AIG SHARED SERVICES CORPORATION (PHILIPPINES) v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION AIG SHARED SERVICES CTA Case No. 9879 CORPORATION (PHILIPPINES), Members: CASTANEDA, JR. , Chairperson, and Petitioner, BACORRO-VILLENA, ]]. -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. Promulgated: . OCT 26 2021 / x------------------------------------------------------------------~-------------x ~ 2.:.r.r, .�. DECISION BACORRO-VILLENA, ].: At bar is a Petition for Review filed by petitioner AIG Shared Services Corporation (Philippines) [petitionerIAIG] pursuant to Rule 8, Section 3(aY, in relation to Rule 4, Section 3(a)(1)3 of the Revised Rules of the Court of Tax Appeals4 (RRCTA)J Filed on 23 July 2018, Division Docket, Volume I, pp. I0-27. 2 SEC. 3. Who may appeal; period to file petition. - (a) A party adverse ly affected by a decision, ruling or the inaction of the Commissioner of Internal Reven ue on d isputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appea l to the Court by petition for review filed within thirty days after rece ipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Co mmissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. SEC. 3. Cases within the jurisdiction of the Court in Divisions. - The Court in Divisions shall exercise: (a) Exclusive origi nal over or appellate jurisdiction to review by appeal the following:

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x The instant petition is a claim for refund or tax credit representing unutilized input value-added tax (VAT) arising from petitioner's domestic purchases of goods and services, purchases of capital goods and purchases of services rendered by non-residents which are attributable to zero-rated transactions for the first (1") to fourth (4th) quarters of the taxable year (TY) 2016 in the amounts of Pn,643,887.21, P8,s46,66g.63, P6,484,775�53 and "P1s,6g2,9S0.42, respectively, or in the aggregate amount of"P42.368,282.79�5 Petitioner is a foreign corporation organized and existing under the laws of the State of New York, U.S.A. and is licensed to transact business in the Philippines through a branch office with address at nth and 12th Floors, World Plaza 5th Avenue, Crescent Park West, Bonifacio Global City, Taguig City.6 Respondent is the duly appointed Commissioner of Internal Revenue (respondent/CIR) who holds office at the Bureau of Internal Revenue (BIR) National Office Building, located at Agham Road, Diliman, Quezon City? FACTS OF THE CASE Petitioner is duly registered with the Securities and Exchange Commission (SEC) and is licensed as a regional operating headquarters8 (ROHQ) in the Philippines to provide qualifying services of 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 an~(' (I) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes. fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; 4 A.M. No. 05-1 1-07-CTA dated 22 November 2005. Brief Statement of the Case, Joint Stipulation of Facts and Issues (JSFI), Division Docket, Volume I, p. 492. 6 Stipulation of Facts, JSFI, id. 7 !d., p. 493. Exhibits "P-I" to "P-1.4", Petitioner's Formal Offer of Evidence Folder (FOE Folder).

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x communication and business development, to its affiliates in the Philippines and abroad (qualifying services).9 Petitioner is registered with the BIR as a VAT taxpayer with Taxpayer Identification Number (TIN) 001-218-732-ooo and BIR Certificate of Registration No. OCN 8RCoo01467897E10 effective 05 March 2018 issued by Revenue District Office (RDO) No. 126." For the 1st to 4th quarters ofTY 2016, petitioner filed with the BIR, through the Electronic Filing and Payment System (eFPS), its Quarterly VAT Returns, as follows: Period Covered Nature of Filed Return Date Filed 1st Quarter Original12 22 April 2016 2"ct Quarter 20 December 2017 Final Amended'3 22 July 2016 3rct Quarter Original"' 19 August 2016 4tn Quarter Amended'5 20 December 2017 Final Amended'6 21 October 2016 20 December 2017 Original'7 Final Amended'8 25 January 2017 27 January 2017 Original'9 20 December 2017 Amended20 Final Amended21 During such period, petitioner reported sales of services subject to 12% VAT and o% VAT in the amounts of P5o,210,635�o322 and oy P2,994,J11,644-7723, respectively. Petitioner likewise reported input VAT on its domestic purchases of goods and services, purchases 9 Stipulation of Facts, JSFI, Division Docket, Volume I, p. 493. 10 Exhibit "P-2", FOE Folder. II Stipulation of Facts, JSFI, Division Docket, Volume I, p. 493. 12 Exhibit "P-5.2", FOE Folder. 13 Exhibit "P-5", id. 14 Exhibit "P-6.2", id. " Exhibit "P-6.3", id. 16 Exhibit "P-6", id. 17 Exhibit "P-7.2", id. 18 Exhibit "P-7'', id. 19 Exhibit "P-8.2", id. 20 Exhibit "P-8.3", id. 21 Exhibit "P-8", id. 22 Sum of amounts reflected in Line !SA of Exhibits "P-5", "P-6", "P-7'' and "P-8", id. 23 Sum of amounts reflected in Line 17 of Exhibits "P-5", "P-6", "P-7" and "P-8", id.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X capital goods and purchases of services from non-residents in the total amount of P48>393,559�oo.24 Out of the said amount of total input VAT, petitioner claims that P42,368,282.79 is attributable to zero-rated sales, net of the input VAT applied against output VAT of P6,025,276.2I. 25 The amount of P42,368,282.79 was thereafter deducted by petitioner from its total available input VAT in its Quarterly VAT Return filed for the 4th quarter ofTY 2017.26 Petitioner then filed with the VAT Credit Audit Division (VCAD) of the BIR an administrative claim27 for refund or issuance of tax credit of petitioner's unutilized input VAT attributable to zero-rated transactions for the 1st to 4th quarters of TY 2016 dated 26 March 2018 (administrative claim) in the aggregate amount ofP42,368,282.79-28 On 27 June 2018, petitioner received a letter dated o8 June 201829 from the Assessment Service of the BIR informing it of the denial of its administrative claim.30 PROCEEDINGS BEFORE THIS COURT On 23 July 2018, following the denial of its administrative claim, petitioner filed the instant Petition for Review.3' On o8 October 2018, respondent filed his Answer32 interposing the following special and affirmative defenses: 1. Petitioner failed to substantiate its claim for refund at the administrative level;/ 24 Sum of amounts reflected in Lines 208, 21 B, 21 D, 21 F, 21J and 21 L less the amount reflected in Line 23A of Exhibits "P-5", "P-6", "P-7" and "P-8", id. 25 Sum of amounts reflected in Line 19B of Exhibits "P-5", "P-6", "P-T' and "P-8", id. 26 Exhibits "P-23" and "P-23.1", id. 27 Exhibits "P-28", "P-28.1", "P-28.2" and "P-29", id. 28 Stipulation of Facts, JSFI, Division Docket, Volume I, p. 493. 29 Exhibit "P-30", FOE Folder. 30 Stipulation of Facts, JSFI, Division Docket, Volume I, p. 493. 31 Supra at note I. 32 Division Docket, Volume I, pp. 78-87.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X 2. Since a decision has been rendered denying the claim for refund for failure to substantiate its claim, petitioner cannot present herein documents that it did not submit at the administrative level, citing Pilipinas Total Gas, Inc. v. Commissioner ofInternal Revenue33; 3- The BIR denied the administrative claim as it found that petitioner is even liable for deficiency VAT amounting to P1,268,659-78; 4- Petitioner's allegation that it is entitled to refund or tax credit was not clearly proved by sufficient evidence; and, s- Claims for refund are construed strictly against the taxpayer and in favor of the government. After the parties filed their respective pre-trial briefs34 on 16 November 2018, as well as their Joint Stipulation of Facts and Issues35 (JSFI), the Court issued the Pre-Trial Order36 on o8 February 2019. On 20 February 2019, petitioner sought the commissioning37 of its Independent Certified Public Accountant (ICPA), Edward L. Roguel (Roguel), and presented two (2) of its witnesses, namely: (1) Atty. Geronimo Randy L. Recinto (Recinto); and, (.2) Glaiza Apolinario- Baroro (Baroro). Through his Judicial Affidavit38, Recinto testified that: (1) he is the Vice President of AIG Shared Services Corporation- Management Services (ROHQ) and concurrently petitioner's resident agent, Assistant Corporate Secretary and lead counsel; (2) he is familiar with the nature of petitioner's business, particularly, that it is licensed as an ROHQ to provide qualifying services to its affiliates in the Philippines and abroad; (3) petitioner was originally licensed by the SEC to operate /� as a regional headquarters (RHQ) in the Philippines and it 33 G.R. No. 207112,08 December2015. 34 Respondent's Pre-Trial Brief, Division Docket, Volume I, pp. 438-442; Pre-Trial Brief for Petitioner, id., pp. 443-458. 35 Filed on 01 February 2019, id., pp. 492-505. 36 !d., Volume II, pp. 507-517. 37 See Order dated 20 February 2019, id., pp. 552-553. 38 Exhibits "P-38" and "P-38-1", FOE Folder.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X application to convert from RHQ to ROHQ was subsequently approved on 25 November 2oo839; (4) petitioner last changed its name from "Chartis Technology and Operations Management Corporation" to its current name, as evidenced by Amended License No. FMoooo0152 dated 31 January 201340; and, (5) as proof that petitioner provided qualifying services to its affiliates abroad, they executed Master Agreements (MAs). Respondent did not conduct any cross-examination.4' Later, through her Judicial Affidavit4' and Supplemental Judicial Affidavit43, Baroro testified that: (1) she is an Accountant III of petitioner; (2) petitioner obtained its Computerized Accounting System (CAS) Permit No. 1115-126-oo2n-CAS dated 27 November 201544; (3) petitioner is primarily engaged in zero-rated export sale of qualifying services to non-resident affiliates which are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (4) in compliance with Revenue Memorandum Circular (RMC) No. 17-201845, petitioner's Controller, Leah Ocampo, executed four (4) Certifications, all dated 07 February 201846, indicating the amounts of zero-rated sales for the 1st to 4th quarters ofTY 2016; (5) petitioner's export documents, including its invoices and receipts, also establish petitioner's export sales; (6) petitioner had sales which are not zero-rated and these are in the nature of qualifying services rendered to local affiliates in the Philippines and the incidental sale of an asset to a third party buyer amounting to P68ao3.57; (7) petitioner incurred output VAT in the amount of P6,o25,276.21 which was offset against the accumulated allowable input VAT from the previous period; (8) petitioner's affiliates are residents of foreign countries and are not doing business here in the Philippines, but instead, in their countries of registration, as shown , by their authenticated registration documents; (9) petitioner alsy 39 Exhibit "P-l. I", id. 40 Exhibit "P-1.4", id. 41 TSN of20 February2019, p. 14. 42 Exhibits "P-37" and "P-37-1", FOE Folder. 43 Exhibits "P-39" and "P-39-1 ", id. 44 Exhibit "P-3", id. " Amending Revenue Memorandum Circular (RMC) No. 89-2017 and Certain Provisions of RMC No. 54-2014 Regarding the Processing of Claims for Issuance of Tax Refund/Tax Credit Certificate (TCC) in Relation to Amendments Made in the National Internal Revenue Code of 1997, as Amended by Republic Act No. 10963, Known as the Tax Reform for Acceleration and Inclusion (TRAIN). 46 Exhibits "P-10", "PIO.l", "P-10.2" and "P-10.3", FOE Folder.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x obtained from the SEC a Certification of Non-Registration of Company (SEC Certification of Non-Registration) for each of these affiliates to ascertain if they are not doing business in the Philippines; (10) for its export sale of qualifying services to its affiliates abroad, petitioner was compensated in U.S. Dollars (USD/$); (n) petitioner issues system generated invoices to its affiliates which serve as the service invoice; (12) thereafter, payments are inwardly remitted directly by the affiliate- clients or, in some instances, indirectly by American International Group Inc. (AlGI) and A.l. COS. Overseas Pool (AICOS) on behalf of the affiliate-clients through Eastwest Banking Corporation (EWBC) and The Hongkong and Shanghai Banking Corporation (HSBC); (13) it is then credited to petitioner's dollar accounts in the said banks; (14) AlGI and AICOS manage and maintain the pool offunds from various affiliates intended primarily and significantly to facilitate payment of financial commitments and obligations between and among affiliates; (15) as soon as the service invoice becomes due and demandable, AlGI and AICOS automatically transfer and remit the payment in USD from the particular affiliate's pooled funds to petitioner's pool funding account, or it is directly credited to petitioner's dollar accounts in EWBC or HSBC; (16) the document entitled Application - AIG Overseas Pool Account47 will establish the pooling of fund arrangement; (17) to prove that export sales of qualifying services have been paid for in USD inwardly remitted and credited to petitioner's dollar accounts, and petitioner secured Certificates of Inward Remittances from EWBC and HSBC; (18) the input VAT incurred attributable to zero-rated sales remained unutilized since they were not applied against any output VAT liability during and in the succeeding quarters; (19) the same was continuously carried over until petitioner filed its administrative claim48 on 26 March 2018 where it was deducted as amount claimed for refund or tax credit in the Quarterly VAT Return49 for the 41h quarter ofTY 2017 (reflected in Line 23D thereof); (2o) petitioner's domestic purchases of goods and services and purchases of capital goods relating to its zero-rated sales are evidenced by sales invoices and official receipts (ORs) as well as the Schedule of Local Purchases (SLP); (21) the purchase of services from non-residents are evidenced by the schedule of income payments to non-residents, BIR Form No. 16oo50 and the payment reference number evidencing payment of VAT; (22) petitioner submitte~' 47 Exhibit "P-19", id. 48 Supra at note 27. 49 Supra at note 26. " Monthly Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines} v. CIR DECISION x---------------------------------------------------------x documents in support of its application for VAT credit or refund in compliance with Annex A.1.51 of RMC No. 17-201852; (23) with respect to the denial of its administrative claim on the ground of failure to submit proof of payment on big ticket purchases, petitioner in fact submitted bank statements and ORs and/or invoices, which, under the law, rules and regulations, should suffice as proof of payment; (24) as regards the denial of the administrative claim on the ground that its input VAT are attributable to sales to parent company, the same should not have been disallowed because the ultimate parent company has a personality separate and distinct from petitioner; (25) petitioner did not file any similar claim with other government agencies covering the periods subject of this case, as evidenced by Certifications from the Department of Finance53 (DOF), VCAD54 and Regular Large Taxpayers Audit Division 355 (RLTAD3); (26) despite diligent efforts to locate the original Application- AIG Overseas Pool Account, she could not find the same but the plain copy thereof is a faithful reproduction of the original; and, (27) attached to petitioner's BIR Form No. 16oo for the month of December 2016 are SEC Certifications of Non-Registration of DRI Malaysia SDN BHD and Pega Systems Inc. both dated 29 November 2017.56 On cross-examination, when asked whether the exhibits she identified in her Judicial Affidavit are all the documents petitioner submitted to the BIR, Baroro testified that the same are just sample documents but they provided the BIR the rest for all its clients.57 As to the Application - AIG Overseas Pool Account, Baroro also confirmed that she lost the original and what was submitted is a print-out of a scanned copy.58 Petitioner did not conduct any re-direct examination. 59 On 10 July 2019, petitioner presented its third witness, ICPA ty Roguel, who testified by way of his Judicial Affidavit60 that: (1) he � examined and verified petitioner's documentary evidence relating " Revised Checklist of Mandatory Requirements for Claims for VAT Refund. 52 Supra at note 45. 53 Exhibit "P-33", BIR Records (Main Folder), p. 95. 54 Exhibit "P-34", id., p. 94. 55 Exhibit "P-35", id., p. 93. 56 Exhibits "P-27.4.1" and "P-27.4.2", FOE Folder. S7 TSN of20 February2019, p. 21. " !d., p. 22. " !d. 6iJ Exhibits "P-5510" and "P-5510-1 ", Division Docket, Volume II, pp. 561-566.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X its claim for refund or tax credit; (2) he and his team prepared summaries of documents and schedules; (3) they determined the authenticity and due execution as well as the faithfulness of the reproduced copies of the said documents; (4) after they performed the audit, they prepared a Report dated o8 April 201961; (5) their overall finding is that out of the total claim of"P42,J68,282.79, the amount of P37.490,579�53 was supported by documents; and, (6) the difference of P4,877,703.24 noted in their examination pertains to out of period claims, claims supported by documents that do not comply with the invoicing requirements and claims not completely supported by relevant documents, among others. During the cross-examination, ICPA Roguel explained that the exceptions correspond to supporting documents which are not proper such as when: (1) the VAT OR does not show the amount of VAT separately; (2) the invoices/ORs are outside the period of claim; (3) the documents state an incorrect TIN or address; (4) the document contains alterations; or, (5) the input VAT claim is higher than the amount reflected per document.6' Petitioner did not conduct any re- direct examination.63 On 04 September 2019, petitioner recalled Recinto to the witness stand to additionally testify, through his Supplemental Judicial Affidavit6\ that: (1) petitioner executed various MAs with 48 of its affiliates; (2) he has in his custody MAs with 21 thereof; (3) for the rest, he could not find the same despite diligent efforts; (4) the plain photocopies are faithful reproductions of the scanned copies; (5) the contents of the MAs are essentially the same and that they pertain to petitioner's rendering of qualifying services, particularly, information technology (IT) support services to its non-resident foreign affiliates; (6) qualifying services (insofar as ROHQs are concerned) refer to the services that an entity duly registered as an ROHQ is qualified and limited to render; and, (7) petitioner does not perform any other kind MAJI of service considering that the services rendered by petitioner a~e limited by the scope and nature of the services indicated in the 61 Exhibits "P-5508" and "P-5508-1" (!CPA Report). 62 TSN of 10 July 2019, p. II. 63 ld., p. 12. 64 Exhibits "P-5511" and "P-5511-1 ", Division Docket, Volume 11, pp. 585-591.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x When asked on cross-examination of proof to show that petitioner's affiliates are both non-resident and foreign [corporations], Recinto referred to the SEC Certifications stating that they are not doing business in the Philippines and their respective Articles of Incorporation (AOI) indicating that their places of incorporation are outside of the Philippines.65 Petitioner did not conduct any re-direct exam�matw� n.66 On 20 September 2019, petitioner filed its Formal Offer of Evidence67 (FOE) with respondent's Comment68 filed on 25 September 2019. On os November 2019, the Court resolved69 to admit all of petitioner's documentary evidence, except certain exhibits?/ 65 TSN of04 September 2019, p. 6. 66 Id. 67 Division Docket, Volume IV, pp. 1575-I646. 68 Id., pp. 1647-I650. It merely states that respondent has no objection to the admission of petitioner's exhibits but only as to the manner they were identified in open court and without necessarily admitting the truth of its contents, relevancy, materiality, probative value and the validity of the purposes for which said exhibits are offered. 69 See Resolution dated 05 November 2019, id., pp. 1661-1664. 70 Exhibit Description P-15.1 Memorandum of Understanding between AIG Shared Services Corporation (Philippines) [formerly Chartis Technology and Operations Management P-15.4 Corporation (Philippines)] and AIG APAC Holdings Pte. Ltd. dated September 10, P-15.5 2013 and August I, 2013. P-15.6 Statement of Work between AIG Shared Services Corporation [formerly Chartis P-15.12 Technology and Operations Management Corporation (Philippines)] and AIG P-15.13 Claims, Inc. dated October31,2013 and December 18,2013. P-15.14 Master Agreement for Professional Services between Chartis Technology and P-15.18 Operations Management Corporation (Philippines) and Chartis Egypt Insurance Co. P-15.21 S.A.E. dated April29, 2014. P-15.22 Master Agreement for Professional Services between Chartis Technology and P-15.24 Operations Management Corporation and AIG Employee Services, Inc. dated September 26, 20 II. Master Agreement for Professional Services between American International Underwriters Corporation - Regional Operating Headquarters and AIG Insurance and Reinsurance Company dated March I, 2009. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation - Philippines and Chartis Insurance Hong Kong Limited dated April 23, 2014. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation (Philippines) [and] American Home Assurance Company (New Zealand Branch) dated June 6, 20 II. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation (Philippines) and Chartis Lebanon S.A.L. dated July 25,2010 and July 19,2010. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation and Chartis MEMSA Insurance Company Limited (Kuwait Branch) dated December I, 20 II. Master Agreement for Professional Services between AIG Shared Services Corporation and AIG PC Global Services, Inc. dated October 31, 2013. Master Agreement for Professional Services between AIG Shared Services Corporation and AIG Shared Services (M) SDN. BHD. dated January I, 2014.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x P-15.25 Master Agreement for Professional Services between Chartis Technology and P-15.26 P-15.27 Operations Management Corporation (Philippines) and Chartis South Africa P-15.28 P-15.29 Limited dated July 30,2010 and April23, 2014. P-15.31 P-15.32 Master Agreement for Professional Services between American International P-15.33 Underwriters Corporation - Regional Operating Headquarters and AIG General P-15.37 P-15.39 Insurance Taiwan Co., Ltd. dated April23, 2014. P-15.41 P-15.42 Master Agreement for Professional Services between Chartis Technology and P-15.43 P-15.46 Operations Management Corporation (Philippines) and AIG Global Services (M) P-15.47 SDN. BHD. dated January 5, 20 l 0. P-55 P-58 Master Agreement for Professional Services between Chartis Technology and P-59 P-69 Operations Management Corporation and AIG Global Services, Inc. dated June 19, P-72 P-100-a 201 I. P-121-a P-102-b Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation and Travel Guard Asia Pacific Pte Ltd. dated AprillO, 2012 andJanuary2012. Business Process Outsourcing Master Services Agreement between AIG Shared Services Corporation, United Guaranty Services, Inc., and Integra Business Processing Solutions, Inc. dated December 12, 2012. Master Agreement for Professional Services between American International Underwriters Corporation - Regional Operating Headquarters and AIG General Insurance (Vietnam) Company Limited dated May I l, 2009, May 8, 2009 and April 23,2014. Master Agreement for Professional Services between American International Underwriters Corporation - Regional Operating Headquarters and AIU Insurance Company dated May 15, 2009 and May 14, 2009. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation (Philippines) and American International Group KK dated January 18, 2012. Master Agreement for Professional Services between American International Underwriters Corporation - Regional Operating Headquarters and AIG Caspian Insurance Com.J'.any dated May 18, 2009 and April 15, 2009. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation (Philippines) and Guam Insurance Adjusters Inc. dated November 18, 20 ll. Master Agreement for Professional Services between AIG Shared Services Corporation and National Union Fire Insurance Company of Pittsburgh, PA (Guam Branch) dated September 25, 2014 and September 24, 2014. Master Agreement for Professional Services between Chartis Technology and Operations Management Corporation (Philippines) and New Hampshire Insurance Company dated March 18, 20 l 0 and March 22, 20 l 0. Business Process Outstanding Master Services Agreement between AIG Shared Services Corporation, United Guaranty Services, Inc. and Integra Business Processing Solutions, Inc. dated December 12,2012. Statement of Work 2016 AIGSS-lT Services between AIG Shared Services Corporation (Philippines) and AIG Shared Services - Business Processing, Inc. dated March 18, 2016. SEC Certification of Non-Registration of Company for AIG Egypt Insurance Company S.A.E. dated 29 November 2017. SEC Certification of Non-Registration of Company for AIG Europe Limited dated 12 July 2016. SEC Certification of Non-Registration of Company for AIG Europe Limited- Ireland dated 07 October 2015. SEC Certification of Non-Registration of Company for AIG Lebanon S.A.L. dated 29 November 2017. SEC Certification of Non-Registration of Company for AIG MEA Ltd. - (Kuwait Branch) dated 29 November 2015. Certificate of Registration abroad for AIG Australia Limited. Screenshot of the results of database search abroad for AIG South Africa Limited. Screenshots of the results of the database search abroad indicating that the customers are registered abroad (AIG Claims, Inc.). ~ ~

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X On o6 November 2019, respondent presented his lone witness, Revenue Officer (RO) Daniel Carlo C. Perez (Perez), who testified by way of his Judicial Affidavit71 that: (1) he is presently employed as RO II of the BIR's Tax Audit Review Division (TARD); (2) his duties include the review of the examination and verification of claims for refund conducted by the VCAD and by the various revenue regions; (3) he was the person authorized to review the examination and verification of petitioner's claim for refund; (4) he started his review by evaluating the veracity of the memorandum report from VCAD; (5) the said memorandum report found petitioner's claim partly meritorious to the extent of P17,o66,s88.24; (6) after conducting his review based on the documents submitted by petitioner, he submitted his own Memorandum dated o8 June 2018 for the denial of the claim for refund; and, (7) specifically, he found that the total deductions, adjustments and disallowances exceeded the claim for refund hence the denial. On cross-examination, RO Perez confirmed that: (1) VCAD recommended the amount of P17 Million for refund but he found additional disallowances amounting to PIS Million; (2) the disallowances consist of, among others, lack of proof of payment relative to petitioner's big ticket suppliers in the amount of P12,249,711.25; (3) with respect to proof of payment, secondary evidence is needed to support the primary evidence (i.e., sales invoices and ORs); (4) part of the P18 Million additional disallowances is input VAT attributable to petitioner's ultimate parent; (5) petitioner's ultimate parent is AlGI, as stated on page 78, fifth (s'h) paragraph of Note 1 [of the Audited Financial Statements]; (6) ultimate parent means the mother company; and, (7) no assessment has been made forTY 2016. On 11 November 2019, respondent filed his FOF', with , petitioner's Commenf3 filed on 18 November 2019. At the same time'/ p.]]J-b Various screenshots of the results of database search abroad indicating that the customers are registered abroad. P-119-b Various screenshots of the results of database search abroad indicating that the P-660 customers are registered abroad. P-4777 Various official receipts. P-34 Billing invoices for VAT zero-rated sales (billing invoices in support of OR No. 04000215 or Exhibit "P-367"). Certification issued by Regular Large Taxpayer Audit Division 3. 71 Exhibits "R-8" and "R-8-1", Division Docket, Volume IV, pp. 1655-1659. 72 !d., pp. 1667-1671. 73 ld., pp. 1672-1675.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x petitioner also filed a Motion for Reconsideration74 (MR) seeking admission of its denied exhibits. Respondent's Commenf5 thereon was filed on 13 December 2019. On 24 February 202076, the Court partially granted petitioner's MR insofar as Exhibits "P-102-b"77 and "P-4777"78 are concerned while it denied admission to all of respondent's documentary evidence, except Exhibit "R-8".79 On 13 March 2020, petitioner filed a Tender of Excluded Evidence (Tender of Excluded Evidence) with Motion for Leave of Court to Recall Atty. Geronimo Randy L. Recinto80 (Motion for Leave), with respondent's Comment81 filed on 20 July 2020. On n September 2020, the Court granted petitioner's Tender of Excluded Evidence but denied its Motion for Leave.82 After the parties submitted their respective memoranda83, the Court submitted the case for decision on 26 October 2020.84 ISSUES As the parties so stipulated, the issues for this Court's determination are the following:85 I. WHETHER PETITIONER AIG SHARED SERVICES CORPORATION (PHILIPPINES) IS ENTITLED TO A REFUND OR ISSUANCE OF A TAX CREDIT CERTIFICATE (TCC) FOR ITS UNUTILIZED INPUT � VALUE-ADDED TAX (VAT) ARISING FROM ITS DOMESTIY 74 !d., pp. !676-!686. 75 !d., pp. 1703-1707. 76 See Resolution dated 24 February 2020, id., pp. 1709-1717. 77 Screenshots of the results of the database search abroad indicating that the customers are (registered abroad (AIG Claims, Inc.). 78 Billing invoices for VAT zero-rated sales (billing invoices in support of OR No. 04000215 or Exhibit "P-367"). 79 Judicial Affidavit of Daniel Carlo C. Perez. 80 Division Docket, Volume IV, pp. 1718-1725. 81 Received on 28 July 2020, id., pp. 1735-1738. 82 See Resolution dated II September 2020, id., pp. 1741-1743. 83 Petitioner's Memorandum filed on 15 October 2020, id., pp. 1744-175; Respondent's Memorandum filed on 21 October 2020, id., pp. 1754-1793. 84 See Resolution dated 26 October 2020, id., p. 1794. 85 JSFI, id., Volume I, pp. 493-494.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x PURCHASES OF GOODS AND SERVICES, PURCHASES OF CAPITAL GOODS AND PURCHASES OF SERVICES RENDERED BY NON-RESIDENTS, WHICH ARE ATTRIBUTABLE TO ZERO-RATED TRANSACTIONS FOR THE FIRST TO FOURTH QUARTERS OF TAXABLE YEAR 2016 IN THE AMOUNTS OF Pn,643,88pr, P8,s46,669.63, f'6,484.775�53 AND Prs,692,950-42, RESPECTIVELY, OR IN THE AGGREGATE AMOUNT OF f'42,368,282.79; AND, II. WHETHER RESPONDENT COMMISSIONER OF INTERNAL REVENUE'S DENIAL OF PETITIONER AIG SHARED SERVICES CORPORATION (PHILIPPINES)'S CLAIM FOR REFUND WAS CORRECT. RULING OF THE COURT Petitioner anchors its claim for refund on Section no(B), in relation to Section n2(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 1096386, otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN Law). The said provisions read as follows: Sec. no. Tax Credits. - (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, however, that any input tax attributable to zero-rated sales by a VAT-registered person may at his option be 112./ refunded or credited against other internal revenue taxes, subject to ~.~e provisions of Section 86 AN ACT AMENDING SECTIONS 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197,232,236,237,249,254,264,269, AND 288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING SECTIONS 35, 62, AND 89; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Sec. 112. RefUnds or Tax Credits ofInput Tax. - (A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section w6(A)(2)(a)(1), (2) and (b) and Section w8(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 Bangkok Sentra ng Filipinas (BSP): Provided, fUrther, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section w8(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (C) Period within which Refund of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial. In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)-day period shall be punishable under Section 269 of this Code. In Luzon Hydro Corporation v. Commissioner of Internal Revenue87, the Supreme Court laid down the requisites that must concur in order to allow a claim for refund or tax credit for unutilized input VAT, to wit:/ " G.R. No. 188260, 13 November 2013; Citation omitted.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x A claim for refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur, namely: (a) the taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (c) the input taxes are due or paid; (d) the input taxes are not transitional input taxes; (e) the input taxes have not been applied against output taxes during and in the succeeding quarters; (f) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (g) for zero-rated sales under Section w6(A)(2)(1) and (2); w6(B); and w8(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the rules and regulations of the Bangkok Sentra ng Filipinas; (h) where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (i) the claim is filed within two years after the close of the taxable quarter when such sales were made. We shall now proceed to the determination of petitioner's compliance with the aforementioned requisites. For an orderly discussion, We shall start with the first (1st) and ninth (9th) requisites, followed by the second (2"d) and seventh (7th) requisites, then the third (3rd), fourth (4th), fifth (sth) and eighth (8th) requisites, jointly. FIRST (IST) REQUISITE: PETITIONER IS A VALUE-ADDED TAX (VAT)-REGISTERED ENTITY. It is undisputed that petitioner is a VAT-registered entity.88 Thus, the 1st requisite is complied with. NINTH (9TH) REQUISITE: PETITIONER'S ADMINISTRATIVE AND JUDICIAL CLAIMS WERE FILED WITHIN THE PRESCRIPTIVE PERIOD. In accordance with the above-cited Section n2(A) and (C)89 of the NIRC of 1997, as amended by the TRAIN Law, the administrative claim for refund of excess input VAT must be filed with the BIR withiJi' 88 Supra at note I I . 89 Supra at p. 15.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The instant administrative claim covers the four (4) quarters of TY 2016. Thus, petitioner's last day for filing of its administrative claim and the actual filing of administrative claim for the said periods fell on the following dates: Period Covered Last Day to File Actual Date of Filing of Administrative Claim Administrative Claim January to March 2016 (1'' Quarter) 31 March 2018 26 March 201890 April to June 2016 30 June 2018 (2nd Quarter) 30 September 2018 July to September 2016 (3'd Quarter) 31 December 2018 October to December 2016 (4'h Quarter) Clearly, petitioner's administrative claim was filed within the two-year prescriptive period. As to the timeliness of petitioner's judicial claim, respondent had ninety (9o) days or until 24 June 2018, to decide on petitioner's administrative claim. Considering that respondent issued a letter dated o8 June 201891 totally denying the same (which petitioner received on 27 June 2018), petitioner had thirty (3o) days therefrom or until27 July 2018, within which to file a judicial claim before this Court. Thus, the instant Petition for Review was also seasonably filed on 23 July 2018.92 SECOND (zN�) AND SEVENTH (?TH) REQUISITES: PETITIONER IS ENGAGED IN ZERO- RATED OR EFFECTIVELY ZERO-RATED SALES AND WHERE APPLICABLE, THE ACCEPTABLE FOREIGN CURRENCY EXCHANGE PROCEEDS HAVE BEEN DULY ACCOUNTED FOR IN , ACCORDANCE WITH THE RULES ANn; 90 Supra at note 28. 91 Supra at note 29. 92 Supra at note I.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x REGULATIONS OF THE BANGKO SENTRAL NG PILIPINAS (BSP). The 2nd and 71h requisites, respectively, require that the taxpayer is engaged in zero-rated or effectively zero-rated sales and, for zero- rated sales under Sections w6(A)(2)(a)(1), (2) and (b)93, and w8(B)(1) and (2)94 of the NIRC of 1997, as amended95, the acceptable foreign currency exchange proceeds must have been duly accounted for in accordance with BSP rules and regulations/ 93 Sec. 106. Value-Added Tax on Sale ofGoods or Properties.- (A) Rate and Base ofTax. -There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. �The term 'export sales' means: (I) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (b) Foreign Currency Denominated Sale.- The phrase 'foreign currency denominated sale' means sale to a nonresident of goods, except those mentioned in Sections 149 and 150, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangkok Sentra ng Filipinas (BSP). 94 Sec. 108. Value-Added Tax on Sale ofServices and Use or Lease ofProperties.- (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (I) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangkok Sentra ng Filipinas (BSP); (2) Services other than those mentioned in the preceding paragraph, rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangkok Sentra ng Filipinas (BSP); " Prior to the changes brought about by TRAIN.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x As indicated in petitioner's final amended Quarterly VAT Returns for the TY 2016, petitioner declared sales subject to 12% VAT and zero-rated sales in the amounts of Pso,210,635-03 and P2,994,)11,644-77, respectively, detailed as follows: Exhibit Period Sales Subject Zero-Rated "P -5 " January to March 2016 to12%VAT Sales "P-6" 1'14,046,876.84 (1st Quarter) 1'771,292,147-26 ''P-7" April to June 2016 7,920,386.06 679, 718,n6.58 "P-8" (2nd Quarter) 18,432,782.60 706,965,896.84 July to September 2016 (ird Quarter) 9,810,589-53 836�335�484.09 October to December 2016 Pso,21o,635-03 P2,994>311,644.77 (4th Quarter) Total Based on petitioner's Summary List of Sales (SLS)96, petitioner's total zero-rated sales of P2,994,)11,644�77 can be further broken down as follows: Particulars Amount Sale of services to foreign clients 1'2,939.496.433-73 Sale to a PEZA-registered company (i.e., AIG Shared Services- Business Processing Inc.) 54.815,211.04 Total Zero-Rated Sales P2,994>311,644.77 From the above, petitioner has two (2) sources of zero-rated sales, namely: (i) Sale of services under Section w8(B)(2) of the NIRC of 1997, as amended; and, (ii) Sale to Philippine Economic Zone Authority (PEZA)- registered entities under Section w6(A)(2)(a)(5) of the NIRC of1997, as amended. ser.za.tEzamch.'/ source of zero-rated sales shall be discussed below, m 96 Exhibits "P-13" to "P-13.3", FOE Folder.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X i. SALE OF SERVICES UNDER SECTION w8(B)(2) OF THE NIRC OF 1997, AS AMENDED. In this case, petitioner claims that its sale of services to its affiliates that are non-resident foreign corporations (NRFCs) is a transaction subject to o% VAT pursuant to Section w8(B)(2) of the NIRC of 1997, as amended, which states: SEC. 108. Value-Added Tax on Sale of Services and Use or Lease ofProperties.- (B) Transactions Subject to Zero Percent (o%) Rate - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (o%) rate. (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangkok Sentra ng Filipinas (BSP); (2) Services other than those mentioned in the preceding paragraph, rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangkok Sentra ng Filipinas (BSP).97 In Accenture, Inc. v. Commissioner of Internal Revenue98 {Accenture), citing Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. 99, the Supreme Court held that in order for the supply of services to be considered VAT zero-rated under the above-mentioned provision, the taxpayer- � claimant must prove the following, to wit: (1) services other tha/ 97 Emphasis supplied. 98 G.R. No. 190102. II July 2012. 99 G.R. No. 153205, 22 January 2007.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x processing, manufacturing or repacking of goods rendered by VAT registered persons in the Philippines; (2) the transaction paid for in acceptable foreign currency duly accounted for in accordance with BSP rules and regulations; and, (3) the recipient of such services must be performing business outside the Philippines. As to the 1'' requirement, it is also undisputed that petitioner is licensed as an ROHQ to provide qualifying serviceS.100 In fact, its witnesses, Recinto and Baroro, both confirmed that petitioner only rendered qualifying services to its non-resident affiliates abroad.'01 Recinto even added that petitioner does not perform any other kind of service as the services rendered are limited by the nature and scope of those indicated in the MAs.'02 Clearly, the nature of services being rendered by petitioner falls within the scope of services other than "processing, manufacturing or repacking of goods" contemplated under the aforecited Section w8(B)(2) of the NIRC ofi997, as amended. Before proceeding with the discussion of the 2nd requirement, the Court deems it more appropriate to first discuss petitioner's compliance with the 3rd requirement (as laid down inAccenture) which requires that the recipient of such services must be performing business outside the Philippines. In Commissioner of Internal Revenue v. Deutsche Knowledge Services, Pte. Ltd.'03 (Deutsche Knowledge Services), the Supreme Court discussed the two (2) components that the claimant must establish to prove its clients' status as an NRFC, to wit: For purposes of zero-rating under Section w8(B)(2) of the Tax Code, the claimant must establish the two components of a client's � NRFC status, viz: (1) that their client was established under the laws/ 100 Supra at note 9. 101 Question and Answer (Q&A) Nos. 8 and 13, Judicial Affidavit of Atty. Geronimo Randy L. Recinto (Exhibit "P-38", FOE Folder); Q&A No. 22, Judicial Affidavit of Glaiza Apolinario- Baroro (Exhibit "P-37", supra.). 102 Q&A Nos. 10 and 11, Supplemental Judicial Affidavit of Atty. Geronimo Randy L. Recinto (Exhibit "P-5511"), Division Docket, Volume II, pp. 589-590. 103 G.R. No. 234445, 15 July 2020; Citations omitted, italics in the original text and emphasis supplied.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x of a country not the Philippines or, simply, is not a domestic corporation; and (2) that it is not engaged in trade or business in the Philippines. To be sure, there must be sufficient proof of both of these components: showing not only that the clients are foreign corporations, but also are not doing business in the Philippines. To recall, the CTA found that the SEC Certification of Non- Registration of Company and Authenticated Articles of Association and/or Certificates of Registration/Good Standing/Incorporation sufficiently established the NRFC status of n of DKS's affiliates clients. The Court upholds these findings. In any case, after a judicious review of the records, the Court still do not find any reason to deviate from the court a quo's findings. To the Court's mind, the SEC Certifications of Non-Registration show that their affiliates are foreign corporations. On the other hand, the articles of association/certificates of incorporation stating that these affiliates are registered to operate in their respective home countries, outside the Philippines are prima facie evidence that their clients are not engaged in trade or business in the Philippines. Proof of the above-mentioned second component sets the present case apart from Accenture, Inc. v. Commissioner of Internal Revenue and Site/ Philippines Corp. v. Commissioner of Internal Revenue. In these cases, the claimants similarly presented SEC Certifications and client service agreements. However, the Court consistently ruled that documents of this nature only establish the first component (i.e., that the affiliate is foreign). The absence of any other competent evidence (e.g., articles of association/ certificates of incorporation) proving the second component (i.e., that the affiliate is not doing business here in the Philippines) shall be fatal to a claim for credit or refund of excess input VAT attributable to zero-rated sales. As held in the said case, there must be sufficient proof of both components- (1) that its clients are foreign corporations (which can be proven by the SEC Certifications of Non-Registration); and, (2) not doing business in the Philippines (the prima facie proof of which is the articles of association/certificates of incorporation stating tha~'

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X these affiliates are registered to operate in their respective home countries. outside the Philippines). In the instant case, to prove that it rendered services to NRFCs doing business outside the Philippines, petitioner presented the SEC Certifications of Non-Registration, consularized foreign registration documents and screenshots of foreign government websites indicating said clients' registration therein, among others, to wit: Registered Name of Client SEC Consularized Screenshots Certification Foreign of Foreign 1 AIG APAC HOLDINGS PTE. LTD. Government 2 AIG ASIA PACIFIC INSURANCE PTE. of Non- Registration Websites Registration Exhibit No. LTD. "P-g8-a" "P-wo-b" 3 AIG AUSTRALIA LIMITED "P-so" "P-gg-a" "P-1o2-b" 4 AIG BUSINESS PARTNERS "P-st" "P-too-a" "P-103-a " "P-tot-a" "P-ws-a" KABUSHIKI KAISHA104 "P- 52" "P-106-a" 'i AIG CLAIMS, INC. "P-s3" "P-1o2-a" "P-107-a " 6 AIG EGYPT INSURANCE C0.105 "P-<;4" "P-104-a" ' 7 AIG EMPLOYEE SERVICES, INC. "P-ss" 8 AIG EUROPE (SERVICES) LIMITED "P-108-a" ~ 9 AIG EUROPE LIMITED "P-~6" "P-tog-a" 10 AIG EUROPE LIMITED - IRELAND "P-no-a" "P-<;7'' BRANCH "P-s8" "P-nt-a" 11 AIG GLOBAL CLAIMS SERVICES, "P-sg" "P-112-a" "P-113-a" INC. "P-6o" "P-114-a" 12 AIG INSURANCE COMPANY CHINA "P-6t" LIMITED 13 AIG COMMERCIAL INSURANCE "P-62" COMPANY OF CANADA106 "P-63'' 14 CLOSED JOINT-STOCK COMPANY "P-64'' AIG INSURANCE AND REINSURANCE COMPANY07 "P-6s" 15 AIG INSURANCE HONG KONG "P-66" LIMITED "P-67" 16 AIG INSURANCE NEW ZEALAND LIMITED 17 AIG JAPAN HOLDINGS KABUSHIKI KAISHA108 18 AIG KENYA LIMITED109 104 AIG BUSINESS PARTNERS KABUSHI KAISHA in the SEC Certification of Non-Registration. lOS AIG EGYPT INSURANCE COMPANY S.A.E. in the SEC Certification of Non-Registration. 106 AIG INSURANCE COMPANY OF CANADA in the SEC Certification of Non-Registration. 107 AIG INSURANCE COMPANY, CJSC in the SEC Certification of Non-Registration. 108 AIG JAPAN HOLDINGS KK in the SEC Certification of Non-Registration. 109 AIG KENYA INSURANCE COMPANY LIMITED in the SEC Certification of Non-Registration.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Registered Name of Client SEC Consularized Screenshots Certification Foreign of Foreign Government of Non- Registration Websites Registration Exhibit No. "P-us-a"" "P-121-a " 19 AIG KOREA INC. "P-68" "P-n6-a" "P-124-a" 20 AIG LEBANON SAL "P-69" "P-117-a" "P-126-a" 21 AIG MALAYSIA INSURANCE "P-7o" "P-n8-a" "P-71" "P-133-a" BERHAD "P-72" "P-ng-a" "P-134-a" 22 AIG MEA LIMITED (OMAN "P-73" "P-12o-a" "P-74" ::::'; BRANCH) "P-75 " "P-122-a" 23 AIG MEA LTD.- (KUWAIT BRANCH) 24 AIG PC GLOBAL SERVICES, INC. "P-76" "P-123-a" 2<; AIG PNG LIMITED "P-77" 26 CHARTIS TECHNOLOGY & "P-121)-a" "P-78" OPERATIONS MGMT (M) SON. "P-127-a" "P-79" 110 "P-8o" "P-128-a" "P-8t" BHD. "P-82" "P-129-a" "P-t3o-a" 27 AIG SOUTH AFRICA LIMITED "P-83" "P-13t-a" 28 AIG ASIA PACIFIC INSURANCE PTE. "P-84" "P-132-a" LTD. TAIWAN BRANCHm "P-Bs" "P-86" "P-135-a" 29 AJG GLOBAL SERVICES (MALAYSIA) "P-87" "P-136-a" "P-88" 112 "P-8g" "P-go" SON. BHD "P-gt" "P-92" 30 AIG TECHNOLOGIES, INC. "P-93 " 11 AIG TRAVEL ASSIST, INC. 32 AIG UKRAINE INSURANCE COMPANY 33 AIG UNITED GUARANTY INSURANCE (ASIA) LIMITED 34 AIG VIETNAM INSURANCE CO., LTD 35 AIG GENERAL INSURANCE COMPANY, LTD113 36 AMERICAN GENERAL LIFE INSURANCE COMPANY 37 AMERICAN HOME ASSURANCE COMPANY, LTD. 38 AMERICAN HOME ASSURANCE COMPANY (DUBAI BR) 39 AMERICAN INTERNATIONAL GROUPKK 40 AMERICAN INTERNATIONAL GROUP, INC. 41 CHARTIS AZERBAIJAN INSURANCE co. 42 CHARTIS KAZAKHSTAN INSURANCE COMPANY 43 GUAM INSURANCE ADJUSTERS, INC. 44 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA 110 AIG SHARED SERVICES (M) SDN BHD in the SEC Certification of Non-Registration. Ill AIG TAIWAN INSURANCE CO., LTD. in the SEC Certification of Non-Registration. 112 AIG TECHNOLOGIES (MALAYSIA) SON. BHD. in the SEC Certification of Non-Registration. 113 AIU INSURANCE COMPANY, LTD in the SEC Certification of Non-Registration.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Registered Name of Client SEC Consularized Screenshots Certification Foreign of Foreign 45 NEW HAMPSHIRE INSURANCE Government COMPANY of Non- Registration Websites Registration Exhibit No. 46 NEW HAMPSHIRE INSURANCE "P-137-a" "P-140-a" COMPANY, BANGKOK BRANCH "P-94 " "P-95" "P-138-a" 47 P.T. ASURANSI AIU INDONESIA114 "P-g6" 48 TATA AIG GENERAL INSURANCE "P-139-a" "P-97" CO. LTD. "P-141-a" 49 UNITED GUARANTY CORPORATION However, as stated in the ICPA Report11S, ICPA Roguel could not ascertain whether the following SEC Certifications of Non-Registration are faithful reproductions of the original documents as he was only able to examine the photocopies (hence, the Court denied admission of the same): a. AIG Egypt Insurance Company S.A.E.116; b. AIG Europe Limited 117 ; c. AIG Europe Limited- Ireland Branch118; d. AIG Lebanon S.A.L.119; and, e. AIG MEA Ltd.- (Kuwait Branch).120 Moreover, as can be gleaned from the table above, only SEC Certifications of Non-Registration were submitted as evidence for the following entities: a. AIG Europe Limited; b. AIG MEA Ltd.- (Kuwait Branch); c. AIG PNG Limited; d. AIG United Guaranty Insurance (Asia) Limited; and, e. American International Group KK., 114 PT AIG INSURANCE INDONESIA in the SEC Certification of Non-Registration. !IS Exhibit "P-5508", !CPA Report, p. 8. 116 Exhibit "P-55", USB (Exhibit "P-5508-2"). 117 Exbibit "P-58", id. 118 Exbibit "P-59", id. 119 Exhibit "P-69", id. 120 Exhibit "P-72", id.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Also, no SEC Certification of Non-Registration was presented for New Hampshire Insurance Company, as only consularized Articles of Reorganization and Restated Articles of Incorporation were submitted. Furthermore, ICPA Roguel also noted121 that he was not able to ascertain whether the screenshot of the website of the Financial Services Board in South Africa122 for AIG South Africa Limited is a faithful reproduction because the website123 is inaccessible. In addition, the screenshot of foreign government website submitted for Chartis Azerbaijan Insurance Co. is not in English. Neither was it accompanied by an official translation into English or Filipino as required by Section 3312\ Rule 132 of the Rules of Court. As such, no probative value may be accorded to the said screenshots. Consequently, the aforementioned clients cannot be considered as NRFCs following the ruling in Deutsche Knowledge Services; hence, the related sales to the same shall be disallowed. In addition, the Court likewise observed that there are significant differences in the names reflected in the pertinent SEC Certifications of Non-Registration, foreign registration documents and ORs issued to the following clients: Name in the SEC Name in the Name in the Exhibit Total Amount Certification of Consularized Foreign OR Non-Registration Registration Documents AIG INSURANCE CLOSED JOINT-STOCK CJSCAIG "P-21o" ~'735� 759-82 COMPANY, CJSC COMPANY "AIG INSURANCE AND "P-2n" REINSURANCE IIP-297'' COMPANY" "P-892" AIG INSURANCE AIG INSURANCE NEW AMERICAN ~~P-247'' 33-953.753-84 NEW ZEALAND LIMITED ZEALAND LIMITED HOME NEW "P-398" "P-443" ZEALAND "P-sog" "P-s1o" 121 I Exhibit "P-5508", ICPA Report, p. 8. 122 Exhibit "P-121-a", USB (Exhibit "P-5508-2"). 123 URL indicated in the print-out i.e., https://www.fsb.co.za/Pages/Home.aspx. 124 Sec. 33. Documentary evidence in an unqfficial language. ~ Documents written in an unofficial language shall not be admitted as evidence, unless accompanied with a translation into English or Filipino. To avoid interruption of proceedings, parties or their attorneys are directed to have such translation prepared before trial.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Name in the SEC Name in the Name in the Exhibit Total Amount Certification of Consularized Foreign OR Non-Registration "P-su" Registration "P-836" Documents "P-837 " "P-888" AIGKENYA AIG KENYA LIMITED CHARTIS "P-241" 227,167�58 INSURANCE KENYA "P-759" 10,423.)92-32125 COMPANY INSURANCE LIMITED COMPANY "P-171 " 126 LIMITED "P-301 " AIGMEA AIG MEA LIMITED "P-302 " 1,429.335�67 LIMITED (OMAN (OMAN BRANCH) CHARTIS "P-447" 1,870, 790.22 BRANCH) MEMSA "P-626" 211,142,567.14 INSURANCE "P-283" AIGSHARED CHARTIS CO. LTD. � SERVICES (M) TECHNOLOGY & OMAN "P-359 " SDNBHD OPERATIONS MGMT BRANCH OR j (M) SDN. BHD. QATAR ~~P-36o" ~ I' BRANCH AIG AIG-SOFTWARE AIGSHARED "P-428" TECHNOLOGIES INTERNATIONAL]V SERVICES "P-541" (MALAYSIA) SON. SON. BHD. (M) SDNBHD "P-542" BHD "P-622 " AIGGENERAL AIGGLOBAL "P-427'' AIU INSURANCE INSURANCE SERVICES COMPANY, LTD COMPANY, LTD MALAYSIA ~'P-486" "P-938" AIU "P-243" INSURANCE "P-244" COMPANY- JAPAN "P-245" "P-516" "P-517 " "P-stS" "P-519 " "P-szo" "P-4t7" "P-442 " "P-672 " "P-838" "P-889" up-9775" 125 This amount excludes the receipt disallowed by !CPA Rogue! for not being traceable to the certificates of inward remittances. 126 This amount excludes the other amounts to be disallowed due to the fact that its SEC Certification of Non-Registration does not cover entirely the subject period of claim.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Name in the SEC Name in the Name in the Exhibit Total Amount Certification of Consularized Foreign OR 14,148.909�41 Non-Registration "P-704 " 61,724,421.22 Registration VARIABLE AMERICAN Documents ANNUITY "P-t88" P:335,656,097�"" GENERAL LIFE AMERICAN GENERAL LIFE "P-189" INSURANCE LIFE INSURANCE INSURANCE COMPANY COMPANY CHAR TIS "P-365" PTAIG INSURANCE "P-s87" INSURANCE P.T. ASURANSI AIU INDONESA INDONESIA INDONESIA IIP-ggc;" Total As such, the amount of ~"335,6s6,o97�22 must also be disallowed and deducted from the total zero-rated sales. The Court also noted that the SEC Certifications of Non- Registration of the following foreign clients do not cover entirely the subject period claim for refund, i.e., from 01 January 2016 to 31 December 2016: Name in the SEC Certification of Exhibit Issue Date Non-Registration No. 07 October 2015 15 October 2015 AIG BUSINESS PARTNERS KABUSHIKI KAISHA "P-c;�:( 10 November 2015 AIG EMPLOYEE SERVICES, INC. "P-56" GUAM INSURANCE ADJUSTERS INC. ''P-92, 26 May 2016 AIG APAC HOLDINGS PTE LTD "P-so" 27 May 2016 AMERICAN INTERNATIONAL GROUP, INC. "P-89" CHARTIS AZERBAIJAN INSURANCE CO. "P-go" 12 July 2016 NEW HAMPSHIRE INSURANCE THAILAND "P-94" AIG ASIA PACIFIC INSURANCE PTE LTD "P-st" ( AIG AUSTRALIA LIMITED AIG CLAIMS INC "P-52" ~ AIG GLOBAL CLAIMS SERVICES, INC. "P-s4" b AIG INSURANCE COMPANY CHINA LIMITED "P-6o" AIG INSURANCE COMPANY OF CANADA "P-61" AIG JAPAN HOLDINGS KK "P-62" AIG KOREA INC. "P-66" AIG MALAYSIA INSURANCE BERHAD "P-68" AIGTAIWAN INSURANCE CO., LTD "P-7o" AIG TRAVEL ASSIST, INC. AIG VIETNAM INSURANCE COMPANY "P -77 " LIMITED "P-Bo" "P-83"

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Name in the SEC Certification of Exhibit Issue Date Non-Registration No. 14 July 2016 AIG SHARED SERVICES (M) SDN BHD "P-7s" 26 August 2016 AMERICAN HOME ASSURANCE COMPANY, UAE IIP-87" Thus, for the period beyond the issue dates of the foregoing SEC Certifications of Non-Registration, the aforementioned entities cannot be considered NRFCs. As a result, the sales to the aforementioned foreign entities during the said period not covered (per OR date and SLS"7) shall also be disallowed, to wit: Registered Name of Client Amount AIG BUSINESS PARTNERS KABUSHIKI KAISHA AIG EMPLOYEE SERVICES, INC. 1"29,578,142.79 GUAM INSURANCE ADJUSTERS INC. AIGAPAC HOLDINGS PTE LTD 519,892,099�59 AMERICAN INTERNATIONAL GROUP, INC. NEW HAMPSHIRE INSURANCE THAILAND 904,368.52 AIG ASIA PACIFIC INSURANCE PTE LTD AIG AUSTRALIA LIMITED 155,141.364.18 ' AIG CLAIMS INC 11,125.342. 8 6128 36,516,952.70129 52,000,507. 8 7130 53.679.527. 6 3131 33.834,257�48132 127 Supra at note 96. 128 Computed as follows: July 2016 SLS p 5,652,517.77 August 2016 SLS 1,162,587.62 September 2016 SLS 998,142.13 October 2016 SLS 1,51 8,630.50 November 20 16 SLS 6,763.29 December 20 16 SLS I ,786,701.55 Total p 11,125,342.86 p 22,221,827.89 129 Computed as follows: July 2016 SLS October 2016 SLS 14,295,124.81 Total p 36,516,952.70 P 8,447,883.20 (ORs beyond 12 July 2016) 130 Computed as follows: July 2016 SLS August 2016 SLS 8,165,572.43 September 2016 SLS 9,602,395.88 October 2016 SLS 4,151,785.20 December 2016 SLS 21,632,871.16 Total p 52,000,507.87 p 2,186,313.32 131 Computed as follows: August 2016 SLS September 2016 SLS 20,587,572.02 November 2016 SLS 30,905,642.22 Total p 53,679,527.63 P 14,387,767.79 (ORs beyond 12 July 2016) 132 Computed as follows: July 2016 SLS August 2016 SLS 6,941,394. 73 September 2016 SLS 4,341,062.52 October 2016 SLS 462,616.47 November 2016 SLS 7,460,083.94 December 2016 SLS Total I 241,332.03 ~ p 33.834.257.48

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Registered Name of Client Amount AIG GLOBAL CLAIMS SERVICES, INC. AIG INSURANCE COMPANY CHINA LIMITED 81,122,319.09133 AIG INSURANCE COMPANY OF CANADA 5,938.438 .OJ134 AIG JAPAN HOLDINGS KK 1,402, 737� 6 0 135 AIG KOREA INC. 4,719, 870.6 2136 AIG MALAYSIA INSURANCE BERHAD J,961,623.83137 AIG TAIWAN INSURANCE CO., LTD 40,400, 6 91.23138 AIG TRAVEL ASSIST, INC. 7,085.351.32139 AIG VIETNAM INSURANCE COMPANY LIMITED 96,28o,8o8.95140� 9.469,047�33141 133 Computed as follows: July 2016 SLS I' 11,559,580.01 (DRs beyond 12 July 2016) August 2016 SLS 13,557,295.57 September 2016 SLS 13,380,970.90 October 2016 SLS 8,955,588.93 November 2016 SLS 20,601,519.77 December 20 16 SLS 13,067,363.91 134 Total I' 81,122,319.09 I' 4,550,099.79 (DRs beyond 12 July 2016) Computed as follows: July 2016 SLS August 2016 SLS 28,359.72 September 2016 SLS 1,300,535.71 October 2016 SLS 28,636.50 November 2016 SLS 15,534.79 December 2016 SLS 15 271.52 Total I' 5,938,438.03 I' 228,123.54 (DRs beyond 12 July 2016) 135 Computed as follows: July 2016 SLS August 2016 SLS 228,337.24 September 2016 SLS 229,303.86 October 2016 SLS 236,420.95 November 2016 SLS 238,736.53 December 20 16 SLS 241,815.48 Total I' I ,402,737.60 I' 756,826.57 (DRs beyond 12 July 2016) 136 Computed as follows: July 2016 SLS August 2016 SLS 699,298.08 October 2016 SLS I ,520,518.32 November 20 16 SLS 758,874.88 December 20 16 SLS 984 352.77 Total I' 4,719,870.62 I' 442,592.96 (DRs beyond 12 July 2016) 137 Computed as follows: July 2016 SLS September 2016 SLS 392,948.08 November 2016 SLS 3,126,082.79 \38 Total I' 3,961,623.83 I' 12,529,405.70 Computed as follows: August 2016 SLS October 2016 SLS 13,846,916.77 November 2016 SLS 6,459,485.58 December 2016 SLS 7,564,883.18 139 Total I' 40,400,691.23 I' 6,877,682.63 (DRs beyond 12 July 2016) Computed as follows: July 2016 SLS August 2016 SLS 207,668.69 140 Total 7,085,351.32 I' 78,3 78,413.26 Computed as follows: October 2016 SLS December 2016 SLS 17,902,395.69 141 Total I' 96,280,808.95 I' 3,040,680.34 (DRs beyond 12 July 2016) Computed as follows: July 2016 SLS August 2016 SLS I ,204,274.26 September 2016 SLS 2,003,480.41 ' December 2016 SLS 3,220,612.32/

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Registered Name of Client Amount AIG SHARED SERVICES (M) SDN BHD 4.363.516.71 142 AMERICAN HOME ASSURANCE COMPANY, UAE 234,o8o.56143 Total PJ,I47�651,048,89 With respect to the 3'd requirement that payment for such services must be in acceptable foreign currency duly accounted for in accordance with the rules and regulations of the BSP, petitioner presented documents such as: (1) Certificates of Inward Remittance issued by EWBC144; (2) Certificates of Inward Remittance issued by HSBC145; and, (3) ORs issued for zero-rated sales.146 As noted by ICPA Roguel, receipts amounting to $862,718�43147, equivalent to P4o,J82,o87.53� are not traceable to the Certificates of Inward Remittance provided, broken down as follows: Date Client OR No. Exhibit Amount per Amount 26 January 2016 No. ORin USD inPhP 03 March 2016 CHARTIS 04000013 03 March 2016 "P-169" $868.oo P4o,672.75 23 March 2016 AZERBAIJAN 04000134 04000154 "P-288" 12,220.00 572,604�76 18 Aoril 2016 INSURANCE CO. 04000204 ''P-3o8" 8,259�00 389,)91.80 AIG INSURANCE 04000262 164,882.70 "P-357'' 7.732,979�18 COMPANY CHINA 271.00 "P-412" u; 14,1Q7.Q7 ' LIMITED AIG INSURANCE COMPANY CHINA LIMITED AIG JAPAN HOLDINGS KABUSHIKI KAISHA AIG INSURANCE Total P 9,469,047.33 P 2,244,509.31 (ORs beyond 14 July 20/6) 142 Computed as follows: July 2016 SLS August 2016 SLS 415,898.45 September 2016 SLS 412,807.96 October 2016 SLS 421,114.11 November 2016 SLS 432,285.83 December 2016 SLS 436 901.05 143 Total P 4,363,516.71 P 134,535.44 Computed as follows: August 2016 SLS November2016 SLS 99 545.12 Total P 234,080.56 (ORs beyond 26 Aug 2016 but excluding the OR dated 21 Sept 2021 (Exhibit P-786) since the same has already been disallowed by the 144 /CPA for not being traceable to the certificates ofinward remittances). 145 Exhibits "P-20" to "P-20.2", BIR Records (Main Folder), pp. 276, 277-282 and 283-285. Exhibits "P-21" to "P-21.2", id., pp. 258-262, 263-264, 265-275. 146 Exhibits "P-159" to "P-1026", USB (Exhibit "P-5508-2"). 147 Exhibit "P-5508", !CPA Report, p. 7.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Date Client OR No. Exhibit Amount per Amount No. ORin USD inPhP 18 April 2016 04000268 26 May 2016 COMPANY CHINA 04000365 "P-418" "P-su" 26 May 2016 LIMITED 04000366 26 May 2016 04000367 "P-513" 26 May 2016 AIG AUSTRALIA 04000368 "P-514 " 28,965.00 1.J86,548.59 29 June 2016 04000436 "P-sts" 21,976.oo 1,040,607-74 29 June 2016 LIMITED 04000438 "P-sBt" 30 June 2016 04000450 "P-583" AIG MEA "P-594" 21 September 2016 04000652 LIMITED (OMAN "P-786" Total BRANCH) AIG AUSTRALIA 56,2oo.oo 2,647,132-32 13,27o. 56 621,096�57 ' LIMITED 12,464.23 266.00 1,037,130.31 AIG AUSTRALIA 22,068.34 325.478.06 15,107,190�36 LIMITED 183.)87�77 8,609,566.66 AIG LEBANON S.A.L. AIG AUSTRALIA LIMITED AIG AUSTRALIA LIMITED AIG TAIWAN INSURANCE CO., LTD AMERICAN 24,604.00 1,J70,504.29 HOME ASSURANCE COMPANY, UAE $862,']18.43 P4o,J82,o87.53 Furthermore, ICPA Roguel noted that there were "non-trade" receipts inwardly remitted but were not receipted nor declared in the VAT Returns148, to wit: Supported with Debit Memos $2.34o,sg6.3o Not supported with Debit Memos 678,1<n.o4 Total $3,0I8,g8g.34 Based on the Debit Memos149 issued by petitioner, these receipts pertain to pass-through expenses incurred by petitioner's employees for the account of its clients such as hotel accommodation, airfare, and other chargeable expenses. "Gross receipts" under Section 4.108-4 of Revenue Regulations (RR) No. 16-2005150, as amended by RR No. 04-2007151, is defined as follows:; 148 Exhibit "P-5508", ICPA Report, Annex G. 149 Exhibits "P-4 I4 I" to "P-4605", USB (Exhibit "P-5508-2"). 150 Consolidated Value-Added Tax Regulations of2005.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x SEC. 4.1o8-4. Definition of Gross Receipts. -'Gross receipts' refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the VAT, except those amounts earmarked for payment to unrelated third (J'd) party or received as reimbursement for advance payment on behalf of another which do not redound to the benefit of the payor. A payment is a payment to a third (3'd) party if the same is made to settle an obligation of another person, e.g., customer or client, to the said third party, which obligation is evidenced by the sales invoice/official receipt issued by said third party to the obligor/debtor (e.g., customer or client of the payor of the obligation). An advance payment is an advance payment on behalf of another if the same is paid to a third (3'd) party for a present or future obligation of said another party which obligation is evidenced by a sales invoice/official receipt issued by the obligee/creditor to the obligor/debtor (i.e., the aforementioned "another party") for the sale of goods or services by the former to the latter.'52 The above definition excludes from the purview of gross receipts any amount that is due to a payee different from the receiving party to settle an obligation of another person. However, in the instant case, petitioner was not able to show that the "non-trade" receipts were third party obligations of its foreign clients (through an invoice or OR issued by the third party creditors to petitioner's foreign clients) which petitioner paid in advance. Noteworthy is the fact that these charges were incurred by petitioner's own employees for the benefit of its foreign clients. As it is, such receipts should have been part of petitioner's gross receipts. Consequently, petitioner has unreported zero-rated sales off'143.379,J51.23.'5/ IS\ Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of2005. \52 Emphasis supplied and underscoring omitted. \53 Translated using the period average annual BSP cross rate of Philippine Peso and US Dollar in 2016 of l'47.4925:$1. Available at https://www.bsp.gov.ph/statistics/extemal/pesocross.xls (last visited 16 October 2021).

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x As held by this Court in Commissioner of Internal Revenue v. Northwind Power Dev't. Corporation'54, unreported zero-rated sales must be disallowed pursuant to Section 114(A)'55 in relation to Section w8'56 of the NIRC of1997, as amended, to wit: In the similarly assailed Resolution of June 26, 2013, which effectively affirmed the Decision of March 12, 2013, the Court in Division further explained, thus: As regards the first ground, We reiterate our findings/ruling in the Assailed Decision that only the amount of P34.352,J40.o7 was reflected as zero-rated receipts in petitioner's Quarterly VAT Return for the 2nd quarter of2oo8. The difference of P22,456,725.94 was allegedly recognized in the 3'd and 4th quarters of 2008. Petitioner, however, failed to substantiate the said allegations even if the difference of P22.456,725.94 was indeed reported in the said quarters. Pursuant to Section 114(A) in relation to Section 108 of the NIRC of 1997, as amended, petitioner should have reported the zero-rated sales of P22,456,725.94 in its Quarterly VAT Returns for the period the payments were received, i.e., on June 2oo8 which is covered by the 2nd quarter of 2008. Since the input VAT sought to be refunded in the amount of P51,936,956.o5 is attributable to petitioner's gross receipts from sale of electricity to Ilocos Norte Electric Cooperative (INEC), in the amount of Ps6,8o9,o66.m, and, inasmuch as only the amount of P34,J52>340.o7 was declared in its 2nd Quarterly VAT Return, it is but proper to apportion the substantiated input VAT over the volume of zero- , rated sales per official receipts and only the amouny 154 CTA EB Nos. 1037 & 1042 (CTA Case No. 8119), 16 December 2014; Emphasis supplied. ISS SEC. 114. Return and Payment of Value-Added Tax.- (A) In General. - Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis. !56 SEC. 108. Value-Added Tax on Sale ofServices and Use or Lease of Properties.-

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x attributable to the zero-rated sales of P34,J52,J40.07 may be claimed for refund. Thus, there is no plausible reason why petitioner should be entitled to a refund of the substantiated input VAT without allocating its reported zero-rated sales to sales per official receipts because the substantiated input VAT covers the entire zero-rated sales, both reported and unreported sales for the quarter. In disallowing a portion of petitioner's zero-rated sales, it essentially follows that a portion of the claim for refund of input VAT attributable to such zero-rated sales should also be disallowed by the Court. Otherwise, We will be disregarding the substantiation of petitioner's zero- rated sales thereby negating its effect on the amount of unutilized input VAT claimed for refund. In the instant case, since some of the zero-rated sales were not reported in the appropriate period when such sales were made, it is apt for the Court to apportion the input VAT because it is impossible to specifically pinpoint what input VAT is directly attributable to such reported zero-rated sales. Clearly, the unreported gross receipts amounting to Pl43,379o351.23 must also be disallowed for purposes of determining the amount of substantiated input VAT to be refunded to petitioner. ii. SALE TO A PEZA-REGISTERED ENTITY UNDER SECTION w6(A)(2)(A)(s) OF THE NIRC OF 1997, AS AMENDED. Section w6(A)(2)(a)(s) of the NIRC ofl997, as amended, states: SEC. 106. Value-Added Tax on Sale ofGoods or Properties. - (A) Rate and Base ofTax. - ... (2) The following sales by VAT-registered persons shall be subject to zero percent (o%) rate/

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x (a) Export Sales.- The term 'export sales' means: (s) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws[.] Relative thereto, Section 4.106-s(a)(s) of RR No. 16-2oos'57, as amended by RR No. 04-2007'58, provides: SEC. 4.106-s. Zero-Rated Sales o(Goods or Properties. - ... The following sales by VAT-registered persons shall be subject to zero percent (o%) rate: (s) Export Sales. - ... (s) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of1987, and other special laws. "Considered export sales under Executive Order No. 226" shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws. even without actual exportation, the following shall be considered constructively exported: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended. 7903, 7922 and other similar export processing zones: {J) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority thy pursuant to RA 1227: (4) sales to registered export traders operating , bonded trading warehouses supplying raw materials in '" Supra at note 150. 158 Supra at note 151.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); (5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not.159 The special law applicable to this case is RA 7916160, otherwise known as "The Special Economic Zone Act of 1995", as amended by RA 8748.161 Section 8 thereof states that "[t]he ECOZONE shall be managed and operated by the PEZA as separate customs territory". By legal fiction, since the ecozone is viewed as a foreign territory, a VAT-registered person's sales of goods and services to an entity registered and operating within the ecozone in the Philippine customs territory are considered exports to a foreign country subject to zero percent (o%) VAT. The Supreme Court, in the case of Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc. 1 62 , explained: This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. ... An ECOZONE or a Special Economic Zone has been described as - ... [S]elected areas with highly developed or which have the potential to be developed into agro- industrial, industrial, tourist, recreational, commercia'/ 15, Emphasis, italics and underscoring in the original text. 160 AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CREATION, OPERATION, ADMINISTRATION, AND COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS PURPOSE, THE 161 PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), AND FOR OTHER PURPOSES. AN ACT AMENDING REPUBLIC ACT NO. 79I6, OTHERWISE KNOWN AS THE "SPECIAL ECONOMIC ZONE ACT OF I995". 162 G.R. No. !50 I54,09 August 2005; Citations omitted and emphasis supplied.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory. Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise? The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (w%) VAT [now, twelve percent (12%)]. Based on the foregoing and in relation to the aforementioned Section w6(A)(2)(a)(5) of the NIRC ofi997, as amended, the following essential elements must be present in order for an export sale to qualify for VAT zero-rating: 1. The sale was made by a VAT-registered person; and, 2. The sale of goods must be to an entity entitled to incentives under Executive Order (EO) No. 226, otherwise known as the Omnibus Investment Code of 1987 (OIC), and other special laws.;

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X As determined earlier, petitioner is a VAT-registered person hence, the 1st essential element is present.'63 Relative to the 2nd essential element, petitioner presented a Certification issued by PEZA dated 22 January 2016'64 certifying that AIG Shared Services- Business Processing Inc. (AIG Shared Services) is registered with PEZA and is a qualified enterprise for the purpose of VAT zero-rating. The said Certification further states that it is valid for year 2016. Accordingly, petitioner's sales of services to AIG Shared Services for the four (4) quarters of TY 2016 qualify for VAT zero-rating pursuant to Section w6(A)(2){a){s) of the NIRC of 1997, as amended, provided that the same are properly supported by VAT zero-rated ORs pursuant to Section 113(A)(2), (B)(1), (2)(a)(c), (3) and (4) of the NIRC of 1997, as amended, and Section 4.113-1 (A)(2), B(1), (2)(a)(c) of RR No. 16-2oos'65, as amended, which require 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 OR 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: (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/ ----------------- 163 Supra at note 11. 164 Exhibit "P-142", USB (Exhibit "P-5508-2"). 165 Supra at note 150.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (c) If the sale is subject to zero percent (o%) value-added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and (4) In the case of sales in the amount of One thousand pesos (P1,ooo) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client. SEC. 4�113-I. Invoicing Requirements. - (A) A VAT-registered person shall issue:- (z) 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: I (1) A statement that the seller is a VAT-registered person, followed by his TIN;

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (c) If the sale is subject to zero percent (o%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (3) In the case of sales in the amount of One thousand pesos (P1,ooo) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) of this Section. Upon examination of the submitted ORs in support of petitioner's sales of services to AIG Shared Services, the following zero- rated sales must be disallowed since the TIN of the customer was not indicated therein: OR No. Amount in Gross Receipts in Exhibit No. USDperORs PHPperSLS 04000285 P36,212,278.o8 "P-4~34~" 0400041'5 $780,012-47 4,026,24Q.<H "P-<;6o" 04000486 2,415,273-12 "P-627 " 04000668 86.~2q6 2,411,912. 3'i "P-8o2 " 04000606 2,243.710.62 "P-74'1" 04000709 52,000.83 2,417.49'5-72 "P-841 " 04000815 52,000.83 2,530,454�03 "P-944" 04000875 47.921.31 2,'i'i7,8>7-19 "P-1oo2 " <;o,q6o.81 P54,8I5,211.04 Total 50,960.81 '50,960.81 $1,171,139�23 To summarize, petitioner's valid and duly substantiated zero- rated sales for the four (4) quarters of TY 2016 amounted to PI,223,003,0SS�53� computed as follows:)

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Particulars T�2016 1'2,994.311,644�77 Zero-Rated Sales 143.379.351.23 Add: Unreported Zero-Rated Sales P3,137,6go,C)96.oo Total Zero-Rated Sales 128,817,412.90 Less: Disallowances 63,986,731.66 335,656,097.22 1) Zero-Rated Sales with no SEC 1,147,651,048.89 40,382,087�53 Certificate of Non-Registration 143.379.351.23 a. AIG Egypt Insurance 1'165,058.92 54,815,211.04 Company S.A.E. ~ b. AIG Europe Limited 26,142,233�05 Pt,223,003,055�53 !.II b c. AIG Europe Limited- 95,266,275.61 Ireland Branch d. AIG Lebanon S.A.L. _166 e. AIG MEA Ltd. - (Kuwait 51,401.87 Branch) f. New Hampshire 7,192,443-45 Insurance Company 2) Zero-Rated Sales supported only with SEC Certificate of Non- Registration a. AIG PNG Limited 862,121.33 b. AIG United Guaranty 39,231,801.08 Insurance (Asia) Limited c. American International 3�753�309.14 Group KK d. AIG South Mrica Limited 20,139,260.07 e. Chartis Azerbaijan 240.04167 Insurance Co. 3) Discrepancy in the names stated in the ORs 4) ORs dated beyond the issue date of the relevant SEC Certificates of Non-Registration 5) Zero-Rated Sales not traceable to the certificates of inward remittance provided 6) Unreported Zero-Rated sales 7) ORs issued to a PEZA-registered entity without the customer's TIN Total Valid and Substantiated Zero-Rated Sales 166 The sale to AIG Lebanon S.A.L. was no longer deducted since the JCPA already disallowed the same for not being traceable to the Certificates oflnward Remittances. 167 This amount excludes the other sale to Chartis Azerbaijan Insurance Co. since the same was already disallowed by the !CPA for not being traceable to the certificates of inward remittances.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x THIRD (3R0 l. FOURTH (4TH). FIFTH (sTH) and EIGHTH (gTH) REQUISITES: PETITIONER INCURRED UNUTILIZED INPUT VALUE-ADDED TAX (VAT) ATTRIBUTABLE TO ITS ZERO-RATED SALES. The Court shall jointly discuss and determine whether petitioner complied with the following remaining requisites: a. 3rd requisite: the input taxes are due or paid; b. 4th requisite: the input taxes are not transitional input taxes; c. 5th requisite: the input taxes have not been applied against output taxes during and in the succeeding quarters; and, d. 8th requisite: where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. In its amended Quarterly VAT Returns forTY 2016'68, petitioner declared excess and unutilized input VAT of P42,368,282.77 on its domestic purchases of capital goods exceeding and not exceeding PI Million, purchases of goods other than capital goods and services as well as the amortization of capital goods for TY 2016, as shown below: 1st Quarter 2�d Quarter 3'd Quarter 4th Quarter Total Input Tax Deferred 1'7,526,244-01 1'8,535.299�33 1'11,158,785.65 1'9.570,757�34 1'36,791,086.33 on Capital Goods Exceeding 1'1 Million - - - 12,4J2.00 .- 12,4)2.00 from Previous Quarter ,tJ Input Tax on Purchase of Capital Goods Not Exceeding 1'1 Million 168 Exhibits "P~5", "P-6", ''P-7'', and "P-8", FOE Folder.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x 1st Quarter 2nd Quarter 3'd Quarter 4 1 Quarter Total h 6,JJ4,634�77 Input Tax on 2,161,)61.52 4,17J,273-25 - - Purchase of Capital Goods Exceeding 1'1 1,739.766.13 351,171.70 633�571.24 269,647-22 2,994,156.29 Million Input Tax on 10.437.440.09 7.358,293�63 6.353,854�88 13,795.667-42 37.945,256.02 Domestic Purchase of Goods Other Than 237.863�70 121,255�01 1,)94,230. 73 1,753.349�44 Capital Goods Input Tax on 1'21,864,811.75 1'2o,655.901.61 1'18,267.466.78 1'25,042,734�71 1'85,83o,914.85 Domestic Purchase of Services 8,535,299.33 11,158,785.65 9.570,757�34 8,q2,513�55 37.437.355�87 Input Tax on Services rendered by Non- Pt3,J29�512,42 ~'9�497�ll5.� 1'8,6\)6,709-44 Pt6,870,221.16 p 48>393�558.98 residents 1,685,625.23 2�2ll,933�9� 1,177,270�74 6,025,2?6.21 950�446�33 Total Input Tax Ptt,643�887.19 1'8,546,669.63 1'6,484.775�53 Pt5,692,950.42 P42,J68,282.77 Less: Input Tax on Purchases of Capital Goods Exceeding 1'1 Million Deferred for Succeeding Period Total Allowable Input VAT Less: Output VAT Total Input VAT Applied for Refund In the instant case, since there is no showing that the claimed input VAT is transitional input tax (inasmuch as petitioner is not a newly-registered VAT taxpayer), the 4th requisite is deemed complied with. With respect to the 3rd requisite, petitioner provided supporting documents to prove that the input VAT claimed during the subject periods are actually due or paid, such as invoices or ORs from its suppliers. However, as stated in the ICPA Report'69, petitioner's input VAT in the amount ofP4,877,703.25 must be disallowed for not being oy properly substantiated with VAT zero-rated invoices/ORs as prescribed under Sections no(A)'70 and 113(A) and (B)'71 of the NIRC \ 169 Exhibit "P-5508", !CPA Report, pp. 12-13. 170 SEC. l1 0. Tax Credits. - (A) Creditable input Tax. - (I) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: (a) Purchase or importation of goods: (i) For sale; or (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code. (b) Purchase of services on which a value-added tax has actually been paid. (2) The input tax on domestic purchase or importation of goods or properties by a VAT- registered person shall be creditable: (a) To the purchaser upon consummation of sale and on importation of goods or properties; and (b) To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs. Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifry-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (Pl,OOO,OOO): Provided, however, That if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. (3) A VAT-registered person who is also engaged in transactions not subject to the value- added tax shall be allowed tax credit as follows: (a) Total input tax which can be directly attributed to transactions subject to value-added tax; and (b) A ratable portion of any input tax which cannot be directly attributed to either activity. The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section I I I of this Code. The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code. 171 SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. -A VAT-registered person shall issue: ( 1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt.- The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. Provided, That: (a) The amount of the tax shall be known as a separate item in the invoice or receipt; (b) If the sale is exempt from value-added tax, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt. (d) If the sale involved goods, properties or services some of which are subject to and some of which are VAT zero-rated or Vat exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be known on the invoice or receipt: Provided, That the se11er may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and (4) In the case of sales in the amount of One thousand pesos (Pl,OOO) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and ~axpayer Identification Number (TIN) of the purchaser, customer or client./

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x 1997, as amended, in relation to Sections 4.110-2'7', 4.110-3173, 4.110-8174 and 4.113-1'75 ofRR No. 16-2005176, as amended. ICPA Roguel's findingsm are as follows: 172 SEC. 4.110-2. Persons Who Con Avail of the Input Tax Credit. - The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT-registered person shall be creditable: (a) To the importer upon payment ofVAT prior to the release of goods from customs custody; (b) To the purchaser of the domestic goods or properties upon consummation of the sale; or (c) To the purchaser of services or the lessee or licensee upon payment of the compensation, rental, royalty or fee. 173 SEC. 4.110-3. Claim for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT} in a calendar month exceeds One Million pesos (PI ,000,000.00}, regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner: (a) If the estimated useful life of a capital good is five (5) years or more- The input tax shall be spread evenly over a period of sixty (60) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 60 and the quotient will be the amount to be claimed monthly. (b) If the estimated useful life of a capital good is less than five (5) years- The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (PI,OOO,OOO.OO), the total input taxes will be allowable as credit against output tax in the month of acquisition; Provided, however, that the total amount of input taxes (input tax on depreciable capital goods plus other allowable input taxes) allowed to be claimed against the output tax in the quarterly VAT Returns shall be subject to the limitation prescribed under Sec. 4.110-7 of these Regulations. The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired in instalment for an acquisition cost of more than PI,OOO,OOO.OO will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed PI ,000,000.00. 174 SEC. 4.110-8. Substantiation ofInput Tax Credits. - (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau: (I) For the importation of goods - import entry or other equivalent document showing actual payment of VAT on the imported goods. (2) For the domestic purchase of goods and properties- invoice showing the information required under Sees. 113 and 237 of the Tax Code. (3) For the purchase of real property - public instrument i.e., deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller. (4) For the purchase of services- official receipt showing the information required under Sees. 113 and 237 of the Tax Code. A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code. ' 175 SEC. 4.113-l.lnvoicing Requirements.-/

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Nature Reference Amount 1. Purchase of services supported by VAT OR which did P102,069.14 Annexes Jand not show the VAT amount separately uy,164.49 2. Invoices/ORs which are out-of-period ]-1 534.497-92 770,865�39 3� Invalid supporting documents AnnexK 247,014-42 4- Incorrect TIN of petitioner Annexes L and 1,978,271.89 L-1 5� No TIN of petitioner indicated 6. Purchase of goods and services duly supported by Annexes M and M-1 invoices/ORs but with alteration on petitioner's TIN AnnexN without countersignature 7� No supporting documents Annexes 0 8. Incorrect registered address of petitioner indicated in and 0-1 the supporting documents 9� Input VAT claimed is higher than that indicated in the Annex P 1,U9,167.12 supporting document AnnexQ 3.755�36 Total Annex R 4.897�52 P4,877,703.25 ' I (A) A VAT-registered person shall issue: - (I) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoice or official receipts. Said documents shall be considered as a "VAT Invoice" or VAT official receipt. All purchases covered by invoices/receipts other than VAT InvoiceNAT 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: (I) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The selJer has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) In the case of sales in the amount of one thousand pesos (PJ,OOO.OO) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (I) and (2) of this Section. 176 Supra at note 150. 177 Exhibit "P-5508", !CPA Report, pp. 12-13.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Additionally, upon further scrutiny of the ICPA Report'78 with the other submitted documentary evidence, the Court finds that a total amount ofP4,621,209.o7 shall likewise be disallowed for failure to meet the substantiation requirements, to wit: Exhibit Supplier Amount Reason a. Input VAT on services rendered by non-residents "P-27�4" COMPUTRON SOF'IWARE 1"44,640.00 WVAT Return was AUSTRALIA 2,232.00 filed and remitted DR! MALAYSIA SON BHD outside the period 148,8oo.oo of claim (in 2017) BOCA PERFORMANCE IMPROVEMENT ASIA PTE LTD PEGA SYSTEMS INC. 59.520.00 1,012,078.08 PROCESS WORKS PTE LTD 1"1.,267,270.08 Subtotal b. Purchase ofgoods or services "P-1373" AIG SHARED SERVICES- BUSINESS 153.705.12 Incorrect name of "P-1652" PROCESSING INC. petitioner COMLAN INC 9,200.00 "P-2os6" EASTERN TELECOMS 480.00 480.00 "P-2o57'' 400.357�36 "P-1376" FILINVEST ASIA CORPORATION 47.929-33 56,o61.46 "P-1377" 55,087.49 54.982.74 ~~P-1378" 400.357�35 "P-1415" 54.499�15 57,043�79 IIP-1724" 55.719�90 840.00 "P-1725" 101,294�88 "P-1778" 8,546.39 409-50 "P-2187" 3,407.14 2,768.27 "P-2188" 1,869.69 11P-I38o" GOLDEN ARIES AIRE SYSTEM 163,252.80 INCORPORATED "P-2129" JOE RILEY &ASSOCIATES INC. 37.434�78 [...,. "P-2130" A "P-1734" JOLLIBEE FOODS CORPORATION "P-1796" "P-1389" LANTRONIX SYSTEM INC "P-173611 MARSH PHILIPPINES, INC. "P-2153" ONESEARCH INCORPORATED ~~P-1752" ORACLE (PHILIPPINES) CORPORATION 178 Exhibit "P-5508", !CPA Report.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Exhibit Supplier Amount Reason "P-1754" PICAZO BUYCO TAN FIDER & SANTOS 1,200.00 "P-1755" RED RIBBON BAKESHOP INC "P-2157'' SM PRIME HOLDINGS INC 23,486.64 "P-1711" STAR APPLIANCE CENTER INC 3,805.71 ''P-zozo" TOWER CLUB, INC. "P-1456" 26.357�57 TOWERS WATSON PHILIPPINES, 2,748.21 "P-1714 .. INC. 2,710�71 TRI SENSE CORPORATION 1,489.29 "P-2103 " AIG PHILIPPINES INSURANCE, INC. 16,122.32 AUDIO 4 DESIGN N TECHNOLOGY 8,839�29 ''P-2172" CORP. CONTRADE INTEGRATED DEPOT 13,500.00 "P-2173" INC. 1,J28.57 "P-21o4 .. ELID TECHNOLOGY INTERNATIONAL, INC. 79.747�98 With noted "P-1682" EXTINGUISHED INC. 8,J94�00 handwritten 11 P-I326" ISO-LUX INDUSTRIAL SALES alterations or 117.60 additions in the "P-1319 " JD ASTRO DISTRIBUTORS, INC. 198.oo computerized/ "P-1654" 280.32 typewritten JENIFFER PASCUA ARROYO 936.16 invoices/ORs .. 11P-2027 1,680.96 without JOIR ENTERPRISES 1,523.81 countersignature of 11P-2oz8" NEHEMIAH ONE VENTURES INC. 1,118.57 the authorized representative of 11P-2029" the supplier "P-2o3o" 7,500,00 ,. 11 P - I J 2 0 11 547�05 768.oo A "P-2032" 4.582.80 ~ "P-1316" 585.48 "P-1330" 612.00 "P-2034 " 173�24 "P-IJJI11 110-46 "P-1332" "P-2035" 1,J50,00 "P-2036" 1,665�70 .. 216.oo 3.960.00 IIP-1040 702.00 "P-1322" 1,500.00 "P-2012" 4,o5o.oo "P-2013" 1,116.6o 28,875�00 "P-2o14 .. 102.86 "P-2015" "P-2016" "P-2037.. 11 P-2017 11 IIP-200411

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x Exhibit Supplier Amount Reason "P-2005 " 77-14 NEXUS TECHNOLOGIES INC. "P-1043"/ 1,201,016.g2 PINGCON MARKETING "P-1043.1" CORPORATION 5�976.oo IIP-1339" SCHNEIDER ELECTRIC THE FIRST ENTERPRISE INC. I "P-r668'' THE FIRST ENTERPRISE INC. "P-r66g" ULTRA MODULAR CONCEPTS, INC. 5.780.14 "P-167o" INTERLINK BUSINESS SOLUTIONS "P-t6sr" INC 4.376�79 ''P-r7go" IIP-1791" PICAZO BUYCO TAN FIDER & 3.488.40 "P-1792" SANTOS "P-1793" MONTEMAR BEACH CLUB INC 39.626.40 "P-1794" "P-togs" 3,916.8o Supporting 5,875.2o document is not "P-rn6" 5,875.20 valid for claiming 3,916.8o input VAT 3,916.8o "P-1036"/ ISO-LUX INDUSTRIAL SALES 1,200.00 Supported by VAT ORs with erasures "P-1o~6.r" DIMENSION DATA PHILIPPINES, n6,787.10 but without INC. countersignature of "P-2031" 6,698.78 the authorized 25,680-48 representative of the supplier Illegible supporting document Supported by VAT invoice with no CAS permit number indicated Subtotal PJ,J5J,938�99 Total p 4,6;l.1,209.07 Anent the input taxes on services rendered by non-residents, it must be noted that Sections 4.no-8(a) and (c) and 4�114-2(b) of RR No. 16-2oos179, as amended, provide: SEC. 4.no-8. Substantiation ofInput Tax Credits.- (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the s% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau: / 179 Supra at note 150.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X (d) Input tax from payments made to non-residents (such as for services, rentals and royalties) shall be supported by a copy of the Monthly Remittance Return of Value Added Tax Withheld (BIR Form t6oo) filed by the resident payor in behalf of the non-resident evidencing remittance of VAT due which was withheld by the payor. SEC. 4�114-2. Withholding of VAT on Government Money Payments and Payments to Non-Residents. - (b) The government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, as well as private corporations, individuals, estates and trusts, whether large or non- large taxpayers, shall withhold twelve percent (12%) VAT, starting February 1, 2oo6, with respect to the following payments: (1) Lease or use of properties or property rights owned by non-residents; (2) Other services rendered in the Philippines by non-residents. In remitting VAT withheld, the withholding agent shall use BIR Form No. 16oo - Remittance Return of VAT and Other Percentage Taxes Withheld. VAT withheld and paid for the non-resident recipient (remitted using BIR Form No. 16oo), which VAT is passed on to the resident withholding agent by the non-resident recipient of the income, may be claimed as input tax by said VAT-registered withholding agent upon filing his own VAT Return, subject to the rule on allocation of input tax among taxable sales, zero-rated sales and exempt sales. The duly filed BIR Form No. 16oo is the proof or documentary substantiation for the claimed input tax or1. nput VAT.'80 As can be gleaned from the afore-quoted provisions, the withholding VAT (WVAT) may be claimed as input tax credit in the month such WVAT is withheld and remitted to the BIR supported 1 by BIR Form No. 16oo. However, in the instant case, the Decemb/ ISO Emphasis and underscoring supplied.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION x---------------------------------------------------------x 2016 WVAT Return's' was filed and remitted to the BIRon 09 January 2017, which is outside the period of claim. Thus, out of petitioner's claimed input VAT ofP48.393,558.98 for TY 2016, only the amount of PJ8,894,646.66 represents the substantiated input VAT, computed as follows: Claimed Input VAT I'4,877,703.25 I'48,)93�558.98 Less: Disallowances 4,621,209.07 9,498,912.32 Per !CPA PJ8,894,646.66 Per Court's verification Substantiated/Valid Input VAT Consequently, in compliance with the gth requisite, only the substantiated unutilized input VAT ofPJ2,869,J70.45 can be attributed to the total zero-rated sales in the amount of PJ,137,69o,996.oo, after deducting the output VAT of P6,o25,276.21's', and only the input VAT of P12,812,48o.6o is attributable to the valid zero-rated sales of PI,22J,OOJ,055�53, as determined below: Total Zero-Rated Sales [A] TY2m6 Valid Zero-Rated Sales [B] 1'3,137,690,996.oo Percentage of Valid Zero-Rated Sales [C=B/A] Substantiated/Valid Input VAT [D] 1,223,003,055�53 Less: Output VAT [E] 38-98% Substantiated/Valid Input VAT attributable to Zero- Rated Sales [F=D-E] 38,894,646.66 Excess Input VAT attributable to Valid Zero-Rated 6,025,276.21 Sales [FxC] 32,869,)70-45 1'12,812,480.60 Lastly, the claimed input VAT ofP42,368,282.77 was carried-over by petitioner in 2017 and the same remained unutilized until it was eventually deducted as "VAT Refund/TCC Claimed" in its 4th Quarterly VAT Return for TY 2017's3; thus, preventing the carry-over or application of the claimed input VAT in the next taxable periods.'s;/ 181 Exhibit "P-27.4", FOE Folder. 182 Exhibits "P-5" to "P-8", id. 183 Supra at note 26. 184 Exhibit "P-5508", !CPA Report, pp. !0-1 I.

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X Verily, petitioner likewise complied with the s'h requisite stating that the input VAT have not been applied against output VAT during and in the succeeding quarters. In sum, petitioner has sufficiently proven its entitlement to the refund or issuance of tax credit in the amount of P12,812,48o.6o, representing the unutilized input VAT attributable to its zero-rated sales for the four (4) quarters ofTY 2016. WHEREFORE, premises considered, the present Petition for Review filed by petitioner AIG Shared Services Corporation (Philippines) on 23 July 2018 is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue, is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P1.2,812,48o.6o, representing unutilized excess input value-added tax (VAT) attributable to its zero-rated sales for the four (4) quarters of taxable year ended 31 December 2016. SO ORDERED. t LLENA I CONCUR: ~~c.~~~ g. JifANITO C. CASTANEDX,')R. Associate Justice

CTA Case No. 9879 AIG Shared Services Corporation (Philippines) v. CIR DECISION X---------------------------------------------------------X 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.~"'-'..., Q. J13ANrro c. CASTANEDX, JR. Associate Justice 2nd Division Chairperson CERTIFICATION Pursuant to Section 13, Article VIII 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's Division. Presiding Justice