PROCTER & GAMBLE INTERNATIONAL OPERATIONS SA-ROHQ v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PROCTER & GAMBLE CTA EB NO. 2740 (CTA Case No. 9768 & 9829) INTERNATIONAL OPERATIONS SA-ROHQ, Present: Petitioner, DEL ROSARIO, P.J., -versus- RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, ]]. Promulgated: COMMISSIONER OF SEP 1 3 ~ ., INTERNAL REVENUE, ..... ._~ �., ,..~ , ~. ~ . Respondent. x------------------------------------------------------------------------------------- ---------x DECISION RINGPIS-LIBAN, J : The Case Before the Court En Bane is a Petitionfor Review1 flied by Procter & Gamble International Operations SA-ROHQ under Section 18 of Republic Act No. (RA) 11 25 as amended by RA 9282. The petition assails the October 5, 2022 D ecision2 / 1 Rollo, pp. 5-32. 2 Rollo, pp. 4 1-79. Penned by Associate Justice Ma rian Ivy Reyes-Fajardo, with a Dissenting Opinion by Presiding Justice Roman G. Del Rosario and a Separate Concurring Opinion by Associate Justice Catherine T. Manahan.

DECISION CfA EB NO. 2740 (CfA CASE NO. 9768 & 9829) and the February 21, 2023 Resolution' of the Court of Tax Appeals (C:TA) First Division. The relevant portions of the assailed decision and resolution read: October 5 2022 Decision "In view of petitioner's failure to pro,�c that its alleged V},T zero-rated sales were performed in the Philippines, petitioner failed to show that it is entitled to the claim for refund or tax credit under the substantive law. A. claim for unutilized input \'alue-added tax is in the nature of a tax exemption. Thus, strict adherence to the conditions prescribed by the law is required of the taxpayer. Refunds need to be proven and their application raised in the right manner as required by law. Consequently, it becotnes unnecessary to determine petitioner's compliance with the remaining requisites for granting a refund for the subject periods. WHEREFORE, in light of the foregoing considerations, the PetitiollJ. .for Rm'ew are DENIED, for insufficiency of evidence." February 21, 2023 Resolution "WHEREFORE, petitioner's Motion .for ReconJidemtion (Re: Decision dated October j, 2022) is DENIED for lack of merit. SO ORDERED." The Parties Petitioner is the Philippine Regional Operating Headquarters (ROHQ) of a Procter & Gamble International Operations S.-\; a multinational company organized and existing under and by virtue of the laws of S\vitzerland. It is licensed by the Securities and Exchange Commission (SEC) to transact business in the Philippines under SEC: Registration No. FS2011 04304 dated ""larch 24, 2011, with registered office address at 11th Floor, ~et Park, 5th "-\venue, Crescent Park West, Bonifacio Global City, Taguig 1634. It is also registered with the Bureau of Internal Revenue (BIR), as a VAT taxpayer, with Tax Identification Number (TIN) 406-931-778-000005 Respondent is the duly appointed Commissioner of Internal Revenue (C:IR) vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of said office, including inter alia, the duty to act upon and approve claims for refund pursuant to the provisions of thy ' Id., pp. 89-92. 4 SEC Amended License, Exhibit P-1.1, Docket, Vol. V, p. 2377. 5 October 5, 2022 Decision, Rollo, p. 42.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) National Internal Revenue Code of 1997 (NIRC), as amended, and other tax laws, rules and regulations. Respondent holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City." The Facts Petitioner is engaged in "corporate finance advisory services; training and personnel management; logistics services; technical support and mamtenance; data processing and commurucauon; and, business development".7 In 2011, petitioner entered into several Services Agreements with various affiliated companies of The Procter & Gamble Company, US"�\ (P&G USA), which are engaged in business support / distribution / export / import /manufacturing / toll manufacturing / marketing / procurement / production / provision of services / selling/ trading of various products in other countries worldwide. Under these agreements, petitioner rendered financial service and so!tttiom services to these affiliates and, in return, was paid at stipulated serviceJed for the purpose of improving overall operational efficiency. On September 18,2017, petitioner filed \vith the BIR-Large Taxpayers Services Regular Audit Division (BIR-LTRAD), an administrative claim for refund of and/ or the issuance of tax credit certificate (TCC) of its unutilized input V,\T attributable to zero-rated sales of service during the 1st quarter of FY 2016 covering the period from July 1, 2015 to September 30, 2015, in the total amount ofPhP37,374,865.939 (1'' quarter- FY2016). Subsequently, on December 5, 2017, petitioner also filed \vith the BIR- LT~-\D another administrative claim for the refund and/ or issuance of tax credit certificate for its unutilized input V"-\T attributable to zero-rated sales of service during the 2nd quarter of FY 2016 covering the period from October 1, 2015 to December 31, 2015, in the total amount of PhP14,367,836.2710 (2"'1 quarter- FY2016) Respondent has neither approved nor denied petitioner's administrative claim for the 1'' quarter- FY2016~ 6 Id. 7 SEC Amended License, Exhibit P-1.1, Docket, Vol. V, p. 2377. 8 Exhibits P-4.2 to P-4.45, Docket, Vol. V, pp. 2303-2307; see the contract Preambles, pp. 2402, 2419, 2437, 2457, 2473, 2489, 2507, 2528, 2554, 2566, 2584, 2598, 2614, 2650, 2665, 2685, 2702, 2720, 2737, 2755, 2773, 2790, 2809, 2827, 2846, 2864, 2882, 2900, 2919, 2939, 2953, 2980, 2993, 3014, 3036 (Exhibit P-4.36 was entered into in the year 2014), 3059, 3079, 3098, 3120, 3142, 3160, 3177, 3191, 3027 (Exhibit P-4.44 was entered into in the year 2015), 3231 (Exhibit P-4.45 was entered into in the year 2015). 9 !d., pp. 42-43. 10 Id., p. 43. " Id.

DECISION ITA EB NO. 2740 (ITA CASE NO. 9768 & 9829) However, on April 2, 2018, petitioner received respondent's letter dated March 5, 2018, denying its admimstrative claim for the 2nd quarter of FY 2016. 12 CTA Case No. 9768 (1st quarter - FY 2016} On February 14, 2018, alleging inaction, petitioner filed a Petition for Review, which was raffled to the Cl'A Second Division13 On April 26, 2018, respondent flied an Amwer. 14 The parties filed their Pre-Trial Briefs. 1' Thereafter, petitioner filed an Omnibus l'viotion (I. lVIotion to Comolidate Cases; and II. iVlotion to Defer Pre-Trial Conference). 16 CTA Case No. 9829 (2nd quarter - FY 2016) On April30, 2018, petitioner filed a Petitionfor Review, which was raffled to the CT.\ Third Division. 17 On june 4, 2018, petitioner flied aMotion to Consolidate, CTA Case No. 9829 with CTc\ Case No. 9768. 18 In a Resolution dated August 22, 2018, the Court's Third Division granted petitioner's iv1otion to Comolzdate, and the present cases were consolidated, subject to the conformity of the Court's Second Divisioni9 On "-\ugust 24, 2018, respondent flied her Amwer20 On August 30, 2018, respondent submitted the BIR Records of this case. 21 Consolidated CTA Cases (Nos. 9768 and 9829} ,../ 12 Jd. 13 Jd. 14 Jd. 15 Jd. 16 Jd 17 Id, p. 44. 18 Jd. 19 Jd 20 Jd. 21 Jd.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) In the Resol11tion dated September 4, 2018, the Court's Second Division stated that it had no objection to the Resolution of the Court's Third Division, which consolidated CTA Case No. 9829 with CTA Case No. 9768, the case bearing the lower number.'' However, the consolidated cases were transferred to the First Division due to reorganization authorized by CT1\ Administrative Circular No. 02- 2018 dated September 18, 2018. 23 On September 21, 2018, petitioner filed its Pre-Trial B1iif, while respondent ftled a Consolidated Pre-T1ial Briefon November 8, 2018.'4 On November 15, 2018, the Pre-Trial C01iference was held." On December 5, 2018, the parties filed their Joint Stzpzt!ation ofFacts and Issues, which the Court approved in the Resolution dated December 20, 2018.'6 On February 19, 2019, the Court issued the Pre-Trial Order. ' 7 During trial, peunoner presented J\Ir. Carlos Ben C. Ignacio, petitioner's Comptroller and Compliance 1\Ianager; and Mr. Jay )L Ballesteros, the Court-commissioned Independent Certified Public 1\ccountant (ICPA).'8 The Report of the ICPA was submitted to the Court on 1\farch 22, 2019.'9 On 1\Iay 16, 2019, petitioner flled its Fonna! Offer of Evidence, to which respondent filed her Comment (on Petitioner's Motion to Amend Pre-Trial Order) on I\Iay 22, 2019. 30 In the Resolution dated "-\ugust 15, 2019, the Court admitted petitioner's offered exhibits, except for the following: 1. Exhibits "P-4," "P-6.5," "P-6. 7," "P-6.8," "P-6.1 0," "P-6.22," "P-6.23," 11P-7.22,11 11P-7.23,11 11P-21.9,11 and 11P-21.12,11 for failure to present their originals for comparison; and, 2. Exhibits 11P-6.42,11 11 P-20-26,11 11 P-20-27,11 11P-20-47," 11P-20- 11 P-20-84" 11 P-20-96 'II 11P-20-113" "P-20-93 ' II 11P-20- ' ' , v 65'II 22 Id. 23 Id. 24 Id., p. 45. 2s Jd. 26 Id. "Id. 2s Id. 2s Jd. 30 !d. Should have been entitled" Comment to Petitioner's Formal Offer ofEvidence' by respondent.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) 117 II 11P-20-118 'II 11 P-20-127 II 11P-20-138 II 11 P-20-141 II 11 P-20- ' ' ' ' 11 P-20- 144 II 11 P-20-154 11 P-20-158 11 P-20-159 II 11 P-20-160 11 P-20- ' 11 P-20-183 ' II 11 P-20-184 ' II ' 11 P-20-190 ' II 182 II II 11 P- ?0-186 ' II ' II ' ' II ' ...... 191,11 11 P-20-192,11 11 P-20-203, 11 11 P-20-204,11 11 P-20-271,11 and 11 P-22-272,11 for failure of document formally offered and identified to correspond with the document markcd. 31 On June 7, 2019, the Court issued an Amended Pre-Trial Order. 32 On September 11, 2019, petitioner filed its Omnibus Motion [(i) Jvfotion for Reconsideration Re: Resolution datedAugust 15, 20 19; (it) iVIotionfor Leave ofCourt to Recall Witness]. Respondent failed to ftle his comment thcreto. 33 In the Resolution dated January 23, 2020, the Court granted petitioner's i\1otionfor Leave ofCourt to Rem!! WitneSJ. Thus, the Court-commissioned ICPA, Mr. Jay.-\. Ballesteros, was recalled34 In the Resolution dated November 24, 2020, the Court partially granted petitioner's Aiotion for Recomideration Re: Resolution dated August 15, 2019, and admitted Exhibits 11 P-6.22, 11 11 P-6.23, 11 11 P-7.22, 11 11 P-7.23,11 11 P-20-26, 11 11 P-20- 2270-'I1I 1117P-I2I 011-P4-72'0II-111 P1-820II -611 P5-'2II 011-P1-?270-II8411P' II-2110P--12308-9I3I II 11 P-20-96 II 11 P-20-113 ' II 11 P- '11 P-20-141 11 P-20-144 11 P- ' II II ' ' L...o ' ' ' ' 11 P- 20-154 II 11 P-20-158 II 11 P-20-159 II 11 P-20-160' II 11P-20-182' II 11 P-20-183 II 11 P-20-191 ' II ' ' ' P-21.9,11 and ' 20-184' II 11 P-20-186 1P1 P-2-220-2-17920,1'1 11 P-20-192 11 P-20-203 ' II 11 P- 20-204, 11 11 P-20-271, II 11 II 11 P-21.1211 ; II ut still denied the 11 '11 ' b following: 1. Exhibits 11 P-4, 11 11 P-6.5, 11 11 P-6. 7, 11 11 P-6.8,11 11 P-6.1 0, 11 and 11 P- 6.22,11 for failure to present their originals for comparison; and, 2. Exhibits 11 P-6.4211 , for failure of document formallv offered and identified to correspond with the document marked35 Petitioner then rested its case."' Respondent presented Revenue Officers Carolyn Mendoza (CTA Case No. 9768) and i\Is. Olivia Sison (CTA Case No. 9829) as witncsses.37 On February 11, 2021, respondent filed a Formal Offer of Evidence, to which petitioner flied its Comment (Re: Respondent's Formal Offer of Evidence) on March 2, 2021 ;.,./ 31 !d., p. 46. 32 Id. 33 !d. 34 !d. JS !d., pp. 46-47. 36 !d., p. 47. 37 !d. 38 !d.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) In the Resolution dated June 15, 2021, the Court admitted respondent's offered exhibits.39 On July 23, 2021, respondent filed her 1\:Iemorandmn, while on July 30, 2021, petitioner filed its Afemorcmdum.<O The consolidated cases were then submitted for decision on October 27, 2021.41 Hence, the assailed October 5, 2022 Decision and Februarv 21, 2023 ' Resolution. Proceedings Before the CTA En Bane On i\Iarch 21, 2023, petitioner filed a iVIotion for Extension of Tzme to File Petition for Reviezv4 ' On March 23, 2023, the Court En Bane issued a Min11te Resolution granting petitioner a final and non-extendible period of fifteen (15) days from March 21, 2023, or until April 5, 2023, within which to fllc its petition!3 On April 4, 2023, petitioner filed its Petitionfor Review!4 On April 17, 2023, petitioner filed its S11bmissio11 with attached certified true copy of the authenticated/apostilled Special Power ofAttomey dated March 27, 2023 in satisfaction of its undertaking in the petition!5 On May 22, 2023, the Court issued the Resolution, which noted the Submission and ordered respondent to file a comment on the petition!6 On June 9, 2023, respondent filed the iVIanifestation with Motion, which stated that the counsels of record at the Litigation Division, BIR National Office did not receive a copy of the petition because it was served on Revenue Region ~o. 8"\ instcad 47 On June 23, 2023, petitioner filed the lv1anifestation with attached copy of the petition and furnished a copy of the same to the counsels of recor/ 39 Id. 40 Id. '' Id. 42 Id., pp. 1-3. 43 Jd., p. 4. 44 Id., pp. 5-32. 45 Id., pp. 93-95. 46 Id., pp. 99-100. 47 Id., pp. 101-104. 48 Jd., pp. 107-109.

DECISION ITA EB NO. 2740 (ITA CASE NO. 9768 & 9829) On September 13, 2023, the Court issued the Resolution, which (a) noted that despite receipt of the copy of the petition respondent failed to file a comment thereon and, thus, was deemed to have waived the right to ftle the same; and (b) s11bmitted the case for decision.49 Issues /Petitioner's Arguments Petitioner assails the decision, which denied its petitions for insufficiency of evidence. It submits that it has presented both testimonial and documentary evidence to sufficiently establish its entitlement to refund or the issuance of a TCC for its excess and unutilized input VAT for the period of the claim. Particularly, it asserts that: � It sufficiently proved that the services it rendered to its client-affiliates were performed in the Philippines. � It presented sufficient evidence to establish that the recipient of the services arc persons engaged in business conducted outside the Philippines or nonresidentpersons who are outside the Philippines when the services were performed; and, � It sufficiently proved that the discrepancy found in the schedule of Comparison of Zero-Rated Official Receipts against Certificates of Inward Remittance pertained to withholding taxes, billing adjustments, and reimbursements. The Ruling of the Court En Bane This Petition for Review was timely filed. Before the Court sets out to discuss the merits of the petition, It 1s important to dispense with its procedural but jurisdictional aspect. Petitioner received a copy of the assailed decision on October 13, 202250 Thus, under Rule 15 Section 1 of the RRCL\, petitioner had fifteen (15) days to file a motion for reconsideration of the decision, or until October 28, 2022, which the petitioner did. 51 / 49 Jd., pp. 206-208. su Division Docket, Vol. VII, p. 4529. 51 Petitioner filed its Motion for Reconsideration (Re: Decision dated October 5, 2022) on October 28, 2022; Division Docket, Vol. VII, p. 4578.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) This petition was filed under Section 18 of RA 1125, as amended by RA 9282. Section 18 of RA. 1125, as amended by Rc\ 928252 in relation to Rule 8 Section (b) of the 2005 RRCTA,53 provides that a party may appeal resolution of a division of the Court on a motion for reconsideration, by filing a petition for review or a motion for extension of time to file the petition with the Court En Bane within fifteen (15) days from receipt of the questioned resolution. On ivfarch 6, 2023, petitioner's counsel received the February 21, 2023 Resolution, which denied petitioner's Motion for Reconsideration (Re: Decision dated October 5, 2022P" Thus, it had fifteen (15) days from .\larch 6, 2023 or until March 21, 2023 to file a petition or a motion for an extension to ftle a petition. Within the deadline, petitioner filed a Motion for Extension ofTime to File Petition for Review on March 21, 2023.55 The motion was granted in the 1\iinute Resolution dated i\Iarch 23, 2023,56 which gave petitioner until April 5, 2023 to flle its petition. :\ccordingly, the Petition for Review filed on April 4, 2023 is clearly within the reglementary period. The Court En Bane can properly take cognizance of the present case. Petitioner failed to establish that the services it rendered to its client- affiliates were peiformed only in the Philippines(/ 52 SECTION 18. Appeal to the Court of Tax Appeals En Bane.- No civil proceeding involving matter arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the CTA and disposed of in accordance with the provisions of this Act. A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en bane. 53 SEC. 3. Who may appeal; period to file petition. - XXX XXX XXX (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. 54 Notice of Resolution, Rollo, p. 87. 55 Rollo, pp. 1-3. 56 Rollo, p. 4.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) Petitioner anchored its refund claim on Section 108(B)(2)57 in relation to Sections 110(B),58 112(A) and (C) 59 of the NIRC, as amended. It appealed t / 57 "SEC. 108. Value-added Tax on Sale ofServices and Use or Lease of Properties. - {A} Rate and Base of Tax. -There shall be levied, assessed and collected, a value-added tax equivalent to twelve percent (12%) of the gross sales derived from the sale or exchange of services, including the use or lease of properties. XXX XXX 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 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); XXX XXX xxx" 58 "SEC. 110. Tax Credits. - (A) Creditable Input Tax.- XXX XXX 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. Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. 59 SEC. 112. Refunds ofInput Tax. - {A} Zero-rated or Effectively Zero-rated Sales. -Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (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 Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. Provided, finally, That for a person making sales that are zero-rated under Section 108(8) (6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. XXX XXX XXX (C) Period within which Refund of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That for this purpose, the VAT refund claims shall be classified into low-, medium-, and high-risk claims, with the risk classification based on amount

DECISION erA EB NO. 2740 (erA CASE NO. 9768 & 9829) decision, which denied its claim, and questions the CTA First Division's appreciation of the evidence that was presented to prove that its services to these affiliates were performed here in the Philippines. The Court notes that petitioner does not dispute that Section 108(B)(2) requires that it must carry out these setvices in the Philippines in order for these sales of services to qualify as zero-rated sales. Petitioner contends, however, that the unrebutted testimony of its Comptroller and Compliance manager60 was already sufficient to prove that its services were actually performed in the Philippines: "Q16: What is Petitioner's basis for its claim for input Vc\T refund? A: Cnder Section 112(A), 1997 0Jational Internal Revenue Code of Q17: 1997 (the 'Tax Code'), Petitioner is entitled to the refund of its excess and unutilized input taxes on its purchases of goods and A: services which are attributable to zero-rated sales of services to nonresident entities engaged in business conducted outside the Philippines, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the l3angko Senlrcilng PilipinaJ (BSP). How did Petitioner incur the input VAT credits subject of its claim for refund for the Period of Claim? For the Period of Claim Petitioner rendered services in the Philippines to entities located and conducting business outside the Philippines. For and in consideration of these sen�ices, Petitioner was paid in acceptable foreign currencies and accounted for in accordance with rules and regulations of the BSP." (C'ndem'Oiing Jltpplied) The Court is not convinced. First, the issue presented to the Court is not one of admissibility of the testimonial evidence quoted but of its weight. ,-\dmissibility refers to the question of whether certain pieces of evidence are to be considered at all, while probative value refers to the question of whether the admitted evidence proves an issue(/' of VAT refund claim, tax compliance history, frequency of filing VAT refund claims, among others: Provided, further, that medium- and high-risk claims shall be subject to audit or other verification processes in accordance with the Bureau of Internal Revenue's national audit program for the relevant year: Provided, finally, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial within the ninety (90)-day period. In case of full or partial denial of the claim for tax refund, 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 ninety (90)-day period, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the Bureau of Internal Revenue to act on tile a~~l1caUo11 will lin 11im:Ly (9UJ days period sl1all be punishable under Section 269 of this Code. 60 Exhibit "P-31", Docket (9768), Vol. 1, pp. 213-214.

DECISION erA EB NO. 2740 (CfA CASE NO. 9768 & 9829) Thus, a particular item of evidence may be admissible, but its evidentiary weight depends on judicial evaluation within the guidelines provided by the rules of evidence61 Respondent had the opportunity to cross-examine the witness during trial and, therefore, his testimony stood admissible62 and was correctly considered by the court a q11o. However, the issue lies in the fact this 'vitness's version remains self-serving, that is, it comes from the party solely interested in the grant of the petition63 Thus, while a witness's interest alone is not a ground for disregarding his testimony, a party's interest may to some extent affect his credibility64 The Court must consider it with caution. Second, while the testimony of petitioner's '>vitness may have been zmreb11tted by respondent's evidence, its weight was offset by several of petitioner's own evidence. If considered alone, such unrebutted evidence may have been sufficient to sustain the refund claim. But the Court has to consider the totality ofthe evidence presented. The court a quo correctly concluded that petitioner's various Service Agreements with its affiliates, which governed their zero-rated sales transactions subject of the refund, expressly allow it to perform its services both in the Philippines and abroad. 65 As the law between the parties,66 these agreements even permit petitioner to subcontract its services or activities to any affiliated company and, thus, pave the prospect of rendering them abroad, closer to its client- affiliates, which are incidentally also doing business abroad. The provisions are quite clear: ''4.2 Performance of Sen~ices 4.2.1 In order to make optimum use of its facilities and organizations, it is agreed that THE SERVICE PROVIDER may enter into specific agreements with anv third pam� and with am� affiliated P&G company. \Vith the purpose to sub-contract some setTices or activities which THE SERVICE PROVIDER deems appropriate or necessarv to render the Services referred to in Article 4.1. THE SERVICE PROVIDER shall however supervise and guarantee the quality of the serTices it subcontracts to any third partv and with any affiliated P&G company. 4.2.2 THE SERVICE PROVIDER shall render the Services referred to in Article 4.1 from all or anv of its operational locations~ 61 Magsino v. Magsino, G.R. No. 205333, February 18, 2019. 62 National Development Company v. Workmen's Compensation Commission, G.R. No. L-21724, April 27, 1967. 63 Santos-Gantan v. Gantan, G.R. No. 225193, October 14, 2020. 64 National Development Company v. Workmen's Compensation Commission, G.R. No. L-21724, April 27, 1967. Supreme Court En Bane. 65 Decision, Rollo, p. 78. 66 Development Bank of the Philippines v. Heirs ofJulieta L. Danica, G.R. No. 196476, September 28, 2020.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) provided however that nothing herein shall be construed to require THE SERVICE PROVIDER to establish or maintain an office or other place of business other than its current and future places of business as deemed appropriate by THE SERVICE PROVIDER itself or be construed to require THE SERVICE PROVIDER to provide the serYices of its emplovees. agents. or subcontractors, to SERVICE RECIPIENT outside of THE SERVICE PROVIDER's normal place of business on other than on an occasional basis. XXX XXX .\s stated, the single testimonial proof found in Exhibit "P-31" was q11alijied by several documentary proofs spelled out in these agreements and offered by petitioner as "P-4.1" to "P-4.45".68 Proofs are said to be incomistent when they are contrary to each other, so that one infers the negation of the other.69 In this case, there is inconsistency between the testimony, which states that the services were provided in the Philippines, when it is negated by the contracts that expressly permit their performance outside. It did not help that this inconsistency was not explained or reconciled by the petitioner. Third, Book III, Section 2(3) of Executive Order No. (EO) 226, otherwise known as the Omnibus Investments Code of 1987, as amended by Republic ,\ct No. (R"\) 8756, defines an ROHQ as "a .foreign busineJJ entity which is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets. "'0 In addition, under Article 29 of EO 226 as amended by R"\ 8756, an ROHQ can perform qualifying services to its related parries abroad: "Art. 59. Qualification oJ'Regiona/ Operating Headquattm (ROHQs). -�1m' foreign business entitv formed, organized and existing under am� laws other than those of the Philippines may establish a regional operating headquarters in the Philippines to sen-ice its own affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and other foreign markets. ROHQs will be allowed to derive income by performing the qualifying services enumerated under paragraph (b) 1 hereunder. ROI-IQs of non-banking and non-financial institutions are required to secure a license fron1 the Securities and Exchange Commission, upon the fa\�orable recommendation of the Board of Innstments. ROHQs of banking and financial institutions, on the other hand, are required to secure licenses fro1n the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas, upon the fa,�orable recommendation of the Board of lm�estments." (l'ndemming Jupplial)/ 61 See Exhibit "P-4.1", Docket (9768), Vol. V, p. 2406. 68 Formal Offer of Evidence, Docket (9768), Vol. V, pp. 2406-3252. 69 Words and Phrases, Permanent Edition, Vol. 20, p. 549. 70 Italicization supplied.

DECISION erA EB NO. 2740 (erA CASE NO. 9768 & 9829) Petitioner, as an ROHQ, is a mere extension of a foreign entity and does not have a separate and distinct !ega! personality apart from the same entity. Since a foreign entity, by virtue of the EO 226 definition, earns income from activities worldwide --- both domestically and outside the Philippines, petitioner fails to convince the Court that this refund pertains on!J to the input VAT attributable to services performed domestically to the exclusion ofthe mt. Petitioner contends that the "fact the petitioner is an ROHQ is sufficient to establish that the services are rendered in the Philippines."71 This is a non- sequitm~ Precisely because an ROHQ is a foreign entity, which is based abroad and came to establish a local presence, 1~\ 87 56 intentionally recognized that it can still "service its own affiliates, subsidiaries or branches ... in the Asia-Pacific Region and other foreign markets."72 Consequently, an ROHQ can derive its sales/income from sources outside the Philippines. c\nd in such cases, the Court cannot just rely on the fact that petitioner is an ROHQ and safely concede that its services, subject of this claim, are confined to those performed domestically. In Commzssio11er of Intema! Revenm v. Deutsche Knowledge Services Pte. Ltd.73 The Supreme Court observed that [because] EO 226 expressly authorizes ROHQs to render services to local and foreign affiliates alike only stresses the ROHQ's burden to distinguish among their clients' nationalities and actual places of business operations." Fina!!J, the Concurring Opinion of]. Manahan clarifies what petitioner needs to hurdle to prove its claim because of the foregoing considerations: ",\ close reading of the aforcquoted section of the Sen�ices Agreement rc'\~cals that setTices to the recipients/ foreign clients may be rendered outside of petitioner's place of business on an occasional basis. Thus, petitioner must prm�e that indeed ALL of its services rendered to its foreign client were done in the Philippines."" Petitioner also fails to convince the Court that it presented sufficient evidence to establish that the client- affiliates are entities engaged m business conducted outside the Philippines The assailed decision resolved that six of petitioner's client-affiliates did not qualify as non-resident foreign entities because of imuffidency of evidence75 Because of these disqualifications, petitioner's sales/receipts in the amount o~ 71 Petition for Review, Rollo, p. 25. 72 Article 59, Executive Order No. 226 as amended by Republic Act No. 8756. Italicization supplied. 73 G.R. No. 234445, July 15, 2020. 74 Rollo, p. 85. 75 Rollo, pp. 59-61.

DECISION ITA EB NO. 2740 (ITA CASE NO. 9768 & 9829) PhP18,996,007.51 / US$428,867.31 (1" Quarter) and PhP28,426,524.33 / USS634,370.80 (2"d Quarter) were disallowed by the court a quo.76 Petitioner, however, begs to differ and mapped out the other pieces of evidence for the Court to consider.77 After due consideration, the Court remains zmconvinced. The ruling of the Supreme Court in Commissioner of Internal Revenue v. Dmtsche Knowledge Services Pte. Ltd78 is instructive as to what proofs are needed to prove that the sale of services was made to non-resident foreign entities. Specifically, the Supreme Court reiterated that both the SEC Certification ofNon- Registration and proof of foreign incorporation/association are necessary to establish the non-resident foreign starus of a client-affiliate, and that service agreements or contracts by themselves would not suffice to prove such starus: "The Court accords the CL\'s factual findings with utmost respect, if not finality, because the Court recognizes that it has necessarily deYeloped an expertise on tax matters. Significantly, both the CL\ Division and CT"\ En Bane gave credence to the aforementioned documents as sufficient proof of NRFC status. The Court shall not disturb its findings without any showing of gra\�e abuse of discretion considering that the members of the tax court are in the best position to analne the documents presented bv the parties. In any case, after a judicious re,�iew of the records, the Court still do not find any reason to deviate from the court a quo's findings. To the Court's mind, the SEC Certifications of Non-Registration show that their affiliates are foreign corporations. On the other hand, the articles of association/certificates of incorporation stating that these affiliates are registered to operate in their respective hotne countries, outside the Philippines are prima facie evidence that their clients are not engaged in trade or business in the Philippines. Proof of the abm�e-mentioned second component sets the present case apart from /Jccen!Jrr~, Inc. ''� CommiHioner of Inlema/ Rem111e and Si!el Pbilippines Corp. ''� CommiHioner of fnlmw/ Re!Jemre. In these cases the claimants similarlv presented SEC Certifications and client sctTicc agrcctncnts. Ho\vc,~er the Court consistently ruled that documents of this nature onlv establish the first component (i.e., that the affiliate is foreign). The absence of anv other competent C\'idence (e.g., articles of association/certificates of incorporation) proving the second component (i.e., that the affiliate is not doing business here in the Philippines) shall be fatal to a claim for credit or refund of excess input VAT attributable to zero-rated sales." (Emp!Ja.ri.r and underscoring .r1rpplied) A review of the documents highlighted by petitioner does not iron out the deficiemies or discrepancies in these documents. For example: ;v" 76 Decision, Rollo, p. 66. 77 Petition for Review, Rollo, pp. 16-19. 78 G.R. No. 234445, July 15, 2020.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) � While Gillette Pakistan Limited had a negative certification from the Philippine SEC, it did not have a business registration from Pakistan because the document submitted was denied admission by the court a quo. � Also, while Procter & Gamble Egypt had a negative certification from the Philippine SEC, it had no business registration from Egypt, since none was offered in evidence. The Service Agreement (Exhibit-4.13) petitioner referred to as additional proof that the entity was doing business outside the country actually pertains to another entity Procter & Gamble Egypt Ltd. No explanation was provided for the discrepancy in the names stated in the documents. � Finally, although Procter & Gamble Egypt Distribution had a negative Philippine SEC certification, it had no business registration from Egypt and the Service Agreement (Exhibit-4.4) petitioner referred to as additional proof pertains to another entity in Singapore Procter & Gamble Intemationa! Operation.!' SA Singapore Branch. To facilitate reference, the table below summarizes the Court's evaluation of petitioner's exhibits relevant to the issue: Name of Client- SEC Business Service Sworn Mfiliates Certificates of Registration Agreements Statement from Documents 1. Gillette Pakistan Non- (Exhibit Nos.) Authorized Limited Registration (Exhibit Nos.) No eYidence Representatives (Exhibit Nos.) P-6.42"' (Exhibit Nos.) P-5.44" P-7.41' 1 E\'idence \Vas dwied admission by the court a quo 2. P&G Israel P-5.33" P-6.33" P-4.41"' P-7.36" 1\LD.O. Ltd. The words Proctor & Gamble \VCtC no! spelled out 3. Procter & P-5.13"' No e'�idence P-4.21" No evidence Gamble 79 Docket, Vol. V, p. 3316. 80 Docket, Vol. VI, p. 4008. 81 Docket, Vol. VI, p. 4173. 82 Docket, Vol. v, p. 3300. 83 Docket, Vol. V, p. 2316. 84 Docket, Vol. v, p. 3160. 85 Docket, Vol. VI, p. 4159. 86 Docket, Vol. v, p. 3272. 87 Docket, Vol. V, p. 2754.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) Name of Client- SEC Business Service Sworn Affiliates Certificates of Registration Agreements Statement from Documents Non- (Exhibit Nos.) (Exhibit Nos.) Authorized Registration Representatives Distributing (Exhibit Nos.) No evidence (Exhibit Nos.) New Zealand P-5.5" No evidence Limited 4. Procter & P-4.13" Gamble Egypt Pertains to Procter Gamble & Ltd. Egypt 5. Procter & P-5.37"' No evidence P-4.401 No evidence Gamble Egypt Distribution Pertains to Procter & Gamble International Operations s,\ Singa12ore Branch 6. Procter & P-5.3892 No evidence P-4.5�3 No evidence Gamble Egypt Supplies Ltd. Even if assuming that the Court were to accept these documents as sufficient to prove that its client-affiliates are non-resident foreign entities doing business otttJide the Philippines, the issue on the sit11s of petitioner's services remains, as discussed in the first part. The Court ts unconvinced of petitioner's explanation for the discrepancies found between the zero- rated sales/receipts and the inward remittances. The court a quo disallowed the sales/receipts for the first and second quarters of 2015 in the total amount of PhP619,624,912.14 (USS13,892,900.07) due to petitioner's failure to prove that the same were paid in acceptable foreign currency and accounted for per Bangko Sentral ng Pilipinas rules. Specifically, the court a quo noted that the sales/receipts do not tie up with the inward remittances / 88 Docket, Vol. V, p. 3261. 89 Docket, Vol. V, p. 2598. 90 Docket, Vol. V, p. 3306. 91 Docket, Vol. V, p. 3140. 92 Docket, Vol. v, p. 3308. 93 Docket, Vol. V, p. 2473.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) listed in the "Comparison of Zero-Rated Official Receipts against Certificates of Inward Remittance".94 Petitioner states that it sufficiently proved that the discrepancy pertained to withholding taxes, billing adjustments, and reimbursements based on the testimony of the independent Certified Public Accountant (ICPA). Petitioner's contention is untenable. Findings of the ICP,-\ are not conclusive upon the Court as it makes its own independent evaluation of the evidence presented to support the claim. Rule 13, Section 3 of the Revised Rules of the Court of Tax Appeals provides: "SEC. 3. Findings of independent CPc\. ~The submission by the independent CPA of pre-marked documentary exhibits shall be subject to 1�erification and comparison with the original documents, the availability of which shall be the primary responsibility of the party possessing such documents and, secondarily, bv the independent CPA. The findings and conclusions of the independent CP,-\ may be challenged by the parties and shall not be conclusive upon the Court. which ma1�. in whole or in part. adopt such findings and conclusions subject to ,�erification." (Undenmring mpplied) From the above provision, this Court is not bound by the findings of the ICPA. The ICP.c\ merely aids the Court in the resolution of the case. The determination of the merit or the probative value of the ICPA's findings is still within the province of the Court. As such, the Court is free to adapt or disregard, completely or partially, these findings. It can even make its own audit and evaluation of the documents pertinent to the case presented during the trial in order to resolve the issues brought before it. 95 In Republic oftbe Philippines, represented by tbe Commissioner ofInternal Revenue v. Team (Pbi!s.) Emt;g;y Cotporation (formerly iVIirant (Pbils.) Enn;g;y Cotporation),"' the Supreme Court ruled that "it is fundamental that the findings of fact by the C:TA in Division are not to be disturbed w-ithout any showing of grave abuse of discretion considering that the members of the Division arc in the best position to analyze the documents presented by the parties." Finally, because this is a refund case, the Court has adopted a narrow interpretation of the laws and a stringent appreciation of the facts against tbe ta>-.pa:;,er. A refund undoubtedly partakes of the nature of an exemption, it cannot be allowed unless granted in the most explicit and categorical language. It has / 94 Decision, Rollo, pp. 73-75; Exhibit P�17. 95 Manulife Data Services, Inc. v Commissioner ofInternal Revenue, CTA Case No. 9881, May 2, 2024 (Resolution). 96 G.R. No. 188016, January 14, 2.015, citing Sea-Land Service, Inc. v. Court of Appeals, G.R. No. 122605, April 30, 2.001.

DECISION erA EB NO. 2740 (erA CASE NO. 9768 & 9829) been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimijttris97 All told, petitioner failed to raise any issue that has convinced the Court En Bane to modify or reverse the assailed Decision and Resolution of the Court a quo. The findings of fact of said court are not to be disturbed unless clearly shown to be unsupported by substantial evidence98 WHEREFORE, premises considered, the Petition for Review is DENIED for lack of merit. The assailed Decision and Resolution of the court a quo are hereby AFFIRMED. SO ORDERED. ~. ~ ' / \.....____. MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR: (With due reJpect, I reiterate m)' D mting Opinion in the msai!ed Decision and ReJ�olution) ROMAN G. DEL ROSARIO Presiding Justice ~.. T-~ CATHERINE T. MANAHAN .\ssociatc Justice (With dm respect, I join i Dissenting Opinion of the Presiding ]wtice in the a sai!e Decision and Resolution) JEAN MA . BACORRO-VILLENA :\ssociate Justice 91 Resins Inc. v. Auditor General of the Philippines, G.R. No. L-17888, October 29, 1968, Supreme Court En Bane. 98 Commissioner ofInternal Revenue v. Union Shipping Corporation and The Court of Tax Appeals, G.R. No. L�66160, May 21, 1990.

DECISION CTA EB NO. 2740 (CTA CASE NO. 9768 & 9829) ~~F.~-~�~ MARIAN IVYGJ. REYES:FAJAR't>O Associate Justice Associate Justice ~~. (With due respect, Ijoir/Jbe Dim1 � :g Op � � 11 ofP~ �idingJustice Del Rosario in the assailed Decision and R ttion) CORAZON G. FERR R-FLORES Associate Justice (With dm respect- Ijoin the DissAe Opinion ofthe Presiding justice in the assailed decision and resolution) HENRY S. ANGELES Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice