REMA TIP TOP PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC REMA TIP TOP PHILIPPINES, CTA EB No. 2688 INC., (CTA Case No. 9794) Petitioner, Present: - versus - DEL ROSARIO, P!t COMMISSIONER OF INTERNAL RINGPIS-LIBAN, REVENUE, MANAHAN, BACORRO-VILLENA, Respondent. MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES,IL. Promulgated: FES08~ DECISION REYES-FAJARDO, L;_ Before the Court En Bane is a Petition for Review1 filed by Rema Tip Top Philippines, Inc. (RTTPI) on October 12, 2022 assailing the Decision2 and Resolution3of the Third Division of this Court (Court in Div ision) promulgated on January 24, 2022 and July 26, 2022, respectively, in CTA Case No. 9794. In these assailed issuances, the Court in Division denied RTTPI's claim for refund amounting to P1,377,618.64, allegedly representing input value-added tax (VAT) attributable to zero-rated sales relative to the fourth quarter of the taxable year 2015. 1 Rollo, pp. 8-53. 2 Penned by Court of Tax Appeals Associate Jus tice Rollo, pp. 59-99. 3 Rollo, pp. 101-109.

DECISION CTA EB No. 2688 (CIA Case No. 9794) Page 2 of IS FACTS Petitioner RTTPI is a domestic corporation duly organized and existing under Philippine laws, primarily to operate, conduct, and carry on the business of engaging in any construction-related work on commercial or industrial facilities.4 It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification Number (TIN) 008-042-655-000. On the other hand, respondent Commissioner of Internal Revenue (CIR) is vested with the power to decide on disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the 1997 National Internal Revenue Code (Tax Code), as amended, or other laws or portions thereof administered by the BIR. On October 21, 2017, RTTPI filed an amended Quarterly VAT Return (BIR Form No. 2550-Q) relative to the fourth quarter of taxable year 2015,5 declaring total sales amounting to P18,861,067.96, computed as follows: Particulars Line Amount Sales subject to VAT 15A P4,313,062.28 Zero-rated sales 17 14,548,005.68 Total 19A P18,861,067.96 RTTPI computed output tax on its vatable sales, which amounted to '1"517,567.47,6 applied the output tax payable against the available input tax and, ultimately, reported a VAT overpayment amounting to '1"4,376,566.04, viz.: Particulars Line Amount P4,894,133.51 Total available input tax 22 517,567.47 Less Output tax due 19B P4,376,566.04 VAT overpayment 29 ' Exhibit "P-17-a," Docket- Vol. 3, p. 1440. Exhibit "P-3," Docket- Vol. 3, p. 1382. ' Vatable sales x Tax rate= 1'4,313,062.28 x 12% = 1'517,567.47.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 3 of18 Its total available input tax amounting to P4,894,133.51 was broken down as follows: 20 Les5� Allowable Input Tax 20A Input Tnx Cnnlod Ou11 from Previ~ Penod 20A 4,696,993.60 208 0.00 208 Input llJ� Dafarr&d on Capj[,lf Good~ Exc-.do'"<g PI ~lollion lrO<n Provoous OuWI<!r 20C 0.00 200 0.00 20C ''"":>'llv"dll,pul1i!~ 20E 0.00 20F 200 Presumplivo Input Tax 4.696.993.60 218 20E Othen; 210 0.00 21F O.CO 21 KIL &!rv'c" l{r. -rl ~1�1 .'lon�rt':;,df}~.ls '21c Purchas.os 21H 10.604.84 21E 000 21J 105.908.30 21M Purct� .'-f/1. ;l,_,ri:d for lllP(I\ Ta~ 21G 0.00 21L 80,626.77 211 0.00 21N/O Oth~<�~ (\~"f'J"t".f,r 21K 88,373.65 210 21M 882,569.15 0.00 21N 671,889.72 112 0.00 0.00 11,480,155.31 �ttps tittfps.b�r.gov.phl �/ i. I.._/ / 1fJS/2U'I, , I! BJR Form 255CQ 11 ~ 21 P To!al Cum::nt P~rchn~os {Sum of 111 :,_ 21C, 21F. '/IC:. 21 p 13.122 13 211, 2\K. 21M&. 21N) 22 2 To'l.ll A~floillhle lnp11l T,u iS~un vll\<;'11 20F, 218, 210. 21 F, 21H. 21J, 2 H. & ? to) :1 I""" 1).�<1� '-""n" "'""'' '"'"'' r~. On December 27, 2017, RTTPI filed an Application for Tax Credits/Refunds (BIR Form No. 1914) seeking the refund of alleged unutilized input VAT credits amounting to Pl,377,618.64 relative to the subject period (administrative claim)? Subsequently, on March 2, 2018 respondent8 denied RTTPI's administrative claim through a Notice of Denial for VAT Refund/Credit9 for failure to comply with some of the requirements listed under Annex "A" of Revenue Memorandum Circular (RMC) 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 (BOC) receipts. This prompted RTTPI to file a Petition for Review10 before the Court in Division on April 2, 2018 Qudicial claim) docketed as CTA Case No. 9794. In the main, it averred as follows: 7 Exhibits "P-1" and "P-1-A," Docket - Vol. 3, p. 1373. 8 Through Revenue District Officer Rufo B. Ranario. 9 Exhibit "P-36," Docket- Vol. 3, p. 1457. 1o Docket- Vol. 1, pp. 10-38.

I DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 4 of18 First, zero-rated sales as declared in the VAT return amounting to '1'14,548,005.68 (Line 17) consisted of sales to enterprises registered with the Bureau of Investments (BOI) and the Philippine Economic Zone Authority (PEZA),11 sales to non-resident foreign corporations (NRFCs), and exchange of transportation equipment yielding a net gam. Second, as declared in the VAT return, total purchases in the fourth quarter of taxable year 2015 amounted to '1'13,122,987.83 (Line 21P). Of this total, purchases allocated to vatable sales and attributable or allocated to zero-rated sales amounted to '1'1,642,832.52 (total of Lines 21E, 21G, 211)12 and '1'11,480,155.31 (Line 21N), respectively. Third, RTTPI is entitled to the refund of unutilized input tax amounting to '1'1,377,618.64,13 which was computed and paid on its purchases attributable or allocated to zero-rated sales (i.e., '1'11,480,155.31 ).14 RULING OF THE COURT IN DIVISION In the Assailed Decision promulgated on January 24, 2022, while it ruled in favor of the timeliness of RTTPI' s administrative and judicial claims and confirmed its VAT registration, the Court in Division denied RTTPI's judicial claim. Its key findings are summarized as follows: First, only fourth quarter sales to the extent of '1'2,322,393.4815 out of sales amounting to '1'14,548,005.68 declared in the return qualify as zero-rated. Second, the input tax met the substantiation and invoicing requirements to the extent of '1'232,014.18. Third, RTTPI failed to substantiate the amount of '1'4,696,993.60 representing input tax carried from previous periods, as reported in its VAT return (Line 20A). Resultantly, there is no sufficient proof that the input tax subject of the instant claim was not applied against any output tax in the subject and succeeding periods. Stated differently, RTTPI was unable to establish that it had unutilized input tax that may be refunded in its favor. n Paragraph 15, Petition for Review in CTA Case No. 9794, Docket- Vol. 1, p. 17. 12 Paragraph 19, Petition for Review in CTA Case No. 9794, Docket- Vol. 1, p. 19. n Input tax subject of the instant claim = Purchases attributable to zero-rated sales x VAT rate = 1'11,480,155.31 X 12% = 1'1,377,618.64. 14 Paragraph 18, Petition for Review in CTA Case No. 9794, Docket- Vol. 1, pp. 18-19. 1s Rollo, pp. 79, 82-83.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 5 of18 The Court in Division likewise denied16 RTTPI's subsequent motion for reconsideration. Verily, upon re-verification, the amount of sales qualifying as zero-rated was adjusted from P2,322,393.48 to P4,222,393.48Y However, RTTPI still failed to submit proof that it had valid input tax available for refund and attributable to said zero-rated sales. 18 Hence, RTTPI filed the present petition. ARGUMENTS Petitioner assigns the following errors upon the Court in Division as follows: First, contrary to the assailed rulings, it complied with the requisites to the entitlement to a refund of unutilized input tax as set out in Section 112(A) of the Tax Code, as amended.19 Second, the Court in Division should have recognized the zero-rated character of its sales for the following reasons: (a) its zero-rated sales were substantiated properly, as confirmed by the Independent Certified Public Accountant (ICPA); (b) photocopies of the BOI Certifications submitted to prove that its sales were made to SOl-registered entities are admissible in evidence; and, (c) on motion for reconsideration, it submitted clearer copies of invoices relative to sales made to PEZA- registered enterprises, but the Court in Division still rejected the same. Third, its input tax on purchases and importations should not have been disallowed for the following reasons: (a) these transactions were substantiated properly, and (b) photocopies of the importations documents are admissible in evidence. Fourth, the disallowance of input tax carried from previous periods amounting to P4,696,993.60 is not relevant to the instant claim, which relates to the fourth quarter of 2015. Significantly, the Court directed respondent to file a Comment on the instant petition but it failed to do so within the time allowed.20 Consequently, the case was submitted for decision on February 10, 2023.21 16 In a Resolution promulgated on July 26. 2022. 17 Rollo, p. 105. JR Rollo, p. 106. 19 Rollo, pp. 30-37. 2o As per Records Verification dated January 25, 2023. Rollo, p. 125. 21 In Resolution dated February 10, 2023. Rollo, pp. 127-128.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 6 oflS ISSUES The primary question in the present controversy is: Did the Court in Division err in denying RTTPI's claim for refund? To resolve this question, We must inquire into the sufficiency of evidence in establishing the following: First, whether RTTPI' s sales amounting to P14,548,005.68 are zero-rated, as declared in its VAT return and, second, whether the input taxes subject of the present claim are available / eligible for refund. OUR RULING The Petition for Review lacks merit. We do not find sufficient reason to reverse or modify the Assailed Decision. In the recent case of Chevron Holdings, Inc. v. Commissioner of Internal Revenue (Chevron), 22 the Supreme Court reiterated the requisites for the availment of a tax credit/ refund under Section 112(A)23 of the Tax Code, as amended: Under Section 112(A) of the Tax Code, the taxpayer may claim for refund or issuance of tax credit certificate of unutilized input VAT attributable to zero-rated sales subject to the following conditions: (1) the taxpayer is VAT-registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the claim must be filed within two (2) years after the close of the taxable quarter when such sales were made; and (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax. 22 G.R. No. 215159, July 5, 2022. '' SECTION 112. Refunds or Tax Credits of Input Tax.- (A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(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 or 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.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 7 of18 At the outset, We recognize RTTPI's VAT registration and the timeliness of its administrative and judicial claims for refund/ credit (i.e., first and third requisites). Thus, Our pronouncement below deals more specifically with the second and fourth requisites in Chevron. RTTPI established the zero-rated character of its sales, as declared in the VAT return, but only in part. RTTPI's zero-rated sales amounting to !'14,548,005.68, as declared in the VAT return (Line 17), consisted of sales to BOI- and PEZA-registered entities, sales to an NRFC, and exchange of equipment yielding a net gain. However, the Court in Division recognized the zero-rated character of these sales to the extent of !'4,222,393.48, viz.: Sales to BOI-registered entity Per Return Confirmed Sales to PEZA-registered entities 1'44,855.96 as zero-rated Sales to NRFC by Court in Exchange of equipment yielding a net gain 13,792,692.39 Total 170,091.17 Division 540,366.16 1'4,222,393.48 t"14,548,005.68 t"4,222,393.48 A. The sales to PEZA-registered entities. Under Section 108(B)(3) of the Tax Code, as amended, when a VAT-registered person renders services to a person enjoying a tax exemption that, in essence, subjects the supply of such services to zero percent rate, such supply or sale shall be regarded as zero-rated. Revenue Regulations (RR) No. 16-05, otherwise known as the Consolidated VAT Regulations of 2005 (VAT Regulations) is instructive: (c) "Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement". - Sales of goods or property to persons or entities who are tax-exempt under special laws, e.g. sales to enterprises duly registered and accredited with the

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 8 of18 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.24 (Emphasis supplied) The above-cited regulation includes a PEZA-registered enterprise in the definition of "person enjoying a tax exemption" for purposes of VAT zero-rating. In Revenue Memorandum Circular (RMC) No. 74-99,25 the BIR clarified the tax treatment of sales of goods, property, and services by a supplier from the customs territory to a PEZA-registered enterprise, VlZ.: SECTION 3. Tax Treatment Of Sales Made By A VAT Registered Supplier From The Customs Territory, To A PEZA Registered Enterprise.- (1) If the Buyer is a PEZA registered enterprise which is subject to the 5% special tax regime, in lieu of all taxes, except real property tax, pursuant to R.A. No. 7916, as amended: (a) Sale of goods (i.e., merchandise). - This shall be treated as indirect export hence, considered subject to zero percent (0%) VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916, in relation to ART. 77(2) of the Omnibus Investments Code. (b) Sale of service.- This shall be treated subject to zero percent (0%) VAT under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5,1998. (2) If Buyer is a PEZA registered enterprise which is not embraced by the 5% special tax regime, hence, subject to taxes under the NIRC, e.g., Service Establishments which are subject to taxes under the NIRC rather than the 5% special tax regime: (a) Sale of goods (i.e., merchandise). - This shall be treated as indirect export hence, considered subject to zero percent (0%) VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916 in relation to ART. 77(2) of the Omnibus Investments Code. 24 Section ,1.106-S(c), RR No. 16-2005. 25 Tax Treatment of Sales of Goods, Property and Services Made by a Supplier from the Customs Terri ton; to a PEZA Registered Enterprise; and Sale Transactions Made by PEZA Registered Enterprises Within and Without the ECOZONE, October 15, 1999.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 9 of18 (b) Sale of Service.- This shall be treated subject to zero percent (0%) VAT under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5,1998. (3) In the final analysis, any sale of goods, property or services made by a VAT registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the class or type of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent (0%) VAT. Accordingly, all sales of goods or property to such enterprise made by a VAT registered supplier from the Customs Territory shall be treated subject to 0% VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC, in relation to ART. 77(2) of the Omnibus Investments Code, while all sales of services to the said enterprises, made by VAT registered suppliers from the Customs Territory, shall be treated effectively subject to the 0% VAT, pursuant to Section 108(B)(3), NIRC, in relation to the provisions of R.A. 7916 and the "Cross Border Doctrine" of the VAT system. This Circular shall serve as a sufficient basis to entitle such supplier of goods, property or services to the benefit of the zero percent (0%) VAT for sales made to the aforementioned ECOZONE enterprises and shall serve as sufficient compliance to the requirement for prior approval of zero-rating imposed by Revenue Regulations No. 7-95 effective as of the date of the issuance of this Circular. (Emphases Supplied) To underscore, all sales of goods, property, or services by a VAT- registered supplier to a PEZA-registered enterprise shall be subject to VAT at zero percent, not at the regular rate of 12%. To enjoy the benefit of VAT zero-rating of its sales, the supplier is not even required to secure a separate certification therefor. RMC No. 74-99's provisions shall be sufficient basis.26 As declared in the return, RTTPI' s sales to PEZA-registered entities in the subject period amounted to P13,792,692.39, broken down27 as follows: Customer Amount Coral Bay Nickel Corporation (CBNC) 1"920,197.48 Taganito HPAL Nickel Corporation (THPAL) 12,872,494.91 Total 1"13,792,692.39 26 See Commissioner of Internal Revenue v. Kurimoto (Pitilippines) Corp., C.T.A. EB Case No. 2666 (C.T.A. Case No. 9740), October 11, 2023. " Footnote 52, Assailed Decision.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Fnge 10 of18 CBNC and THPAL are PEZA-registered enterprises by virtue of their respective PEZA Certificates of Registration.28 Hence, RTTPI's aggregate sales to these enterprises are zero-rated. B. Sales to BOI-registered enterprise. In the present case, RTTI?I claims that it made sales in the amount of N4,855.96 to FCF Minerals Corp., a BOI-registered enterprise. Sales to HOI-registered enterprises are regarded as zero-rated pursuant to Revenue Memorandum Order No. 09-00,29 viz.: SECTION 3. Sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered exporter shall be accorded automatic zero-rating, i.e., without necessity of applying for and securing approval of the application for zero-rating as provided in Revenue Regulations No. 7-95, subject to the following conditions: (1) The supplier must be VAT-registered, (2) The BOI-registered buyer must likewise be VAT- registered; (3) The buyer must be a BOI-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 BOI-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 BOI-registered buyers; and; (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 RR 7-95. The supplier must likewise indicate in the VAT invoice the name and BOI-registry number of the buyer " Exhibits "P-9," "P-9-A," "P-9-B," and "P-10," Docket- Vol. 3, pp. 1398-1402. '' SUBJECT: Tax Treatment of Sales of Goods, Properties and Services Made by VAT-registered Suppliers to BOJ-registered Manufacturers-Exporters With 100% Export Sales, February 2, 2000.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 11 of18 As proof of the transaction's zero-rating and compliance with the fourth requirement above, RtTPI offered in evidence a copy of FCF Minerals Corp.'s BOI Certification.3D Significantly, due to its failure to secure the original copy or certified true copy thereof, RTTPI offered a mere photocopy of the document. The Court in Division denied31 admission, did not give probative value thereto, and, consequently, did not regard the sales to FCF Minerals Corp. as zero-rated. We find this ruling to be in order, especially in light of the further finding that said BOI Certificate pertains to 2014 sales to FCF Minerals Corp. and, thus, irrelevant to the present claim which is founded on zero-rated sales for the fourth quarter of2015. C. Sales to NRFCs. According to RTTPI, sales in the aggregate amount of P170,091.17 were made to NRFCs, namely: Evonik Methionine Sea Pty Ltd. (Evonik), Tip Top Japan, Inc. (Tip Top Japan), and Veolia Water Technologies Deutschland (Veolia).32 Sales of services in connection with the processing, manufacturing, or repacking of goods for persons doing business outside the Philippines are regarded as VAT zero-rated under subparagraph (1) of Section 1JOS(B) of the Tax Code, as amended. On the other hand, sales of services other than those specified in Section 108(B)(l), nonetheless, may qualify for VAT zero-rating, if the requisites as discussed by the Supreme Court in Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd.33 concur, viz.: Conditions for Zero-rating <Df Sales of Services Zero-rated sales are, for all intents and purposes, subject to VAT, only that the rate impbsed upon them is 0%. Thus, while these sales will not mathematically yield output VAT, the input VAT '" Annex A, Exhibit 'T'-42-2," Docket- Vol. 3, pp. 1166 to 1467. 31 As per Resolution dated June 26, 2019~ Par. 2, Docket- Vol. 4, pp. 1501-1503. 32 See Footnote 53, Assailed Decision. 33 G.R. No. 234445, July 15,2020.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 12 of18 arising therefrom is noneth~less creditable or refundable, as the case maybe. ' Sales of "other services," such as those qualifying services rendered by DKS to its for~ign affiliates-clients, shall be zero-rated pursuant to Section 108 (~)(2) of the Tax Code if the following conditions are met: First, thle seller is VAT-registered. Second, the services are rendered "to a ~erson engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside t~e Philippines when the services are performed." Third, the sen!"ices are "paid for in acceptable foreign currency and accounted fdr in accordance with [BSP] rules and regulations." XXX Proof of NRFC Status For purposes of zenjl-rating under Section 108 (B)(2) of the Tax Code, the claimant must establish the two components of a client's NRFC status, viz.l (1) that their client was established under the laws of a countr)!' not the Philippines or, simply, is not a domestic corporation; andl (2) that it is not engaged in trade or business in the Philippin~s. To be sure, there must be sufficient proof of both of these compbnents: showing not only that the clients are foreign corporations, l:)ut also are not doing business in the Philippines. (Emphasis supplied) As found by the Court in Division, RTTPI did not meet two of the three above-enumerated requisites with reference to its sales to NRFCs. More specifically, it cannot avail of VAT zero-rating on its sales to Evonik, Tip Top Japap, and Veolia because it failed to adduce evidence to prove (a) these E)ntities' NRFC status (i.e., that these are foreign corporations not doilng business in the Philippines), and (b) that the services had been" p~id for in acceptable foreign currency and accounted for in accordance With [BSP] rules and regulations." Thus, the Court in Div~sion was correct in not according zero- rating to the aforementioned fales. D. Exchange of equipment yiel�ing a net gain The Court in Division fbserved that the alleged zero-rated sale in the amount of 1'540,366.16!pertains to the net gain on the exchange

DECISION CTA EB No. 2688 (CIA Case No. 9794) Page 13 of18 of a transportation equipmen~' with Mr. Joseph Antonio Tomas Cruz. On this score, We also agree kith the Court in Division's ruling that this transaction does not qua ify for zero-rating, inasmuch has there was no proof showing that t is transaction may be regarded as zero- rated under the applicable s b-paragraphs of Section 108 of the Tax Code, as amended. ' At this juncture, while We confirm the zero-rated nature of the sales amounting to 1:'13,792,492.39 out of the aggregate amount of 1:'14,548,005.68 declared as zerp-rated sales in RTTPI's VAT return, We nonetheless uphold the Court! in Division's denial of the instant claim. I With respect to the fourth qtjarter of 2015, RTTPI did not incur rnput tax available for refund. � Input VAT subject of a !claim must be valid; that is, eligible for refund or credit in accordanc� with relevant Tax Code provisions and regulations. To be valid, the ~nput VAT: (a) must not be transitional input taxes,34 (b) must be ; due or paid35 and substantiated by supporting documents that} in turn, meet the applicable VAT invoicing requirements,36 (c)! must be attributable to zero-rated or effectively zero-rated sales o~ supplies of service?? and, (d) must not have been applied against o~tput taxes during and in the succeeding quarters.38 � A judicious review of the records reveals that RTTPI failed to declare in its VAT return for ~he fourth quarter of 2015 the input taxes Af subject of the instant claim. will be explained below, RTTPI's lapse, in turn, amounts to failure to ~eet requirements (b), (c), and (d) above. " Intel TeclmolO!JlJ Philippines, Inc. v. Co,Jmzissioner of Internal Revenue, G.R. No. 166732, April 27, 2007; San Roque Power Corporation p. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Cmlnmmicatimzs Services Philippines, Inc., G.R. No. 182364, August 3, 2010. I 35 Ibid. 36 Team Energy Corporation v. Commissionfr oflntenwl Revenue, et seq.� G.R. Nos. 197663 and 197770, March 14, 2018. : " Intel TeclmologJJ Philippines, Inc. v. Co+ missioner of Internal Revenue. G.R. No. 166732, April 27, 2007; and San Roque Power Corporati9n vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009. : 38 Intel Technology Philippines, Inc. v. cbmmissioner of Internal Revenue, supra; S~n ~oque Pm_ver Corporation vs. Commissioner of llzter~al Revenue, supra; and AT&T Commumcatwns Serv1ces Philippines, Inc., supra. �

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 14 of18 A VAT taxpayer is rna dated to report the correct amount of input taxes in the correspondi g declaration/return as an integral part of its responsibility to deter ine the correct amount of VAT payable (i.e. output tax less input tax). 9 Under the Tax Codel provisions governing VAT and its implementing rules, for eved month or quarter it is required to file a declaration4o or return,41 the axpayer shall work out the amount of input taxes creditable by ad ing all creditable input taxes arising from domestic purchases or importations made during the subject month or quarter, as the case ay be. Claimants bear the burden of proving the factual and legal basis of its claim for refund or crFdit.42 Thus, for purposes of input tax refunds founded upon Sectior 112(A) of the Tax Code, as amended, the claimant must demonstr~te, among others, attributability of the purchases that incurred inpu~ VAT to the "relevant sales" that were made.43 Subject of the present! claim are input taxes amounting to 1'1,377,618.64 claimed to hav~ been incurred in the fourth quarter of 2015. In its VAT return fori the said period, RTTPI declared total available input tax amounti~g to 1'4,894,133.5044 broken down as follows: Particulars: Line Amount Input tax carried over froml previous period 20F 1'4,696,993.60 In ut tax from current tran actions 197,139.90 Total available input tax 22 P4,894,133.50 39 In computing the VAT payable or ex~ess tax credits, "[t]here shall be allowed as a deduction from the output tax the amount of i put tax deductible as determined under Sec. 4.110-1 to 4.110-5 of these Regulations to arriv at VAT payable on the monthly declaration and the quarterly VAT returns, subject to the~mitations set forth in Section 4.110-7." See Section 4.110- 6, Consolidated Value-Added Tax egulations of 2005, Revenue Regulations No. 16-05, September 1, 2005, as amended by Re enue Regulations No. 04-07, February 7, 2007. 40 Section 4.114-1, Consolidated Value- dded Tax Regulations of 2005, Revenue Regulations No. 16-05, September 1, 2005. ! 41 Section 114, Tax Code; Section 4.114~1, Consolidated Value-Added Tax Regulationsof 2005, Revenue Regulations No. 16-05, Septrmber 1, 2005, as amended by Revenue Regulations No. 04-07, February 7, 2007. . 42 Commissioner of Intemational Revenut v. Fiiminera Resources Corporation, G.R. No. 236325, Scptcm.ber 16, 2020, citing Atlas Cons lidntcd Mining muf Dcvclopmc11t Corp. v. Commissioner of Internal Revenue, G.R. Nos. 141104 & 1 8763, June 8, 2007, 551 PHIL 519-567. " Maibarara Geothermal, Inc. v. Commissi ner of Internal Revenue, G.R. No. 250479, july 18, 2022. -!4 Amount is 1'4,894,133.51 in Line 22 of! he VAT return; 1'0.0 l discrepancy.

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 15 oflS In other words, as of he fourth quarter of 2015, input taxes amounting to P4,894,133.50 m y be applied against any output tax due and/ or claimed as refund or credit.45 However, the eligibility of this balance for refund/credit is egated by RTTPI's own averments, viz.: First, it specified46 that the i put taxes it seeks to refund arose from current period purchases i.e., fourth quarter of 2015), which forecloses a claim against the alance of input taxes carried over from previous periods (P4,696,993. 0). Second, it identified47 the balance of input taxes from current tran actions (1'197,139.90) as attributable to vatable sales, which makes aid balance unavailable for refund or credit. These lead Us to the co~clusion that RTTPI itself acknowledges that the present claim (l'1,3f7,618.64) cannot be sourced from the balance of available input tax~s (1'4,894,133.50) declared in the subject return. ' Verily, RTTPI's claim t~at it had purchases attributable to zero- rated sales during the foprth quarter of 2015 amounting to 1'11,480,155.3148 can be tranrd to Line 21N of the subject return, classified as "others" und~r the "current transactions" section. However, notably, it did not ~eport any input tax resulting therefrom (Line 210), viz.: Current reriod transactions !Line Purchases Line Resulting Domestic purchases of goods Inrut tax i21E !'88,373.65 21F other than capital goods !'10,604.84 Importation of goods other '21G 882,569.15 21H : 21I 671,889.72 21J 105,908.30 than capital goods 1'1,642,832.52 80,626.77 Domestic rurchase of services I 11,480,155.31 210 Subtotal 1'13,122,987.83 1'197,139.90 Others 21N nil49 Total 21P P197,139.90 " See Chevron, supra Note 22. in~1CTA Case No. 9794, Docket- Vol. 1, pp. 18-19; also see " Paragraph 18, Petition for Review Paragraph 17, Present Petition for Re iew, Rallo, p. 14. 47 Paragraphs 19-20, Petition for Revie in CTA Case No. 9794, Docket- Vol. 1, p. 19; also see Paragraphs 18-19, Present Petition for Review, Rollo, p. 15. " Paragraph 17, Petition for Review i CTA Case No. 9794, Docket- Vol. 1, p. 18; also see Paragraph 16, Present Petition for Re~iew, Rollo, p. 14. 49 Left blank in the return. �

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 16 of IS Interestingly, 12% of I' 1,480,155.31 corresponds exactly to the amount of the present clai ('1'1,377,618.64). Further verification revealed that, instead of decla ing this amount in the fourth quarter of 2015, RTTPI reported the sam in its first quarter VAT return for 2017. 35. The Input tax allocate to zero-rated sales which was first presented in line 20E thers of the 1st Quarter VAT return for 2017 amounted to P7,2 5,535.75 (Exhibit P-1077). This amount consists of Pl,377,618. 4 which is the amount of Input tax allocated to zero-rated ales for the 4th Quarter of 2015 and the subject matter of the cl im for refund under the filed Petition, and P5,897,917.11, the mount of Input tax allocated to zero- rated sales for the yea 2016. Following is a summary of the details of the total amo � nt of input tax allocated to zero-rated sales as first presented f1 TI the 1st Quarter VAT Return for 2017. As earlier stated, this t\:Jtal amount of input tax attributable to zero-rated sales was ndt utilized and was deducted from total available input tax. Period Am unto� Input Tax as Exhibit Nos. 4th Quarter 2015 Purc~ases computed see Petition 1st Quarter 2016 alloc4ted to 1,377,618.64 2nd Quarter 2016 Zero~ rated 1,195,872.54 P-1073 3rd Quarter 2016 1,856,774.16 P-1074 4th Quarter 2016 S~les P-1075 805,185.64 P-1076 9,96 ,604.54 2,040,084.76 15,47 ,118.03 7,275,535.75 6,70 ,880.34 17,00 ,706.32 (Emphasis supplied)Jso In other words, RTTPI ~eclared the input taxes (i.e., subject of the present claim and supposed! to have been paid in relation to 2015 4 purchases) belatedly and in different period. To be clear, the taxpayet is not at liberty to declare input taxes at just any time; these must be ~eported in the declaration/return in the proper period to establish t~e attribution of input taxes to the zero- rated sales upon which the clJim for refund is based, as well as the fact that the input taxes were due fnd paid. so Page 19, !CPA Report, Exhibit "P-42", Docket- Vol. 3, pp. 1238-1239.

DECISION CTA EB No. 2688 (CIA Case No. 9794) Page 17 oflB That the year/period u on which RTTPI's claim was founded (2015 fourth quarter) does ot coincide with the year/period of reporting/ declaration (2017 f rst quarter) indicates an absence of the required nexus between the i put taxes sought to be refunded and the sales to which the purchases and the corresponding input taxes are supposed to relate. Furtherm re, RTTPI's failure to declare input taxes that may have arisen from s ch other purchases in 2015 casts doubt upon the due and paid chara ter thereof. WHEREFORE, in light of the foregoing considerations, the Petition for Review is DENI~D for lack of merit. Accordingly, the assailed Decision and Resoluhon of the Third Division of this Court promulgated on January 24, :2022 and July 26, 2022, respectively, in CTA Case No. 9794 are AFFI~MED. SO ORDERED. ~ &-,. /' ~ .F~~ MARIAN IVYrf. REYEs1-FAJAI1DO Associate Justice WE CONCUR: Pr~siding Justice ~. ~ -r'-- MA. BELEN M. RINGPIS-LIBAN As~ociate Justice ' [7~,7~ CATHE~INE T. MANAHAN Asfociate Justice O~id LEA'JE JEAN MARIE lA. BACORRO-VILLENA Asfociate Justice

DECISION CTA EB No. 2688 (CTA Case No. 9794) Page 18 of18 MARIARO te Justice c~t~OjEs As~ociate Justice HENRY/ANGELES ~ssociate Justice CEitTIFICATION Pursuant to Article VIti, Section 13 of the Constitution, it is hereby certified that the copclusions in the above Decision were reached in consultation befo� the case was assigned to the writer of the opinion of the Court. Presiding Justice