GENERAL MOTORS AUTOMOBILES PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION GENERAL MOTORS CTA CASE NO. 8976 AUTOMOBILES PHILIPPINES, INC., Members: Petitioner, CASTANEDA, JR., Chairperson, and CASANOVA, JJ. -versus- COMMISSIONER OF Promulgated: INTERNAL REVENUE, MAY 0'i. 2017 / Respondent. r7 It:~"'�~. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X AMENDED DECISION CASANOVA,}. : Before this Court is respondent's Motion for Reconsideration filed, through registered mail, on December 16, 2016 and received by this Court on January 4, 2017, with petitioner's Comment/Opposition (On Respondent's Motion for Reconsideration dated 16 December 2016), filed on January 30, 2016. Respondent seeks reconsideration of the Court's Decision dated December 2, 2016, the dispositive portion of which reads: "WHEREFORE, premises considered, this instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND the amount of P3,579,874.53 in favor of petitioner, representing the latter's unutilized input VAT attributable to its zero-rated sales for the CY 2012 ~

AMENDED DECISION CTA CASE NO. 8976 SO ORDERED." In assailing the aforesaid Decision, respondent has presented the following arguments: 1. Input taxes that are not directly attributable to petitioner's zero-rated sales must be excluded; 2. Petitioner failed to prove that its clients/customers are non-resident foreign corporation doing business outside the Philippines; 3. Petitioner fell short of the invo1cmg requirements under Section 113 of the National Internal Revenue Code of 1997, as amended by Republic Act (R.A.) No. 9337;and 4. Failure to print/imprint the word "zero-rated" on the sales invoices is fatal to a claim for refund of input VAT. Petitioner has sufficiently established that its clients are non-resident foreign corporations doing business outside the Philippines, and that part of the input taxes claimed are attributable to its zero-rated sales. Respondent contends that petitioner failed to establish and prove that its sales were directly attributable to the zero-rated sales. Allegedly, the purported zero-rated receipts which petitioner presented do not, in any way, establish that they are directly attributable to zero-rated sales or effectively zero-rated sales. Respondent, likewise, claims that the discrepancy between input Value-Added Tax (VAT) per claim and input VAT per supporting documents only shows that the instant claim for refund must be denied due to inconsistencies. It is further alleged by respondent that each entity must be supported, at the very least, by both Securities and Exchange Commission (SEC) certificate of registration of ~

AMENDED DECISION CTA CASE NO. 8976 corporation/partnership and certificate/articles of foreign incorporation/association/registration to be considered as non- resident foreign corporation doing business outside the Philippines. Respondent posits that the documents presented by petitioner are not sufficient to prove that its clients are non-resident foreign corporations. Allegedly, except for General Motors Global Service Operations, Inc. and Onstar, LLC. Petitioner failed to present the certificates/articles of foreign incorporation of its clients. Respondent further states that the documents presented as to its clients Chevrolet Sales (Thailand) Ltd., General Motors (Thailand) Limited and General Motors Holdings LLC/General Motors North America/Customer Care and Aftersale merely showed that they are registered in the land of incorporation, but do not prove that they are non-resident foreign corporations doing business outside the Philippines. On the other hand, petitioner counter-argues that it submitted more than sufficient documents to prove that its clients are non- resident foreign corporations doing business outside the Philippines. Petitioner also avers that it only made and reported zero-rated sales in calendar year (CY) 2012 which all pertain to sales of consultancy and administrative services to non-resident foreign corporations doing business outside the Philippines. Petitioner alleges that respondent overlooked the fact that the former had no VATable and VAT exempt sales during the said period as it had no domestic sales. Considering that all of petitioner's sales are zero- rated, it is allegedly logical that all of its input VAT should be attributable to the said sales. Petitioner also insists that the Independent Certified Public Accountant (ICPA) confirmed that the input VAT amounting to P3,579,874.53 is properly attributable to petitioner's zero-rated sales for CY 2012. In addition, petitioner claims that the motion for reconsideration is merely a pro-forma motion because respondent failed to provide specific details or to illustrate why the input VAT covered by the claim for refund are not attributable to petitioner's zero-rated sales. Petitioner also alleges that respondent's reliance on the doctrine that tax refunds are in the nature of tax exemptions and must be strictly construed against the claimant is misplaced since the same would not apply in cases where the taxpayer has clearly established its entitlement to a refund based on law and evidence.~

AMENDED DECISION CTA CASE NO. 8976 The Court finds respondent's arguments bereft of merit. The Court has enumerated in the assailed Decision the documents presented by petitioner and has already ruled that the same proved that the latter's clients are non-resident foreign corporations doing business outside the Philippines. Contrary to respondent's allegation, petitioner has presented its clients' SEC Certificates of Non-Registration of Company and Certificates of Incorporation/Association/Registration, as follows: Chevrolet Sales Documents presented Exhibits (Thailand) Ltd. Exhibit "P-53-A" Certification of Non-Registration of Company issued by the Exhibit "P-52" General Motors Securities and Exchange Commission (SEC\ March 16, 2015 (Thailand) Limited Consularized Certificate of Residence of Chevrolet Sales Exhibit "P-53" (Thailand) Ltd. authenticated by the Philippine Embassy on General Motors June 17, 2015 Exhibit "P-55-A" Global Service Consularized Certificate of Registration of Chevrolet Sales Exhibit "P-54" Operations, Inc. (Thailand) Ltd. authenticated by the Philippine Embassy on March 30, 2015 Exhibit "P-55" Onstar, LLC Certification of Non-Registration of Company issued by the SEC, March 17 2015 Exhibit "P-57-A" General Motors Consularized Certificate of Residence of General Motors Exhibit "P-56" Holdings LLC/General (Thailand) Limited authenticated by the Philippine Embassy on June 17, 2015 Exhibit "P-57" Motors North Consularized Certificate of Registration of General Motors America/Customer (Thailand) Limited authenticated by the Philippine Embassy on Exhibit "P-59-A" Care and Aftersales March 30, 2015 Exhibit "P-58" Certification of Non-Registration of Company issued by the SEC, March 17, 2015 Exhibit "P-59" Original Certificate of Residence of General Motors Global Exhibit "P-61-A" Service Operations, Inc. issued by the Department of the Exhibit "P-61-B" Treasury Internal Revenue Service in Philadelphia, PA, April 2, Exhibit "P-61-C" 2012 Exhibit "P-60" Consularized Certificate of Incorporation of General Motors Global Service Operations, Inc. authenticated by the Philippine Exhibit "P-61" Embassy on March 13 2015 Certification of Non-Registration of Company issued by the SEC March 16, 2015 Original Certificate of Residence of Onstar, LLC issued by the Department of the Treasury Internal Revenue Service in Philadelphia PA, February 27, 2012 Consularized Certificate of Incorporation of Onstar, LLC authenticated by the Philippine Embassy on March 13 2015 Certification of Non-Registration of Company issued by the SEC April 14 2015 Certification of Non-Registration of Company issued by the SEC March 17, 2015 Certification of Non-Registration of Company issued by the SEC, April 15, 2015 Original Certificate of Residence of General Motors Holdings LLC, Inc. issued by the Department of the Treasury Internal Revenue Service in Philadelphia, PA April 9, 2012 Consularized Certificate of Formation of General Motors

AMENDED DECISION CTA CASE NO. 8976 Holdings LLC authenticated by the Philippine Embassy on May 28, 2015 Likewise, the Court has considered the testimony of Ms. Modesty N. Alcala showing that the Customer Care and Aftersales is a division of General Motors North America, which is an operating segment of General Motors Holdings LLC, to wit: "In the Judicial Affidavit of Ms. Modesty N. Alcala, petitioner's Finance Manager, she manifested that Customer Care and Aftersales is only a division of General Motors North America, an operating segment of General Motors Holdings LLC. All billings to General Motors North America are addressed directly to Customer Care and Aftersales. All receipts for General Motors North America are likewise in the name of Customer Care and Aftersales since it is the Customer Care and Aftersales which directly transacts with petitioner. To prove this, petitioner has submitted Exhibits "P-29" to "P-29-B". Said exhibits are comprised of internal reports such as Forecasts, Variance Budget/Forecast against actual, and IAS Monthly Statement, of Customer Care and Aftersales to petitioner and vice versa for the months of September 2012 and October 2012. The Court notes that even though the internal reports and billing statements pertain to Customer Care & Aftersales, the financial entity indicated in all the reports is GM LLC- GMNA."1 Without any convincing evidence to controvert the above ruling, the Court sustains its finding that petitioner complied with the second requisite that the recipient of services is a non-resident foreign corporation doing business outside the Philippines. As regards the issue on whether the input VAT is attributable to petitioner's zero-rated sales, the Court has ruled in the assailed Decision that only the input VAT of P3,579,874.53 can be attributed to petitioner's zero-rated sales, to wit: "From the declared input VAT of P4,125,644.74, petitioner is claiming the refund of the amount of41&- 1 Page 12 of the assailed Decision dated December 2, 2016

AMENDED DECISION CTA CASE NO. 8976 P4,125,403.72. In support of the foregoing, petitioner has offered various official receipts and invoices issued by its supplier's (sic), which were examined by the Court- Commissioned Independent CPA (!CPA), Mr. Glenn Ian Villanueva of Reyes Tacandong & Co. In his Report. xxx. XXX XXX XXX Apparently, the foregoing findings are in order. Thus, out of the claimed input VAT of P4, 125,403.72, petitioner has been able to substantiate only the amount of P3,825,492.37, and only the input VAT of P3,579,874.53 can be attributed to the zero-rated sales that have been substantiated, computed as follows: Input VAT claimed for Refund p 4,125 403.72 Less: Disallowances per !CPA Report Substantiated input VAT 299 911.35 Divided by Reported Zero-Rated Sales p 3,825,492.37 Multiply by Substantiated Zero-Rated Sales p 79,207,236.90 Input VAT attributable to Substantiated Zero-Rated Sales p 74,121,692.81 p 3,579,874.53'12 However, as will be discussed, a re-evaluation of the evidence presented by petitioner shows that the amount of substantiated input VAT for the CY 2012 found in the assailed Decision should be reduced, which shall consequently modify the amount of input VAT attributable to the substantiated zero-rated sales. Additional input taxes should be disallowed as the nature of the services rendered were not indicated in the supporting official receipts. Respondent avers that petitioner's claimed input taxes on domestic purchases of goods/services must be disallowed on the following grounds: that VAT was not separately indicated in the supporting VAT official receipts/sales invoices; that some of the invoices/receipts do not have the quantity, unit cost, and description of the goods or properties or nature of the service; and, that some ok 2 Pages 12 to 18 of the assailed Decision dated December 2, 2016

AMENDED DECISION CTA CASE NO. 8976 the sales invoices/official receipts are without TIN and address of petitioner. Respondent also claims that failure to print/imprint the word "zero-rated" on the sales invoices is fatal to a claim for refund of input VAT. Petitioner opposes respondent's arguments stating that the same have no basis and petitioner complied with the invoicing requirements provided in Section 113 of the Tax Code. Petitioner asserts that Mr. Glenn Ian D. Villanueva, the !CPA, examined all the original commercial invoices and official receipts dated January to December of CY 2012. After the said examination, the !CPA allegedly determined that only P299,911.35 out of the P4,125,403.72 claimed input VAT failed to comply with the invoicing requirements. Petitioner also claims that respondent failed to identify the specific commercial invoices and/or official receipts that do not satisfy the requirements provided in Section 113 of the Tax Code. Based on the foregoing arguments, the Court finds it proper to revisit and further scrutinize the supporting documents presented by petitioner. A careful evaluation of the invoices and official receipts supporting petitioner's input VAT reveals that the additional input VAT of P3,552,703.74 should be disallowed as the nature of services rendered were not indicated in the supporting official receipts, in violation of Section 113(8)(3) of the NIRC of 1997, as amended, detailed as follows: Exhibit Supplier Invoice/ Disallowed Official Input VAT Receipt No. P-65 p. 001 Airfrieght 2100, Inc. 1667528A p 330.53 P-65 p. 002 Airfrieght 2100, Inc. 1686040A P-65 p. 003 Airfrieght 2100, Inc. 1678384A 323.48 P-65 p. 004 Angara Abello Concepcion Regala & Cruz 61589 P-65 p. 005 John Clements Consultants, Inc. 111387 319.35 P-65 p. 006 John Clements Consultants, Inc. 111599 P-65 p. 007 Manabat Delgado Amper & Co. 14338 9,000.00 P-65 p. 008 North Point Printing Press 11837 P-65-A p. 037 Business Process Outsourcing International Inc. 51388 6,219.69 P-65-A p. 038 Business Process Outsourcing International Inc. 51773 P-65-A p. 039 CEO Suite Philippine Branch 6,571.22 P-65-A p. 040 Commonwealth Tire Service Center 2839 19445 52,800.00 407.14 1,228.08 6,940.08 3,096.00 2,298.21 ,....

AMENDED DECISION CTA CASE NO. 8976 P-65-A p. 043 John Clements Consultants, Inc. 111959 7,158.63 P-65-A p. 044 John Clements Consultants, Inc. 112042 7,595.62 P-65-A p. 045 Lane Archive Technologies Corp 37096 5,824.20 P-65-A p. 047 SGV & Co. 96793 P-65-A p. 048 SGV &Co. 96816 144.00 P-65-B p. 150 Adventure International Tours, Inc. 200-00025295 26,400.00 P-65-B p. 151 Angara Abello Concepcion Regala & Cruz 63929 P-65-B p. 152 Angara Abello Concepcion Regala & Cruz 66050 36.00 P-65-B p. 154 BPO Outsourcing International Inc. 53143 9,000.00 P-65-B p. 155 BPO Outsourcing International Inc. 52503 79,086.10 P-65-B p. 156 BPO Outsourcing International Inc. 53521 2,070.60 P-65-B p. 157 BPO Outsourcing International Inc. 54292 1,642.20 P-65-B p. 160 Hewlett-Packard Phils. Corporation 121663 1,642.20 P-65-B p. 161 Hewlett-Packard Phils. Corporation 123209 1,642.20 P-65-B p. 162 Hewlett-Packard Phils. Corporation 123583 378,453.65 P-65-B p. 163 Hewlett-Packard Phils. Corporation 124400 378,002.97 P-65-B p. 164 Hewlett-Packard Phils. Corporation 122412 374,941.76 P-65-B p. 165 John Clements Consultants, Inc. 112548 380,812.18 P-65-B p. 166 John Clements Consultants, Inc. 112295 379,644.53 P-65-B p. 167 John Clements Consultants, Inc. 112741 8,341.56 P-65-B p. 168 John Clements Consultants, Inc. 112989 7,333.85 P-65-B p. 170 Lane Archive Technologies Corp 37095 7,854.95 P-65-B p. 171 Lane Archive Technologies Corp 37097 7,299.96 P-65-B p. 172 Manabat Delgado Amper & Co. 15003 5,790.60 P-65-B p. 174 SGV &Co. 97849 5,790.60 P-65-B p. 175 SGV &Co. 99823 33,600.00 Angara Abello Concepcion Regala & Cruz Law 24,569.40 P-65-C p. 261 Offices 66850 Angara Abello Concepcion Regala & Cruz Law 264.00 P-65-C p. 262 Offices Business Process Outsourcing International Inc. 41,760.00 P-65-C p. 263 Business Process Outsourcing International Inc. P-65-C p. 264 Business Process Outsourcing International Inc. 68397 23,880.00 P-65-C p. 265 Business Process Outsourcing International Inc. P-65-C p. 266 Hewlett-Packard Phils. Corp. 54810 1,642.20 P-65-C p. 270 Hewlett-Packard Phils. Corp. 55328 1,642.20 P-65-C p. 271 Hewlett-Packard Phils. Corp. 54292 1,642.20 P-65-C p. 272 John Clements Consultants, Inc. 55909 1,642.20 P-65-C p. 273 John Clements Consultants, Inc. 125116 374,226.87 P-65-C p. 274 John Clements Consultants, Inc. 125843 371,789.66 P-65-C p. 275 Lane Archive Technologies Corp. 126389 372,651.90 P-65-C p. 277 Manabat Delgado Amper & Co. 113242 7,361.89 P-65-C p. 278 Cebu City Marriott Hotel 113478 7,099.20 P-65-C p. 279 Quaerito Qualitas Inc. 113756 5,932.25 P-65-C p. 280 SGV &Co 35802 5,790.06 P-65-C p. 281 15281 TOTAL 169865 803.57 4357 1,944.00 102714 77,280.00 31,140.00 p 3,552,703.74 Thus, petitioner's substantiated input VAT for the CY 2012 as found in the assailed Decision shall be reconsidered and adjusted~

AMENDED DECISION CTA CASE NO. 8976 from P3,825,492.37 to P272,788.63. Consequently, only the input VAT of P255,274.09 can be attributed to the zero-rated sales that have been substantiated, computed as follows: Input VAT claimed for Refund p 299,911.35 p 4 125 403.72 Less: Disallowances 3 552,703.74 3 852 615.09 Per ICPA Report Per this Motion for Consideration p 2721788.63 Substantiated input VAT Divided by Reported Zero-Rated Sales p 79 207 236.90 Multiply by Substantiated Zero-Rated Sales p 74 121 692.81 Input VAT attributable to Substantiated Zero-Rated Sales p 2551274.09 WHEREFORE, premises considered, respondent's Motion for Reconsideration is PARTIALLY GRANTED. Accordingly, the dispositive portion of the Decision of this Court dated December 2, 2016 is hereby amended to read as follows: "WHEREFORE, premises considered, this instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND the amount of P255,274.09 in favor of petitioner, representing the latter's unutilized input VAT attributable to its zero-rated sales for the CY 2012. SO ORDERED." SO ORDERED. CAESA~ANOVA Associate Justice I CONCUR: <;Z..,~c:.~~ ~ JtiANITO C. CASTANEDA/lR. Associate Justice

AMENDED DECISION CfA CASE NO. 8976 ATTESTATION I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~c_.~~.Q JU'ANITO C. CASTANEoi(, JR Associate Justice 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 Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice