PETROTRADE PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Fonn No.8 1111111111111111111111111111111111111 1111111111111111111111111111111111111111111 22-000279- 0055 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE N0.10882 PETROTRADE PHILIPPINES, NOTICE OF DECISION INC., Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Village Makati City ATTY. AYESHA BANIA B. GUILING-MATANOG Bureau of Internal Revenue Room 703, Litigation Division, BIR National Office Building Sen. Miriam P. Defensor-Santiago Avenue Diliman, Quezon City DU-BALADAD AND ASSOCIATES 20th Floor, Chatham House Rufino comer Valero Streets Salcedo Village, Makati City GREETINGS: You are hereby notified by these presents that on July 9, 2026, a Decision was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, July 13, 2026. Atty. Maria ~~� Chan-Te Executive er ourt III

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION PETROTRADE CTA Case No.1o882 PHILIPPINES, INC., Members: Petitioner, BACORRO-VILLENA, Acting Chairperson, and CUI-DAVID, ]]. -versus - COMMISSIONER OF INTERNAL REVENUE, ,JPUroLmijli~ ated: ; SOPI'l Respondent. }( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - }( DECISION BACORRO-VILLENA, L: At bar is a Petition for Review1 filed by petitioner Petrotrade oft Philippines, Inc. (petitioner) pursuant to Section 3(a),2 Rule 8 in relation to Section 3(a)(1),3 Rule 4 of the Revised Rules of the Court Filed on I0 June 2022, Division Docket, Volume I, pp. 7-42 . SEC. 3 . Who may appeal; period tofile petition. - (a) A party adversely affected by a d ecision, ruling or the inaction of th e Commissioner o f Internal Revenue on disputed assessments o r claims for refund of internal r evenue taxes, or by a decision or ruling of the Commissioner of C ustoms, 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 appeal to the Court by petiti on for review filed within th irty days after receipt of a copy of such decision or ruling, or exp iration of the period fixed by law fo r the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Comm issioner of Internal Revenue on claims fo r refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition fo r review within the two-year period prescribed by law fro m payment or co ll ection of the taxes . S EC. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall e x er c ise : (a) Exclusive orig inal over or appellate j urisdiction to review by appeal the following: ( I) Decisions of the Commissione r of Internal Revenue in cases involving disputed assessments, refunds of interna l revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Intern al Revenue Code or other laws administered by the Bureau of Intern al Revenue[.]

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x--------- ------------- --------- ----------------x Tax Appeals (RRCTA), challenging respondent Commissioner of Internal Revenue's (respondent's/CIR's) total denial of its administrative claim for refund or issuance of tax credit certificate (TCC) in the amount of P38,812,218.95� The amount claimed represents excess and unutilized input Value-Added Tax (VAT) on purchases of goods and services, and importations attributable to zero-rated sales for the third (3rd) quarter of calendar year (CY) 2020. PARTIES TO THE CASE Petitioner is a corporation organized under Philippine law and registered with the Securities and Exchange Commission (SEC) with Company Registration No. 196991 and 94 Scout Rallos St., Sacred Heart, Quezon City as its principal office.4 It is likewise registered with the Bureau of Internal Revenue (BIR) with Taxpayer's Identification Number (TIN) ooo-658-115-ooooo under Revenue District Office (RDO) No. 124- Excise Large Taxpayers Audit Division (ELTAD) Il.5 Petitioner is engaged in the wholesale or retail trading of all kinds of petroleum products and domestic shipping operations and hauling services.6 Respondent, on the other hand, is the duly appointed CIR of the BIR vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of said office, including, inter alia, the power to decide disputed assessments, grant tax refunds and issue tax credit certificates, pursuant to the provisions of the National Internal Revenue Code (NIRC) of1997, as amended, and other tax laws, rules and regulations. He or she holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City. FACTS OF THE CASE On 22 October 2020, petitioner filed its BIR Form No. 2550-Q or Quarterly VAT Return for the 3rd quarter of CY 2020 (Original VAT Return), . through the BIR's Electronic Filing and Payment System (eFPS).7 t 4 Certificate of Filing of Amended Articles ofl ncorporation, Exhibit "P-2", Division Docket, Vo lume I, p. 402. See also Amended Articles of Incorporation, Exhibit "P-3", id., pp. 403-4 12. BIR Certificate of Registration, Exhi bit "P-6", id., pp. 422-424. 6 Corporate Information, Note I (General Information), 2020 Audited Financial Statements, Exhib it " P-1 0", id., p. 449. Exh ibit " P-2 1" , id ., pp. 533-534.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION X- -- - ---------------- - - - -------- - --- -- ----------X Petitioner filed amended returns on the following dates: 14 April 20218 (First Amended VAT Return), 19 May 20219 (Second Amended VAT Return), and 25 May 202110 (Third Amended VAT Return). In its Third Amended VAT Return, petitioner declared total sales ofP852,387,579�53, which included zero-rated sales ofP420,794,369.87. Petitioner also declared that it incurred input tax during the 3rd quarter of CY 2020 in the total amount ofP78,883,757�02, composed of: 11 Input Tax Source Amount Domestic Purchases of Goods Other than Capital Goods Importation of Goods Other than Capital Goods P2.448 ,590.22 Domestic Purchases of Services 67,8 02,932.84 Total Input Tax from Current Transactions 8 , 6 3 2 , 233 �9 6 P-78,883,757�02 Signaling its intent to refund the portion of the said input tax attributable to its zero-rated sales, petitioner deducted P38,942,192.o6 from its Total Available Input Tax. 12 On 12 January 2022, petitioner filed with respondent's ELTAD II an administrative claim for refund of P38,812,218.95 representing the input tax attributable to its zero-rated sales for the 3rd quarter of CY 2020.13 The amount claimed was computed as follows :14 Sales Amount of Sales Percentage of Output Tax each sale to Vatable Sales 4 31. 5 9 3 . 2 0 9 .6 6 total sales 51,791,185 .16 Zero-rated sales 4 2 0 ,79 4 .36 9 . 8 7 To tal 8 5 2>387. 57 9 � 5 3 50 .63% - Purchases Total Input Tax 49 �37% 51,791,185.16 Importations 67,077,661.26 w o .oo% Total Amount Local purchases of goods and services 11,542,814.25 Percentage of being Claimed Total 78 ,620>475�51 Zero-rated for Refund Sales over Total Sales 33,113,929�44 5,6 9 8 ,28 9 . 51 49�37% jy/ 38,812,218.gs < 49�37% 0 Exhib it " P-22- 1", id., pp. 535-536. 9 Exhib it " P-22-2", id., pp. 537-538 . 10 Exhib it " P-22-3", id., pp. 539-540. II Id. 12 Id., Line 23(D). 13 Letter-Request fo r Administrative C la im, Exhibit "P-27", id., pp. 557-55 8. See also Applicat io n for Tax Cred it/Refund (BIR Form 19 14), Exhibit " P-28", id., p. 559. 14 See Annex A-1 to the ICPA Report, id., p. 2 8 1.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x After filing its administrative claim, petitioner again amended its VAT return for the 3rd quarter of CY 2020 on 22 April 202215 (Fourth Amended VAT Return). Among other amendments, petitioner reduced the amount of its claim (from P38,942,192.o6 in the Third Amended Return) to P26,829,290.09. On 12 May 2022, petitioner received respondent's Letter dated 10 May 2o2216 (Denial Letter) informing petitioner that its claim for refund for the 3rd quarter ofCY 2020 is denied due to its failure to deduct the amount claimed In its quarterly VAT return for the 3rd quarter of CY 2021. PROCEEDINGS BEFORE THE COURT Aggrieved, petitioner filed the present Petition for Review17 on 10 June 2022. The case was raffled to the Court's Second Division, which issued the Summons on respondent on 20 June 2022.18 After being granted an extension, respondent eventually filed his or her Answer on 22 August 2o22.19 In his or her Answer, respondent insisted that petitioner's administrative claim for refund was properly denied as it failed to comply with Revenue Memorandum Order (RMO) No. 47-2020,20 specifically the latter's requirement that the quarterly VAT returns for the relevant quarter must show the deduction of the amount claimed from the available input tax filed on or before the date of the application for the VAT refund. According to respondent, petitioner did not reflect the amount claimed for refund for the 3rd quarter of CY 2020 in its VAT return for the 3rd quarter of CY 2021, which should have been amended on or before its administrative claim taxt was filed. Petitioner's failure to do so resulted in the overstatement of carry-over amounts in the succeeding returns. Finally, respondent averred that petitioner's claim for refund, being in the nature of a IS Exhibit " P-22-4", id., pp. 54 1-542. 16 Exhibit "P- 1" I " R-2", BIR Records, Folder 8 of 8, pp. 344-345. 17 Supra at note I. 18 Division Docket, Vo lume I, p. 54. 19 See {I) Motion for Extension of T ime to File Answer, id., pp. 56-58; (2) Order dated 28 July 2022, extending respondent's deadline to file an Answer until 22 August 2022., id ., p. 60; and (3) An swer, id ., pp. 6 1-68. 20 Consolidated and Updated Guidelines and Procedures on the Processing ofC laims for Value-Added Tax Credit/Refund Except T hose under the A uthority and Jurisdiction of the Legal G roup.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x- - ----------- ------------- --------- ---- ------ --x exemption, must be construed in strictissimi juris against the taxpayer and in favor of the government. Subsequently, the Pre-Trial Conference was set on 24 November 2022.21 In anticipation, the parties filed their respective Pre-Trial Briefs beforehand.22 Pre-Trial Conference proceeded as scheduled.23 On 09 January 2023, the parties filed their Joint Stipulation of Facts and Issues24 (JSFI). On the same day, petitioner sought the commissioning of George V. Villaruz (Villaruz) to serve as the Independent Certified Public Accountant (ICPA) for the case.2 5 Meanwhile, respondent elevated the BIR records on n January 2023.26 The Court admitted and approved the parties' JSFI.27 With the issuance of the Pre-Trial Order28 on 25 January 2023, pre-trial is deemed terminated. The case was then transferred to this Court's First Division pursuant to Administrative Circular No. 01-2023 (Reorganizing the Divisions of the Court) dated 23 May 2023.29 Satisfied with ICPA Villaruz's competence and independence, the t Court appointed the latter as the case's ICPA during the hearing on 27 September 2023.'0 21 See Notice of Pre-Trial Conference dated 08 September 2022, Di vision Docket, Vo lume I, pp. 78- 79. 22 See (I) petitioner' s Pre-Trial Brief filed on 18 November 2022, id., pp. 80-11 0; and (2) respondent' s Pre-Trial Brief filed on 2 1 November 2022, id., pp. 111-11 3. 23 See Order dated 24 November 2022, id ., pp. 11 7- 11 8. 24 !d., pp. 169-1 92. 25 Motion to Avail of th e Provisions of Rule 13 of the Revised Rul es of the Court of Tax Appeals, id., pp. 193-196. 26 Compl iance, id., pp. 199-20 I . 27 See Resolution dated 22 January 2023, id., p. 204. 28 !d., pp. 207-217. 29 Notice of Resolution dated 29 May 2023, id., p. 2 18. 30 See Order dated 27 September 2023, id., pp. 249-2 50.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x--------------------------------- ---- ----------x On the same day, petitioner presented Alfie I. Herrera (Herrera), its Finance Manager, as its first witness.31 Through his Judicial Affidavit, Herrera testified that: (1) petitioner imports fuel such as industrial fuel oil, marine gas oil, and automotive diesel oil for export; (2) petitioner's zero-rated sales declared in its VAT returns for the 3rd quarter of CY 2020 refers to its sale of bunker fuel to international shipping companies to be used for international shipping operations; (3) since petitioner's purchases for the said period included 12% input taxes, a substantial portion of this input taxes are attributable to petitioner's zero-rated sales, which were not utilized in the quarter they were incurred and were not used in subsequent periods; (4) after allocating petitioner's input taxes of P78,620.475�51 to its zero-rated sales (which composed 49.37% of its total sales), petitioner have P38,812,219.51 unutilized input taxes, which is the subject of the present claim for refund; (5) petitioner filed its administrative claim with respondent on 12 January 2022, within two (2) years from the close of 3rd quarter of CY 2020; and (6) petitioner received respondent's letter dated 10 May 2022 denying its administrative claim on 12 May 2o22.32 No cross-examination was conducted.33 Next to testify was ICPA Villaruz, who took the witness stand on 14 November 2023.34 By way of his Judicial Affidavit, he testified that: (1) he is the Court-commissioned ICPA; (2) pursuant to the Court's instructions, he prepared the ICPA Report dated 30 October 2023;35 (3) on 10 November 2023, he submitted the ICPA Report to the Court, together with a USB36 containing the scanned copies of the documents he examined; (4) to verify that petitioner's sales were indeed sold to foreign vessels, he accessed an International Maritime Organization (IMO) report entitled "GISIS Ship and Company Particulars"37 (IMO Report) which is readily available in IMO's website; (5) based on the results of his examination, petitioner is entitled to the refund of unutilized input tax ofP25.431,286.74 (out of its claim ofP38,812,218.gs)~ 31 !d . u 32 See Judicial Affidavit of Alfie I. Herrera subscribed on I0 June 2022, Exhibit " P-85", USB attached to the Petition for Review, supra at note I . 33 TSN dated 27 September 2023, p. 22. 34 See Order dated 14 November 2023 , Division Docket, Volume I, pp. 646-647. 3S Exhibit "P-I 00", id., pp. 254-3 12. 36 Exhibit "P- I00-2", USB. 37 See ( I) Printout of IMO's website, Exhibit "P-408", id.; (2) Summary of printouts of screenshots of GISIS Ship and Company Particulars, Exh ibit " P-409", id.; (3) Printouts of vesse l detai ls fro m the IMO webs ite, Exhibit "P- 41 0" to "P-454", id., and (4) Printout of vessels details fro m the Vessel Finder found in the IMO's website, Exhibit " P-455".

CTA Case No. 10882 Petrotrade Phil ippines, Inc. v. Comm issioner of Internal Revenue DECISION x-------------------------------------- ------ -- -x for the period 01 July 2020 to 30 September 2020; (6) the difference of P13a8o,932.21 represents (i) the remaining output tax ofPu,690,786.o7, and (ii) disallowed input tax ofP690,146.14. 38 In his cross-examination, ICPA Villaruz maintains that IMO's website can be used to verify whether the vessels were actually operating outside the Philippines.J9 During redirect examination, he pointed out that the Philippines is a member of the IM0.4 0 He also testified that he wrote a letter41 to the IMO requesting for (1) the official publication of the IMO Convention and (2) a certified list of IMO's member countries.42 No re-cross examination was conducted.43 Following the presentation of its witnesses, petitioner filed its Formal Offer of Evidence44 (FOE) on 04 December 2023 and offered Exhibits "P-1" to "P-6os", with sub-markings, to prove its entitlement to its claim for refund. Respondent did not interpose specific objection to the exhibits but only as to the manner they were identified and subject to the condition that they have faithfully complied with the necessity of comparison with the original documents.4s The Court reconsidered and admitted petitioner's documents, except for the following:46 Exhibit Document Reason for Denial No. P-n Quarterly VAT Return for the Failure of the exhibit ; / 4 th quarter of CY 2019 formally offered and ' 38 .. .... 7) See Jud1c1al Affidavit of George C . Vll laruz subscnbed on 13 November 2023, Exh1b1t P-99 , Division Docket, Volume I, pp. 32 1-348 . 39 TSN dated 14 Novem ber 2023, pp. 10- 1I 40 Id., p. 18. 41 Exh ibit " P-605". 42 Supra at note 39, at pp. 18-19. 43 Jd ., p. 2 1. 44 Division Docket, Volume I, pp. 352-40 I. 45 Comment (On Petitioner's Formal Offer of Evidence) filed on 28 December 2023, Division Docket, Volume II, pp. 652-654. 46 See (I) Resolution dated 02 May 2024, id., pp. 660-667; (2) Petitioner' s Omnibus Motion for Reconsideration filed on 22 May 2024, id., pp. 668-744 (with annexes); (3 ) Resolution dated 30 July 2024, id., pp. 752-757; (4) Petitioner' s Compliance (with Attached Copy of Certification dated August 9, 2024) filed on 09 August 2024, id., pp. 758-764 (with attachment); (5) Resolution dated 22 October 2024, id., pp. 775-776 ; (6) Compliance (with Attached Hard Copies of the Orig ina lly Marked Exhibits "P-38", "P-44", and "P-55") fi led on 04 November 2024, id. , pp. 777-788 (with attachments); and (7) Reso lution dated 03 March 2025, id., pp. 793-797.

CTA Case No. 10882 Petrotrade Ph ilippines, Inc. v. Commissioner of Internal Revenue DECISION x---------------- -- ---------------------------- - x Exhibit Document Reason for Denial No. identified to P-456-2 P-457-2 correspond to the P-458-2 P-459-2 document actually P-460-3 P-584 marked P-588 P-592 Assessment Notice No. L-1018354 P-593 P-594 Assessment Notice No. L-1018338 P-595 Assessment Notice No. L-1022199 P-37 Assessment Notice No. L-1022204 Customs Payment Receipt Original Certificate of Registration with the BIR Authority to Use CAS dated May 2, 2oo8 Failure to present Letter from the Department of Foreign the originals for Affairs (DFA) dated December 10, 2020 comparison Certificate issued by the DFA dated December 10, 2020 Instrument ofAccession Senate Resolution No. 220 (Resolution Concurring m the Ratification of the International Convention on the Simplification and Harmonization of Customs Procedures as Amended) Request for Certification with the For not being found Maritime Industry Authority (MARINA) dated November 23, 2020 in the records During respondent's turn to present evidence on 24 April 2025, Revenue Officer (RO) Raymond D. Hernandez (Hernandez) took the witness stand as respondent's sole witness.47 By way of his Judicial Affidavit, RO Hernandez testified on the following: (1) he was the RO who conducted the verification and examination of petitioner's claim for refund for the 3rd quarter of CY 2020; (2) after reviewing the documents, he recommended the denial of petitioner's claim through Memorandum Report48 dated 03 March 2022; (3) his recommendation was approved, hence, respondent issued the Denial Letter49 on 10 May O 2022, which petitioner r~ed on 12 May 2022; and (4) he identified the BIR Recordsso for case.51 47 See Order dated 24 April 2025, id., pp. 799-800. 48 Exhibit " R- 1", BIR Records, Fo lder 8, pp. 32 3-340. 49 Supra at note 16. 50 Exhibit " R-3". 51 See Judicial Affidavit of Revenue Officer Raymond D. Hern andez dated 22 Augst 2022, Exh ibit " R-4", Di vision Docket, Volume I, pp. 73-76.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x------- - ------------- - --------------- --- - ----- - x On cross-examination, RO Hernandez admitted that under the BIR Revised Checklist of Mandatory Requirements under RMO No. 47-2020,52 the taxpayer is required to submit only the VAT return corresponding to the covered period and not the VAT returns for the succeeding periods.53He also admitted that petitioner amended its VAT return for the 3rd quarter of CY 2021 after its filing of the present claim, and that petitioner is allowed to amend its returns as long as there is no Letter of Authority (LOA) issued to the taxpayer.54 On redirect examination, RO Hernandez clarified further that the amended VAT return for the 3rd quarter of CY 2021 was filed after the issuance of the Denial Letter.ss There were no re-cross examination questions.56 Afterwards, respondent offered his or her documentary evidence composed of Exhibits "R-1" to "R-4".57 Without specific objections from petitioner, the Court admitted the said exhibits, subject to its final evaluation and appreciation of their probative value in relation to the issues raised.58 With the filing of petitioner's Memorandum59 and respondent's Manifestation60 that the Answer (and the arguments raised therein) are being adopted as his or her memorandum, the Court submitted the case for decision on 10 July 2025.61 ISSUE -t The sole issue for this Court's resolution is 52 Supra at note 20. 53 TSN dated 24 April 2025, pp. 7-9. 54 !d., pp. 9-10 . 55 !d., pp. II . 56 !d. 57 !d. 58 !d. 59 Filed on 26 May 2025, Division Docket, Volume II, pp. 802-833 . 60 Filed on 27 June 2025, pp. 838-840. 61 See Notice of Resolution dated I0 July 2025, id., p. 844.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-------------------------------- -- -------------x WHETHER PETITIONER PETROTRADE PHILIPPINES, INC. IS ENTITLED TO ITS CLAIM FOR REFUND IN THE TOTAL AMOUNT OF P38,812,218.95, ALLEGEDLY REPRESENTING ITS UNUTILIZED AND EXCESS INPUT VALUE-ADDED TAX {VAT) ATTRIBUTABLE TO ITS ZERO-RATED SALES/RECEIPTS FOR THE 3Ro QUARTER OF TAXABLE YEAR (TY) 2020.62 ARGUMENTS In support of the petition, petitioner argues that it has complied with all the requisites for a claim for refund, to wit: (1) it is a VAT- registered taxpayer; (2) it is engaged in zero-rated sales; (3) the subject input taxes are due and paid; (4) the input taxes being claimed are attributable to zero-rated sales and those input taxes which cannot be directly attributed have been proportionately allocated; (s) the input taxes claimed have not been applied in the succeeding quarters; (6) the claim was filed within two (2) years after the close of the taxable quarter when the sales were made; and (7) the present judicial claim was filed within thirty (3o) days from the receipt of the Denial Letter. Moreover, contrary to respondent's claim, the amount being claimed for refund was deducted in its Amended Quarterly VAT Returns for the 3rd quarter of CY 2021 filed on 20 April 2022 and 29 May 2022. That these amendments were made after the filing of the administrative claim is not a valid ground for respondent to deny petitioner's claim.63 On the other hand, respondent maintains that petitioner's administrative claim for refund was properly denied since petitioner did not reflect the claim for refund in the CY 2021 3rd quarter VAT return, which should have been amended on or before the claim was filed. In other words, the amount being claimed for refund for the 3rd quarter of CY 2020 should have been deducted from carry-over amounts in the amended returns for the 3rd quarter of CY 2021. Petitioner's failure to do so resulted in the overstatement of carry-over amounts in the t succeeding returns. Finally, respondent averred that petitioner's claim for refund, being in the nature of a tax exemption, must be construed in. strictissimi juris against the taxpayer and in favor of the government.64 62 Pre-Trial Order, supra at note 28. 63 !d . 64 Answer, supra at note 19.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x------------- ------- -------- -------------------x RULING OF THE COURT After a careful and thorough evaluation of the parties' respective evidence and the applicable laws, rules and regulations, the Court finds the instant petition partly meritorious. Petitioner anchors its claim on Sections no(B),65 n2(A) and (C) of the NIRC of 1997, as amended by Republic Act (RA) No. 10963 or Tax Reform for Acceleration and Inclusion (TRAIN), which are quoted hereunder: 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 refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. 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 ofcreditable 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 ofthe Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods or properties or services, and the amount ofcreditable input tax due or paid cannot be U directly and entirely attributed to any one of the transactions, it shall~ be allocated proportionately on the basis of the volume of sales: 65 As am ended by Repu blic Act No. 936 1, " AN ACT AMENDING SECTION II 0(8 ) OF THE NATI ONAL INTERNAL REVENUE CODE OF 1997, AS AMEN DED, AN D FO R OTHER PURPOSES".

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x 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 ofInput 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 (3o) days from the receipt of the decision denying the claim, appeal the decision with the Court ofTax 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 (9o)-day period shall be punishable under Section 269 of this Code.66 In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd. 67 (Deutsche), the Supreme Court laid down the requisites for the entitlement to tax refund or credit of excess input tax attributable to zero-rated sales, to wit: Under Section 4.112-1(a) of Revenue Regulations No. (RR) 16-os, otherwise known as the Consolidated VAT Regulations of 2005, in relation to Section 112 of the Tax Code, a claimant's entitlement to a tax refund or credit of excess input VAT attributable to zero-rated sales hinges upon the following requisites: "(1) the taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim must be filed within two years after the close of the taxable quarter when such sales were t made; and (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such ~~put tax has not been applied against the output tax." 66 Italics in th e original text. 67 G .R. No. 234445, 15 July 2020; Citations om itted.

CTA Case No. 10882 Petrotrade Philippines, Inc. v . Comm issioner of Internal Revenue DECISION x --- -- -- - -- -- --- ------- ---- - -- ---- ----- -- -------x Based on the foregoing, the Court will proceed to determine whether petitioner complied with the aforementioned requisites. For an orderly discussion, We shall start with the third (3rd) requisite, followed by the first (1st) and second (2nd) requisites, then the fourth (4th) requisite. 3RD REQUISITE: THE CLAIM MUST BE FILED WITHIN TWO (2) YEARS AFTER THE CLOSE OF THE TAXABLE QUARTER WHEN SUCH SALES ARE MADE. In accordance with Section n2(A) and (C) of the NIRC of1997, as amended by TRAIN, the administrative claim for refund of unutilized input tax must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales are made. Petitioner's present claim covers the 3rd quarter of CY 2020. Counting two (2) years from the close of the 3rdquarter on 30 September 2020, petitioner had until 30 September 2022 to file its administrative claim before respondent. Thus, petitioner's administrative claim lodged with the CIR on 12 January 2022,68 was filed on time. As to the timeliness of petitioner's judicial claim, respondent had ninety (90) days or until 12 April 2022, to decide on petitioner's administrative claim. However , this 90-day period was extended toU for another 30 days under Revenue Regulations (RR) No. 01-2022,69 a~~ clarified in Revenue Memorandum Circular (RMC) No. 16-202270 due 68 Supra at note 13. 69 Extens ion of the Deadlines for th e Filing of Returns and Payment of the Corresponding Taxes Due Thereon, Revenue Regul ati ons No. 1-2022, 20 January 2022 . Section I of which provides: " Purpose. - In view of the declaration by the COVID-1 9 Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) placing various parts of th e country und er Alert Level 3 or higher and tak ing into account the mandate of Presidential Proclamation No. 12 18 for a ll government agencies to continue rendering full assistance to and cooperation w ith each other in order to curta il and e liminate the threat of COVID-1 9, the statutory deadl ines for the . .. (ii) filing of applicati on for tax refund, includ ing claim fo r Value-Added Tax (VAT) refund; (iii) processing of VAT refund ; ... falling due during the period declared as Alert Level 3 or higher are hereby extended." 70 Clarifying th e Scope and Coverage of the Extension of Deadlines Granted Pursuant to Revenue Regu lations No. 1-2022, 3 1 January 2022. It provides, among oth ers, that " Also, the extension sha ll apply to the processing period prescribed fo r VAT refund processing. For exampl e, if the VAT refund claim was fi led on the December 15, 202 1, the 90-day processing period is unti l March 14,

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x---- --- ------------- ---------------------------x the Covid-19 pandemic. Thus, respondent's Denial Letter issued on 10 May 2022 was issued before the additional3o days expired on 12 May 2022. As such, petitioner had 30 days from its receipt of the Denial Letter on 12 May 2022 or untiln June 2022, within which to file a judicial claim before this Court. Thus, the instant Petition for Review was also seasonably filed on 10 June 2022.71 Such being the case, the Court finds that petitioner satisfied the 3rd requisite. t 5T REQUISITE: PETITIONER MUST BE VALUE-ADDED TAX {VAT) REGISTERED. Undeniably, petitiOner is a VAT-registered taxpayer with TIN ooo-6s8-ns-ooooo, as shown in its BIR Certificate of Registration Number OCN 124RC2o21ooooooo522.72 2ND REQUISITE: PETITIONER MUST BE ENGAGED IN SALES WHICH ARE ZERO-RATED OR EFFECTIVELY ZERO-RATED. The 2nd requisite requires that the taxpayer be engaged in zero- rated or effectively zero-rated sales. Petitioner alleges that it is engaged in zero-rated sales as it sells its bunker fuels to persons engaged in international shipping, where the goods are used for international shipping operations. Section 1o6(A)(2)(a)(6) ofthe NIRC of1997, as amended, provides: -t SEC. 106. Value-Added Tax on Sale of Goods or Properties. 2022. However, in view of the declaration of Alert Level 3 in the National Capital Region, the processing of VAT refund claim shall be extended until April 13, 2022 (30 days from March 14, 2022) . 71 Supra at note I. 72 Exhibit " P-6", Division Docket, Volume I, pp. 422-424.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-- -------------------------- ----- ---- ----------x (A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or exchange ofgoods 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 (o%) rate: (a) Export Sales. - The term 'export sales' means: (6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations: Provided, That the goods, supplies, equipment and fuel shall be used for international shipping or air transport operations. 73 The above provision is implemented by Section 4.106-s of RR No. 16-2005/4 as amended by RR No. 13-2018/s which provides that: SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. - A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations. The following sales by VAT-registered persons shall be subject to zero percent (o%) rate: (a) Export sales. - "Export Sales" shall mean: U (s) The sale of goods, supplies, equipment and fuel to~ persons engaged in international shipping or international air 73 Emphasis supplied. 74 Consolidated Value-Added Tax Regulations of 2005, Revenue Regulations No. 16-05, OJ September 2005. 75 Regulations Implementing the VAT Provisions under the RA No. I0963, Further Amending RR No. 16-2005, as Amended, Revenue Regulations No. 13-18, 15 March 20 18.

CTA Case No. 10882 Petrotrade Philippines , Inc. v. Commissioner of Internal Revenue DECISION x------- ----------------------- -- ------ -- - - - - - -- x transport operations: Provided, That the goods, supplies, equipment, and fuel shall be used exclusively for international shipping or air transport operations. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations is limited to goods, supplies, equipment and fuel that shall be used in the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and /or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad: Provided,further, that ifany portion ofsuch fuel , goods, supplies or equipment is used for purposes other than that mentioned in this paragraph, such portion of fuel , goods, supplies, and equipment shall be subject to u % VAT.76 Based on the foregoing, to qualify for VAT zero-rating, petitioner's sales of bunker fuel oils to foreign vessels must comply with the following: 1. Petitioner sold the fuel to persons engaged in international shipping operations; and 2 . The buyer used the fuel exclusively for international shipping, which means the transport of goods and/or passengers from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines. In this connection, petitioner's Fourth Amended VAT Return77 shows that petitioner had sales for the 3rd quarter of CY 2020, as follows : Description Amount Vatable Sales I Receipt P43I,593,209.66 Zero-Rated Sales I Receipt 420 ,794.36 9 .87 Total P8s2.387,579 �53 76 Emphasis suppl ied . 77 Supra at note 15.

CTA Case No. 10882 Petrotrade Philipp ines, Inc. v. Commissioner of Internal Revenue DECISION x-- -- -- -- -- --- -- --- - -- - -- --- ---- -- -- - -- -- ------ -x According to petitioner, its sales of bunker fuel oils amounting to P420,794,369.87 met the criteria for zero-rating, as follows : (1) it sold the fuels to vessels registered under foreign countries; (2) the fuel sold was loaded to the international vessel; and (3) the international vessel directly proceeded to a foreign port without docking or stopping at any port in the Philippines. The first order of business is for the Court to determine whether petitioner's zero-rated sales exists. Based on case records, petitioner's zero-rated sales for the 3rd quarter of CY 2020 amounting to P420,794,369.87 is supported with Sales Invoices,78 Bunker Delivery Receipts (BDRs),79 and Bunkering Permits80 issued by the Bureau of Customs (BOC). Second, to determine whether petitioner's zero-rated sales for the 3rd quarter of CY 2020 were indeed sold to foreign vessels, the Court verified petitioner's zero-rated sales against MARINA's Certification81 dated 28 December 2020 (MARINA Certification), whereby the latter certified that "verification of this Authority's records showed that the foreign vessels in the attached list are not appearing in the Philippine Registry of Domestic Ships, and the same have not been granted any Special Permit to temporarily trade/operate domestically". In addition to the MARINA Certification, petitioner also presented the IMO Report82 extracted from IMO's website to prove the foreign registration of the foreign vessels. The IMO Report allegedly shows the ships' IMO reference number, ship name, flag administration, and ship status which are used to identify a foreign vessel and determine the foreign flag.83 However, the Court cannot give credence to the information extracted by petitioner from the IMO website (https://gisis.imo.org/Public/SHIPS/Default.aspx) because the Court is unable to confirm the existence and accuracy of the details provided by petitioner. Nevertheless, the Court finds t~at the MARINA Certification is sufficient to prove this particular point.~ 78 n~ See Summary in Annex C-2, !CPA Report, supra at 35. See also the Sales Invoices, Exhibits "P-I 57" to "P-2 18", US B attached to the !CPA Report, supra at note 36. 79 See Summary in Annex D, !CPA Report, supra at note 35. See also the Bunker Delivery Receipts, Exhibits "P-219" to "P-275", US B attached to the !CPA Report, supra at note 36. 80 See Summary in Annex E, !CPA Report, supra at note 35 . See also the BOC Bunkering Perm its, Ex hi bits " P-286" to " P-335", US B attached to the !CPA Report, supra at note 36. 81 Exhi bit " P-578", USB attached to th e !CPA Report, supra at note 36 . 82 Supra at note 37. 83 Par. 46, petitioner' s Memorandum, supra at note 59.

CTA Case No. 10882 Petrotrade Philippines , Inc. v. Commissioner of Internal Reven ue DECISION X--------------- - ------------------------------ -X Lastly, to determine whether the foreign vessels proceeded directly to a foreign port from a port in the Philippines, or vice versa, without docking or stopping at any other port in the Philippines, the Court verified petitioner's zero-rated sales for the 3rd quarter of CY 2020 against the BOC Certifications dated 15 June 2023,84 24 May 2023, 85 14 April 86 30 March 2023,87 and 19 June 202388 (BOC 2023, Certifications) whereby it certified that the listed vessels "departed for their respective Next Foreign Port of Destination after bunkering operations" from a port in the Philippines. The Court's verification shows the following: No. Name of Name of Amount of Amount of Vessel Next Port of Customer Receiving Sales Sales Registry per Call per BOC Certifications Vessel (in USD) (in PHP) MARINA Certification PRINCESS M /V 434,000.00 2.1,603,2.18.oo United Singapore I CRUISE LINES Golden 178,5oo.oo Kingdom (GB) Princess 310,000.00 LIMITED United Singapore M/V 8,885,194�50 Kingdom (GB) PRINCESS Diamond 2. CRUISE LINES Princess 15.430,870.00 Netherlands Singapore (NL) LIMITED M/VNieuw Amsterdam HOLLAND 3 AMERICA LINE M/V Ruby t86,ooo.oo Bermuda (BS) Singapore Princess 9 .258.522.00 N.V. M/VRoyal 158,10o.oo Bermuda (BS) Singapore PRINCESS Princess 414,000.00 7.869.743�70 Singapore 4 CRUISE LINES M/V United LIMITED Sapphire 2.0,607,678.00 Kingdom (GB) Princess PRINCESS 5 CRUISE LINES M/V Pacific 310,000.00 United Singapore Dawn 15,)32.,2.90.00 Kingdom (GB) LIMITED PRI NCESS M/V Netherlands Singapore 6 CRUISE LINES Zuiderdam 2.49.900.00 Singapore LIMITED 12.}59.804.10 (NL) CARN IVAL CORPORATION M/V Netherlands Noordam 7 I CARNIVAL 2.2.1,777�58 11,039.42.2..60 (NL) P.L.C. M/V 153.000.00 Panama (PA) Singapore ~ HOLLAND Carnival 7.564.932..00 8 AMERICA LINE Conquest N.V. HOLLAND 9 AMERICA LINE N.V. CARNIVAL CORPORATION 10 I CARNIVAL P.L.C. 84 Exhibits " P-580", USB attached to the ICPA Report, supra at note 36. 85 Exhibits "P-580-1 ", id. 86 Exhibits " P-580-2", id. 87 Exhibits " P-580-3", id. 88 Exhibits " P-580-4", id.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x No. Name of Name of Amount of Amount of Vessel Next Port of Receiving Sales Sales Registry per Call per BOC Customer Certifications Vessel (in USD) (in PHP) MARINA Certification CARNIVAL MN Carnival CORPORATION Dream 3o6,ooo.oo Panama (PA) Singapore 11 / CARNIVAL 15,129,864.00 P.L.C. CARNIVAL MN Carnival 12 CORPORATION Panorama 276,000.00 Panama (PA) Singapore I CARNIVAL 460,000.00 13,646, 544.00 MNCosta 497,836.23 P.L.C. Venezia 255.000.00 264,85o.oo COSTA MN Costa 22,793,000.00 Italy (IT) Hong Kong 13 CROCIERE S.P.A Serena 73�050.00 24,596,oq6.78 Italy (IT) Singapore MN 221.)27�39 COSTA Japan 14 CROCIERE S.P.A Norwegian 301,648.82 Joy BREAKWAY MN Bahamas (BS) 15 FOUR LTD. 12,633.720.00 Southern SOUTHERN Robin 13,035,122.45 Liberia (LR) Vietnam 16 DRAGON MN 3>595>301.85 Liberia {LR) 10,943.)11.47 Korea (KR) Not included CHEMICAL S.A. Minoan 14,928,6oo.1o in the BOC Sky Panama (PA) Certifications FIRENZE SEAS 17 S.A. M/VSein Port of Sun Destination SEIN SHIPPING 18 CO., LTD. MN not IndicatedSc) HONG KONG Liaoyu Reefer 1 Port of EVER OCEAN Destination not Indicated 19 SHIPPING 90 COMPANY LIMITED CARNIVAL M/V Carnival 20 CORPORATION Splendor 270,900.00 Panama (PA) Singapore I CARNIVAL 26,200.00 13,J04,982.60 Indonesia MNTiger P.L.C. Summer 49.200 .00 China Malaysia TIGER SHIP NO. MNKiran 257.355-00 1,286,524.80 Hong Kong South Korea 21 Caribbean (HK) 2 LIMITED MN Spectrum SPARROW of the Seas 22 MARITIME Malta (MT) LIMITED 2,416,4o8.8o SPECTRUM OF Bahamas (BS) 23 THE SEAS INC. 12,639.733�47 ASAHI TANKER MNSunny 86,940.00 Panama (PA) CO., LTD. I Orion 4,264,841.70 24 SOLAR SHIPPING & TRADING S.A 89 Petitioner presented the BOC Certification dated 19 June 2023 (Exhibit "P-580-4" ) which certified that MN Sein Sun berthed and underwent bunkering activities at its Sub-Port in General Santos City, Philippines. However, the said Certification did not indicate the relevant period and the port of destination. 90 Petitioner presented the BOC Certification dated 19 June 2023 (Exhibit "P-580-4") which certified that MN Liaoyu Reefer I berthed and underwent bunkering activities at its Sub-Port in General Santos City, Philippines. However, the said Certification did not indicate the relevant period and the port of destination.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x---- -------------------------------------------x No. Name of Name of Amount of Amount of Vessel Next Port of Customer Receiving Sales Sales Registry per Call per BOC Certifications Vessel (in USD) (in PHP) MARINA Certification Did not ply SUN LANES M/VCNC 54,000.00 2,648.970.00 domestic 25 SHIPPING S.A. Jupiter 361,000.00 Malta (MT) waters9' PRINCESS M/V Ruby 51,500.00 Bermuda (BS) Singapore 26 CRUISE LINES Princess 17,678,170.00 48.700 .00 LIMITED 750.00 GLENDA 120,250.00 113,000.00 INTENATIONAL M/V 48,8oo.oo Liberia (LR) Manila92 SHIPPING Glenda 2,517,835�00 27 DESIGNATED Melody QO, OQ').OO ACITVITY 146,11 2.57 COMPANY 314,572.50 20 ,4 0 0 . 0 0 GRAND BLUE M/V Weco 20.400.00 2,380,943�00 Singapore Did not ply 28 SHIPPING PTE. Laura '17,600.00 36,440.25 (SG) domestic 215,500 .0 0 waters9J LTD 262,800.00 5.888,642.50 Not in the Not included list in the BOC MONJASA PTE M/V Certifications 29 LTD Chemtran Singapore s Polaris (SG) Singapore KUMIAI M/V Azul 30 NAVIGATION Libero PTE. LTD. OCEAN TIANYONG M/V Daisy 5�487.)93�00 Hong Kong China 31 SHIPPING Ocean (HK) China LIMITED Singapore BLACK SHIP M/V Orient 2,369,776.8o United Singapore 32 LINE S.A. Hope 4.418,078.61 Kingdom (GB) Singapore HARTMAN M/V Pacific United Outside of 33 SHIPPING 1 B.V Dawn Kingdom (GB) Claim TRIO HAPINESS MN 7,087,044�00 Panama (PA) Period94 34 S.A. 15,266,20343 Wawasan Netherlands China ADVANCE Ruby (NL) 35 CHINOOK LTO. China MN Korea Chinook China DOMI M/V Liberia (LR) 36 DEVELOPMENT Bourbon 991,868.40 S.A. BRIGHT M/V Noble Panama (PA) 991,746.00 37 PESCADORES sw S.A. PANAMA SUN LANES M/V Sinar 2,800,224.00 Panama (PA) 38 SHIPPING S.A. Sangir 10.448,o86.5o Marshall Is CHEMBULK MN (MH) 39 HONGKONG Chembulk Panama (PA) LLC Hongkong 12,739.492.80 CONNECTORt MN 40 AS Co n n e c t o r 91 While the BOC Certification dated 14 Apri l 2023 (Exhibit " P-580-2") did not indicate the port of destination, it certified that MN CNC Jupiter "did not ply domestic waters, based on availab le records". 92 Per BOC Certification (undated), Exhibit " P-580-5". 93 While the BOC Certification dated 14 April 2023 (Exhibit " P-580-2") did not indicate the port of destination , it certified that MN Weco Laura "did not ply domestic waters, based on available records". 94 The BOC Certification dated 30 March 2023 (Exhibit "P-580-3") shows that MN Bourbon departed Manila Port for Quangyen, Vietnam on 16 March 2021 , a date outside of the claim period of 3rd Quarter of CY 2020.

CTA Case No. 10882 Petrotrade Ph ilippines, Inc. v. Commissioner of Internal Revenue DECISION X--------------------------------------- ----- --- X No. Name of Name of Amount of Amount of Vessel Next Port of Customer Receiving Sales Sales Registry per Call per BOC Certifications Vessel (in USD) (in PHP) MARINA Certification India M/V 33,66s.1o GOLDEN Golden 30,300.00 1,635,686.21 Marshall Is Singapore 41 IOANARI INC. Iaonari 68,040.00 (MH) Vietnam ALKIONI M/V 48,200.00 Malta (MT) 42 SHIPPING INC. Marinicki 1,471.243�70 Indo nesia 95.819�05 TRUMP M/V 9�500.00 3,296,810.16 Panama (PA) China 43 PESCADORES TrumpSW 72,)00.00 96,400.00 Panama (PA) Outside of S.A. PANAMA M/VAu 62,855.86 2.J33.J62.00 Claim EASTERN Taurus 140,650.00 Period95 ORIENT 4.634.479�89 Marshall Is 44 HOLDING M/VTony 8 ,544,795�10 (MH) Not included LIMITED Smith in the BOC REMEZZO Liberia {LR) Certifications 45 MARITIME M/V 460,265�50 Not included CORP. Bourbon in the BOC DOMI Marshall Is Certifications 46 DEVELOPMENT M/VBeks Did not ply S.A. Ceyda 3�509,803�50 {MH) domestic RIVER M/VBeks Marshall Is waters96 47 MARITIME INC. Ceyda Not included 4�672,026.00 (MH) in the BOC RIVER M/V Lilac Certifications 48 MARITIME INC. Harmony 3�046.749�44 Liberia (LR) 6,816,602.25 TATESHINA M/V Cayman Is 49 MARINE S.A Nordic (KY) Skier NAT BERMUDA 50 HOLDINGS 420�794�369.86 LTD. TOTAL Considering that some of petitioner's sales to foreign vessels failed to comply with the requirement that the fuel sold was used exclusively for international shipping (i.e., the transport of goods and/or passengers from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Ph,ines), a recomputation of the qualified zero-rated sales is in order: [) 3�d Quarter CY 2020 Amount of Sales P<J20,794,369.87 Zero-Rated Sales per VAT returns Less: Sales Not Entitled to Zero-Rating p 3.595.301.85 17. FIRENZE SEAS S.A. (M/V Minoan Sky) 10,943.311.47 18. SEIN SH IPPING CO., LTD. (M/V Sein Sun) 95 The BOC Certification dated 30 March 2023 (Exh ibit " P-580-3" ) shows that MN Bourbon departed Manila Port for Quangyen, Vietnam on 16 March 202 1, a date outside of the claim period of 3rd Quarter ofCY 2020. 96 While the BOC Certification dated 14 April 2023 (Exhibit " P-580-2") did not indicate the port of destination, it certified that MN Lilac Harmony "did not ply domestic waters, based on available records".

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x----- -------------------- ----------------------x 3�d Quarter CY 2020 Amount of Sales 14,928,6oo.1o lg. HONGKONG EVER OCEAN SHIPPING COMPANY LIMITED (M/V Liaoyu Reefer 1) 2,517.835�00 48�472,054� 32 PJ72,J22,J15�55 27. GLENDA INTENATIONAL SHIPPING 36.440.25 DESIGNATED ACITVITY COMPANY (M/V Glenda 991,868.40 Melody) 460,26') .')0 3,sog,8o3.so 29. MONJASA PTE LTD (M/V Chemtrans Po laris) 4.672,026.00 36. DOMI DEVELOPM ENT S.A. (M/V Bourbon) 46. DOMI DEVELOPM ENT S.A. (M/V Bourbon) 6,816,602.25 47� RIVER MARITIME INC. (M/V Beks Ceyda) 48. RIVER MARITIME INC. (M/V Beks Ceyda) so. NAT BERMUDA HOLDINGS LTD. (M/V Nordic Skier) Sales Entitled to Zero-Rating After verifying petitioner's zero-rated sales, the Court will proceed to determine whether petitioner's input tax complied with the requirements for VAT refund. 4TH REQUISITE: THE CREDITABLE INPUT TAX DUE OR PAID MUST BE ATTRIBUTABLE TO SUCH SALES, EXCEPT THE TRANSITIONAL INPUT TAX, TO THE EXTENT THAT SUCH INPUT TAX HAS NOT BEEN APPLIED AGAINST THE OUTPUT TAX. To satisfy the 4th requisite, the following conditions must concur: a. 1st condition: the input taxes are due or paid; b. 2nd condition: the input taxes claimed are attributable to zero- rated or effectively zero-rated sales and 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; c. 3rd condition: the input taxes are not transitional input taxes; and, d. 4th condition: the input taxes have not been applied against output taxes during and in the succeeding quarters.t

CTA Case No. 10882 Petrotrade Philippines, Inc. v . Commissioner of Internal Revenue DECISION x-----------------------------------------------x The 1st condition requires that the input taxes are due or paid. In its Fourth Amended VAT Return,97 petitioner declared input tax arising from its Current Purchases amounting to P78,620,475�SI, comprised of: Input Tax Source Amount Domestic Purchases of Goods Other than Capital Goods P2.447,621.54 Importation of Goods Other than Capital Goods 67,077,661.26 Domestic Purchase of Services Total Available Input Tax 9:095:192.71 P78,620,475�51 It is of crucial importance that petitioner provides documents to support its declaration that the input tax claimed during the subject period was actually due or paid in accordance with Section no(A) of the NIRC of 1997, as amended,98 which provides: SEC. 110. Tax Credits. - (A) Creditable Input Tax.- (1) 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: 1. For sale; or n. For conversion into or intended to form part of a finished product for sale including packaging materials; or m. For use as supplies in the course of business; or tv. For use as materials supplied in the sale of service; or 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.t 97 Supra at note 15. 98 Prior to the changes brought about by Republic Act No. 11976 or " Ease of Paying Taxes Act" .

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x---------------------------------- -- -----------x ... 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 free. 99 The above provision is implemented by Sections 4.110-1 to 4.110-2 of RR No. 16-2005, as amended by RR No. 13-2018,100 which provide as follows: SEC. 4.110-1. Credits For Input Tax. - 'Input tax' means the VAT due on or paid by a VAT-registered person on importation ofgoods or local purchases ofgoods, properties, or services, including lease or use of properties, in the course of his trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. m of the Tax Code. It includes input taxes which can be directly attributed to transactions subject to the VAT plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity. Any input tax on the following transactions evidenced by a VAT invoice or official receipt issued by a VAT-registered person in accordance with Sees. 113 and 237 of the Tax Code shall be creditable against the output tax: a. Purchase or importation of goods 1. For sale; or 2. For conversion into or intended to form part of a finished product for sale, including packaging materials; or 3� For use as supplies in the course of business ; or 4� For use as raw materials supplied in the sale of services; or 5� For use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code. b. Purchase of real properties for which a VAT has actually been paid; c. Purchase of services in which a VAT has actually been paid; d. Transactions "deemed sale" under Sec. 106 (B) of the Tax Code ; e. Transitional input tax allowed under Sec. 4.m (a) of these Regulations; f. Presumptive _input tax allowed under Sec. 4.m (b) of these Regulations; ~ 99 Emphasis supplied and ital ics in the orig inal text. 100 Regulations Implementing the Value-Added Tax Provisions under the Repub lic Act (RA) N o. I0963, or the "Tax Refonn for Acceleration and Inclusion (TRAIN)," Further Amending Revenue Regulations (RR) No. 16-2005 (Consolidated Value-Added Tax Regulations of 2005), as Am ended .

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x g. Transitional input tax credits allowed under the transitory and other provisions of these Regulations. SEC. 4.110-2. Persons Who Can Avail ofthe 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 ofgoods from customs custody; b. To the purchaser of the domestic goods or properties upon consummation of the sale; or c. To the purchaser ofservices or the lessee or licensee upon payment of the compensation, rental, royalty or fee. 101 Meanwhile, Sections 4.no-8(a) and (d) and 4.114-2(b) of RR No. 16-2005, as amended by RR No. 04-2007/ 02 provide for the substantiation requirements of input tax credits, as follows: SEC. 4 .110-8. Substantiation ofInput Tax Credits. - a. Input taxes for the importation ofgoods 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: 1. For the importation of goods - import entry or other equivalent document showing actual payment ofVAT 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 ~o sell, etc., together with VAT invoice _ _ _ ____i_ss_u_e_d_b_y_the seller.~ 101 ori~al Emphasis supplied and italics in the text. 102 Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x ----- ------------------------------------------x 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. The documents also need to comply with the invoicing requirements provided under Sections 113(A)(1), (B)(1) and (2)(c) of the NIRC of1997, as amended, and Sections 4�113-1(A)(1), (B)(1) and (2)(c) of RR No. 16-2oo5, as amended. Based on ICPA Villaruz's findings, input tax amounting to P562,149�76 arising from petitioner's importation, and domestic purchases of goods (other than capital goods) and services shall be disallowed for petitioner's failure to meet the substantiation and invoicing requirements, viz:103 Supplier Invoice/ Amount of Reason for OR No. Input Tax disallowance (in PHP) Chevron Singapore PTE BC Form No. 38-A The supporting SAD LTD 1888873553 835,853.77 and SDT were dated n November 2020 which was beyond the covered period of the claim SGS (SUBIC BAY) INC. OR# 2272313 780.00 Supported by 2,675 �49 photocopy documents TOYOTA QUEZON OR# AVENUE, INC. 1000000000055492 146.58 DHL WORLWIDE EXPRESS B.l# 435.931.71 No supporting CORP MNLRom966533/ B.I.# 642.85 document HERMA SHIPPING AND MNLRo01975259 4�950.00 TRANSPORT 40�96 CORPORATION S.l# 23233 MASTER SEAL CORPORATION 3818 MICROGENESIS BUSINESS SYSTEMS 2968 PIONEER INSURANCE & SURETY CORPORATION 103 Part Jll.2.1 Computation of Adjusted Input Taxes For the period covered, !CPA Report, supra at note 35. See also Annexes " H-1 ", " H-2", and " H-2. 1" to the ICPA Report, id.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x---- ------- ---------------------- - - -------- ----x TOWER CLUB, INC. SOA# Coo81-B for 744�64 S e p t .2 o 2 o 6oo.oo WILHELMSEN-SMITH FDA# 191151 BELL SHIPPING INC. 6oo.oo WILHELMSEN-SMITH FDA# 191133 BELL SHIPPING INC. FDA# 20 0016 6oo.oo WILHELMSEN-SMITH BELL SHIPPING INC. OR # 1005 105 ,6 0 0 .0 0 Difference between the FLAGSHIP PETROLEUM amount claimed in the CARRIERS INC. 8,837�50 0 .03 CTA Petition and FLAGSHIP PETROLEUM OR # 1006 supporting official CARRIERS INC. p I,J981003�53 receipts Varia nce Total Disallowance per ICPA Upon further verification, the Court finds that additional input tax on domestic purchases of goods and services in the total amount of P1,290,151.71 shall likewise be disallowed for the following reasons: Exhibit Supplier Invoice/ Amount of Reason for No. OR No. Input Tax disallowance (in PHP) P-473 C H EV R O N 51974310123 P-474 PHILIPPINES INC. 126,471.76 P-475 P-476 CHEVRON SI9743m54 150,601.22 P-477 PHILIPPINES INC. P-478 SI974312596 57 ,151. 50 P-479 CH EVRON P-482 PHILIPPINES INC. Si974312858 74,982.11 P-483 P-484 CH EVRON SI974313779 109,587.08 Input tax on d omestic P-485 PHILIPPINES INC. Si974316044 51,875�85 purchases o f goods P-486 SI974 316191 9 2 ,9 2 4 �91 P-487 CHEVRON SI974319241 120,651.90 supported by VAT Sis PHILIPPINES INC. SI974321265 57>436-44 but without the CHEVRON notation "THIS PHILIPPINES INC. INVOIC E SHALL BE CHEVRON VALID FOR FIVE (5) PHILIPPINES INC. YEARS FROM THE DATE OF ATP/ PTU ." CHEVRON PHILIPPINES INC. Si974322061 126,364�35 CHEVRON SI974327990 73,411.89 PHILIPPINES INC. SI97433o889 7 0 ,025 .85 'bDv' CHEVRON SI974331350 80,945�60 PHILIPPINES INC. CHEVRON PHILIPPINES INC. CHEVRON PHILIPPINES INC. CHEVRON PHILIPPINES INC.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x Exhibit Supplier Invoice/ Amount of Reason for No. OR No. Input Tax disallowance SI633113197 (in PHP) P-471 CH EVRON SI633113821 Input tax on domestic PHILIPPINES INC. 3.956�45 purchases of goods Sio633114124 P-48o CHEVRON 3�930�74 supported by VAT Sis PHILIPPINES INC. OR247878 but (1) without the OR247877 4.437�34 notation "THIS P-488 CH EVRON INVOICE SHALL BE PHILIPPINES INC. VALID FOR FIVE (s) YEARS FROM THE DATE OF ATP/ PTU.", and (2) did not indicate petitioner's TIN. P-539 INTERTEK TESTING 28,177�74 Input tax on domestic P-540 SVCS PHILS INC. 57,218.98 purchases ofservices supported by VAT ORs, INTERTEK TESTING but the nature of the SVCS PHI LS INC. services was not indicated therein . Total Disallowance per Court verification p 10290,151�71 Hence, for purposes of compliance with the 1st condition, out of the total reported input tax of P78,620.475�51, only the amount of P75.932.320.27 represents petitioner's valid input tax due or paid for the 3rd quarter of CY 2020, as computed below: Input tax per VAT Return P78,620.475�51 Less: Disallowances p I,)g8,003.53 Per ICPA findings 1,2g0,151.71 2,688,155�24 Per Court's further verification J75,9J2,p0.27 Total Substantiated or Valid Input Tax As for the 2nd condition, since petitioner had both zero-rated and VATable sales in the period of claim and the corresponding input tax cannot be directly and entirely attributed to any ofthese sales, the input tax shall be proportionately allocated on the basis of sales volume. In the case of Chevron Holdings, Inc. (Formerly Caltex Asia Limited) v. Commissioner of Internal Revenue104 (Chevron), the Supreme Court made a definitive declaration that a VAT-registered fromt taxpayer has two (2) options with respect to its input tax attributable to . zero-rated sales, it may: (1) charge the same against output tax 104 G.R. No. 2 151 59, 05 July 2022; Citation omitted, emphasis in the original text and supplied .

CTA Case No. 10882 Petrotrade Philippines, Inc. v . Commissioner of Internal Revenue DECISION x----- -- -- ------- -------------------------------x VATable sales, and claim for refund or issuance of a TCC any unutilized or "excess" input tax; or (2) claim the same for refund or issuance of a TCC in its entirety, viz: [T]he input tax attributable to zero-rated sales may, at the option of the VAT-registered taxpayer, be: (1) charged against output tax from regular 12% VAT-able sales, and any unutilized or "excess" input tax may be claimed for refund or the issuance of tax credit certificate; or (2) claimed for refund or tax credit in its entirety. It must be stressed that the remedies of charging the input tax against the output tax and applying for a refund or tax credit are alternative and cumulative. Furthermore, the option is vested with the taxpayer-claimant. It goes without saying that the CTA, and even the Court, may not, on its own, deduct the input tax attributable to zero-rated sales from the output tax derived from the regular twelve percent (12%) VAT-able sales first and use the resultant amount as the basis in computing the allowable amount for refund. The courts cannot condition the refund of input taxes allocable to zero- rated sales on the existence of "excess" creditable input taxes, which includes the input taxes carried over from the previous periods, from the output taxes. These procedures find no basis in law and jurisprudence. Citing the same doctrine, the Supreme Court in Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd.10s (DKS), reiterated that this Court cannot deduct or charge validated and substantiated input tax to determine the refundable amount of input tax. Clearly from the foregoing, a VAT-registered taxpayer has the discretion to decide whether to charge its input tax attributable to zero- rated sales against output tax. In this respect, the Court cannot impose its own methods for calculating the refund, such as compelling the crediting of input tax against output tax as a condition precedent to the refund or issuance of a TCC. In this case, when petitioner filed its administrative claim with respondent, it chose the second option and applied for the refund ofth~~ entire P38,812,219.05 input tax allocated to its zero-rated sales asu 105 G.R. Nos. 226548 & 22769 1, 226682-83, 15 February 2023.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of lnt rnal Revenue DECISION x- - - - - ------ -- -------- - - - ---- - ------ ---------- -x declared in its Third Amended VAT ~eturn106 (its latest return prior to the filing of its administrative claim en 12 January 2022). Furthermore, regardless of wh ch option the taxpayer-claimant chooses, the Supreme Court's ruling n Chevron clarifies that since the taxpayer-claimant is requesting a refi nd of unutilized or unused input tax from zero-rated sales (as opposed o the "excess" creditable input tax from the output tax) , this amount is ir herently immediately refundable given that there is no related output t~x to offset it against. Therefore, the Court's proper step in determining the refundable excess and unutilized input tax attr' butable to valid zero-rated sales should be computing the ratable p< rtion of the taxpayer-claimant's Input tax allocable to zero-rated sales, assuming the input tax cannot be directly attributed to zero-rated activ'ties: Valid Zero-Rated Sales Divided by Total Declared Sales Multiplied by: Valid Inpu t Tax not directly attribu able to any activity Valid Input Tax Attributable to Zero-Rated Sal es Next, petitioner complied with t 1e 3rd condition as its input taxes do not appear to be transitional input axes since they operate to benefit only newly VAT-registered persons. Lastly, the 4th condition requi res that the input taxes have not been applied against output taxes during and In the succeeding quarters. As previously mentioned, pEtitioner applied for the refund of the entire P J8,812,219.05 input tax al ocated to its zero-rated sales as declared in its Third Amended VAT Return107 (its latest return prior to the filing of its administrative claim 01 12 January 2022). However, case records show tha ~ after filing of its administrative U claim, petitioner filed a Fourth Amen< ed Return,108 wherein it reducem~~ the amount declared in Line 23D (\AT Refund/TCC claimed) fro 06 Supra at note I0. 07 Id . 08 Supra at note 15.

CTA Case No. 10882 Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue DECISION x------ - - --- --- ------------------ --- -------- -- -- x P38,812,219.05 to P26,829,290.09. Therefore, while petitioner was able to establish P33,167,18S.8I of Valid Input Tax Attributable to Zero-Rated Sales, the Court can only grant P26,829,290.09 because only such amount was not applied against output taxes during and in the succeeding quarters. Claims for the tax refund, like tax exemptions, are construed strictissimi juris against the taxpayer. However, when the claim for refund has a clear legal basis and is sufficiently supported by evidence, as in the present case, then the Court shall not hesitate to grant the refund. 109 W H EREFORE, premises considered, the instant Petition for Review filed on 10 June 2022 by petitioner Petrotrade Philippines, Inc. is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the amount of P26,829,290.09 representing petitioner's unutilized excess input Value-Added Tax for the 3rd quarter of CY 2020 which is attributable to its zero-rated sales for the same period. SO ORDERED. JEANMA WE CONCUR: /MMitfMtL., LANEE S. CUI-DAVID Associate Justice 109 Chen�on Holdings, Inc. (Formerly Callex Asia Limited) v. Commissioner ofInternal Revenue, supra at note I 04.

CTA Case No. 10882 Petrotrade Ph ilippines, Inc. v. Commissioner of Internal Revenue 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. JEANMA ciate Justice Special 1st Division Acting Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Special 1st Division Acting Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consulta tion before the case was assigned to the writer of the opinion of the Court's Division.