -

P20" | 10/17/2018 SURIGAO LocKSMIT |= | S—*”

HILOMEOWNER'S ASSOCIATION, INC.

"P-569" 11/04/2015

400.00 235.00 0) a

"P-638" 11/09/2015

"P-587" 11/26/2015

WICENE

"p.507" 11/17/2015

"P-658" 11/21/2015

"P-540" 11/20/2015 | KAI. HUGO CAFE BOHEMIAN 2,289.00 12/21/2015 | ASIALINK AUTO SUPPLY 450.00 h TAGANITO BAKEHAUZ & P0665 11/24/2015) uNERAL MERCHANDISE 275.00 "p.675" 11/13/2015 | MS FOOD GALLERY 205.00

GOODWILL SUBDIVISION 3

"p-708" 11/13/2015 | HOMEOWNER'S ASSOCIATION, 70.00 "p40" 12/31/2015 | SEBY'S ENTERPRISES 350.00}

NEW DAYWAN RICE MILL &

D8 12/13/2015 | saci FARM PRODUCTS 6,000.00 po "p.334" 12/19/2015 | CHROMIUM DRUG 1o000[ yazan JV BULALO & CALDERITA P-338 12/12/2015 | Gonepaypy 740.00 “p-344" 12/18/2015 | MS FOOD GALLERY 325.00] ENDEE GENERAT.

mp.34gn 5 pati 12/08/2015 | stiRCHANDISE 426.00 a ny aean JV BULALO & CALDERITA » .

P-354 12/04/2015 | opetay ry 440.00

| TOP SPRING PURIFIED

mp anan 5 raed 12/01/2015 | DRINKING WATER 335.00 pe | "p.475" 12/01/2015 | V'LOR'S MERCHANDISING 2,300.00} - | "p.425" 12/03/2015 | SAVEMORE 540.00 - sy agen ‘TOP SPRING PURIFIED

TOP SPRING PURIFIED

10/08/2015 | SANFORD MARKETING CORP 540.00] "p-241" 10/14/2015 | SANFORD MARKETING CORP 2,825.00[ = - 12/03/2015 | INT EXPRESS WORLDWIDE 9,600.00] - "p-439” 12/16/2015 | SAVEMORK 540.00; - "p41" 12/14/2015 | PURIFIED DRINKING 350.00[ = - 12/03/2015 | ANJA GOTOUAN 565.00{ - | wy tae BASTIS GRILI, AND SEAFOOD P-105 09/23/2015 | RoeraURAN'T 689.00 P| “p.232" 09/23/2015 | SANFORD MARKETING CORP 130,00{ = "p-233" 09/23/2015 | SANFORD MARKETING CORP 64426[ Subtotal P 34156.26|P - | Total-Domestic Purchases of Goods and Services P265,648,488 P 27,779.05 wv * Net Amount of Purchases — Not Valid to Claim Input VAT of P265,648.44 per Annex C, Exhibit “P-42- 4”, Docket — Vol. 3, p. 1477; P0.04 rounding-off difference.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

II. Input VAT on Importations 1, Supported by photocopy of Informal Import Declaration and Entry/BOC Form No. 38-AT "P.877" to _ "D877" 12/03/2015 | HIDROSSPA P 48,058.33 P 5,767.00 Total-Importations P48,058.33% P 5,767.00 ee A 2 In addition to the above disallowances, the input VAT in the amount of P1,290,986.71 shall, likewise, be disallowed for failure to meet the substantiation and invoicing requirements under the aforementioned VAT law and regulations, to wit:

91 Amount of

Payee Reference Date Input VAT Exhibit

I. Input VAT on Domestic Purchases of Goods and Services

1. Supported by VAT Invoice/OR wherein the VAT amount is not separately/properly indicated QUADRO CORNELIO FOOD paige VENTURES 1367 08-Oct-15 P 39.64 “P-215” LSPRUTINGKLE GAS AND SERVICK, 21550 159.19 “P.308”/ XENTRIX SOLUTIONS INC 85593 1,817.14 | “P-308-A” CHAE OASIS DEVELOPMENT CORP. 50345 101.79 ONE AND ONLY MARKETING 0048 48.64 TRON CFYY CALTEX 04261 187.50 TRON CITY CALTEX 04221 186.42 TRON CITY CALTEX 03807 182.14 IRON CITY CALTEX 3946 189.99

ESPRUTINGKIAE GAS AND SERVIC:

INC

PIPELINE ENTERPRISES

ESPRUTINGKLE GAS AND SERVICE

INC

QUADRO CORNELIO FOOD

VENTURES

QUADRO CORNELIO FOOD

VENTURES

MANDAUE STAR OF. GASOLINIE

ST NTION & CONVIENTENCE STORE

TYTANS PROPERTIES AND

DEVELOPMENT INC.

FESPRUTINGKLE GAS & SERVICE

INC.

MCDONALD'S - GOLDEN ARCHES

01345 59.46 | __“P-220” 3550 04-Nov-15 160.71 48459 201.01 049711 57.00 275515 6.43 1895008 37.50 83379 151.23 32648 107.14 *® Net Amount of Importations — Not Valid to Claim Input VAT of P48,058.33 per Annex D, Exhibit “P- 42-5”, Docket — Vol. 3, p. 1478.

*! Expressed in day-month-year.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

0595 | a6Now-5 <p."

6026 72.00 “P-595” 7780 24-Nov-15 112.50 “P_604” 2

CONSOLIDATED G]OBAL

IMPORTS, INC.

MSD GODSPEED |} XHIBITS CORP.

THE, HOUEE ANDREA THE HOLT, ANDREA OPTIMUS SHELI. SERVICE

CORPORATION

TRON CITY CALTEX STATION

PARKWAY 21869 17-Dec-15 “P-332”

06254 15-Dec-15 138.21 | _“P-418” | 17-Dec-15 | 131.79 9583 10.61 “P.544” TRON CITY CALTEX STATION 06426 17-Dec-15 123.00 “P_333” 21687 20-Nov-15 187.04 “P-666” IRON CIVY CALTIEX STATION 00205 19-Dee-15 138.21 “P-335” NICKIi). SALES CENTER None 12-Dec-15 19.07 “P-337” IRON CILY CALTEX STATION None 12-Dec-15 136.93 “P.339” PARKWAY 21881 18-Dec-15 53.68 “P-343”

NEW FAMILY DRUG AND

GENERAL MERCUANDISE 621599 “P_451”

EFRON CILY CALTEX STATION 05902 “P-345”

IRON CITY CALTEX STATION

TRON CITY CALTEX STATION

IRON CIry CALTEX STATION

PARKWAY

TYT ANS PROPERTIES AND

DEVELOPMLNT 4160 18-Dec-15 42.86 “P-472” 05901 05-Dec-15 133.29 “P.346” PARKWAY 22882 12-Dec-15 533.38 “P-340” 22868 04-Dec-15 561.33 “P-452” PARKWAY 22883 12-Dec-15 198.80 “P-344”

TYTANS PROPERTIES AND

DEVELOPMENT 4061 18-1ec-15 176.79 | “P-471”

TYTANS PROPERTIES AND

DEVELOPMENT 4159 18-Dec-15 37.50 | “P-473” 05819 03-Dec- 125.92 “P-352” CUBU'S ORIGINAL LECHON BELLY 33579 37.50 “P-356” “p.441”

MJM FILOIL

ESPRUVINGKILE GAS AND SERVICE

INC

TNE EXPRESS WORLDWIDE

MOREDONIE VEN'PURES

11230 15-Dec-15 12.32 15 15 628320 12-Dec-15 670.18 “P-450” 15 ec-15 15 004182 05-Dec-15 637.50 “P-444”

MSPRUTINGKILE GAS AND SERVICE

INC 47957 07-Dec-15 202.50 “P-366”

236850 “P-403”

430161A 14-Dec-15 “p.455” 44893 16-Dec-15 74.36 “P-440”

ESPRUTINGKLE GAS AND SERVICE

INC

016726 17-Dec-15 “P-399”

1417 18-Dee-15 “P-379”

16274 “P-429”

05476 09-Dec-15 133.71 “P-348” 070340 03-Dec- 310.24 “P-466” 47719 02-Dec-15 1,043.36 “P-361”

SKY PACIPIC CATV

31111 16-Dec-15 129.64 “p-374” LAFAYETTE, INC 00114 “P-388”

1M GRILE CEBU

12216 “P3900”

MCDONALDS CEBU 054224 “P_413”

ONAS FOOD CORPORATION 16269 10-Dee-15 10.61 “P-428” STA. LUCIA HAST SUPERMARKET 175987 10-Dec-15 166.35 “P-465” MR. KIMBOB CO 4248 11-Dec-15 10.61 “P-445” MCDONALDS CEBU 0014221 11-Dec-15 22.50 “P-411” 3371 11-Dec-15 62.68 “P-38 025800 16-Dec-15 214.29 “P_438” 0120533 03-Dec-15 33.00 “P-416” MAJOR SHEOPPING MANAGEMENT | coseo0_|

CORP

MCDONALDS CEBU [0120533 |

CYry CHIX INCORPORATED “P.406” Subtotal es ee P 13,562.77 ie eee

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

2. Supported by VAT Invoice/OR wherein TIN and or address are not indicated, incomplete or unreadable

CEBU BELMONT INC

ACE HARDWARE PHILIPPINES INC

LBC EXPRESS

LBC F:XPRESS

LBC [XPRESS

SMART COMMUNICATIONS INC 0196408273 03-Oct-15 535.71 | _“P-859B”

LBC EXPRESS “P-846"

LBC 1:XPRIESS, INC. “P-616” 1.BC EXPRESS, INC. | 153262

CONCORDE CAR ACCESSORIES “P-513”

LBC EXPRIISS, INC.

SILICON VALLEY COMPUTER

GROUP PILS., INC, LBC EXPRESS, INC.

LBC EXPRESS, INC.

LBC EXPRESS, INC, LBC EXPRIESS, INC.

287920655 “P-484”

LBC EXPRIESS, INC.

SMART COMMUNICATIONS INC

LBC EXPRESS, INC CABADBARAN SITE, SERVICE

STATION

LBC EXPRESS, INC LBC XPRESS, INC LBC EXPRESS, INC LBC lEXPRIESS, ENC LBC EXPRESS, INC

CEBU AIR INC

FIRST ASIA REALLY

PHI!

Subtotal

153926 09-Nov-15 19.82 “P-637” 00141 373.93 | “P-641” 155143 “p-643” 155349 23-Nov-15 16.07 155748 27-Nov-15 16.07 “P.557” 15590 24-Nov-15 19.82 “P-668” 45410 15-Nov-15 16.07 “P-685” “P74 “P-867" 21-Nov-15 17.14 “P-642” 0192251871 02-Nov-15 497.03

“P-868”

0194274790 02-Nov-15 116.13 “p_304” 46231 21-Dec-15 19.82 11506 15-Dec-15 19.82 “P-431” 11213 08-Dec-15 16.07 “P-432” 45882 04-Dec-15 “P.433”

156339 “P-435”

43414 “P-437”

3741318 “P-402”

0012337 “P-446"

0291690616 “P-609”

Po 5576.85 |

3. Supported by out of period SI, OR or collection receipt 1D MICIIAEJ, CO INDUSTRIAL, “P-5157/ 1999 O1-Sep- P18,970.71 “P-515-A” SUPPLY CORP.

15 15 153262 03-Nov-15 19.82 “P-622” 15 15 5 048795 29-Dec-15 105.31 “p-400” 1 28788 11-Nov-15 12.32

157868 17-Dec-15 “D434”

GOODIHOPE HARDWARE 32791 02-Sep-15 184.29 “P-853” GOODITOPE HARDWARI! 33311 11-Sep-15 110.68 “P-721”

SYT GLASS CENTIER INC

CEBU MMF GLASS AND ALUMINUM

4964 1,429.20 [| “P-723” SUPPLY 23480 14-Sep-15 925.99 “P-724”

JASPER GLASS & BUILDERS CORP “P-725”

ATLANTIC HARDWARE:

PURIEGOID PRICE CI.UB, ING.

IRON CITY CALTEX STATION

JASPER GLASS & BUILDERS CORP 11661

ASYA GIASS PHILIPPINES

SANFORD MARKETING

12623 23-Sep-15 16.87 “P-733”

CORPORATION

SOUTHERN STAR ALOMINIM 743) 25-Sep-15 9,642.86 “P-737” CORPORATION Se .

SANFORD MARKETING | onsenis | o3ae 12651 24-Sep-15 93.46 “p.734” SANFORD MARKEPING | oprase_| CORPORATION 13011 “P.735” 34024

SANFORD MARKIZTING

CORPORATION 13017 27-Sep-15 24,75 “P-741” 10-Sep-14 2,887.76 “P-745”

DEXCEL INTERNATIONAL

FORWARDER INC 0161

U FREIGHT PUTLS 1132415 :

MANDARIN 4417 30-Sep-15 96.32

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

WILCON DEPOT BUILDERS DEPOT Lays |

INC 44317 30-Sep-15 1,433.08 “p_304”

PRUDENTIAL CUSTOMS

BROKERAGE SERVICES INC 28-Sep-15 17.57 “p_198” TORN SI 30-Sep-15 320.89 “P-284” 26-Sep-15 176.81 | “P-144”

XPRESSITLE STATION SUCAT a

BRANCH 24298 04-Sep-15

XPRESSFILL STATION SUCAT

BRANCH 25206 22-Sep-15

D MICHAEL CO INDUSTRIAL

SUPPLY CORP 1888 01-Sep-15

CITT HARDWARE BACOLOD INC 30-Sep-15

NEW SURIGAO PAINTHAUS AND

AUTO PARTS GEN MDSE

53.57 “P-155” 214.30 “ P-156” 123.25 “P-157” “p_345”

*P_160”

13,312.57 57.86 30-Sep-15 26.79 “P-257”

CITTRA METRO MANILA TOLLWAYS

CORP,

CTYRA METRO MANILA TOLLWAYS

CORP.

“p_197” 29332 28-Sep-15 214.29 2879896 16-Sep-15 214.29 * P-194” “P.] 12”/

| 30-Sep-15 __|

[SPRUTINGKLE GAS AND SERVICE

INC None 10,72 | “P-184” unreadable 47 | “P4183” ESPRUTINGKLE GAS AND SERVICE, ESPRUTINGKLE GAS AND SERVICE | epise” INC none 203.57 | __ “P-188” QUADRO CORNELIO FOOD | pose _| VENTURES 1329 17.68 “P-286” SUPER SHOPPING MARKET INC 13018 36.96 SANFORD MARKETING CORP 12683 24.11 SANFORD MARKETING CORP 12684 18.80 SANFORD MARKETING CORP 12692 302.68 SANFORD MARKETING CORP 12698 50.49 12693 16.77 6324726 1,261.59 OFFICE BASICS CORPORATION 23953 143.57 OFFICE BASICS CORPORATION 23455 991.61 PRIMERA CLAS GAS STATION INC 64471 214.30 AM PIHIEL. FOOD CONCEPTS ING 17007 645.77 U PREIGIY PHILIPPINES INC 66957 24-Aug-15 518.25 | “P-112-A” U FREIGHT PHUIPPINES INC 1130867 10-Aug-15 10,074.34 TRI ORTO SHELL GASOLINE, “P.293”/ STATION 9996 128.58 | “P-294” XPRESSFIED. SFATION SUCAT pase BRANCI 29157 Aug 166.81 “P_158” XPRESSEILI. SEA TION SUCAT Lot vugis paso _| BRANCII 23461 24-\ug-15 144.65 “P.159” XPRESSFILL STATION SUCAT | pase BRANCH 23516 28-Aug-15 116.79 “P_154” CYFRA METRO MANILA ‘TOLEWAYS | pase CORPORATION 2774929 28-Aug-15 214.29 “P_496” es ee 20727 2

4. Supported by documents other than SI or OR

ME'ERO SURIGAO SITOPPING “P-719"/

7381 30-Oct-15 P 989.48 | “P-719-A” 5 CENTER, INC.

WILCON BUILDERS DEPOT INC 42656 15-Oct-1 41.71 “P-751” WILCON BUILDERS DEPOT INC 25818 23-Oct-15 77.25 “P-808”

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

CITRA METRO MANILA TOLLWAYS

CORP, 27-Oct-15

PITILIPPINIE LONG DISTANCE

TELEPHONE COMPANY 05-Oct-15

CEBU BELMONT INC 06-Oct-15

BELMONTH HARDWARE DEPOT 12-Oct-15

CEBU BELMONT INC 12-Oct-15

OFFICE WAREHOUSE INC. 22-Oct-15 OFFIC, WAREHOUSE INC. 13-Oct-15

OCTAGON COMPUTER

SUPERSTORE 48133 17-Oct-15

SHOPPING CEN‘TTER INC

OCTAGON COMPUTER

SUPERSTORE

MIZTRO SUPERMARKET BANILAD

CUBIX OFFICE INC

PROTON MICROSYSTEMS

RICLIMONDE HOTEL

METRO SURIGAO SHOPPING

CENTER INC

CYERA METRO MANILA TOLLWAYS

CORP.

SOUTIT LUZON TOLWAY

96988 47940 36317 15681 324900 2133162 758827 7263 271131 342375 271857

CTTRA METRO MANILA TOLLWAYS

CORP. 232363

SOUTTT LOZON POLLAWAY

CORPORATION 305010

CTTRA MIFPRO MANILA TOLLWAYS

CORP. 34625

CITRA METRO MANILA ‘VOLILWAYS

CORP. 190913 STATION SQDARE, AST

COMMERCIAL CORP 75808

OCTAGON COMPUTER

SUPERSTORE 48393

CITRA METRO MANILA ‘TOLLWAYS

CORP. 285531

MANILA INTERNATIONAL

AIRPORT AUTHORITY

CITRA MIETRO MANILA TOLD WAYS

CORP,

CYPRA MIETRO MANILA TOLLWAYS

CORP.

MANILA INTERNATIONAL

AIRPORT AUTHORITY

TALEVEN

NATIONAL BOOK STORE

OCTAGON COMPUTER

SUPERSTORE

PIZZA PUT - PEOLAPPINIE PIZZA

INC.

41290 134504 3195753 468831 unreadable 1059593 unreadable 137655

02-Oct-15

06-Oct-15

04-Oct-15

09-Oct-15

07-Oct-15

02-Oct-15

30-Oct-15

17-Oct-15

20-Oct-15

16-Oct-15

19-Oct-15

16-Oct-15

04-Nov-15

09-Nov-15

15-Nov-15

10-Nov-15

25-Nov-15

15-Nov-15

11-Nov-15

26-Nov-15

19-Nov-15

LBC EXPRESS, INC.

'TALPAN DEVELOPMENT INC.

OCTAGON COMPUTER

SUPERSTORE 48522 13-Nov-15

PARK WAY None 13-Nov-15

GLOBES THLIECOM INC.

3_LOBE TELECOM INC.

GLOBE TELECOM INC.

GLOBL TELECOM INC.

GLOBE 'TRLECOM INC. 16-Nov-t5 GLOBI ‘TELECOM INC. 02-Nov-15

CHT HARDWARE BACOLOD ING 133977 12-Dec-15

SAVEMORI! 8521560 01-Dec-15

ACH EEARDWARK:

7 BLEVEN

214.29 706.09 235.69 419.57 267.00 341.79 74.46 556.07 831.01 741.43 63.92 30.21 2,673.21 115.93 8.04 819.66 9.00 1.29 14.25 14.25 1.61 214.29 9.00 4.29 741.43 9 00 - 29 53.57 53.57 4,29 18.96 116.73 185.36 89,68 19.82 44.11 1,612.50 46.41 160.54 383.78 419.68 160.54 336.47 535.50 616.49 30.16 5.33 34.93 7.71 5.36 8.68 “—Dp.505” “Pp. 10” «pid 1 1 o>

“P17”

“D-118”

«“D_359”

“P-242”

“P.272” “p_4 22" “p-273"

“P-252”

“P-200"

“P-274”

“P-152”

“P_267”

“P-322” to

“P-322-B”

“P.189”

*P-190”

“p.$91” “Pp 253”

“P-254”

«P.195” “p.

175” “pL 174”

“Pp_615”

«D.625” “p-495” “p-499”

*P_503”

“p-504” “P.636" “P.639”

“P-588”

“P_647”

“P-649”

“P-667”

“P-677”

“P-891”

“2-696”

“P-849”

“P-697”

“P-848”

“P-698"

“P-206”

“P-449”

“P-422”

“P-360”

“P-436”

“P-436-A”

“P-372”

“P-479”

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

GLOBE TELECOM 38492 23-Dec-15 4,109.10 “P-844” vCTTRA METRO MANILA ‘TOLIWAYS CORP. 217846 01-ec-15 214.29 *P-498" Subtotal | sd P_ 19,503.07 ee 5, Purchase of services supported by documents other than OR PINEDA GASOLINE STATION 30010 05-Oct-15 P 10.71 “P-282”

LAVEINDIER SHELL SERVICE

STATION & GEN MDSE 105116 04-Oct-15 192.84 “P-243” 105091 07-Oct-15 184,29 “P-247” LAVENDER SHES.L SERVICE 109676 09-Nov-15 119.07 “P-610”

STATION & GEN MDSE

XPRESSFILL SFATION

PRIMERA CLASE GAS STATION, 69996 02-Nov-15 165.53 | “P-613” 4193 16-Nov-15 123.41 “P.614” 68951 09-Nov-15 128.57 | “P-624” 69404 25-Nov-15 77.37 | “P-501” 15706 22-Nov-15 111.64 | “P-581” INC.

VALUCORE BUSINESS VENTURES

CORPORATION

CAPTVOL 8 GAS & VUE STATION, INC.

CAPTYVOL. 8 GAS & FULL STATION, INC.

TONNIEL'S PETRON SERVICE

STATION

SOLANO PRFRON SERVICE

CENTER

111660 XPRISSFILD. STATION

PINEDA GASOLINE STATION

LAVENDER SHEL. SERVICE STATION & GEN.MDSE. 136.87 LAMUAN SHELL GAS STATION, INC.

ERICK PETRON SERVICE CENTER 1068905

LAVENDER SHEL) SERVICE

LAVENDER SHELL SERVICE a

SENVITON & GEN. MERCIIANDISI: “P.326”

NORTHERN SPAR ENERGY

PINEDA GASOLINE: STATION

fetweed fe a es Total-input VAT on domestic purchases of goods and services | P5617.71[

QO OO

IT. Input VAT on Importations Input VAT on importations supported by photocopied ” Sta tement of Settlement of Duties & Taxes/Assessment Notice/BOC Single Administrative Document/Temporary Assessment Notice and computer generated bank statement

REMA TIP TOP AG

TIP TOP OBERELACHTENSHUTZ

ELBE

“P-872” to

P 178,392.00 | “P-872-f1” 462,603.00 | “P-873-E” REMA ‘TTP TOP AG 132,659.00 | “P-874-F” GMA GARNET GROUP 59,251.00 | “P-875-D”

TIP TOP OBERFLACHENSIIUTZ “P-876" to

ELBE 214,016.00 | _“P-876-C” “P-B18" to AMIE INTERNATIONAL 27,673.00 |_“P-878-D” ee ee es ee ee eee

HIP PLOP JAPAN

REMA TIP POP ‘TIANJIN RUBBER

“P-879” to

80,265.00 | “P-879-F”

“P-880” to

20,510.00 | ‘*P-880-D”

TECU

Total-input VAT on importations P1,175,369.00 | ee ee TOTAL P1,290,986.71| | In sum, out of the reported input VAT of P1,574,758.55 for the 4" quarter of 2015, only the amount of P232,014.18, as computed below, represents petitioner’s valid input VAT *? “PHOTOCOPY/ORIGINAL” Column, Exhibit “P-42-5”, Docket — Vol. 3, p. 1478.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Reported Input VAT

Less: Disallowances

Unaccounted/unsubstantiated input VAT Per !CPA Report Per Court's further verification

Valid Input VAT

Since there are both zero-rated or effectively zero-rated sales and taxable sales subject to 12% VAT, the valid input VAT of P232,014.18 shall be proportionately allocated on the basis of sales volume.

1'1,574,758.55 p 18,211.61 33,546.05 1 ,290,986. 71 1,342,744.37 P232,014.18 To reiterate, the eighth requiSite 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 directly 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 subject period of claim, there exist taxable sales subject to twelve percent (12%) and 0% rates, to wit:93

Particulars

Amount

Vatable Sales/Receipts

p 4,313,062.28

Zero-Rated Sales/Receipts

14,548,005.68

Total Sales/Receipts

p 18,861,067.96 Since petitioner's input VAT cannot be directly or entirely attributed to any of the transactions, the valid input VAT of P232,014.18 shall be allocated proportionately on the basis of the volume of petitioner's total sales, as shown below:

Taxable Sales subject to 12% VAT for the 4'' quarter of2015 p 4,313,062.28 Divided by the Total Sales for the 4'' quarter of 2015 18,861,067.96

Multiplied by Total Valid Input VAT

232,014.18 Validinput VAT allocated to sales subject to 12% VAT p 53,055.94 Zero-Rated Sales for the 4'' quarter of 2015 1'14,548,005.68 Divided by the Total Sales for the 4'' quarter of 2015 18,861,067.96

Multiplied by Total Valid Input VAT

232,014.18 Valid input VAT allocated to zero-rated sales p 178,958.24 /¥"

93 Exhibit "P-3", Docket- Vol. 3, pp. 1382 to 1383.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Thus, for purposes of, and with regard to petitioner's compliance with the eighth requisite, only the amount of I'178,958.24 represents valid input VAT attributable to total reported zero-rated sales. Petitioner has no excess input VAT available for refund Having determined that petitioner had valid input VAT attributable to its zero-rated sales, the Court shall now determine whether the same was not applied against its output VAT liability during and in the succeeding quarters, relative to the ninth requisite for the successful prosecution of an input VAT refund claim.

After deducting the input VAT attributable to taxable sales subject to 12% VAT in the amount of I'53,055.94 from its output VAT liability of I'517,567.4794 on the said sales, petitioner still has a net output VAT payable of I'464,511.53, as computed below:

Output VAT per Return

p 517,567.47 Less: Input VAT allocated to 12% Vatable Sales 53,055.94

Net Output VAT Payable

P464,511.53 Since the valid input VAT attributable to 12% vatable sales is not enough to cover its output VAT liability, the valid input VAT attributable to total reported zero-rated sales in the amount of I'178,958.24 shall be utilized against the remaining output VAT liability of I'464,511.53. However, the input VAT attributable to zero-rated sales of I'178,958.24 is lower than the net output VAT payable of I'464,511.53.

Consequendy, petitioner still has net output VAT due off'285,553.29, computed as follows:

Net Output VAT Payable

p 464,511.53 Less: Input VAT attributable to Zero-rated Sales 178,958.24

Net Output VAT Still Due

p 285,553.29 Although petitioner's amended Quarterly VAT Return for the 4'h quarter of taxable year 2015 reflected the amount of I'4,696,993.6095 as "Input Tax Carried Over from Previous Period", petitioner failed to substantiate the same. Needless to say, petitioner failed to prove that it has excess input VAT carried over from previous period;/

94 Exhibit "P-3" (Line 15B), Docket~ Vol. 3, p. 1382.

95 Exhibit "P-3" (Line 20A), Docket- Vol. 3, p. 1382.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

Accordingly, the input tax carries over of P4,696,993.60, cannot be validly applied against petitioner's output tax pursuant to Section 110(A) in relation to Section 11 O(B) of the NIRC of 1997, as amended, which states: "SEC. 110. Tax Credits. - (A) Creditable Input Tax. -

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax:

XXX

(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: xxx."

Based on the foregoing provision, it is worthy to stress that in claiming excess or unutilized input VAT from zero-rated transactions, it is the excess input tax over the output tax which should be refunded to the taxpayer or credited against other internal revenue taxes. Hence, it is important for the taxpayer to prove that it has enough prior year's excess input tax credits to cover its output tax liability for the current taxable year. To repeat, in cases filed before this Court, which are litigated de novo, party-litigants must prove every minute aspect of their case.96 Consequently, petitioner failed to fulfill the ninth requisite, i.e., that the input taxes have not been applied against output taxes during the quarter. Its failure to substantiate that it has sufficient input taxes to offset its output taxes due for the period covered merits the denial of its claim for refund. With the foregoing disquisitions, there is no showing that petitioner fully complied with the requisites to successfully obtain a refund of input VAT. In fine, considering that petitioner failed to show that its administrative claim should not have been denied in the first place, as earlier discussed, and since it likewise failed to sufficiently prove its entitlement to a refund of its~ 96 Edison (Bataan) Cogeneration Corporation vs. Commissioner of Internal Revenue, et seq., G.R. Nos. 201665 and 201668, August 30, 2017; Commissioner of internal Revenue vs. Philippine National Bank, G.R. No. 180290, September 29, 2014; Commissioner of Internal Revenue vs. United Salvage and Towage (?hils.), Inc., G.R. No. 197515, July 2, 2014; Dizon vs. Court of Tax Appeals, eta/., G.R. No. 140944, April 30, 2008; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526, March 16, 2007; and Commissioner of Internal Revenue vs. Manila Mining Corporation, G.R. No. 153204, August 31, 2005.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue input VAT for the 4th quarter of taxable year 2015, the instant claim for refund must perforce be denied.

It must be emphasized that actions for tax refund or credit, as in the instant case, are in the nature of a claim for exemption and the law is not only construed in strictissimi juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption is strictissimi scrutinized and must be duly proven.97 Thus, the burden is on the taxpayer to show that it has strictly complied with the conditions for the grant of the tax refund or credit.98 In this case, petitioner failed to discharge the said burden warranting the denial of its claim for refund or issuance of tax credit certificate.

WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit.

SO ORDERED.

WE CONCUR:

~. ~ ~<..._ MA. BELEN M. RINGPIS-LIBAN

Associate Justice

ERL~UY

Associate Justice

97 Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 159490, February 18,2008.

98 Commissioner of Internal Revenue vs San Roque Power Corporation, G.R. Nos. 187485, February 12, 2013.

Rema Tip Top Philippines, Inc. vs. Commissioner of Internal Revenue

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~UY

Associate Justice

Chairperson

CERTIFICATION

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

Presiding Justice

Footnotes

1
Summary of the Case, Pre-Trial Order dated November 5, 2018, Docket- Vol. 3, p. I 063; and Summary of the Case, Amended Pre-Trial Order dated March 4, 2019, Docket - Vol. 3, p. 1317.
2
Exhibits " P-1 7'' and " P-17-a", Docket - Vol. 3, pp. 1416 to 1447.
3
Exhibit "P-15", Docket - Vol. 3, p. 1409.