NEW YORK BAY PHILIPPINES, INC., v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION ********* NEW YORK BAY PHILIPPINES, CTA Case No. 9896 INC., Members: Petitioner, UY, Chairperson, RINGPIS-LIBAN, and -versus - MODESTO-SAN PEDRO, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION UY, J.: Before this Court is a Petition for Review1 filed on July 27, 2018 by petitioner, New York Bay Philippines, Inc. against respondent, Commissioner of Internal Revenue, praying for a refund or issuance of a tax credit certificate (TCC) in the amount of P45, 183,477.36, representing petitioner's excess and unutilized input value-added tax (VAT) on domestic purchases of goods and services attributable to zero- rated sales for the four quarters of calendar year (CY) 2016. THE FACTS Petitioner is a domestic corporation duly organized and existing 1J under Philippine Laws with principal place of business at Unit 2102, 21st Floor Ante! Global Corporate Center, Julia Vargas Avenue, Pasig City 2 1 Docket - Vol. 1, pp. 10 to 23. 2 Par. 1, Admitted Facts, Joint Stipulation of Facts and Issues (JFSI), Docket - Vol. 1, p. 267.

DECISION CTA Case No. 9896 Petitioner is registered with the Bureau of Internal Revenue (BIR), Revenue Region No. 7, Revenue District Office (ROO) No. 43 as a VAT taxpayer with Taxpayer Identification Number (TIN) 000-217-994-000. 3 Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue (CIR) empowered to perform the duties of the said office including, among others, the power to decide, approve and grant claims for refund or tax credits of erroneously paid or overpaid taxes, as provided by law. He may be served summons, pleadings, and other processes of this Court at his office at the 5th Floor, Bureau of Internal Revenue, National Office Building, BIR Road, Diliman, Quezon City. 4 Petitioner filed its VAT returns for the first, second, third, and fourth quarters of CY 2016 on the following dates: Period VAT Return Filing_ Date Exhibit 1st Quarter Original Quarterly VAT Return A_2ril 25, 2016 P-3 5 Amended Quarterly VAT Return May 20, 2016 P-3-a5 2na Quarter Original Quarterly VAT Return July 25, 2016 Amended Quarterly VAT Return July 26, 2016 P-4' 3ra Quarter Orig_inal Quarterly VAT Return October 25, 2016 P-4-atl Amended Quarterly VAT Return January 26, 2017 P-59 4th Quarter Original Quarterly VAT Return January 23, 2017 P-5-a 1u Amended Quarterly VAT Return January 26, 2017 P-611 P-6-a 12 On March 28, 2018, petitioner filed with the BIR an Application for Tax Credits/Refunds (BIR Form No. 1914),13 together with Cover Letter, 14 requesting for the refund of its excess and unutilized input VAT for the four quarters of CY 2016 in the amount of P45,183,477.36. Petitioner attached to its administrative claim for refund the complete supporting documents as required by law and pertinent regulations. 15 ~ 3 Exhibit "P-2", Docket- Vol. 1, p. 149. 4 Par. 2, Admitted Facts, JSFI, Docket- Vol. 1, p. 267. 5 Docket - Vol. 2, pp. 516 to 51 7. 6 Docket - Vol. 2, pp. 518 to 519. 7 Docket- Vol. 2, pp. 520 to 521. 8 Docket- Vol. 2, pp. 522 to 523. 9 Docket- Vol. 2, pp. 524 to 525. 10 Docket- Vol. 2, pp. 526 to 527. 11 Docket- Vol. 2, pp. 528 to 529. 12 Docket- Vol. 2, pp. 530 to 531. 13 Exhibit "P-8", Docket- Vol. 1, p. 536. 14 Exhibit "P-7'', Docket- Vol. 1, pp. 532 to 534. 15 Par. 3, Admitted Facts, JSFI, Docket- Vol. 1, p. 268; Exhibit "P-7-a", Docket- Vol. 2, p. 535.

DECISION CTA Case No. 9896 On June 29, 2018, petitioner received a letter from the respondent denying petitioner's administrative claim for refund of its excess and unutilized input VAT for the four quarters of CY 2016 in the amount of P45, 183,477.36 on the ground that petitioner allegedly failed to submit relevant vital documents in support of its claim, viz.: "Please be informed that after consideration of the factual basis of the said claim and the law applicable thereto, it was ascertained that you failed to provide the "original copies" of the "Certificates of Non-Registration of Company", issued by the Securities and Exchange Commission. instead photocopies were attached to the docket. Please note that the submission of the original copies is a mandatory requirement under Annex A.1 of the RMC No. 17-2018, also known as "Revised Checklist of Mandatory Requirements for claims for VAT Refund. Accordingly, failure on your part to submit the relevant vital documents in support of your claim upon filing of the application can result in non-acceptance or denial of the claim pursuant to IV(3) of RMC 17-2018. In view of the foregoing, we regret to inform you that the processing of the application of VAT refund of NEW YORK BAY PHILIPPINES, INC. covering the period January 1, 2016 to December 31, 2016 cannot be acted upon favorably for lack of factual basis."16 On July 27, 2018, petitioner filed the instant the instant Petition for Review. Thereafter, on October 10, 2018, respondent filed his Answer, 17 interposing the following special and affirmative defenses, to wit: 1) That petitioner's claim for tax refund has no basis since its request was denied by the respondent due to petitioner's failure to submit documents required by Revenue Memorandum Circular (RMC) 17-2018; that petitioner did not comply with the invoicing and accounting compliance required by the National Internal Revenue Code (NIRC); ~ 16 Par.4, Admitted Facts, JSFI, Docket- Vol. 1, p. 268. 17 Docket, Vol.- 1, pp. 72 to 76.

DECISION CTA Case No. 9896 2) That for the entitlement to refund under Section 110 (B) of the NIRC of the Philippines, the taxpayer availing of such benefit must comply with the following: a) The registration requirements of a value-added taxpayer under the pertinent provision of the 1997 NIRC, as amended, and its implementing revenue regulations; b) The invoicing and accounting requirements for VAT- registered person, as well as the filing and payment of VAT pursuant to the provisions of Section 113 and 114 of the 1997 NIRC, as amended. Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of the claim for input tax of the taxpayer claimant; c) The submission of complete documents in support of the administrative claim for tax refund pursuant to Section 112(C), as amended. Otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for tax credit/refund which is a condition sine qua non prior to the filing of such claim; d) The alleged unutilized input taxes of the petitioner for the fourth quarter of 2016 were: i. Paid by the petitioner; ii. Attributable to its zero-rated or effectively zero-rated sales; and iii. Such input taxes should not have been applied against any output tax. e) Petitioner's claim for tax credit/refund allegedly representing unutilized input VAT must be filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Section 112(A) of the 1997 NIRC, as amended. 3) That a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. Tax refunds, like tax exemptions, are construed strictly against the taxpayer. 4) That tax refunds are in the nature of tax exemptions which are construed strictissimi juris against the taxpayer and liberally construed in favor of the government. As tax refunds involve a return of revenue from the government, the claimant must show~

DECISION CTA Case No. 9896 indubitably the specific provision of law from which her right arises; it cannot be allowed to exist upon a mere vague implication or inference nor can it be extended beyond the ordinary and reasonable intendment of the language actually used by the legislature in granting the refund. 5) Citing Commissioner of Internal Revenue vs. San Roque Power Corporation, 18 'Taxes are the lifeblood of the nation. The Philippines has been struggling to improve its tax efficiency collection for the longest time with minimal success. Consequently, the Philippines has suffered the economic adversities from poor tax collections, forcing the government to continue borrowing to fund the budget deficits. The Court cannot turn a blind eye to this economic malaise by being unduly liberal to taxpayers who do not comply with statutory requirements for tax refunds or credits. The tax refund claims in the present cases are not a pittance. May other companies stand to gain if this Court were to rule otherwise. The dissenting opinions will turn on its head the well-settled doctrine that tax refunds are strictly construed against the taxpayer." During the Pre- Trial Conference on February 19, 2019, 19 both parties' counsel agreed to file their Joint Stipulation of Facts and Issues (JSFI) within a period of period thirty (30) days, while respondent's counsel was given until March 21, 2019 within which to submit the Judicial Affidavit of respondent's intended witness, the Revenue Officer who conducted the audit examination of petitioner's claim for refund. Thereafter, the parties filed their Joint Stipulation of Facts and Issues on March 21, 2019,20 which was approved by the Court on March 26, 2019. 21 However on April 5, 2019,22 respondent filed a Manifestation averring that he will no longer present his intended witness for the case. On April 11, 2019, the Court issued a Pre- Trial Order. 23 ~ 18 G.R. No. 187485, February 12,2013. 19 Minutes of the hearing and Order dated February 19,2019, Docket- Vol. 1, pp. 224,226 to 228. 20 Docket - Vol. 1, pp. 267 to 281. 21 Docket- Vol. 1, p. 283. 22 Manifestation dated April 5, 2019, Docket- Vol. 1, pp. 284 to 285. 23 Docket- Vol. 1, pp. 287 to 295.

DECISION CTA Case No. 9896 During trial, petitioner presented as witnesses: (1) Ma. Victoria Cruz24, its accounting manager, and (2) Ma. Milagros F. Padernal25, the duly-commissioned Independent Certified Public Accountant (ICPA). On September 5, 2019, petitioner filed its Formal Offer of Evidence. 26 In the Resolution dated November 15, 2019, 27 the Court admitted most of petitioner's exhibits, except for exhibit "P-12" for failure of the exhibit formally offered to correspond with the document actually marked, and exhibits "P16" to "P-24" and "P-34" for failure to offer any documents. Thereafter on January 24, 2020, petitioner filed an Omnibus Motion 1. Motion for Reconsideration (Re: Resolution dated November 15, 2019) with Motion for Leave of Court to Recall Witness; and 2. Motion to Defer Filing Memorandum28 without respondent's comment despite due notice. 29 In the Resolution dated June 22, 2020, 30 the Court granted petitioner's Motion for Leave of Court to Recall Witness and Motion to Defer Filing of Memorandum; while, petitioner's Motion for Reconsideration (Re: Resolution dated November 15, 2019) was held in abeyance. On October 27, 2020, the Court granted petitioner's Motion for Reconsideration (Re: Resolution dated November 15, 2019) admitting Exhibit "P-12" as petitioner's evidence. Subsequently, with the filing of petitioner's Memorandum on November 26, 2020, 31 without respondent's memorandum despite notice, 32 the instant case was submitted for decision on January 15, 2021. 33 Hence, this Decisionft 24 Exhibit "P-13", Docket- Vol. 1, pp. 108 to 122. 25 Exhibit "P-30", Docket- Vol. 1, pp. 252 to 255. 26 Docket- Vol. 2, pp. 444 to 468. 27 Docket- Vol. 2, pp. 589 to 590. 28 Docket- Vol. 2, pp. 591 to 597. 29 Records Verification Report dated March 3, 2020, Docket- Vol. 2, p. 604 30 Docket- Vol. 2, pp. 606 to 608. 31 Docket- Vol. 2, pp. 626 to 667. 32 Records Verification Report dated January 4, 2021, Docket- Vol. 2, p. 669. 33 Resolution dated January 15, 2021, Docket- Vol. 2, p. 671.

DECISION CTA Case No. 9896 THE ISSUES The parties have stipulated the following issues34 for resolution, to wit: (a) Whether or not there was basis for respondent to deny petitioner's administrative claim for refund on the ground that only photocopies of the SEC "Certificate of Non- Registration of Company" of petitioner's clients were attached to the docket of the case; and (b) Whether or not petitioner is entitled to its claim for refund of or issuance of TCC for the amount of P45, 183,477.36, representing petitioner's excess and unutilized input VAT for the four quarters of CY 2016. Petitioner's arguments: Petitioner submits that respondent erred in denying its administrative claim on the ground that petitioner only submitted photocopies of the SEC "Certificate of Non-Registration" of petitioner's non-resident clients. Respondent's reliance on RMC No. 17-2018 as basis for the denial of petitioner's claim is allegedly misplaced; that RMC No. 17-2018 is a mere administrative interpretation of the law which in no case is binding on the courts. Petitioner further argues that RMC No. 17-2018 interprets Section 112 of the Tax Code; that petitioner has proven compliance with RMC No. 17-2018 by submitting all the necessary documentary requirements to prove that it is engaged in zero-rated sales. Section IV(3), RMC NO. 17-2018 only states that the failure to submit relevant vital supporting documents is a ground for the non- acceptance of the application, but not the denial of the taxpayer's claim for refund; that said provision is clear and unambiguous that it is upon failure to present the books of accounts and accounting records relevant , f to the claim that the respondent may validly deny the taxpayer's the application for tax crediUrefund. 34 JSFI, Docket- Vol. 1, pp. 268 to 269.

DECISION CTA Case No. 9896 Allegedly, respondent has duly-accepted petitioner's application for tax credits/refunds on March 28, 2018, and thus has accepted the completeness and sufficiency of the supporting documents in accordance with Section IV, RMC No. 17-2018 Moreover, petitioner submits that it is entitled to a claim for refund of excess and unutilized input VAT for the four quarters of CY 2016 in the amount of P45, 183,477.36 as it has allegedly complied with the requisites under Sections 108(8)(2) and 112(A) of the Tax Code. Petitioner also argues that its sales of services to Trans-Fast Remittance LLC and Trans-Fast International FZ-LLC qualify as zero- rated sales of services under Section 108(8)(2) of the Tax Code; that payments for petitioner's services were made in acceptable foreign currency accounted for in accordance with the 8angko Sentral ng Pilipinas (8SP) rules and regulations; that its excess and unutilized input VAT for the four quarters of CY 2016 amounting to P45,183,477.36 are duly supported by VAT invoices and official receipts; that the same are attributable to its zero-rated sales; and that its input VAT were not applied against any output VAT liability during the succeeding taxable quarters. Finally, petitioner claims that its administrative and judicial claim for refund of excess and unutilized input VAT for the quarters of CY 2016 were filed within the reglementary periods provided under Section 112(A) & (C) of the Tax Code. Respondent's counter-arguments: Respondent asserts that petitioner's allegation that it complied with the documentary requirements has no factual basis. According to respondent, petitioner did not submit the original copies of the Certificate of Non-Registration of Company issued by the SEC as required under RMC No. 17-2018. Respondent submits that there is no valid claim for refund filed before the 81R within the prescribed period. Moreover, respondent contends that petitioner did not comply with the invoicing and accounting compliance required by the NIRC. Lastly, respondent posits that a claimant has the burden of proof to establish the factual basis of his or he claim for tax credit or refund; that tax refunds, like tax exemptions, are construed strictly against the taxpayer. ~

DECISION CTA Case No. 9896 THE COURT'S RULING The instant Petition for Review is partly meritorious. Requisites for the refund of input VAT established by law. Petitioner's refund claim for input vat in the instant Petition for Review pertains to the four quarters of calendar year (CY) 2016. The applicable provisions then, relative to an action for the refund or issuance of tax credit certificate for input taxes was Section 112 of the NIRC of 1997, as amended by Republic Act (RA) No. 9337, 35 which reads as follows: "SEC. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-Rated or Effectively Zero-Rated Sales. -Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the 8angko Sentral ng Pilipinas (8SP): 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 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero- rated sales: xxx _ _ _ _ _ _ _x_x_x_ XXX f5 XXX 35 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

DECISION CTA Case No. 9896 (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. -In proper cases, the Commissioner shall grant a refund or issue a tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." It must be noted that Section 112(C) was subsequently amended by Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion or TRAIN Law which took effect on January 1, 2018. The amendment pertains to the 120-day period, which was shortened to a period of 90 days from the date of submission of complete documents in support of the refund application for the Commissioner of Internal Revenue to act on a taxpayer's application for refund. 36 However, the TRAIN Law is inapplicable to the instant case considering that it took effect only on January 1, 2018, while, as mentioned earlier, the instant Petition involves a refund claim of input 36 Republic Act No. 10963, "'Section 36. Section 112 of the NIRC, as amended is hereby further amended to reads as follows: ,ft) '"(A) X X X (B) X X X (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 within 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."

DECISION CTA Case No. 9896 VAT incurred during CY 2016. Hence, the aforequoted provisions shall apply. Pursuant to the foregoing provisions, and in line with the jurisprudential pronouncements of the Supreme Court, the following requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT, and these are categorized as follows: Prescriptive period for the filing of the administrative and judicial claims: 1. the claim is filed with the 81R within two years after the close of the taxable quarter when the sales were made. 37 2. that in case of full or partial denial of the refund claim, or the failure on the part of the CIR to act on the said claim within a period of 120 days38 , the judicial claim has been filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120-day period; 39 Taxpayer's registration with the 81R: 3. the taxpayer is VAT registered; 40 In relation to the taxpayer's output VAT. it must be shown: 4. that the taxpayer is engaged in zero-rated or effectively zero-rated sales;41 5. that for zero-rated sales under Section 106(A)(2)(a)(1) A and (2); 106(8); and 108(8)(1) and (2), the acceptable 37 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 182364, August 3, 2010. 38 The 120 day period was shortened to 90 days pursuant to Section 36 of RA 10963 starting January 1, 2018 39 Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner ofInternal Revenue, G.R. No. 168950, January 14, 2015. 40 Intel Technology Philippines, Inc. vs. Commissioner ofInternal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra. 41 Ibid.

DECISION CTA Case No. 9896 foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; 42 As regards the taxpayer's input VAT being refunded. it must be shown: 6. that input taxes are not transitional input taxes;43 7. that the input taxes are due or paid; 44 8. that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, 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.45 and I 9. that the input taxes have not been applied against output taxes during and in the succeeding quarters.46 First and second requisites: Timeliness of administrative and judicial claims. The first requisite pertains to the filing of the claim for tax credit or refund of input VAT before the BIR. Pursuant to Section 112(A) of the NIRC of 1997, as amended, the administrative claim for the issuance of a TCC or refund of input VAT must be filed within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. /6 42 Ibid. 43 Ibid. 44 Ibid. 45 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; and San Roque Power Corporation vs. Commissioner ofInternal Revenue, supra. 46 Intel Technology Philippines, Inc. vs. Commissioner ofInternal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT& T Communications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, supra.

DECISION CTA Case No. 9896 Page 13 of41 In the instant case, petitioner's claim covers the four (4) quarters of CY 2016. Counting two (2) years from the close of each quarter, petitioner had until March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018, respectively, within which to file its administrative claims for tax refund or issuance of tax credit certificate for its input VAT, to wit: Taxable Close of Last Day of Filing of Administrative Quarter Taxable Administrative Claim Filed Quarter Claim 1sr Quarter March 28, 2018 (Jan. to Mar. 2016) Mar. 31, 2016 Mar. 31, 2018 March 28, 2018 March 28, 2018 2na Quarter Jun. 30,2016 Jun. 30, 2018 March 28, 2018 (Apr. to Jun. 2016) Sep. 30,2016 Sep. 30,2018 3ra Quarter Jul. to Sep. 2016 Dec. 31, 2016 Dec. 31,2018 4th Quarter Oct. to Dec. 2016 Here, petitioner's administrative claim (Application for Tax Credits/Refunds- BIR Form No. 1914)47 for the said quarters filed with the SIR on March 28, 2018 was timely filed. The second requisite pertains to the timeliness of the judicial claim pursuant to Section 112 (C) of the NIRC of 1997, as amended. The legal provision speaks of two periods: (1) the period of 120 days, which serves as a waiting period to give time for the SIR Commissioner to act on the administrative claim for refund or tax credit; and (2) the period of 30 days which refers to the period for filing a judicial claim with this Court. 48 In this case, counting from the filing of petitioner's administrative claim on March 28, 2018, respondent had 120 days or until July 26, 2018 to act on the said claim. Within the said 120-day period, petitioner received a denial letter on June 29, 2018 from respondent denying its administrative claim for refund of its excess and unutilized input VAT for the four quarters of CY 2016 in the amount of P45,183,477.36. 49 Thus, petitioner had a period of thirty (30) days from June 29, 2018 or until July 29, 2018 to file its judicial claim. ~ 47 Exhibit '"P-T', Docket- Vol. 1, pp. 532 to 535 and Exhibit '"P-8'', Docket- Vol. 1, p. 536. 48 Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 49 Par. 4, Admitted Facts, JSFI, Docket- Vol. 1, p. 268.

DECISION CTA Case No. 9896 It appearing that the instant Petition for Review0 was filed on July 27, 2018, the judicial claim was likewise filed on time. Correspondingly, petitioner complied with the first and second requisites. Third Requisite: Petitioner is VAT registered. The third requisite pertains to the taxpayer's VAT registration. Notably, petitioner presented its Certificate of Registration issued by the SIR with TIN 000-217-994-000, indicating that it is liable for VAT. 51 Thus, the third requisite has also been complied with. Fourth and fifth requisites: Petitioner partially proved that it was engaged in zero-rated or effectively zero-rated sales for the first to fourth quarters of CY 2016. The fourth and fifth requisites, respectively, require that the taxpayer is engaged in zero-rated or effectively zero-rated sales; and that for zero-rated sales under Section 106(A)(2)(1) and (2); 106(S); and 108(S)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with SSP rules and regulations. In its Amended Quarterly VAT Returns for the four quarters of CY 2016, petitioner declared total zero-rated sales/receipts in the total amount of P628,569,036.48, to wit: Period Exhibit Zero-Rated sales 1st Quarter Line 17, "P-3-a" P229,120,891.77 2nd Quarter Line 17, "P-4-a" 168,286,494.02 3rd Quarter Line 17 "P-5-a" 164,926,715.37 4th Quarter 66,234,935.32 I Line 17, "P-6-a" TOTAL P628, 569,036.48 ~ 50 Docket- Vol.1, pp. 10 to 23. 51 Exhibit "P-2", Docket- Vol. 1, p. 149.

DECISION CTA Case No. 9896 Petitioner claims that for the four (4) quarters of CY 2016, it rendered services to non-resident foreign corporations not engaged in business in the Philippines, namely, Trans-Fast Remittance LLC and Trans-Fast International FZ-LLC; and that the services rendered were paid in acceptable foreign currencies and accounted for in accordance with the rules and regulations of the BSP. Relative to the foregoing is Section 108(8) of the NIRC of 1997, as amended, which reads as follows: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX The phrase 'sale or exchange of service' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, xxx. XXX XXX XXX (B) Transactions Subject to Zero Percent (0�/o) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0�/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 Bangko Sentral ng Pilipinas (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 Bangko Sentral ng Pilipinas (BSP);" (Emphases and underscoring jl\ supplied.)

DECISION CTA Case No. 9896 Based on the foregoing provisions, a sale or supply of services will be subject to zero percent (0�/o) VAT under Section 108(8)(2) of the NIRC of 1997, as amended, provided the following essential elements are present, to wit: 1) The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed; 52 2) The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules�' 53 3) The services fall under any of the categories under Section 108(8)(2), 54 or simply, the services rendered should be other than "processing, manufacturing or repacking goods"; 55 and 4) The services must be performed in the Philippines56 by a VAT-registered person. Anent the first essential element, the ruling of the Supreme Court in the case of Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte. Ltd., 57 is instructive, to wit: "For purposes of zero-rating under Section 108(8)(2) of the Tax Code, the claimant must establish the two components of a client's NRFC status, viz: {1) ~ 52 Site! Philippines Corporation (Formerly Clientlogic Phils. Inc.) vs. Commissioner of Internal Revenue, G.R. No. 201326, February 8, 2017; Commissioner ofInternal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao. Inc., G.R. No. 153205, January 22, 2007; Accenture, Inc. vs. Commissioner of Internal Revenue, G.R. No. 190102, July 11, 2012. 53Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra. 54 Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), G.R. No. 152609, June 29, 2005. 55 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra. 56 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra. 57 G.R No. 234445, July 15, 2020.

DECISION CTA Case No. 9896 that their client was established under the laws 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. XXX XXX XXX 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 11 of DKS's affiliates clients. The Court uphold these findings. XXX XXX XXX 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." (Emphases and underscoring added) Based on the foregoing, to satisfy the first essential requirement, petitioner must submit for each of its foreign service-recipients/clients, at the very least, both: (1) SEC Certificate of Non-Registration of Corporation/Partnership and (2) proof of incorporation, association or registration showing the state/province/country where the entity was organized. ttl In this case, to show compliance with the first essential element, petitioner presented the following documents:

DECISION CTA Case No. 9896 Service-recipient Documents presented Trans-Fast SEC Certification of Non-Registration of Remittance LLC Company58 and Articles of lncorporation59 Trans-Fast SEC Certification of Non-Registration of International FZ-LLC 1 Company60 and Memorandum of 1 I Association and Articles of Incorporation61 Taken together, the foregoing documents sufficiently establish that Trans-Fast Remittance LLC and Trans-Fast International FZ-LLC are non-resident foreign corporations not engaged in business in the Philippines. With respect to the second essential element, petitioner presented the Statement of Account dated January 22, 201962 and Credit Advices in US Dollars (USD), 63 both issued by BOO in favor of petitioner, to show that it received inward remittances. The Court finds that the foregoing documents are sufficient proof to establish the fact of payment "in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP'. Hence, petitioner has complied with the second essential element. As to the third essential element, the Court finds that petitioner entered into a Service Agreemenf>4 with Trans-Fast Remittance LLC. Pursuant thereto, the services to be rendered by petitioner to Trans-Fast Remittance LLC shows that the same is other than "processing, manufacturing or repacking of goods", to wit: "WHEREAS: XXX XXX XXX TransFast desires to appoint Correspondent as its correspondent for the payment of remittances in connection with the Business (the "Transactions") in favor of beneficiaries in the Location (the {6 _ _ _ _ _ _"S_e_rv_ice"). 58 Exhibit "P-11 ", Docket- Vol. 2, p. 584. 59 Exhibit "P-9", Docket- Vol. 2, pp. 537 to 566. 60 Exhibit "P-12", Docket- Vol. 2, p. 623. 61 Exhibit "P-10", Docket- Vol. 2, pp. 567 to 583. 62 Exhibits "P-36-26" to "P-36-35", refer to the CD found in petitioner's Formal Offer of Evidence (FOE). 63 Exhibits "P-36-1" to "P-36-25", refer to the CD found in petitioner's FOE. 64 Exhibit "P-29-1 (5-26)" to "P-29-1 (26-26)", refer to the CD found in petitioner's FOE.

DECISION CTA Case No. 9896 Correspondent desires to be appointed as TransFast's correspondent for the execution of Transactions in favor of beneficiaries in the Location. NOW THEREFORE, in consideration of the representations and covenants contained herein, the Parties agree as follows: I. SUBJECT MATTER 1.1 TransFast hereby appoints Correspondent, on a non-exclusive basis, as its correspondent for the execution of Transactions in the Location. TransFast shall collect funds from remitters (hereinafter referred to as the "Remitter(s)" or the "Customer(s)" in the United States of America and/or the countries where TransFast conducts Business and shall execute Transactions for the transmission of such funds to beneficiaries (the "Beneficiaries") in the Location through Correspondent's facilities." Meanwhile, insofar as Trans-Fast International FZ-LLC is concerned, the Court finds that no service agreement or any other contract was submitted to prove that services rendered by petitioner to Trans-Fast International FZ-LLC are not in the same category as "processing, manufacturing or repacking of goods". With regard to the fourth essential element, We find that only the Service Agreement65 with Trans-Fast Remittance LLC has a provision as to where the services are to be performed (i.e., in the Philippines) by petitioner, to wit: "WHEREAS TransFast is a company licensed as a transmitter of money by the relevant authorities of the State of New York and other competent state and federal licensing and regulatory authorities in the United States, and engages in the business of transmission of money on behalf of third parties in the United States and abroad (the "Business"): ~ ----------------- 65 Exhibit "P-29-1 (5-26)" to "P-29-1 (26-26)", refer to the CD found in petitioner's FOE.

DECISION CTA Case No. 9896 Correspondent (Petitioner) is an institution licensed by [Securities & Exchange Commission] and authorized under the laws of [Philippines] to engage in the Business to be conducted by the Parties pursuant to this Agreement, and registered as stipulated previously and desires to engage in the Business in connection with transactions to be executed in favor of beneficiaries in [Philippines] (the "Location")." (Emphasis added) However, insofar as Trans-Fast International FZ-LLC is concerned, petitioner failed to establish compliance with the fourth essential element in the absence of proof showing that the subject services were rendered in the Philippines. Thus, only petitioner's sales to Trans-Fast Remittance LLC qualify for VAT zero-rating under Section 108(B)(2) of the NIRC of 1997, as amended. While the Court has determined petitioner's compliance with Section 108(B)(2), it is equally important to consider that the said foreign currency remittances referred to in Section 108(B)(2) must be duly supported by VAT zero-rated official receipts (ORs) as mandated in Section 113(A)(2), (B)(1 ), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Section 4.113-1 (A)(2), B(1) and (2)(c) of RR No. 16-05, which states that a VAT taxpayer, like herein petitioner, shall for every sale, barter or exchange of services, issue a VAT official receipt which must contain the information stated in the said provisions. Said provisions read as follows: "SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall issue: XXX XXX XXX (2) A VAT official receipt for every lease of goods or p~operties, and for every sale, barter or exchange of _.1\ serv1ces. Jf\J

DECISION CTA Case No. 9896 (8) 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); and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; XXX XXX XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx SEC. 4.113-1. Invoicing Requirements.- (A) A VAT-registered person shall issue:- XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT lnvoiceNAT 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 rA the duplicate to be retained by the seller as part of his accounting records.

DECISION CTA Case No. 9896 (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; In the instant case, aside from the bank credit advices66, petitioner also presented its Schedule of Zero-rated Sales for CY 201667 and the corresponding VAT zero-rated Official Receipts68 in support of its total declared zero-rated sales of P628,569,036.48 for the four (4) quarters of CY 2016, detailed as follows: Period Exhibit Zero-Rated sales Line 17' "P-3-a" 1st Quarter Line 17' "P-4-a" p 229,120,891.77 2nd Quarter Line 17' "P-5-a" 168,286,494.02 3rd Quarter Line 17' "P-6-a" 164,926,715.37 4th Quarter 66,234,935.32 TOTAL p 628,569,036.48 However, as discussed earlier, only services from Trans-Fast Remittance LLC qualify for VAT zero-rating. Upon verification of the submitted documents, only zero-rated sales amounting to P176,909,265.83, in relation to petitioner's sales to Trans-Fast Remittance LLC, are duly supported by bank credit advices of inwar~ remittances and valid zero-rated ORs, detailed as follows: fu 66 Exhibits "P-36-1" to "P-36-25", refer to the CD found in petitioner's FOE. 67 Exhibit "P-30", refer to the CD found in petitioner's FOE. 68 Exhibits "P-35-1" to "P-35-25", refer to the CD found in petitioner's FOE.

DECISION CTA Case No. 9896 Date Exhibits Name of Conversion Customer Rate Official Remittance Receipt Amount Amount in USD in PHP 01/04/2016 "P-36-1" "P-35-1" Trans-fast 261,600.75 47.0067 12,296,987.98 01/21/2016 "P-36-2" "P-35-2" remittance LLC 267,207.75 47.2303 12,620,302.19 02/24/2016 "P-36-4" "P-35-4" 230,258.00 47.5111 10,939,810.86 03/29/2016 "P-36-6" "P-35-6" Trans-fast 218,772.25 47.6361 10,421,456.78 05/04/2016 "P-36-9" "P-35-9" remittance LLC 225,564.25 46.7240 10,539,264.02 05/24/2016 "P-36-10" "P-35-10" 225,037.25 46.2845 10,415,736.60 06/22/2016 "P-36-12" "P-35-12" Trans-fast 223,804.25 46.8023 10,474,553.65 07/21/2016 "P-36-14" "P-35-14" remittance LLC 322,272.25 46.4645 14,974,218.96 08/23/2016 "P-36-16" "P-35-16" 324,032.75 47.0581 15,248,365.55 09/20/2016 "P-36-18" "P-35-18" Trans-fast 343,497.00 46.6809 16,034,749.11 11/23/2016 "P-36-20" "P-35-20" remittance LLC 362,976.75 47.4294 17,215,769.47 11/17/2016 "P-36-22" "P-35-22" 738,973.75 48.3482 35,728,050.66 Trans-fast 3,743,997.00 176,909,265.83 GRAND remittance LLC TOTAL Trans-fast remittance LLC Trans-fast remittance LLC Trans-fast remittance LLC Trans-fast remittance LLC Trans-fast remittance LLC Trans-fast remittance LLC Trans-fast remittance LLC Therefore, out of the P628,569,036.48 zero-rated sales declared per VAT Returns for the four (4) quarters of CY 2016, only the amount of P176,909,265.83, as presented above, qualifies for VAT zero-rating under Section 108(8)(2), in relation to Section 113(A)(2), (8)(1 ), (2)(c) and (3) of the NIRC of 1997, as amended. On the other hand, the rest of petitioner's declared zero-rated sales to Trans-Fast International FZ-LLC in the amount of P451,659,770.65, as detailed below, shall be denied for VAT zero-rating in view of petitioner's failure to prove compliance with the third and fourth essential elements (i.e., that the services it rendered thereto were not in the same category as "processing, manufacturing or repacking of goods", and that the services rendered were performed in the Philippines). Date Exhibits Name of Customer Amount Conversio Amount Official in USD n Rate in PHP Remittance Receipt 50,566,837.31 01/27/2016 "P-36-3" "P-35-3" Trans-fast 1,070,644.00 47.2303 r 33,429,855.20 international FZ LLC 02/26/2016 "P-36-5" "P-35-5" Trans-fast 703,622.00 47.5111 42,342,109.66 03/30/2016 "P-36-7" "P-35-7" international FZ LLC 888,866.00 47.6361 Trans-fast

DECISION CTA Case No. 9896 04/29/2016 "P-36-8" "P-35-8" international FZ LLC 983,740.00 46.7240 45,964,267.76 05/25/2016 "P-36-11" "P-35-11" 889,850.00 46.2845 41 '186,262.33 06/24/2016 "P-36-13" "P-35-13" Trans-fast 1 ,008,190.00 46.8023 47,185,610.84 07/26/2016 "P-36-15" "P-35-15" international FZ LLC 948,038.00 46.4645 44,050,111.65 09/01/2016 "P-36-17" "P-35-17" Trans-fast 857,906.00 47.0581 40,371,426.34 09/10/2016 "P-36-19" "P-35-19" international FZ LLC 819,012.00 46.6809 38,232,217.27 11/24/2016 "P-36-21" "P-35-21" Trans-fast 797,484.00 47.4294 37,824,187.63 11/22/2016 "P-36-23" "P-35-23" international FZ LLC 425,090.00 48.3482 20,552,336.34 12/09/2016 "P-36-24" "P-35-24" Trans-fast 171,950.00 47.5111 12/15/2016 "P-36-25" "P-35-25" international FZ LLC 49.1550 8,169,533.65 Trans-fast 36,314.00 1,785,014.67 GRAND international FZ LLC 9,600,706.00 451,659,770.65 TOTAL Trans-fast international FZ LLC Trans-fast international FZ LLC Trans-fast international FZ LLC Trans-fast international FZ LLC Trans-fast international FZ LLC Having found that petitioner had valid VAT zero-rated sales only in the total amount of P176,909,265.83 for the subject period of claim, We shall proceed to determine whether petitioner complied with the remaining requisites pertaining to the input VAT being claimed for refund/TCC. Sixth requisite: The input taxes being claimed do not appear to be transitional input taxes. The sixth requisite provides that the claimed input taxes do not appear to be transitional input taxes, pursuant to Section 111 (A) of the NIRC of 1997, as amended, to wit: "SEC. 111. Transitional/Presumptive Input Tax Credits. (A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of any inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on her beginning inventory of goods, materials and supplies equivalent to two tt percent (2�/o) of the value of such inventory or the actual value-added tax paid on such goods, materials

DECISION CTA Case No. 9896 and supplies, whichever is higher, which shall be creditable against the output tax." Transitional input tax credit operates to benefit newly VAT- registered persons, whether or not they previously paid taxes in the acquisitions of their being inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer. 69 In this case, records show that petitioner is not a newly VAT- registered entity, thus, in the absence of any indication that the claimed input taxes are transitional input taxes, the Court holds that petitioner has complied with the sixth requisite. Seventh Requisite: The input taxes being claimed were due or paid. The seventh requisite in claiming VAT refund pertains to the requisite proof that the input taxes claimed during the four quarters of CY 2016 were actually due or paid in accordance with Section 110 (A) of the NIRC of 1997, as amended, which provides that: "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 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 J\ packaging materials; or (f" 69 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, et al., G.R. Nos. 158885 and 170680, April2, 2009.

DECISION CTA Case No. 9896 (iii) For use as supplies in the course of business; or (iv) 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. (1) 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 XXX XXX XXX 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 fifty-nine (59) succeeding months of the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1 ,000,000.00): 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." The above provisions are implemented by Sections 4.11 0-1 to 4. 11 0-3 of RR No. 16-2005, to wit: "SECTION. 4.110-1. Credits for Input Tax. - 'Input tax' means the VAT due on or paid by a VAT-registered person on importation of goods or local purchases of goods, /tJ properties, or services, including lease or use of properties, t in the course of his trade or business. It shall also include

DECISION CTA Case No. 9896 the transitional input tax and the presumptive input tax determined in accordance with Sec. 111 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; (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 or 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; XXX XXX XXX SECTION 4.110-2. Persons Who Can 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: XXX XXX XXX~

DECISION CTA Case No. 9896 (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. SECTION 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 (P1 ,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 (P1 ,000,000.00), 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. ~

DECISION CTA Case No. 9896 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 installment for an acquisition cost of more than P1 ,000,000.00 will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1 ,000,000.00. XXX XXX XXX If the depreciable capital good is sold/transferred within a period of five (5) years or prior to the exhaustion of the amortization input tax thereon, the entire unamortized input tax on the capital goods sold/transferred can be claimed as input tax credit during the month/quarter when the sale or transfer was made but subject to the limitation prescribed under Sec. 4.110-7 of these Regulations." Further, Section 4.110-8 of RR No. 16-2005 provides for the substantiation requirements of input tax credits on domestic purchases of goods, properties and services, as follows: "SEC. 4.110-8. Substantiation of Input 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�/o 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: XXX XXX XXX (2) For the domestic purchase of goods and properties- invoice showing the information required under Sees. 113 and 237 of the Tax Code. XXX XXX XXX (4) For the purchase of services - official receipt r" showing the information required under Sees. 113 and~ 237 of the Tax Code.

DECISION CTA Case No. 9896 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." Based on the foregoing provisions, in order to be entitled to input tax credits, the same must be evidenced by VAT invoices (for domestic purchases of goods or properties) or ORs (for domestic purchases of services) issued in accordance with Section 113 of the NIRC of 1997, as amended. The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. A VAT- registered taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales. 70 In addition, the invoicing requirement is reasonable and must be strictly complied with, as it is the only way to determine the veracity of the claim. 71 Out of the reported input VAT on current domestic purchases of goods and services and amortization of input tax on capital goods exceeding P1 million amounting to P45, 188,969.72, petitioner only claims for refund of the excess input VAT in the amount of P45, 183,477.36, as determined as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Input Tax Deferred on Cap. Goods P342,228.82 P323, 149.26 p 304,069.68 P284,990.12 P1 ,254,437.88 Exceeding 1M from Prev. Qtr. 323,149.26 304,069.68 284,990.12 265,910.55 1,178,119.61 Less: Input Tax on Cap. Goods p 19,079.56 p 19,079.58 P19,079.56 P19,079.57 P76,318.27 Exceeding 1M Deferred to Succeeding Period Amortization of Cap. Good Exceeding 1M Current Transactions: 323,180.16 159,077.68 126,591.67 69,642.86 678,492.37 Input Tax on Cap. Goods 21,197.16 19,242.58 25,763.61 23,627.50 89,830.85 11,027,460.48 11,258,244.04 10,747,709.37 11,310,914.34 44,344,328.23 Not Exceeding 1 Million Input Tax on Goods Other than Cap. Goods Input Tax on Services Total P11 ,390,917.36 P11 ,455,643.88 P1 0,919,144.21 P11 ,423,264.27 P45, 188,969.72 Less: Output Tax 5,492.36 - - - 5,492.36 Total p 11 ,390,917.36 p 11,450,151.52 P1 0,919,144.21 P11 ,423,264.27 P45, 183,477.36 ~ 70 Microsoft Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 180173, April 6, 2011. 71 Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 179961, January 31, 2011.

DECISION CTA Case No. 9896 In support of its input VAT claim, petitioner's presented evidence consisting of invoices, official receipts and other related documents which were examined by the ICPA. 72 The results of were summarized as follows: 73 Exhibits Particulars First Second Third Fourth Total Quarter Quarter Quarter Quarter "P-25" Total Excess and Unutilized P45, 183,477.36 to Input VAT Claim for Refund of or Issuance TCC per "P-28" Schedule Less: Downward Adjustments "P-44" Input Tax on Purchases of P162,151.31 P26,250.00 P74,274.56 - P262,675.87 "P-50" Capital Goods not exceeding 1,422.79 1,405.80 4,359.58 "P-52" 1Million - Not Supported 2,339.03 - - 6,933.30 14,121.47 Input Tax on Purchases of - 2,339.03 Goods Other Than Capital Goods - Not Supported Input Tax on Domestic Purchases of Services- Supported by Original VAT ORs not in Petitioner's name "P-53" Input Tax on Domestic 3,472.50 4,463.89 5,343.64 26,295.00 39,575.03 Purchases of Services - Supported by Original VAT ORs without or invalid TIN of petitioner "P-54" Input Tax on Domestic - 1,214.40 - - 1,214.40 Purchases of Services - Supported by Original VAT ORs with invalid Tl N of the supplier "P-55" Input Tax on Domestic - - - 3,377.68 3,377.68 Purchases of Services - Supported by Original VAT ORs in Petitioner's name not dated or issued within the period of the claim "P-56" Input Tax on Domestic 748.08 748.08 498.72 1,355.86 3,350.74 Purchases of Services- Supported by original VAT ORs issued as " Not Valid for Claiming Input Tax" "P-57" Input Tax on Domestic 184,933.08 145,800.98 41,301.15 244,493.86 616,529.07 Purchases of Services- P355,066. 79 P179,883.15 P125,777.65 P282,455.70 Not SuQported P943, 183.29 � Total Downward P44,240,294.07 Adjustments Net Amount of Excess and r Unutilized Input VAT Valid for Claim 72 Exhibits "P-41" to "P-57'', with sub-markings. 73 ICPA Report, Exhibit "P-15", Docket- Vol. 1, p. 341.

DECISION CTA Case No. 9896 Upon careful examination thereof, We adopt the findings of the ICPA that only the input VAT amounting to P44,240,294.07 are valid for the claim for refund. While, the amount of P943, 183.29 should be disallowed for failure to meet the substantiation requirements under Sections 11 O(A), 113(A) and (B), 237 and 238 of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.11 0,3, 4.110-8, and 4.113-1 of RR No. 16-2005, as amended. In addition, upon further examination and verification by the Court, an additional input VAT amounting to P13,955.42 shall likewise be disallowed for the grounds stated hereunder: Supplier Exhibit Input VAT Reason for Disallowance Accent Micro Technologies, Inc. P-43-7 P3,529.39 Invoice Not Readable Cebuana Lhuillier Pera Padala P-51-118 Cebuana Lhuillier Pera Padala P-51-120 19.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-122 Cebuana Lhuillier Pera Padala P-51-124 39.27 Official Receipt not in the name of the _petitioner Cebuana Lhuillier Pera Padala P-51-126 Cebuana Lhuillier Pera Padala P-51-128 19.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-130 Cebuana Lhuillier Pera Padala P-51-132 68.73 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-134 Cebuana Lhuillier Pera Padala P-51-136 9.82 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-138 Cebuana Lhuillier Pera Padala P-51-140 212.14 Official ReceiQt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-142 Cebuana Lhuillier Pera Padala P-51-144 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-146 Cebuana Lhuillier Pera Padala P-51-148 9.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-150 Cebuana Lhuillier Pera Padala P-51-152 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-154 Cebuana Lhuillier Pera Padala P-51-156 183.21 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-158 Cebuana Lhuillier Pera Padala P-51-186 38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-188 19.29 Official Receipt not in the name of thepetitioner 28.93 Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 154.29 Official Receipt not in the name of the _petitioner 38.57 Official Receipt not in the name of the petitioner 48.21 Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 125.36 Official Receipt not in the name of the petitioner 144.64 Official Receipt not in the name of the petitioner 19.29 Official Receipt not in the name of the petitioner 19.29 Official Receipt not in the name of the petitioner 67.50 ~ Official Receipt not in the name of the petitioner

DECISION CTA Case No. 9896 Cebuana Lhuillier Pera Padala P-51-190 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-192 Cebuana Lhuillier Pera Padala P-51-194 125.36 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-196 Cebuana Lhuillier Pera Padala P-51-198 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-200 Cebuana Lhuillier Pera Padala P-51-202 57.86 Official ReceiQt not in the name of the _petitioner Cebuana Lhuillier Pera Padala P-51-204 Cebuana Lhuillier Pera Padala P-51-206 48.21 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-208 Cebuana Lhuillier Pera Padala P-51-210 67.50 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-212 Cebuana Lhuillier Pera Padala P-51-214 96.43 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-216 Cebuana Lhuillier Pera Padala P-51-218 38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-220 Cebuana Lhuillier Pera Padala P-51-222 48.21 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-224 Cebuana Lhuillier Pera Padala P-51-226 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-228 Cebuana Lhuillier Pera Padala P-51-257 9.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-259 Cebuana Lhuillier Pera Padala P-51-261 115.71 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-263 Cebuana Lhuillier Pera Padala P-51-265 37.88 Official Receip_t not in the name of the _petitioner Cebuana Lhuillier Pera Padala P-51-267 Cebuana Lhuillier Pera Padala P-51-269 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-271 Cebuana Lhuillier Pera Padala P-51-273 67.50 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-275 Cebuana Lhuillier Pera Padala P-51-277 38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-279 Cebuana Lhuillier Pera Padala P-51-281 �38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-283 Cebuana Lhuillier Pera Padala P-51-285 57.86 Official Receipt not in the name of the petitioner 77.14 Official Recei2_t not in the name of the _petitioner 115.71 Official Receipt not in the name of the petitioner 48.21 Official Receipt not in the name of the petitioner 106.07 Official Receipt not in the name of the petitioner 77.14 I I Official Receipt not in the name of thepetitioner 86.79 Official Receipt not in the name of the petitioner I 106.07 Official Receipt not in the name of the petitioner I 125.36 Official Receipt not in the name of the petitioner 67.50 I I Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 67.50 Official Receip_t not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 183.21 Official ReceiQt not in the name of the _petitioner 38.57 Official Receipt not in the name of the petitioner 106.07 Official Receipt not in the name of the petitioner 48.21 Official Recei2_t not in the name of the_petitioner 163.93 lf1 Official Receipt not in the name of the petitioner

DECISION CTA Case No. 9896 Cebuana Lhuillier Pera Padala P-51-287 96.43 Official ReceiQ_t not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-289 Cebuana Lhuillier Pera Padala P-51-291 77.14 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-319 Cebuana Lhuillier Pera Padala P-51-321 9.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-324 Cebuana Lhuillier Pera Padala P-51-325 125.36 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-327 Cebuana Lhuillier Pera Padala P-51-329 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-331 Cebuana Lhuillier Pera Padala P-51-333 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-335 Cebuana Lhuillier Pera Padala P-51-337 38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-339 Cebuana Lhuillier Pera Padala P-51-341 19.29 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-343 Cebuana Lhuillier Pera Padala P-51-345 77.14 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-347 Cebuana Lhuillier Pera Padala P-51-349 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-351 Cebuana Lhuillier Pera Padala P-51-353 67.50 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-355 Cebuana Lhuillier Pera Padala P-51-357 48.21 Official Receip_t not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-359 Cebuana Lhuillier Pera Padala P-51-361 38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-387 Cebuana Lhuillier Pera Padala P-51-389 67.50 Official Recei_Q_t not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-391 Cebuana Lhuillier Pera Padala P-51-393 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-395 Cebuana Lhuillier Pera Padala P-51-398 48.21 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-400 Cebuana Lhuillier Pera Padala P-51-402 28.93 Official Receipt not in the name of the _petitioner Cebuana Lhuillier Pera Padala P-51-404 Cebuana Lhuillier Pera Padala P-51-406 77.14 Official Receipt not in the name of the petitioner 183.21 Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 67.50 Official ReceiQ_t not in the name of the petitioner 77.14 Official Receipt not in the name of the petitioner 57.86 Official Receipt not in the name of the petitioner 212.14 Official ReceiQ_t not in the name of the petitioner 28.93 Official Receipt not in the name of the petitioner 57.86 Official ReceiQt not in the name of the petitioner 115.71 Official Receipt not in the name of the petitioner 9.64 Official Receipt not in the name of the petitioner 48.21 Official Receipt not in the name of the petitioner 77.14 Official Receipt not in the name of the _petitioner 250.71 Official Receipt not in the name of the petitioner 19.29 Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 48.21 Official Receipt not in the name of the petitioner 86.79 ~ Official Receipt not in the name of the petitioner j

DECISION CTA Case No. 9896 Cebuana Lhuillier Pera Padala P-51-408 19.29 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-41 0 Cebuana Lhuillier Pera Padala P-51-412 9.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-414 Cebuana Lhuillier Pera Padala P-51-416 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-418 Cebuana Lhuillier Pera Padala P-51-420 192.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-423 Cebuana Lhuillier Pera Padala P-51-448 38.57 Official ReceiQt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-450 Cebuana Lhuillier Pera Padala P-51-452 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-454 Cebuana Lhuillier Pera Padala P-51-456 19.29 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-458 Cebuana Lhuillier Pera Padala P-51-460 28.93 Official Receigt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-462 Cebuana Lhuillier Pera Padala P-51-464 86.79 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-466 Cebuana Lhuillier Pera Padala P-51-468 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-470 Cebuana Lhuillier Pera Padala P-51-472 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-474 Cebuana Lhuillier Pera Padala P-51-476 19.29 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-478 Cebuana Lhuillier Pera Padala P-51-480 77.14 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-482 Cebuana Lhuillier Pera Padala P-51-484 96.43 Official ReceiQ_t not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-486 Cebuana Lhuillier Pera Padala P-51-518 9.64 Official Receig_t not in the name of the _petitioner Cebuana Lhuillier Pera Padala P-51-520 Cebuana Lhuillier Pera Padala P-51-522 38.57 Official Receipt not in the name of the petitioner 1 Cebuana Lhuillier Pera Padala P-51-524 Cebuana Lhuillier Pera Padala P-51-526 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala P-51-528 Cebuana Lhuillier Pera Padala P-51-530 28.93 Official Receipt not in the name of the petitioner 86.79 Official Receipt not in the name of the petitioner 38.57 Official Receigt not in the name of the petitioner 28.93 Official Receipt not in the name of the petitioner 19.29 Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 106.07 Official Receigt not in the name of the _petitioner 48.21 Official Receipt not in the name of the petitioner 86.79 Official Receipt not in the name of the petitioner 48.21 Official Receipt not in the name of the petitioner 9.64 Official Receipt not in the name of the petitioner 154.29 Official Receipt not in the name of the petitioner 28.93 Official ReceiQ_t not in the name of the petitioner 57.86 Official Receipt not in the name of the petitioner 135.00 Official Receipt not in the name of the petitioner 38.57 Official Receipt not in the name of the petitioner 48.21 Official Receipt not in the name of the petitioner 38.57 ~ Official Receipt not in the name of the petitioner

DECISION CTA Case No. 9896 Cebuana Lhuillier Pera Padala P-51-532 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-534 77.14 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-536 67.50 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-538 28.93 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-540 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-542 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-544 96.43 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-547 9.64 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-549 28.93 Official ReceiQt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-551 38.57 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-553 125.36 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-555 96.43 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-587 19.29 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-589 57.86 Official Receipt not in the name of the petitioner Cebuana Lhuillier Pera Padala Cebuana Lhuillier Pera Padala P-51-591 202.50 Official Receipt not in the name of the petitioner Total P-51-593 38.57 Official ReceiQt not in the name of the _petitioner P-51-595 38.57 Official Receipt not in the name of the petitioner P-51-597 9.64 Official Receipt not in the name of the petitioner P-51-599 67.50 Official Receipt not in the name of the petitioner P-51-601 57.86 Official Receipt not in the name of the petitioner P-51-603 212.14 Official Receipt not in the name of the petitioner P-51-605 38.57 i I Official Receipt not in the name of the petitioner � P-51-607 19.29 Official Receipt not in the name of the petitioner P-51-609 86.79 I P-51-612 67.50 I Official Receipt not in the name of the petitioner I I Official Receipt not in the name of the petitioner P-51-613 231.43 Official Receipt not in the name of the _petitioner P-51-615 241.07 Official Receipt not in the name of the petitioner P-51-617 57.86 Official Receipt not in the name of the petitioner P-51-619 86.79 Official Receipt not in the name of the petitioner P13,955.44 Thus, out of the total input VAT per petitioner's VAT Returns amounting to P45, 188,969.72 for the four quarters of CY 2016, only the amount of P44,231 ,831.01, as computed below, represents petitioner's substantiated input VAT for goods and services as well as amortizatior

DECISION CTA Case No. 9896 of input VAT exceeding P1 million for the same period, and to be considered for the purpose of petitioner's compliance with the remaining requisites: Input VAT P11 ,390,917.36 P45, 188,969.72 15 Quarter 11 ,455,643.88 2nd Quarter 10, 919, 144.21 957,138.71 3rd Quarter 11 ,423,264.27 4th Quarter P44,231 ,831.01 P943, 183.29 Less: Disallowances 13,955.42 Per ICPA Report Per Court's further verification Valid ln_put VAT Eight Requisite: The input taxes being claimed are attributable to petitioner's zero-rated sales. The eighth requisite requires that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, 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. For the subject period of claim, petitioner reported zero-rated sales and vatable sales in its Quarterly VAT Returns for the first to fourth quarters of CY 2016, in the following amounts: Period Exhibit Vatable Sales Zero-Rated sales 1Q 2016 Line 17, "P-3-a"74 P45, 769.6576 p 229,120,891.77 2Q 2016 "P-4-a"75 3Q 2016 168,286,494.02 4Q 2016 Line 17, "P-5-a"77 Line 17, "P-6-a"78 164,926,715.37 66,234,935.32 Total P45,769.65 P628,569,036.48 TOTAL SALES P628,614,806.13 ~ 74 Docket- Vol. 2, pp. 518 to 519. 75 Docket- Vol. 2, pp. 522 to 523. 76 Line 15A, Docket- Vol. 2, p. 522. 77 Docket- Vol. 2, pp. 526 to 527. 78 Docket- Vol. 2, pp. 530 to 531.

DECISION CTA Case No. 9896 Considering that petitioner's input VAT cannot be directly or entirely attributed to any of the transactions, the valid input VAT of P44,231 ,831.01 shall be allocated proportionately on the basis of the volume of its total sales, in accordance with Section 112(A) of the NIRC of 1997, as amended, thus: VATable recei ts er Quarter! VAT Return p 45,769.65 Divided b Total Sales/Recei ts er VAT Return 628,614,806.13 Multi I b total valid In ut VAT 44,231,831.01 In ut VAT Attributable to Total VATable Sales ---- -- -~ ~,2~0.53 -~--- - - - - - - - - - - - - - Valid Zero-Rated Sales/Receipts p 176,909,265.82 Divided by Total Sales/Receipts p_er VAT Return 628,614,806.13 Multiply by total valid Input VAT 44,231,831.01 Input VAT Attributable to valid zero-rated sales p 12,448,037.61 Consequently, only the remaining excess input VAT of P12,448,037.61 can be attributed to the substantiated zero-rated sales of P176,909,265.82. Further, petitioner incurred output VAT liability in the amount of P5,492.3679. Considering that petitioner's valid input VAT allocated to VA Table sales in the amount of P3,220.53 is not enough to cover the output VAT liability, the input VAT attributable to petitioner's valid zero- rated sales in the amount of P12,448,037.61 shall then be utilized against the remaining output VAT liability in the amount of P2,271.83. Consequently, only the remaining input VAT of P12,445,765.78 can be allocated to the entire valid zero-rated sales of petitioner, computed as follows: Output VAT due p 5,492.36 Input VAT Attributable to Total VATable 3,220.53 Sales _Ol.J_tpl..J_t V_f\T still due p 2,271.83 Input VAT Attributable to valid zero-rated p 12,448,037.61 sales Less: remaining balance of output VAT 2,272.83 Excess Input VAT attributable to valid p 12,445,765.78 zero-rated sales - - - L__ - - - - - - - --------- ���--- /J 79 Line 15B, Exhibit "P-4-a", Docket, p. 522.

DECISION CTA Case No. 9896 Thus, for purposes of the eight requisite, the excess input VAT attributable to petitioner's valid zero-rated sales is only in the amount of P12,445, 765.78. Ninth requisite: Petitioner's claimed input taxes were not applied against any output taxes nor carried over to succeeding periods. Having determined that petitioner had excess input VAT attributable to its zero-rated sales, We shall proceed to determine whether the same was not applied against its output VAT liability during and in the succeeding quarters. In this case, petitioner's claimed input VAT for the four quarters of 2016 amounting to P45,183,477.36 was not carried over by petitioner in its succeeding Quarterly VAT Returns because it was deducted as "VAT Refund/TCC c/aimed'80 in its Amended Quarterly VAT Return for the 4th quarter of 2016, preventing the carry-over or application of the claimed input VAT in the next taxable quarters. Accordingly, the subject claim no longer formed part of the excess input VAT of P11,771,232.8981 as of the first quarter of 2017. Such being the case, the claimed input VAT could not have been carried over or utilized in the succeeding quarters of 2017. 82 In fine, petitioner has sufficiently proven its entitlement to the refund or issuance of TCC in the amount of P12,445,765.78, representing unutilized excess input VAT attributable to its zero-rated sales for the four quarters of 2016. WHEREFORE, in light of the foregoing considerations the Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P12,445,765.78 representing the 80 Exhibit "P-6-a", Line 23D, Docket- Vol. 1, p. 165. ~ 81 Exhibit "P-58-1 (2/2)", Line 29, refer to the CD found in petitioner's FOE. 82 Exhibits "P-58-1" to "P-58-4", with sub-markings.

DECISION CTA Case No. 9896 latter's unutilized input VAT attributable to its zero-rated sales for the four quarters of the CY 2016. SO ORDERED. ERL~UY Associate Justice WE CONCUR: <iv.~ -4~ MA. BELEN M. RINGPIS-LIBAN Associate Justice Associate" Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ER~P.UY Associate Justice Chairperson, 3rd Division

DECISION CTA Case No. 9896 Page41 of41 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice