DEUTSCHE KNOWLEDGE SERVICES PTE., LTD. v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City SECOND DIVISION DEUTSCHE KNOWLEDGE CTA Case No. 90 79 SERVICES, PTE. LTO., Members: Petitioner, CASTAN EDA, JR., Chairperson, -versus- CASANOVA, and MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, / JAN 09 2018 / Respondent. 17 2: 'f�, .�. x---------------------------------------------------------------------------------x DECISION CASANOVA, J.: This is a Petition for Review1 filed on June 30, 2015 by petitioner Deutsche Knowledge Services Pte. Ltd. against respondent Commissioner of Internal Revenue to seek the refund or issuance of a Tax Credit Certificate (TCC) in the amount of P23,816,670.55, allegedly representing its excess and unutilized input Value Added Tax (VAT) on purchases of goods and services attributable to zero-rated sales for the second quarter of calendar year (CY) 2013. Petitioner is the Philippine branch of a multinational company organized and existing under and by virtue of the laws of Singapore, with registered office address at One Raffles Quay, #17-10 South Tower, Singapore 048583.2 It was registered with the Bureau o~ 1 Docket (Vol. I), pp. 10-21. 2 Par. 1, Joint Stipulation of Facts and Issues (JSFI), Docket (Vol. IV), p. 1421.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR Internal Revenue (BIR) on June 16, 2005 as a VAT-registered taxpayer with Taxpayer Identification No. (TIN) 238-763-115-000. 3 Petitioner is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines by the Securities and Exchange Commission (SEC) on April 25, 2005, pursuant to the Omnibus Investment Code of 1987, as amended by Republic Act (RA) No. 8756 and its implementing rules and regulations, to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development.4 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at 5th Floor, BIR Building, Diliman, Quezon City. On February 27, 2015, petitioner filed with the BIR-Large Taxpayers Regular Audit Division 3, an application for tax credit/refund of its excess and unutilized input VAT for the second quarter of CY 2013 in the amount of P23,816,670.55.5 There being no action taken by respondent on petitioner's administrative claim for refund or issuance of TCC, petitioner filed the present Petition for Review before the Court on June 30, 2015. On July 16, 2015, respondent filed his Answer6 interposing the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSESe: 3 Par. 3, JSFI, Docket (Vol. IV), p. 1422. 4 Par. 2, JSFI, Docket (Vol. IV), pp. 1421-1422. 5 Par. 5, JSFI, Docket (Vol. IV), p. 1422. 6 Docket (Vol. I), pp. 35-43.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR 4. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau. 5. The amount of P23,816,670.55 allegedly representing excess and unutilized input VAT on alleged purchases of goods and services allegedly attributable to zero-rated sales for the 2nd quarter of CY 2013 was not properly documented. 6. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit. 7. Petitioner must show that it has complied with the provisions of Section 229 of the NIRC of 1997 on the prescriptive period for claiming tax refund/credit. 8. There is no record of petitioner ever submitting complete documents to substantiate its administrative claim for refund. Such is a requirement, otherwise, the administrative body will have sufficient reason to deny the claim. As held by the Honorable Supreme Court in the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R 145526, 16 March 2007: 'Petitioner's contention that non- compliance with Revenue Regulations 3-88 could not have adversely affected its case in the CTA indicates a failure on its part to appreciate the nature of the proceedings in that court. First, a judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim. Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claims. In this case, it was necessary for petitioner to show the CTA not only that it was entitled under substantive law to the - grant of its claims but also that it

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR satisfied all the documentary and evidentiary requirements for an administrative claim for refund or tax credit. Second, cases filed in the CTA are litigated de novo. Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim. (emphasis and underscoring supplied) The implementing rule for these complete documents required by law is RMO No. 53-98. Annex B-1 of said RMO lists all the required documents as follows: VALUE-ADDED TAX (For audit involving Claim for Refund I TCC) A.) Requirements from Taxpayer for VAT I. Requirements mention (sic) in Annex B Purchases II. Additional General Requirements 1) 3 copies of 'Application Credit/Refund' 2) Summary List of Local specifying the following: XXX XXX XXX 3) Photocopies of VAT purchase invoices for purchase of goods and official receipts for purchase of services. (The invoices/official receipts must be arranged according to the summary list) 4) Summary of importations made during the period with the following details~ XXX XXX XXX

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR 5) Photocopies of invoices, import entry documents, official receipts or confirmation receipts evidencing payment of VAT. (Segregate documents paid by cash from those paid by tax debit memo) 6} VAT returns filed for the quarter showing that the amount applied for refund/TCC has been reflected as a deduction from the total available input tax, as well as VAT Return for the succeeding quarter 7) Certification of taxpayer showing the amount of Zero-rated Sales, Taxable Sales and Exempt Sales 8) A statement showing the amount and description of the sale of goods and services, name of persons or entities (except in case of exports) to whom the goods or services were sold and date of the transaction, where the applicant's zero-rated transactions are regulated by certain government agency. 9) Articles of Incorporation - for first time filers 10) Sales Contract/Agreement 11) BOI Certificate of Registration 12) BIR Certificate of Registration 13) Certification from BOI, DOF, BOC, EPZA, etc., that subject taxpayer has not filed similar claim for refund covering the same period. 14) Sworn statement that ending inventory as of the close of the period covered by the Claim has been used directly or indirectly in the products subsequently exported as supported by export documents, if the applicant is 100�/o exporter.,_

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR 15) Documents of liquidation evidencing the actual utilization of the raw materials in the manufacture of goods at least 70�/o of which has been actually exported, if the applicant is an indirect exporter. 16) Copy of the ITR and Certified Financial Statement, if applicable. 17) Beginning and ending inventory of raw materials, work-in-process, finished goods, supplies and materials. Additional Specific Requirements 1) For Zero-Rated Sales of Services (contractors, mining, etc) a. Authenticated copy/ies of the contract/s showing the person/s for whom the services were rendered, amount of consideration, description of the services and documents evidencing actual payments. b. Photocopies of official receipts and billings together with a summary of the date of billing, name of principal, official receipt number, date of receipt, amount in foreign currency and the corresponding value thereof, date of remittance, name of bank, bank credit memo number and amount remitted in pesos. c. Bank credit memoranda and certificate from the BSP with information similar to 1-c (export sales) As stated above, the first documentary requirement is that provided in Annex B of the same RMO. Annex B provides for more requirements as follows: VALUE-ADDED TAX A) Requirements from Taxpayers 1) Proof of claimed tax credits 2) Proof of Tax Compliance Certificates applied~

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR 3) Xerox copy of used Tax Credit Certificate (TCC) with annotation of issued TDM at the back, if applicable 4) Proof of payment of deficiency tax, if any a) current year I period b) previous year I period 5) Certification of the appropriate government agency as to taxpayer's entitlement to tax incentives, if applicable 6) Xerox copies of the Official Receipts evidencing VAT payment on imported purchases, if applicable 7) Proof of exemption under special law, if applicable 8) Certification of the appropriate regulatory agency as to the exempt or zero-rated sales of the taxpayer under its regulatory supervision, if applicable 9) Certificate of Registration issued by the appropriate regulatory agency, together with the conditions attached to such registration, if applicable 10) Proof of 'Approval for Effective Zero-Rating of Sales', if applicable 11) Sample invoice I s for 'Export/Exempt Sales', if applicable 12) Proof that the acceptable foreign currency exchange proceeds on export/ sales foreign currency denominated sales had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), if applicable. Far from complying with the checklist of requirements, petitioner merely stated that it submitted complete documents in support of its administrative claim for refund. This is not a claim for erroneously or illegally collected taxes where petitioner has the discretion of choosing the evidence it deems fit to prove its case. This is a claim for excess but legally collected, unutilized input taxes. It does not have to prove its case because the law already acknowledges it is entitled to refund. Thus, it merely has to substantiate the export sales and the excess/unutilized amount of input taxes attributable to the said export sales. Hence, petitioner's failure to complys--

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR with the duly mandated legal requirements in such claims for refund/tax credit warranted the denial by inaction of the administrative claim. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of the government for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people (Mactan Cebu International Airport Authority vs. Marcos, 261 SCRA 667, 690). Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that claims for refund are required to be done within certain time frames. In the instant petition, the failure of petitioner to comply with such periods is fatal to its cause. Moreover, petitioner's failure to submit documents supporting its claim for refund makes its administrative claim for refund pro-forma. This pro-forma administrative claim should not be taken as proper compliance with the requirements of the law that an administrative claim for refund should have been filed prior to the institution of a judicial claim for refund. Thus, without a validly and duly filed administrative claim for refund, the Honorable Court is without jurisdiction to entertain the Petition for Review. Petitioner's failure to comply with a condition precedent prior to the institution of its petition for review makes it dismissible for absence of jurisdiction on the part of the Honorable Court. The claimant has the burden of proof to establish the factual basis of his claim for tax credit or refund. After all tax refunds, like tax exemptions, are construed strictly against the taxpayer (Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332, both cited in Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5392 promulgated October 30, 1998). Partaking of the nature of exemptions, claims for refund are strictly construed against the claimant and_

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR cannot be allowed unless granted in the most explicit and categorical language (Sps. Aguilar vs. Commissioner of Internal Revenue, et al., CA G.R.SP No. 16432, March 30, 1999). Being in the nature of tax exemptions, these claims are regarded as in derogation of sovereign authority and to be construed strictissimijuris against the claimant and liberally in favor of the taxing authority (Commissioner of Internal Revenue vs. Procter and Gamble Philippines Manufacturing Corporation, 204 SCRA 377). Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211)." The Pre-Trial Conference was resee on October 29, 2015. Respondent's Pre-Trial BriefS was filed on August 11, 2015; while petitioner's Pre-Trial Brief9 was filed on September 24, 2015. The parties filed their Joint Stipulation of Facts and Issues10 on December 17, 2015, which was approved by the Court in its Pre-Trial Order11 dated January 21, 2016. Petitioner presented as its witnesses, Ms. Rachel Concepcion12 and Independent Certified Public Accountant (ICPA) Katherine 0. Constantino. 13 On April 28, 2016, petitioner filed its Formal Offer of Evidence14, offering Exhibits "P-1" to "P-753", inclusive of submarkings, as its documentary evidence. Respondent filed his Comment (Re: Petitioner's Formal Offer of Evidence)15, on May 2, 2016.~ 7 Notice of Resetting dated September 24, 2015, Docket (Vol. III), p. 1386. 8 Docket (Vol. I), pp. 46-49. 9 Docket (Vol. I), pp. 56-65. 10 Docket (Vol. IV), pp. 1421-1429. 11 Docket (Vol. IV), pp. 1466-1470. 12 Minutes of the Hearing on January 27, 2016, Docket (Vol. IV), p. 1480. 13 Minutes of the Hearing on April 6, 2016, Docket (Vol. IV), p. 1497. 14 Docket (Vol. IV), pp. 1502-1537. 15 Docket (Vol. IV), pp. 1538-1541.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR In the Resolution 16 dated June 1, 2016, the Court admitted petitioner's Exhibits except for Exhibits "P-7.8", "P-8", "P-8.1", "P-8.2", "P-12"I "P-13"I "P-14"I "P-16"I "P-17''I "P-18"I "P-19"I "P-20"I "P-21"I "P-22", "P-23" to "P-78", "P-80" to "P-95", "P-98" to "P-109", "P-112" to "P-208", "P-210", "P-79", "P-96" to "P-97", "P-110" to "P-111", "P- 209", "P-254" to "P-694", "P-211" to "P-217", "P-218" to "P-253", "P- 753", "P-8.3", "P-8.4", "P-8.5", "P-8.6", "P-8.7", "P-8.8", "P-8.9", "P- 8.10", "P-8.11", "P-8.12", "P-8.13", "P-8.14", "P-8.15", "P-8.16", "P- 8.17", "P-8.18", "P-8.19", "P-8.20", "P-8.21", "P-8.22", "P-8.23", "P- 8.24", "P-8.25", "P-8.26", "P-8.27", "P-8.28", "P-8.29", "P-8.30", "P- 8.31", "P-8.32", "P-8.33", "P-8.34" and "P-8.35". Considering the manifestation of respondent's counsel that there is no report of investigation submitted by the Revenue Officer and upon motion, the parties were granted a period of thirty (30) days within which to file their respective memoranda.17 On July 26, 2016, respondent filed his Memorandum18, while petitioner filed its Omnibus Motion (1) For leave of Court to submit evidence; (2) To admit evidence; and (3) To defer submission of Petitioner's Memorandum19 on July 29, 2016 sans respondent's, comment thereto.20 In the Resolution21 dated August 16, 2016, the Court granted petitioner's motion to defer submission of its memorandum. In the Resolution22 dated October 20, 2016 the Court granted petitioner's Motion for leave to submit evidence; and partially granted petitioner's Motion to admit evidence. On December 29, 2016, petitioner filed its Memorandum23 through registered mail and the same was received by the Court on January 11, 2017. In a Resolution24 dated January 17, 2017, the case was submitted for decision. The parties stipulated the following issues 25 : .fL. 16 Docket (Vol. IV), pp. 1543-1545. 17 Minutes of the hearing on July 11, 2016, Docket (Vol. IV), p. 1546. 18 Docket (Vol. IV), pp. 1548-1558. 19 Docket (Vol. IV), pp. 1559-1570. 20 Records Verification dated September 2, 2016, Docket (Vol. IV), p. 1578. 21 Docket (Vol. IV), p. 1577. 22 Docket (Vol. IV), pp. 1580-1584. 23 Docket (Vol. IV), pp. 1593-1619. 24 Resolution dated January 17, 2017, Docket, (Vol. IV), p. 1621. 25 JSFI, Docket (Vol. IV), p. 1422-1423.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR Whether or not petitioner is entitled to the claim for refund of or issuance of TCC for its alleged excess or unutilized input VAT in the amount of P23,816,670.55 for the 2nd quarter of CY 2013. The main issue may be broken down into the following sub- issues: A. Whether or not petitioner incurred input VAT on its alleged purchases of goods and services attributable to zero-rated sales for the 2nd quarter of CY 2013. B. Whether or not petitioner had zero-rated sales during the 2nd quarter of CY 2013, the consideration for which were allegedly paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. C. Whether or not the input VAT allegedly incurred by petitioner for the 2nd quarter of CY 2013 is duly supported by VAT invoices and official receipts. D. Whether or not the input VAT allegedly incurred by petitioner for the 2nd quarter of CY 2013 amounting to P23,816,670.55 was applied against any output VAT or carried over to succeeding taxable periods. E. Whether or not petitioner's administrative and judicial claims for refund of or issuance of TCC for its alleged excess and unutilized input VAT on purchases of goods and services attributable to its zero-rated sales were filed within the period prescribed under the Tax Code. The provisions of the NIRC of 1997, as amended, relevant to the case at hand are Sections 110(8) and 112(A) and (C), which, respectively, read: "SEC. 110. Tax Credits. -:. XXX XXX XXX

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR "(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: Providect howeve~; 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."26 "SEC. 112. Refunds or Tax Credits of Input Tax.- "(A) Zero-Rated or Effectively Zero-Rated Sales.- Any VAT-registered person, whose sales are zero- rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, 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: Providect however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the 8angko Sentral ng Pilipinas (8SP): Providect 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: Providect 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 nonzero- rated sales." XXX XXX XXX "(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund or issue the tax credit~ 26 NIRC of 1997, as amended by R.A. 9361, November 21, 2006.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." Pursuant to the above provisions, in order to be entitled to a refund or tax credit of input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be complied with: 1. that the taxpayer is VAT-registered; 2. that the claim for refund was filed within the prescriptive periods; 3. there must be zero-rated or effectively zero-rated sales; 4. that input taxes were incurred or paid; 5. that such input taxes are attributable to zero-rated or effectively zero-rated sales; and 6. that the input taxes were not applied against any output VAT liability. First Requisite: The taxpayer is a VAT-registered entity It is undisputed that petitioner is registered with the BIRon June 16, 2005 as a VAT taxpayer with TIN 238-763-115-000 and with BIR Certificate of Registration No. OCN 9RC0000270209. 27 Second Requisite: Timeliness of administrative and judicial claims-e-. 27 Par. 3, Stipulated Facts, JSFI, Docket (Vol. IV), p.1422; Exhibit "P-2".

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR Applying Section 112(A) of the NIRC of 1997, as amended, the two (2)-year prescriptive period in filing administrative claim is reckoned from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the second quarter of CY 2013, which closed on June 30, 2013. Counting two years from the said date, petitioner had until June 30, 2015, within which to file its administrative claim for refund. Thus, petitioner's administrative claim filed on February 27, 201528 was timely filed. As to the timeliness of petitioner's judicial claim, Section 112(C) of the NIRC of 1997, as amended, provides that the Commissioner of Internal Revenue (CIR) has 120 days from the date of submission of the complete documents in support of the application for refund or tax credit certificate within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the Court of Tax Appeals within thirty (30) days from receipt of the decision of the CIR. However, if, after the 120-day period, the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the Court of Tax Appeals within thirty (30) days. However, starting June 21, 2014 when Revenue Memorandum Circular (RMC) No. 54-2014 took effect, the 120-day period shall be reckoned from the date the administrative claim was filed and the taxpayer-claimant is required to submit complete supporting documents and attest to the completeness of the same at the time of filing the claim. At this point, it is relevant to refer to the pronouncement of the Supreme Court in the case of Pilipinas Total Gas, Inc. vs Commissioner of Internal Revenue29� In the said case, the Supreme Court went to discuss that RMC No. 54-2014 dated June 11, 2014 mandates that the application for VAT refund or tax credit must be accompanied by complete supporting documents, and a statement under oath attesting to the completeness of the submitted documents, which are the only documents the taxpayer will present to support the claim; that upon submission of the administrative claim and its supporting documentsr.e_ 28 Exhibits "P-4" and "P-4-a". 29 G.R. No. 207112, December 8, 2015.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR the claim shall be processed and no other documents shall be accepted or required from the taxpayer in the course of its evaluation and a decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer, to wit: "It bears mentioning at this point that the foregoing summation of the rules should only be made applicable to those claims for tax credit or refund filed prior to June 11, 2014, such as the claim at bench. As it now stands, RMC 54-2014 dated June 11, 2014 mandates that: The application for VAT refund/tax credit must be accompanied by complete supporting documents as enumerated in Annex "A" hereof. In addition, the taxpayer shall attach a statement under oath attesting to the completeness of the submitted documents (Annex B). The affidavit shall further state that the said documents are the only documents which the taxpayer will present to support the claim. If the taxpayer is a juridical person, there should be a sworn statement that the officer signing the affidavit (i.e., at the very least, the Chief Financial Officer) has been authorized by the Board of Directors of the company. Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer. The application for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayerI claimant. Thus, under the current rule, the reckoning of the 120-day period has been withdrawn from the taxpayer by.e.---

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR RMC 54-2014, since it requires him at the time he files his claim to complete his supporting documents and attest that he will no longer submit any other document to prove his claim. Further, the taxpayer is barred from submitting additional documents after he has filed his administrative claim." Since petitioner's administrative claim was filed after June 11, 2014, the rules under RMC No. 54-2014 shall apply. Thus, the 120-day period shall be reckoned from the date the administrative claim was filed. Applying the foregoing, upon the filing of its administrative claim on February 27, 2015, respondent had 120 days or until June 27, 2015 to decide on the petitioner's claim. Since respondent failed to act on the said claim, petitioner had until July 27, 2015, the last day of the thirty (30)-day period, within which to file its judicial claim. Clearly, petitioner, timely filed its judicial claim via a Petition for Review on June 30, 2015. Third Requisite: Existence of zero-rated or effectively zero- rated sales Petitioner asserts that its sales of services to its various nonresident foreign clients, the consideration for which was paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) are subject to zero percent (0�/o) VAT pursuant to Section 108(8)(2) of the NIRC of 1997, as amended, which provides: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease ofProperties. - 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�/o) rate:~ XXX XXX XXX

DECISION CfA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR "(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" In the case of Commissioner ofInternal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.30, the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended, the following requisites must be met: 1. the services must be other than processing, manufacturing or repacking of goods; 2. payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and 3. the recipient of such services is doing business outside the Philippines. Petitioner satisfied the first requisite. Petitioner is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines by the SEC on April 25, 2005, pursuant to the Omnibus Investment Code of 1987, as amended by Republic Act (RA) No. 8756, and its implementing rules and regulations, to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development.31 Such services are not in the same category as "processing, manufacturing or repacking of goods"'I!L 30 G.R. No.153205, January 22, 2007. 31 Par. 2, Stipulated Facts, JSFI, Docket (Vol. IV), pp. 1421-1422; Exhibit "P-1".

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR In compliance with the third requisite, petitioner presented the following documents showing that its clients/affiliates are non-resident foreign corporations doing business outside the Philippines: 1. SEC Certifications of Non-Registration of Company32; 2. IntraGroup Service Agreements33; 3. Company Registration Documents (Certificate of Registration/ Certificate of Incorporation/ Association )34; 4. AMinet Company Profile Fact Sheets35; and 5. Deutsche Bank Comprehensive List of Shareholdings 201336� However, each of the aforesaid documents, standing alone, is inadequate proof that petitioner's client is, indeed, a non-resident foreign corporation doing business outside the Philippines. The Certificates of Registration/Foreign Incorporation/ Association, as well as the List of Shareholdings, only prove that the named entities therein were incorporated/organized/domiciled abroad. They, however, do not establish that such entities are not doing business in the Philippines. Also, while the SEC Certificates of Non-Registration show that the named entities therein are not registered corporations/partnerships in the Philippines, the same do not, however, prove that such entities are non-resident foreign corporations doing business outside the Philippines. Likewise, the Service Agreements only show the names and addresses of petitioner's clients to whom it renders services but the same do not establish that such clients are non-resident foreign corporations doing business outside the Philippines. In the case of Site/ Philippines Corporation (formerly Clientlogic Phils./ Inc.) vs. Commissioner of Internal Revenue,37 the Supreme Court already held that while Sitel's documentary evidence, which includes Certifications issued by the Securities and Exchange Commission and Agreements between Sitel and its foreign clients, mav. '"" 32 Exhibits "P-5" to "P-5.50". 33 Exhibits "P-6" to "P-6.37". 34 Exhibits "P-7" to "P-7.7", "P-7.9" to "P-7.11". 35 Exhibits "P-9" to "P-9.49". 36 Exhibit "P-10". 37 G.R. No. 201326, February 8, 2017.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR have established that Sitel rendered services to foreign corporations and received payment therfor through inward remittances, said documents failed to specifically prove that such foreign clients were doing business outside the Philippines or have a continuity of commercial dealings outside the Philippines. Hence, to be considered as non-resident foreign corporation doing business outside the Philippines, each entity must be supported at the very least by both SEC certificate of Non-Registration of Corporation/Partnership and Certificate/Articles of Foreign Incorporation/Association/Registration and that there is no other indication that the recipient of the services is doing business in the Philippines. This Court, however, cannot give credence to the purported foreign business registration print-outs retrieved from the AMinet database which is a database set up by Deutsche Bank Global (the Head Office located in Germany). The said documents are not sufficient to establish the fact that the service recipients are non- resident foreign corporations doing business outside the Philippines, as they may be considered self-serving and can be easily manipulated to favor petitioner in view of its affinity with the entity that maintains or keeps the said database. In this case, the following table shows whether petitioner complied with the third requisite as it presented admitted evidence of the said SEC Certificate of Non-Registration and Certificates of Registration/ Foreign Incorporation/Association for each of the recipients of the services rendered by petitioner: Name of Client/Affiliate SEC Certificate of Certificate of Non-Registration Registration/ Bankers International Corporation DB Consorzio S. Cons. A.R.L. P-5 Incorporation I DB Energy Trading LLC P-5.1 DB Investment Partners Inc. P-5.2 Association DB Services New Jersey, Inc P-5.3 Deutsche Asia Pacific Holdings Pte. Ltd. P-5.4 None Deutsche Asset Management (Korea) Company Limited P-5.5 None Deutsche Bank (Malaysia) Berhad P-5.6 None Deutsche Bank (Suisse) SA P-5.7 None Deutsche Bank Aktiengensellschaft P-5.8 None None P-7 None P-7.1 None P-7.7 I P-7.9

DECISION P-5.10 P-7.2 CTA CASE NO. 9079 P-5.11 None DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR P-5.12 None P-5.13 None Page 20 of 33 P-5.14 None P-5.15 Deutsche Bank Aktiengesellschaft, Asia Pacific Head P-5.16 P-7.3 Office P-5.17 Deutsche Bank Aktiengesellschaft, Filiale Amsterdam P-5.18 None Deutsche Bank Aktiengesellschaft, Filiale Bangkok P-5.19 None Deutsche Bank Aktiengesellschaft, Filiale Dubai (DIFC) P-5.20 Deutsche Bank Aktiengesellschaft, Filiale Ho Chi-Minh City P-5.21 P-7.11 Deutsche Bank Aktiengesellschaft, Filiale Hongkong P-5.22 Deutsche Bank Aktiengesellschaft, Filiale Karachi P-5.23 P-7.4 Deutsche Bank Aktiengesellschaft, Filiale Labuan P-5.24 Deutsche Bank Aktiengesellschaft, Filiale London P-5.25 None Deutsche Bank Aktiengesellschaft, Filiale New York P-5.26 None Deutsche Bank Aktiengesellschaft, Filiale Paris P-5.27 None Deutsche Bank Aktiengesellschaft, Filiale Prag P-5.28 Deutsche Bank Aktiengesellschaft, Filiale Riad P-5.9 P-7.5 Deutsche Bank Aktiengesellschaft, Filiale Seoul P-5.29 Deutsche Bank Aktiengesellschaft, Filiale Singapur P-5.30 P-7.6 Deutsche Bank Aktiengesellschaft, Filiale Tokyo P-5.31 Deutsche Bank Aktiengesellschaft, Filiale Wien P-5.32 None Deutsche Bank Aktiengesellschaft, Filiale Zurich P-5.33 None Deutsche Bank Aktiengesellschaft, Inlandsbank None Deutsche Bank AS P-5.34 None Deutsche Bank Luxembourg S.A. None Deutsche Bank National Trust Company P-5.35 None Deutsche Bank Netherland N.V. P-5.36 None Deutsche Bank PBC Spolka Akcyjna P-5.37 None Deutsche Bank Polska Spolka Akcyjna P-5.38 None Deutsche Bank Privat-UND Geschaftskunden P-5.39 None Aktiengesellschaft P-5.40 Deutsche Bank Securities Inc P-5.41 None Deutsche Bank Societa per Azioni P-5.42 Deutsche Bank Trust Company Americas P-5.43 �None Deutsche Bank, Sociedad Anonima Espanola P-5.44 None Deutsche Group Services Pty Limited P-5.45 None Deutsche Investment Management Americas, Inc. P-5.46 None Deutsche Securities Inc. P-5.47 None Deutsche Securities Korea Co. P-5.48 None Deutsche Trust Company Limited Japan P-5.49 Deutsche Trustees Malaysia Berhad P-5.50 P-7.10 DWS Holding & Service GmbH DWS Investment S.A. None None 000 Deutsche Bank None None PT. Deutsche Securities Indonesia None RREEF Management GmbH None RREEF Management LLC None None None Correspondingly, only the sales of services by petitioner to entities which have the said two (2) required documents will be treated as subject to the 0�/o VAT rate, pursuant to Section 108(8)(2) of the NIRC of 1997, as amended ..,.

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR Corollary to the second requisite, Sections 113(A)(2), (8)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), 8(1) and (2)(c) of Revenue Regulations (RR) No. 16-05 provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties, and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. - "(A) Invoicing Requirements. - A VAT-registered person shall issue: XXX XXX XXX "(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services "(B) Information Contained in the VAT Invoice or VAT Official Receipt- The following information shall be indicated in the VAT invoice or VAT official receipt: "(1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); "(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: XXX XXX XXX "(c) If the sale is subject to zero percent (0�/o) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; XXX XXX XXX "(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx" (underlining supp/ied),eL-

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR SEC. 4.113-1. Invoicing Requirements.- (A) A VAT-registered person shall issue: - XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoice or official receipts. Said documents shall be considered as a "VAT Invoice" or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (underlining supplied) Pursuant to the foregoing prov1s1ons, the foreign currency remittances referred to under Section 108(8)(2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts ..P-

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR To prove that it rendered services to its foreign affiliates and was paid in foreign currency duly accounted for in accordance with the rules and regulations of the BSP for the second quarter of CY 2013, petitioner submitted in evidence its VAT zero-rated official receipts (ORs) with attached invoices38 issued to its alleged non-resident foreign clients and Certificate of Inward Remittance39 issued by Deutsche Bank AG Manila. Upon scrutiny of the documents submitted, the Court finds that out of the P1,105,734,437.7940 zero-rated sales declared per VAT Return for the second quarter of CY 2013, only the amount of 9,725,820.10 with peso equivalent of P522,720,069.53, as detailed below, qualifies for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended: Customer's Name O.R. O.R. Date O.R. Amount Amount Exhibit Number (in Euro) (in Peso) Deutsche Bank Aktiengesellschaft, Filiale London No. Deutsche Bank Aktiengesellschaft, Filiale New York P-28 8-Apr-13 3149 979 193.36 52 546 825.37 Deutsche Bank Aktiengesellschaft, 43 122.42 2 321 653.31 Filiale London P-32 10-Apr-13 3153 Deutsche Securities Inc. 494 390.96 26 617 346.81 Deutsche Bank Aktiengesellschaft, P-33 10-Apr-13 3154 140 139.92 7 544 945.51 Filiale London P-38 10-Apr-13 3159 1 095,610.50 Deutsche Bank Aktiengesellschaft, 235 086.13 59 152 624.44 Filiale Sinqapur P-49 16-Apr-13 3171 12,692 431.81 Deutsche Bank (Malaysia) Berhad 845.12 Deutsche Bank (Malaysia) Berhad P-50 16-Aor-13 3172 18.724.73 45 628.50 Deutsche Bank Aktiengesellschaft, P-51 16-Aor-13 3173 108,135.00 1 016 742.35 Filiale Hongkong P-54 17-Aor-13 3176 220 953.04 5 818 146.39 Deutsche Bank Aktiengesellschaft, 734,597.25 11,888 261.26 Asia Pacific Head Office P-61 18-Apr-13 3183 39 447,431.61 Deutsche Bank Aktiengesellschaft, 2 422 044.20 130,019 216.95 Filiale Sinqaour P-62 18-Aor-13 3184 40 260.24 2 161 950.73 Deutsche Bank Aktiengesellschaft, 31 677.30 1 701,052.01 Filiale London P-64 19-Apr-13 3186 87 688,873.76 Deutsche Securities Inc. 1 633,881.00 Deutsche Bank Aktiengesellschaft, P-65 19-Aor-13 3187 2.811.39 150 884.69 Asia Pacific Head Office P-67 19-Aor-13 3189 1 542,427.60 Deutsche Bank Aktiengesellschaft, 28 739.60 Asia Pacific Head Office P-68 19-Apr-13 3190 Deutsche Asia Pacific Holdings Pte Ltd P-77 23-Apr-13 3199 Deutsche Bank Aktiengesellschaft, Filiale Seoul P-78 23-Aor-13 3200 P-80 23-Apr-13 3202 38 Exhibits "P-23" to "P-78" and "P-80" to "P-95". 39 Exhibits "P-21". 40 Exhibit "P-3".

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR Deutsche Bank Aktiengesellschaft, P-83 24-Apr-13 3205 483 452.03 25 898 211.00 Filiale New York P-87 25-Apr-13 3209 Deutsche Bank Aktiengesellschaft, 1 012 155.91 54 465 415.43 Filiale London 9,725 820.10 522,720,069.53 Total Fourth and Fifth Requisites: Petitioner had input taxes attributable to its zero-rated sales Having resolved that petitioner had valid VAT zero-rated sales for the second quarter of CY 2013 in the amount of P522,720,069.53, we proceed to determine the amount of input VAT attributable thereto. In its Quarterly VAT Return for the second quarter CY 2013, petitioner declared input VAT of P24,020,395.21 on its current purchases of goods and services, of which the amount of P23,816,670.55 is the subject of the present claim, as shown below: Amount Input tax on Purchase of Capital Goods not exceeding p 130,605.62 P1M (Line 188) Input tax on Domestic Purchases of Goods other than 208,138.23 Capital Goods (Line JBF) 23 277,651.34 Input tax on Domestic Purchase of Services (Line 18J) Input tax on Services rendered by Non-residents (Line 404,000.02 18L) Total Input Taxes on Current Purchases p 24,020,395.21 Divide by Total Declared Sales Multiply by Declared Zero-rated Sales 1/115 192J44.62 Input VAT claimed for refund/TCC 1,105 734A37.79 p 23,816,670.55 In support of its input VAT on current purchases of goods and services amounting to P24,020,395.21, petitioner presented various official receipts and invoices41 issued by its suppliers and BIR Forms No. 1600 with payment confirmations42, which were all examined by the Court-commissioned Independent Certified Public Accountant (ICPA), Ms. Katherine 0. Constantino of Constantino Guadalquiver & Co. In her Report, the ICPA noted the following exceptions: 4~ 41 Exhibits "P-254" to "P-691". 42 Exhibits "P-692" to "P-694". 43 Exhibit "P-11".

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR OTHER FINDINGS Reference Amount PURCHASE OF GOODS Annex9-i 1. Purchase of goods supported by VAT REG. TIN Invoices Annex9-j p 659.92 Annex9-k without VAT breakdown Annex9-l 14,780.67 Annex9-m 2. Purchase of goods supported by VAT REG. TIN I TIN NO. 6,037.50 Annex9-n V Invoices with date not within the quarter of claim Annex9-o 3,460.71 Annex9-p 3. Purchase of goods supported by VAT REG. TIN Invoices Annex9-q 1,462.31 with date not within the quarter of claim, with incomplete Annex9-r p 26,401.11 Petitioner's address and without VAT breakdown Annex9-s Annex9-t p 88,515.17 4. Purchase of goods supported by a Certified True Copy VAT REG. TIN Invoice with date not within the quarter of claim Annex9-u 36,071.52 and with incomplete Petitioner's address Annex9-v 9,360.00 5. Purchase of goods supported by VAT REG. TIN Invoice with date not within the quarter of claim and without VAT Annex9-w 39,267.70 breakdown shown in the support Subtotal Annex9-x 214.29 Annex9-y PURCHASE OF SERVICES 1,574.86 1. Purchase of services supported by VAT REG. TIN. I TIN 1,814.04 NO. V ORs with date not within the quarter of claim 36,846.67 2. Purchase of services supported by VAT REG. TIN. ORs 33,907.41 with date not within the quarter of claim 3. Purchase of services supported by VAT REG. TIN. ORs 12,895.92 with altered date without countersiqn 158,361.40 4. Purchase of services supported by VAT REG. TIN. ORs - 214.08 with date not within the quarter of claim and with wrong Petitioner's address 5. Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and without VAT shown in the support 6. Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and with VAT claimed that is more than the VAT shown in the support but equal to our independent computation 7. Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and with VAT shown in the support but not placed in the "12% VAT' line 8. Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and such date was altered but countersigned and the claimed input VAT are more than the VAT shown in the supporting documents and our independent computation 9. Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter of claim and such date was altered but countersigned and the claimed input VAT are less than the VAT shown in the supporting documents and our independent computation 10. Purchase of services supported by VAT REG. TIN. ORs with date not within the quarter, with incomplete Petitioner's name and with VAT claimed that is more than the VAT shown in the support but equal to our independent computation 11. Purchase of services supported by VAT REG. TIN. ORs with incorrect Petitioner's TIN, without Petitioner's address and the claimed input VAT are less than the VAT shown in the supporting documents and our independent computation 12. Purchase of services supported by VAT REG. TIN. ORs without BIR permit number and printing date indicated in the support and incorrect Petitioner's TIN

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR 13. Purchase of services supported by VAT REG. TIN. I TIN Annex9-z 24,340.71 Annex9-aa 34,896.33 NO. V OR with incomplete Petitioner's address and the Annex9-ab claimed input VAT are more than the VAT shown in the Annex9-ac 804.12 supporting documents and our independent computation Annex9-ad 420.00 Annex9-ae 527,848.28 14. Purchase of services supported by VAT REG. TIN. ORs Annex9-aF 9,360.00 Annex9-c 331,602.81 with claimed input VAT that is greater than the VAT shown 28,385.72 in the supporting documents but less than our independent computation Annex9-d 1,390.76 15. Purchase of services supported by Certified True Copy VAT REG. TIN. ORs without BIR permit number and printing Annex9-e 1,645.74 date indicated in the support I' 1,379,737.53 16. Purchase of services supported by photocopy VAT REG. TIN. OR with VAT claimed that is more than the VAT Annex9-ag p 910.72 shown in the support but equal to our independent computation I' 910.72 17. Purchase of services supported by VAT REG. TIN. I TIN I' 250,312.38 No. ORs with note that states "Not to be used for claim of p 1,657 361.74 In_Qut Tax" 18. Purchase of services supported by VAT REG. TIN. OR with incomplete Petitioner's name, with incorrect Petitioner's TIN., with date not within the quarter of claim, and with VAT claimed that is more than the VAT shown in the support but equal to our independent computation 19. Purchase of services supported by documents other than VATORs 20. Purchase of services supported by VAT REG. TIN. ORs where the claimed input VAT is different from schedule- VAT shown in the official receipts is lower than the VAT in the schedule and the computed amount. This pertains to excess claim of input tax. 21. Purchase of services supported by VAT REG. TIN. ORs where the claimed input VAT shown in the official receipt is different from schedule- the VAT shown in the receipts and the independent computation is lower than the schedule. This pertains to excess claim of input tax. 22. Purchase of services supported by VAT REG. TIN. ORs where the claimed input VAT shown in the official receipt is different from schedule- the VAT shown in the receipts and the independent computation is lower than the schedule (independent computation differs from official receipt and schedule amount). This pertains to excess claim of input tax. Subtotal PURCHASE OF CAPITAL GOODS NOT EXCEEDING ONE {1) MILLION 1. Purchase of capital goods not exceeding one (1) million supported by VAT REG. TIN Invoices with date not within the quarter of claim. Subtotal Purchases of services without supporting documents Grand Total The above-noted exceptions found by the ICPA in the amount of P1,657,361.74 should be disallowed for not being properly substantiated by VAT invoices or official receipts as prescribed under Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-2, 4.110-8 and 4.113-1 of Revenue Regulations (RR) No. 16-05, as amended.a...-

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR Further verification of the ICPA report, together with the supporting documents, reveals that the additional input VAT of P10,174,946.65, shall, likewise, be disallowed for the reasons stated below: Exhibit No. Supplier OR No. Amount 1. Purchases ofgoods supported by VAT invoices w/ATPs dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation ofRMC No. 52-2013. P-254 1618 OFFICE SOLUTIONS INC. 3903 p 541.07 P-340 AVLS ALL VISUAL & LIGHTS 035393 41 078.57 P-388 MERCURY DRUG CORPORATION 283-93671 1 617.05 P-389 MERCURY DRUG CORPORATION 283-93672 1 020.19 P-390 MERCURY DRUG CORPORATION 283-93673 485.20 P-391 MERCURY DRUG CORPORATION 283-94066 550.45 P-392 MERCURY DRUG CORPORATION 283-94067 332.28 P-449 QUARTZ BUSINESS PRODUCTS CORP 493693 6 006.86 P-450 QUARTZ BUSINESS PRODUCTS CORP 496091 15 474.64 P-611 THE FLOWER FARM CORPORATION 127779 492.86 P-612 THE FLOWER FARM CORPORATION 127783 267.86 P-613 THE FLOWER FARM CORPORATION 127782 439.29 P-627 DISTINCTIVE BLINDS & OFFICE 64885 68 307.59 P-628 GB DISTRIBUTORS, INC. 1020054538 34 821.43 P-629 GB DISTRIBUTORS, INC. 1020054537 5 357.14 Subtotal p 176,792.48 2. Purchases ofservices supported by VAT ORs wI ATPs dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation ofRMC No. 52-2013. P-311 ACCENTURE INC. 12662 p 461 940.00 P-312 ACCENTURE INC. 12684 656 059.01 P-313 ACCENTURE INC. 12693 104 745.00 P-315 ADVENTURE INTERNATIONAL TOURS 200-00019813 17 072.40 P-320 ARISTEDES TAN 3118 16 236.71 P-323 ASIAPEOPLEWORKS! INC. 501 1 075.24 P-324 ASIAPEOPLEWORKS! INC. 569 3 343.90 P-325 ASIAPEOPLEWORKS! INC. 566 1,455.13 P-326 ASIAPEOPLEWORKS! INC. 568 1 455.98 P-327 ASIAPEOPLEWORKS! INC. 590 3 415.18 P-328 ASIAPEOPLEWORKS! INC. 591 1 682.68 P-329 ASIAPEOPLEWORKS! INC. 592 3 053.86 P-330 ASIAPEOPLEWORKS! INC. 0634 2 696.78 P-331 ASIAPEOPLEWORKS! INC. 0635 3 015.58 P-332 ASIAPEOPLEWORKS! INC. 0682 1,658.88 P-333 ASIAPEOPLEWORKS! INC. 0680 1 678.72 P-334 ASIAPEOPLEWORKS! INC. 0681 1,964.43 P-336 ATLANTICA FIRE SAFETY SYSTEMS 3510 7 872.00 P-337 ATLANTICA FIRE SAFETY SYSTEMS 3521 7,258.68 P-341 BANIQUED & BANIQUED 3844 7,800.00 P-342 BANIQUED & BANIQUED 3843 7,800.00 P-344 BAYANTEL A/C 337550509 943625 182.04 P-345 BAYANTEL A/C 337550509 955049 178.81 P-346 BAYANTEL A/C 337550509 956682 182.04 P-347 BAYANTEL A/C 342578098 943140 19 200.00 P-348 BAYANTEL A/C 342578098 956681 9 600.00 P-349 Bayantel A/C 345079866 942869 182.04 P-350 BAYANTEL AC 337550363 942870 182.04

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR P-351 BUSINESSWORKS, INC. 3596 17 688.00 P-352 BUSINESSWORKS INC. 3597 8 250.00 P-353 BUSINESSWORKS INC. 3599 5 940.00 P-354 HEADSTRONG PHILIPPINES INC. 2135 P-355 HEADSTRONG PHILIPPINES INC. 2146 83 383.90 P-356 HEADSTRONG PHILIPPINES INC. 2162 419 385.80 P-357 HEWLETT-PACKARD PHILIPPINES 129674 231 288.00 P-358 HEWLETT-PACKARD PHILIPPINES 130168 P-359 HOSPITALilY INTERNATIONAL INC 8154 7 466.34 P-360 HOSPITALilY INTERNATIONAL INC 8155 6 799.76 P-361 HOSPITALilY INTERNATIONAL INC 8156 3 602.48 P-362 HOSPITALilY INTERNATIONAL INC 8184 17 714.29 P-363 IBM PHILIPPINES INC. 24293 17_1142.86 P-364 IBM PHILIPPINES INC. 24812 55,637.27 P-365 INDRA Philippines Inc 2097 244 584.72 P-366 INDRA Philippines Inc 2150 81,734.40 P-370 JESSEN & JESSEN COMMUNICATIONS 1771 17,142.86 P-372 JOHN CLEMENTS CONSULTANTS INC 114775 17,142.86 P-373 JOHN CLEMENTS CONSULTANTS INC 114934 6,569.28 P-374 JOHN CLEMENTS CONSULTANTS, INC 115168 154,782.24 P-396 MISNET EDUCATION INC. 12007 375,822.96 P-397 MISNET EDUCATION INC. 11898 153,093.94 P-400 NET PACIFIC, INC. 13306 19,071.43 P-401 NEXT STEP TRAINING AND 0184 P-402 NEXT STEP TRAINING AND 0186 38,142.86 P-403 NEXT STEP TRAINING AND 0187 5,943.39 P-404 NEXT STEP TRAINING AND 0193 P-405 NEXT STEP TRAINING AND 0194 12 504.00 P-406 NEXT STEP TRAINING AND 0197 18 230.00 P-407 NEXT STEP TRAINING AND 0200 26 544.00 P-408 OVE ARUP AND PARTNERS 3388 12 612.00 P-409 OVE ARUP AND PARTNERS 3395 12 000.00 P-410 OVE ARUP AND PARTNERS 3416 P-411 OVE ARUP AND PARTNERS 3417 8,040.00 P-417 PAUL CALVIN DELI 0911 23 640.00 P-418 PAUL CALVIN DELI 0919 152 896.14 P-425 PREMIUM SECURilY & INVESTIGATI 69576 102 640.63 P-426 PREMIUM SECURilY & INVESTIGATI 69633 20 115.00 P-427 PREMIUM SECURilY & INVESTIGATI 69749 85 533.86 P-428 PREMIUM SECURilY & INVESTIGATI 69825 P-430 PREMIUM SECURilY & INVESTIGATI 65012 9 245.36 P-431 PREMIUM SECURilY & INVESTIGATI 69974 2 970.00 P-433 PREMIUM SECURilY & INVESTIGATI 69972 P-434 PREMIUM SECURilY & INVESTIGATI 69975 29.66 P-435 PREMIUM SECURilY & INVESTIGATI 69990 8 540.71 P-453 REALFORM FURNITURE SHOP 1253 P-454 GLOBE TELECOM A/C 49622252 2305003 84.29 P-455 INNOVE AC 830635288 0368834 41.76 P-456 INNOVE AC 106886134 0371607 9 214.13 P-457 INNOVE AC 830635288 0373458 834.43 P-458 GLOBE TELECOM A/C 45413292 2298496 714.79 P-465 BUSINESSWORKS INC. 3617 107.70 P-466 CHITTICK FIRE & SECURilY 8178 13.19 P-467 CHITTICK FIRE & SECURilY 8103 8 451.36 P-468 CHITTICK FIRE & SECURilY 8224 1488.95 P-469 CHITTICK FIRE & SECURilY 8261 62 369.15 P-470 CIBI INFORMATION INC. 32120 298.93 P-471 CIBI INFORMATION INC. 32213 30 617.18 P-472 CilYWAY PRINTING SERVICES 91 19,949.77 P-473 CilYWAY PRINTING SERVICES 92 7 232.14 324.58 10 764.00 10 764.00 3 981.64 540.00 180.00 1 072.71 3 367.98

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR P-474 CITYWAY PRINTING SERVICES 111 6,181.61 P-475 CITYWAY PRINTING SERVICES 112 9 173.08 P-476 CITYWAY PRINTING SERVICES 113 5 566.22 P-478 DESIGN & CREATIVE LOGIC INC 4021 2 335.71 P-482 DEVELOPMENT DIMENSIONS 14158 25 845.56 P-483 DEVELOPMENT DIMENSIONS 14157 12 922.28 P-484 DHL EXPRESS (PHILIPPINES) CORP 2243603 P-485 DHL EXPRESS (PHILIPPINES) CORP 2243606 33.60 P-486 DHL EXPRESS (PHILIPPINES) CORP 2243608 1 615.00 P-487 DHL EXPRESS (PHILIPPINES) CORP 2243605 7 947.00 P-488 DHL EXPRESS (PHILIPPINES) CORP 2243604 1 335.78 P-489 DHL EXPRESS (PHILIPPINES) CORP 2258227 P-490 DHL EXPRESS (PHILIPPINES) CORP 2258226 33.60 P-491 DHL EXPRESS (PHILIPPINES) CORP 2258225 1 359.00 P-492 DHL EXPRESS (PHILIPPINES) CORP 2260678 P-493 DHL EXPRESS (PHILIPPINES) CORP 2262391 103.02 P-494 DHL EXPRESS (PHILIPPINES) CORP 2265204 1052.00 P-495 DHL EXPRESS (PHILIPPINES) CORP 2265203 6 503.00 P-496 DHL EXPRESS (PHILIPPINES) CORP 2265207 P-497 DHL EXPRESS (PHILIPPINES) CORP 2265206 92.38 P-498 DHL EXPRESS (PHILIPPINES) CORP 2265202 33.60 P-499 DHL EXPRESS (PHILIPPINES) CORP 2265205 33.60 P-500 DHL EXPRESS (PHILIPPINES} CORP 2178042 3 342.00 P-501 DHL EXPRESS (PHILIPPINES) CORP 2178043 1 258.00 P-523 REALFORM FURNITURE SHOP 1254 81.66 P-524 REALFORM FURNITURE SHOP 1255 1 827.00 P-527 REUTERS LIMITED 37144 3 537.47 P-542 FUJI XEROX PHILIPPINES INC 178371 67.20 P-543 FUJI XEROX PHILIPPINES INC 178370 1472.04 P-544 FUJI XEROX PHILIPPINES INC 178378 360.00 P-545 FUJI XEROX PHILIPPINES INC 179702 221 565.69 P-546 FUJI XEROX PHILIPPINES INC 179834 7 346.22 P-547 FUJI XEROX PHILIPPINES INC 179833 26 233.77 P-548 FUJI XEROX PHILIPPINES INC 179839 10 874.48 P-549 FUJI XEROX PHILIPPINES INC 179842 12 095.64 P-550 FUJI XEROX PHILIPPINES INC 179841 25 562.46 P-551 GLOBAL CITY CAR LEASE & 9464 11 028.84 P-552 GLOBAL CITY CAR LEASE & 9475 90.05 P-553 GLOBAL CITY CAR LEASE & 9482 21.73 P-554 GLOBAL CITY CAR LEASE & 9484 37 426.14 P-555 GLOBAL CITY CAR LEASE & 9483 27 385.51 P-556 25 623.43 P-557 GLOBAL CITY CAR LEASE & 9501 746.29 P-558 GLOBAL CITY CAR LEASE & 9502 35 539.81 P-559 GLOBAL CITY CAR LEASE & 9505 14,902.07 P-560 GLOBAL CITY CAR LEASE & 9525 P-561 GLOBAL CITY CAR LEASE & 9524 197.68 P-562 GLOBAL CITY CAR LEASE & 9541 55 162.18 P-563 GLOBAL CITY CAR LEASE & 9542 25,795.34 P-564 GLOBAL CITY CAR LEASE & 9549 171046.96 P-565 GLOBAL CITY CAR LEASE & 9547 P-566 GLOBAL CITY CAR LEASE & 9548 309.64 P-567 GLOBAL CITY CAR LEASE & 9553 4,606.39 P-573 GLOBAL CITY CAR LEASE & 9563 6,464.04 P-574 SALVADOR & ASSOCIATES 7317 27 530.14 P-575 SALVADOR & ASSOCIATES 7318 11 458.71 P-576 SALVADOR & ASSOCIATES 7407 12 990.75 P-577 SALVADOR & ASSOCIATES 7408 25 094.89 P-586 SANTA FE MOVING AND RELOCATION 8757 32 369.74 P-587 SGV & CO. MK00005708 10 183.08 SGV & CO. MK00005709 5 092.29 10 254.29 11174.77 641.40 49 060.25 29 070.00

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR P-588 SGV & CO. MK00006664 2 908.09 P-589 SGV &CO. MK00006663 228 300.00 P-590 SGV & CO. MK00006662 129 722.49 P-591 SGV &CO. MK00008289 P-592 SGV & CO. MK00009280 3L600.00 P-593 SGV & CO. MK00008724 5 985.21 P-595 SGV & CO. MK00009279 2L550.00 3 600.00 P-597 SQ RESOURCES INC. 52025 32 436.00 P-598 SQ RESOURCES INC. 52026 3,261.15 P-599 SQ RESOURCES INC. 52027 5,961.78 P-600 SQ RESOURCES INC. 52028 18 510.99 P-601 SQ RESOURCES INC. 52037 2 052.00 P-602 SQ RESOURCES INC. 52458 6,732.00 P-603 SQ RESOURCES INC. 52481 P-604 SQ RESOURCES INC. 52467 59 657.58 P-605 Taurus Electrical Services 0088 9,540.00 P-606 Taurus Electrical Services 0089 P-607 Taurus Electrical Services 0095 12 931.43 P-608 Taurus Electrical Services 0092 431 047.72 P-609 TECOMA CORPORATION 01571 P-615 TOWERS WATSON PHILIPPINES INC. 24963 61 460.52 P-616 TOWERS WATSON PHILIPPINES INC. 24964 19 640.33 P-617 TOWERS WATSON PHILIPPINES INC. 24128 32 894.31 P-619 ZUNIEGA OLASO MACAPUNDAG 1530 P-620 ZUNIEGA OLASO MACAPUNDAG 1531 1 800.00 P-621 ZUNIEGA OLASO MACAPUNDAG 1538 85 440.00 P-624 ACCENTURE INC. 12682 Subtotal 2 160.00 120.00 13 920.00 3 495.00 , 105 435.18 6,169. 488.66 3. Purchases ofservices supported by VAT ORs without the TIN ofpetitioner P-255 6-24 PROPER1Y HOLDINGS INC. 3666 p 2 305 615.20 P-462 ePLDT INC. 14910 1 237 846.28 Subtotal p 3 543 461.48 4. Purchase ofservice supported by VAT OR but with alteration on the year ofthe date P-377 Johnson Controls IFM Phils. Co 3313 p 98 258.05 Subtotal p 98.258.05 5. Purchases ofservices supported by VAT ORs but with notation "not to be used for claim/not valid as source ofinput tax" P-623 ACCENT MICRO TECHNOLOGIES INC 69277 p 2 148.33 P-386 LANTRO PHILS INC 0405 , 7 962.48 P-387 LANTRO PHILS INC 0436 Subtotal 6 723.21 16,834.02 6. Purchases ofservices supported by VAT ORs but without the SIR Authority to Print P-631 PLDT PBMOR001227204 p 235.13 P-632 PLDT PELOR000858865 4.27 P-633 PLDT PBMOROO 1253406 235.13 P-634 PLDT PELOR000892057 4.27 P-635 PLDT PELOR000892059 4.27 P-636 PLDT PBMOR001253408 P-637 PLDT PELOR000892061 235.13 P-638 PLDT PBMOR001253410 582.86 32 057.14 P-639 PLDT PELOR000892062 2.72 P-642 PLDT PELOR000892069 6.43 P-643 PLDT PBMOR001253417 353.57 P-644 PLDT PELOR000892056 4.27 P-645 PLDT PBMOR001253405 235.13 P-648 PLDT PBMOR001227201 235.13 P-649 PLDT PELOR000858862 4.27 P-650 PLDT PELOR000859370 4.27 P-651 PLDT PBMOR001227205 235.13 P-652 PLDT PELOR000859371 582.86

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR P-653 PLDT PBMOR001227206 32 057.14 P-654 PLDT PELOR000858868 2.70 P-655 PLDT PBMOR001253411 149.89 P-656 PLDT PBMOR001253416 151.09 P-657 PLDT PELOR000859381 6.43 P-658 PLDT PBMOR001227215 353.57 P-659 PLDT PELOR00085936 7 4.27 P-660 PLDT PBMMOROO 1227202 235.13 P-661 PLDT PELOR000859368 2.87 P-662 PLDT PBMOR001227203 157.84 P-663 PLDT PELOR000859375 1.91 P-664 PLDT PBMOR001227210 105.13 P-667 PLDT PELOR000892065 1.91 P-668 PLDT PBMOR001253414 105.13 P-671 PLDT PELOR000892060 4.27 P-672 PLDT PBMOR001253409 235.13 P-673 PLDT PELOR000892058 2.87 P-674 PLDT PBMOR001253407 157.84 P-675 PLDT PELOR000892070 6.43 P-676 PLDT PBMOR001253418 353.57 Subtotal p 69,117.10 7. Purchases ofcapital goods not exceeding P1M supported by VAT invoices w/ATPs dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation ofRMC No. 52-2013. P-262 ACCENT MICRO TECHNOLOGIES INC 147619 p 482.14 P-263 ACCENT MICRO TECHNOLOGIES INC 147508 2 410.71 P-264 ACCENT MICRO TECHNOLOGIES INC 147735 6 292.99 P-265 ACCENT MICRO TECHNOLOGIES INC 147736 3 199.11 P-266 ACCENT MICRO TECHNOLOGIES INC 147734 1 446.43 P-267 ACCENT MICRO TECHNOLOGIES INC 147740 42.86 P-268 ACCENT MICRO TECHNOLOGIES INC 147739 42.86 P-269 ACCENT MICRO TECHNOLOGIES INC 147617 193.71 P-270 ACCENT MICRO TECHNOLOGIES INC 147795 964.29 P-271 ACCENT MICRO TECHNOLOGIES INC 147796 2 410.71 P-272 ACCENT MICRO TECHNOLOGIES INC 148086 4 821.43 P-273 ACCENT MICRO TECHNOLOGIES INC 147618 42.86 P-274 ACCENT MICRO TECHNOLOGIES INC 147989 42.86 P-275 ACCENT MICRO TECHNOLOGIES INC 147942 696.43 P-276 ACCENT MICRO TECHNOLOGIES INC 148087 964.29 P-277 ACCENT MICRO TECHNOLOGIES INC 147379 42.86 P-278 ACCENT MICRO TECHNOLOGIES INC 148645 6,292.99 P-279 ACCENT MICRO TECHNOLOGIES INC 149080 482.14 P-280 ACCENT MICRO TECHNOLOGIES INC 149081 482.14 P-281 ACCENT MICRO TECHNOLOGIES INC 148946 1,607.14 P-282 ACCENT MICRO TECHNOLOGIES INC 149082 42.86 P-283 ACCENT MICRO TECHNOLOGIES INC 148893 2,089.29 P-284 ACCENT MICRO TECHNOLOGIES INC 149294 4,821.43 P-285 ACCENT MICRO TECHNOLOGIES INC 149301 696.43 P-286 ACCENT MICRO TECHNOLOGIES INC 149133 12,585.98 P-287 ACCENT MICRO TECHNOLOGIES INC 149640 42.86 P-288 ACCENT MICRO TECHNOLOGIES INC 149642 6 292.99 P-289 ACCENT MICRO TECHNOLOGIES INC 149641 39 051.36 P-290 ACCENT MICRO TECHNOLOGIES INC 149298 2 410.71 Subtotal p 100994.86 Grand Total P10,174,946.65 Thus, out of petitioner's total reported input VAT on current purchases of P24,020,395.21 for the second quarter of 2013, only the,..

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR amount of P12,188,086.82 represents its valid input VAT, as computed hereunder: Total Input VAT on Current Purchases p 24,020,395.21 per Returns Less: Disallowances P1,657,361.74 10,174,946.65 11,832,308.39 Per ICPA's findings Per Court's further verification P12, 188,086.82 Valid Input VAT However, a portion of the P12,188,086.82 shall be applied against the reported output VAT liability of P1,134,996.8244 � Consequently, only the remaining input VAT of P11,053,090.00 can be attributed to the entire zero-rated sales amounting to P1,105,734,437.79 and only the input VAT of P5,225,189.50 is attributable to the valid zero-rated sales of P522,720,069.53, computed as follows: Valid Input VAT p 12,188,086.82 Less: Output tax due 1,134,996.82 Excess Input VAT Divide by Total Declared Zero-Rated Sales P11,053,090.00 Multiply by Valid Zero-Rated Sales 1,105,734,437.79 Excess Input VAT attributable to Valid Zero- Rated Sales 522,720_L069.53 p 5,225,189.50 Sixth Requisite: Excess input taxes were not applied against any output VAT liability Although the claimed input VATwas carried-over by petitioner in its succeeding Quarterly VAT Returns45, the same remained unutilized until it was deducted as "VAT Refund/TCC Claimed" 46 in its Amended Quarterly VAT Return for the first quarter of CY 2015. Thus, the excess input VAT of P155,729,598.4847 as of the end of the first quarter of 2015, which was carried-over to the succeeding second quarter of 2015, no longer included the subject claim. 4A 44 Exhibit "P-3". 45 Exhibits "P-3.1", "P-3.3", "P-3.4", "P-3.7", "P-3.9", "P-3.11", "P-3.15". 46 Exhibit "P-3.15". 47 Exhibit "P-3.15".

DECISION CTA CASE NO. 9079 DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. vs. CIR WHEREFORE, premises considered, the Petition for Review is PARTIALLY GRANTED. Accordingly, let a tax refund or a Tax Credit Certificate be issued in favor of petitioner in the reduced amount of P5,225,189.50, representing its unutilized and excess input VAT attributable to zero-rated sales for the attributable to zero-rated sales for the second quarter of CY 2013. SO ORDERED. WE CONCUR: CAESAR A. CASANOVA ~~~c.~~.-~~ Associate Justice J({ANITO C. CASTANEDi(,tiJR.: ~~/'�/'11~ Associate Justice CATHERINET.MANAHAN Associate Justice 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. ~c:t.1M'"4 c. C(JA;S:T;At-N~E~D/~~, jR. JUANITO C. Associate Justice Chairperson, Second Division CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. OSARIO Presiding Justice