REGUS SERVICE CENTRE, PHILIPPINES B.V. - ROHQ v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SPECIAL SECOND DIVISION

REGUS SERVICE CTA CASE NO. 10124

B.V. - ROHQ CENTRE, PHILIPPINES Petitioner,

Members:

-versus- CUI-DAVID, II. BACORRO-VILLENA, Acting Chairperson, and

COMMISSIONER INTERNAL REVENUE Respondent. OF Promulgated: OCT O 1 2026 Y:47 Pr

DECISION

BACORRO-VILLENA, I.:

Once again, before the Court is the case of Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue, docketed as CTA Case No. 10124. Originally, the Second Division' had resolved this case in its Decision of o9 February 2o22 (Division Decision)

EB No. 2640. In a Decision dated 15 September 20233 (En Banc Thereafter, it was elevated to the Court En Banc and docketed as CTA

Decision), the Court En Banc modified the Division Decision and remanded the case back to this Division for determination of whether petitioner Regus Service Centre, Philippines B.V. - ROHQ (petitioner) has complied with all the requisites to merit a grant of its claim for refund.

c 2 Composed of Associate Justice Juanito C. Castaneda, Jr. (Ret.), with Associate Justice Jean Marie Id., pp. 669-685. A. Bacorro-Villena, dissenting and Associate Justice Lanee S. Cui-David, concurring. Division Docket, Volume II, pp. 541-561.

Page 2 of 24 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION CTA Case No.10124

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As the records so bear, the case originated from a Petition for Review4 (Division Petition) filed by petitioner pursuant to Section 3(a),5 Rule 8 in relation to Section 3(a)), Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA), seeking to appeal respondent Commissioner of Internal Revenue's (respondent's/CIR's) denial of its administrative claim for refund in the amount of P12,295,oo5.64. The amount claimed represents unutilized input Value-Added Tax (VAT) on purchases of services attributable to zero-rated sales for calendar year (CY) 2017.

PARTIES TO THE CASE

under the laws of the Netherlands.7 It is registered with the Securities Centre, Philippines B.V., a corporation duly organized and existing Petitioner is a regional operating headquarters of Regus Service

and Exchange Commission (SEC) and holds office at 3rd Floor, "W" High Street Building, 28th Street corner 1th Avenue, Bonifacio Global City, Fort Bonifacio, Taguig City.

Respondent, on the other hand, is the duly appointed CIR, with principal office at the Bureau of Internal Revenue (BIR), National Office Building, Agham Road, Diliman, Quezon City.i

10 O (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from SEC. 3. Cases within the jurisdiction of the Court in Division. -- The Court in Division shall exercise: arising under the National Internal Revenue Code or other laws administered by the Bureau of Par. 2, I. THE PARTIES, Petition for Review, supra at note 4. SEC. 3. Who may appeal; period to file petition. ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of (a) Exclusive original over or appellate jurisdiction to review by appeal the following: refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters Par. 1, I. THE PARTIES, Petition for Review, supra at note 4. Supra at note 7. payment or collection of the taxes (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, Exhibit "P-1", id., p. 315. Filed on 19 July 2019,id.,Volume I,pp.10-83,with ar Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or Internal Revenue[.]

CTA Case No. 10124 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION Page 3 of 24

FACTS OF THE CASE

Returns" and declared a total sales amount of P892,371,561.96, all of which were zero-rated. For all quarters of CY 2o17, petitioner filed its Quarterly VAT

On 05 April 2o19,petitioner filed a Letter Request for Refundi and Applicationfor Tax Credits/Refunds(BIRFormNo. 1914)3 (administrative claim) with the BIR's VAT Credit Audit Division

rated sales for CY 2017 in the total amount of P12,295,005.64. (VCAD), seeking a refund of unutilized input VAT attributable to zero

form of reimbursement of costs initially paid by it, and said expenses petitioner's claim for refundi4 on the ground that petitioner allegedly: 29 March 2019; and (2) entered into transactions with affiliates in the () still had outstanding tax obligations amounting to P2,693,128.72 as of Respondent, on the other hand, issued a Letter denying

were reported as "management fees", "people recharge", and "property costs" which were unsupported by corresponding source documents.

PROCEEDINGSBEFORE THE COURTIN DIVISION

filed the Division Petition5 to appeal respondent's denial of the administrative claim. The same was raffled to then Second Division and docketed as CTA Case No. 10124. Dissatisfied with the BIR's decision, on 19 July 2019, petitioner

On 29 July 2019, the then Second Division issued Summons ordering respondent to file an Answer within thirty (3o) days from service of the same. The CIR received the said Summons on o5 August 2019.7 After the Second Division granted extension of time,18 the CIR

12 1 13 Exhibits "P-4, "P-5, "P-6, and "P-7, Division Docket, Volume I, pp. 327-334 Exhibit "P-8, id., pp. 335-339. Exhibit "P-9", id., p. 340. Exhibit "P-14, id., pp. 345-346. Supra at note 4. s

1 1 See Order dated 23 August 2019, id., p. 95. Division Docket, Volume I, p. 84. Id

Page 4 of 24 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No. 10124 DECISION

filed an Answer9 on 25 September 2o19.The CIR transmitted the BIR Records earlier on 19 September 2019.

In compliance with the then Second Division's directive respondent filed his or her Pre-Trial Brief on 17 October 2o19,22 while petitioner filed its Pre-Trial Brief on 21 October 2019.23 During the scheduled Pre-Trial Conference on 24 October 2o19,24 parties were given twenty (2o) days to file their Joint Stipulation of Facts and Issues (JSFI) which the parties did on o6 November 2019.25

Commissioning of Independent Certified Public Accountant [ICPA]".26 On o8 November 2019, petitioner filed a "Motion for

The Second Division then issued the Pre-Trial Order dated o2 December 2oi9,27 setting trial dates for the presentation of the parties' witnesses. During the hearing conducted on 04 December 2019, the Second Division granted the Motion for Commissioning of ICPA and ordered ICPA Krista V. Bambao (Bambao) to submit her ICPA Report within forty (40) days,28 which she did on 14 January 2020.29

On the same hearing date, petitioner presented its first witness

Judicial Affidavit3 dated 18 October 2019 that all of petitioner's 2017 sales Atty. Juan R. Bernardino, Jr. (Bernardino),3o who testified by way of his

amounting to P892,371,561.96 were generated from services rendered to affiliates abroad and thus,subject to zero-rated VAT.As such, input VAT credits incurred from its purchases were unutilized and thus, subject to refund. To support said claim, petitioner presented official receipts (ORs) and sales invoices (SIs) to the ICPA. No cross-examination was conducted.3

19 20 2 2 23 24 2 26 2 28 3 31 32 9 Id., pp. 99-101. Id., pp. 105-107. See Minutes of Hearing dated 24 October 2019, id., p. 165. Id., pp. 169-174. Id., pp. 196-200. See Compliance, id., p. 97. See Notice of Pre-Trial Conference dated 27 September 2019, id., pp. 103-104. Id., pp. 154-163. Id.,pp.175-178. See Order dated 04 December 2019, id., p. 221. ICPA Report, USB. Division Docket, Volume I, pp. I11-121, sans annexes. TSN dated 04 December 2019, p. 6. Supra at note 28.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION Page 5 of 24 CTA Case No. 10124

During the hearing conducted on 22 January 2o2o, petitioner presented its second and third witnesses, ICPA Bambao and Edelweiss Y. Chua (Chua).33

ICPA Bambao testified by way of her Judicial Affidavit34 dated 17 January 2020 that: (r) out of the Pi2,947,578.86 input VAT that petitioner incurred and paid based on petitioner's quarterly VAT returns, petitioner was only able to substantiate P8,30i,027.54; and ( based on theRegus Service Centre, Philippines B.V. Services

incorporated under the laws of Luxembourg. Agreement"35 (Service Agreement), the sole recipient of petitioner's services for CY 2oi7 was Franchise International S.A.R.L., an entity

Meanwhile, witness Chua testified by way of her Judicial Affidavit3 dated 17 January 2020 on the circumstances encountered

application for refund with the VCAD, as well as the actual submission during the processing of the requirements to support petitioner's

of the same. No cross-examination was conducted for both witnesses.37

After completing the presentation of evidence, petitioner, on 16 March 2o2o,filed itsFormal Offer of Evidence [FOE] with Motion with Leave of Court to Set Commissioner's Hearing",38 consisting of Exhibits "P- to "P-45o", inclusive of sub-markings. Respondent failed to file his or her comment thereto.39

Service Centre, Philippines B.V. Services Agreement)"4o (Motion to take judicial notice of the due execution of apostilled copy of Regus Thereafter, on o1 September 202o, petitioner filed a "Motion (to

Take Judicial Notice) considering that the Service Agreement has become part of the Third Division's records for the case entitled Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal

requested another Commissioner's Hearing to compare the marked Revenue, docketed as CTA Case No.9962. In the alternative, petitioner

copy with the original apostilled document. On 30 September 2020,

See Order dated 22 January 2020, Division Docket, Volume I, p. 292. 3

35 3 33 39 40 3 Exhibit "P-41", id., pp. 459-468. Supra at note 3; see Order dated 09 March 2020, Division Docket, Volume I, p. 300. Id.,pp.261-290 Division Docket, Volume I, pp. 301-314. See Records Verification dated 30 June 2020, id., p. 432. Id., pp. 437-440. Exhibit "P-18", id., pp. 226-235.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 6 of 24

respondent filed a "Comment (To Petitioner's [Motion to Take Judicial Notice])".4

In its Resolution dated o7 December 2o2o,42 the Second Division granted the Motion to Take Judicial Notice insofar as its alternative prayer for scheduling a Commissioner's Hearing is concerned Furthermore, the Court ordered petitioner to submit the duly marked

Philippines B.V. Services Agreement entered between Head Office of petitioner and Franchise International S.A.R.L.", which the latter did.43 and compared Exhibit "P-41" described as "Regus Service Centre,

Second Division admitted all of petitioner's exhibits, except Exhibit Consequently, in a Resolution dated o2 February 2021,44 the

Exhibit "P-8-"4 for not having been duly marked and for failure of "P-3-i"45 for failure to correspond with the document offered, and

petitioner's witness to identify the same.

On. 18February 2021,petitionerfileda"Motion for Reconsideration with Motion to Set Commissioner's Hearing (Re: Resolution on the [FOE] dated 2 February 2021)"47 (MR on the Resolution of FOE).During the hearing conducted on 22 February 2021, petitioner manifested the filing of an MR on the Resolution of FOE alleging that the document actually marked as Exhibit "P-3-1" was the "Authority to Print", but the correct document should be the "Certificate of Registration" issued by the BIR. There being no objection from the respondent, the marking on Exhibit "P-3-1" was transferred to the correct document, and Exhibit "P-3-1" is hereby admitted in evidence.48

During the same hearing, which was supposedly for the initial presentation of respondent's evidence, the latter's counsel manifested that the revenue officer had no report of investigation and therefore, respondent will no longer present any evidence.49 In view of said

42 Id., pp. 443-444 Id., pp. 447-448. See Compliance (Re: Submission of Exhibit "P-41"), id., pp. 457-468.

4 b Signature above the name Roselle Caraig. See Order dated 22 February 2021, id., pp. 490-491. Certificate of Registration issued by the BIR. See Minutes of Hearing dated 22 February 2021, id., p. 489. Division Docket, Volume I, pp. 478-482. Id., pp. 474-475

Regus Service Centre, Philippines B.V.-ROHQ v. Commissioner of Internal Revenue Page 7 of 24 DECISION CTA Case No. 10124

manifestation, the parties were directed to submit their respective memoranda.

2021, filed his or her Memorandum.5 On the next day, petitioner filed In compliance with the Court's directive, respondent, on 23 March

the same.5i Thereafter, on o1 June 2o21, the case was submitted for decision.52

whereby the then Second Division denied petitioner's judicial claim for On o9 February 2022, the Division Decision53 was promulgated,

its failure to establish that it performed the zero-rated services within the Philippines, there being no indication in the Service Agreement to that effect, nor any other documentary evidence to prove the same. The dispositive portion of the Division Decision reads:

WHEREFORE, in the light of all the foregoing considerations, the instant Petition for Review is DENIED for lack of merit.

SO ORDERED.

"[MR]"54 (MR on Division Decision), while respondent failed to file his In relation thereto, petitioner, on 28 February 2o22, filed a

comment thereto.55 In a Resolution dated 23 May 2022,56 the then Second Division reiterated its position with regard to the lack of proof that the zero-rated services were performed in the Philippines and accordingly, denied petitioner's MR on Division Decision, the dispositive portion thereof reads:

WHEREFORE, premises considered, petitioner's Motion for Reconsideration is DENIED for lack of merit.

SO ORDERED. C

1 52 53 5S 56 7 Id., pp. 530-535. Id., pp. 492-525. See Resolution dated 01 June 2021, id., p. 538. Division Docket, Volume II, pp. 562-575. See Records Verification dated 31 March 2022, id., p. 579. Id., pp. 581-587. Supra at note 2

Page 8 of 24 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No.10124 DECISION

PROCEEDINGS BEFORE THE COURT EN BANC

Undeterred, on 20 June 2022, petitioner filed a Petition for Review57 before the Court En Banc (En Banc Petition), while respondent failed to file his or her comment thereto.58

On 15 September 2023, the En Banc Decision59 was promulgated There, the Court En Banc partially granted the En Banc Petition. The dispositive portion thereof reads:

WHEREFORE,premises considered, the Petition for Review is PARTIALLY GRANTED.

and May 23, 2022, respectively, are MODIFIED as regards the Court The assailed Decision and Resolution dated February 9, 2022

in Division's conclusion that petitioner failed to prove that the services were performed in the Philippines, for reasons above-stated.

unutilized input VAT for CY 2017. other requisites to merit a grant of its claim for refund of alleged Division for the determination of petitioner's compliance with the Accordingly,let this case be REMANDED to the Court in

SO ORDERED.

The Court En Banc ruled that petitioner was able to prove that i performed the services within the Philippines through: (r) the Service Agreement, the admission of which was not contested by respondent; () the testimony of ICPA Bambao, which also remained unrebutted

petitioner is tasked to provide qualifying services to foreign affiliates by performing services within the Philippines; and (4) petitioner is a (3) by its very nature as a regional operating headquarters (ROHQ) resident foreign corporation taxable only on income from sources within the Philippines.

Reconsideration (RE: Decision Promulgated September 15, 2023)"6 On 1o October 2023, respondent filed a "Motion for Partial

Id., pp. 588-600. See En Banc Resolution dated 14 September 2022, id., p. 665. 5

0 Division Docket, Volume II, pp. 687-693. Supra at note 3

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue Page 9 of 24 CTA Case No. 10124 DECISION

Decision Promulgated dated 19 October 2025"61 on 31 October 2023. In a Resolution dated o7 February 2o24,62 the Court En Banc denied (MPR on En Banc Decision), while petitioner filed a "Comment (Re

respondent's MPR on En Banc Decision, the dispositive portion thereof reads:

by respondent CIR is hereby DENIED for lack of merit. Reconsideration (RE: Decision promulgated September 15, 2o23), filed WHEREFORE, premises considered, the Motion for Partial

remanding the case to the Court in Division for the determination of petitioner's compliance with the other requisites to merit a grant of its claim for refund, is AFFIRMED. Accordingly, the En Banc Decision dated September 15, 2023

SO ORDERED.

PROCEEDINGS BEFORE THE SUPREME COURT

of the CIR's Petition for Review on Certiorari filed with the Supreme On 04 April 2024, the Court of Tax Appeals (CTA) received a copy

Court.

Thereafter, on o8 May 2025, the Supreme Court transmitted a copy of the Entry of Judgment4 certifying that on 17 July 2024, the Third Division of the Supreme Court issued a resolution in the case of Commissioner of Internal Revenue v. Regus Service Centre, Philippines B.V. docketed as G.R. No. 2721oo, the dispositive portion thereof reads:

Decision and Resolution dated September 15, 2023 and February 7, 2024, respectively, of the Court of Tax Appeals in CTA EB No. 2640 resolution as to warrant the exercise by this Court of its discretionary (CTA Case No. 10124), the Court further resolves to DENY the petition for failure to show any reversible error in the challenged decision and Acting on the petition for review on certiorari assailing the

appellate jurisdiction.c

11 2 4 6 See Compliance (Re: Resolution of Court of Tax Appeals dated 19 October 2023), rollo, pp. 133- Division Docket, Volume II, pp. 699-704. Id., pp. 708-721. 144 Id., p. 736.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 10 of 24

On 2o December 2o24, said resolution became final and executory

herein Special Second Division, on 31 July 2025, issued a Resolution,6 and was recorded in the Book of Entries of Judgments.5 In line with this,

the dispositive portion of which reads:

any supervening event that may have transpired in this case which the (15) days from receipt hereof, to file a written Manifestation alleging WHEREFORE,both parties are hereby given a period of fifteen

parties would want to present before this Court for its consideration make a determination of petitioner's compliance with the other Upon the filing thereof, or lapse of the period given, the Court shall

input VAT for CY 2017, pursuant to the Decision of CTA En Banc dated requisites to merit a grant of its claim for refund of alleged unutilized September 15, 2023.

SO ORDERED.

"Manifestation (Re: Resolution dated 31 July 2025)",67 stating that there In compliance therewith, on 27 August 2o25, petitioner filed a

were no supervening events pending the resolution of the case which

October 2025, the case was submitted anew for decision.69 need to be brought to the attention of the Special Second Division. Meanwhile, respondent failed to file the same.18 Accordingly, on or

ISSUE

Pursuant to the Court En Banc's order of remand of the case, the sole issue for this Court's resolution is .

WHETHER PETITIONER REGUS SERVICE CENTRE, PHILIPPINES B.V. - ROHQ COMPLIED WITH THE OTHER REQUISITES REPRESENTING UNUTILIZED INPUT VALUE-ADDED TAX (VAT) ATTRIBUTABLE TO ITS ZERO-RATED SALES FOR CALENDAR YEAR 2017. FOR ENTITLEMENT TO THE REFUND OF P12,295,005.64

6 8 b Id., p. 739-741 See Records Verification dated 19 September 2025, id., p. 748. Id., p. 749. Id. Id., pp. 743-746.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION CTA Case No.10124

Page 11 of 24

RULING OF THE COURT

Petitioner anchors its claim on Sections 11o(B)7 and 112(A) and (C)

Inclusion (TRAIN), which are quoted hereunder: of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 1o963 or Tax Reform for Acceleration and

SEC. 1o. 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 excess shall be carried over to the succeeding quarter or quarters: VAT-registered person. If the input tax exceeds the output tax, the 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 of Input Tax.

sales were made, apply for the issuance of a tax credit certificate or person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the refund of creditable input tax due or paid attributable to such sales (A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered

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 1o8(B)(i) and (), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and zero-rated sales under Section io6(A)(2)(a)(i),(2) and (b) and Section

regulations of the 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 directly and entirely attributed to any one of the transactions, it shall services, and the amount of creditable input tax due or paid cannot be

Provided, finally, That for a person making sales that are zero-rated under Section io8(B)(6), the input taxes shall be allocated ratably be allocated proportionately on the basis of the volume of sales: between his zero-rated and non-zero-rated sales.

0 As amended by Republic Act No.9361,"AN ACT AMENDING SECTION 110(B) OF THE

NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES".

Regus Service Centre, Philippines B.V. -ROHQ v.Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 12 of 24

input taxes within ninety (go) days from the date of submission of the proper cases, the Commissioner shall grant a refund for creditable (C) Period within which Refund of Input Taxes shall be Made. - In

application filed in accordance with Subsections (A) and (B and factual basis for the denial. official receipts or invoices and other documents in support of the hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal

In case of full or partial denial of the claim for tax refund, the taxpayer denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, affected may, within thirty (zo) days from the receipt of the decision

ninety (9o)-day period shall be punishable under Section 269 of this agent, or employee of the BIR to act on the application within the Code.7

In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd.72 (Deutsche), the Supreme Court laid down the requisites for the entitlement to tax refund or credit of excess input VAT attributable to zero-rated sales, to wit:

Under Section 4.112-i(a) of Revenue Regulations No. (RR)

in relation to Section 112 of the Tax Code, a claimant's entitlement to a 16-o5, otherwise known as the Consolidated VAT Regulations of 2005,

registered; (2) the taxpayer must be engaged in sales which are sales were made; and (4) the creditable input tax due or paid hinges upon the following requisites: "() the taxpayer must be VAT- must be attributable to such sales, except the transitional input tax refund or credit of excess input VAT attributable to zero-rated sales within two years after the close of the taxable quarter when such zero-rated or effectively zero-rated; (3) the claim must be filed

tax, to the extent that such input tax has not been applied against the output tax.'

In the Division Decision, this Court already ruled that petitioner

Meanwhile, as to the third (grd) requisite, this Court has determined that has met the first (st) requisite, i.e., it is a VAT-registered person

petitioner only timely filed its administrative and judicial claims for the second, third, and fourth quarters of 2017 (Q2 - Q4 2017). The Court

G.R. No. 234445, 15 July 2020; Citations omitted and emphasis supplied. Italics in the original tex

CTA Case No. 10124 Regus Service Centre, Philippines B.V. -ROHQ v. Commissioner of Internal Revenue Page 13 of 24 DECISION

En Banc has affirmed these aspects of the Division Decision and thus. will not be disturbed.

What is left, therefore, for this Court to evaluate is whether petitioner complied with the second (nd) and fourth (4th) requisites.

SECOND (ND) REQUISITE: PETITIONER MUST BE ENGAGED IN SALES WHICH ARE ZERO-RATED OR EFFECTIVELY ZERO-RATED

Petitioner's claim for VAT refund relates to zero-rated sales of services to its nonresident foreign client. In relation thereto, Section 1o8(B)(2) of the NIRC of 1997, as amended, provides that:

SEc. io8. Value-added Tax on Sale of Services and Use or Lease of Properties.

be subject to zero percent (o%) rate: services performed in the Philippines by VAT-registered persons shall (B) Transactions Subject to Zero Percent (o%) Rate. - The following

(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 foreign currency and accounted for in accordance with the rules and performed, the consideration for which is paid for in acceptable

regulations of the Bangko Sentral ng Pilipinas (BSP)[.]73

as zero-rated, the following essential elements must be present: Based on the foregoing, for a sale or supply of services to qualify.

1. The recipient of the services is a foreign corporation, and the

said corporation is doing business outside the Philippines, or

3 Emphasis supplied and italics in the original text.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 14 of 24

is a nonresident person not engaged in business who is outside the Philippines when the services are performed;74

2. The services fall under any of the categories under Section 1o8(B)(2),75 or simply, the services rendered should be other than "processing, manufacturing or repacking goods";76

3. The service must be performed in the Philippines by a VAT-

registered person;77 and

4. The consideration for the services was paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.78

On the first two () essential elements, this Court, in the Division Decision, already declared that petitioner satisfied the same, considering that: () petitioner's sole client, Franchise International S.A.R.L, has been proven to be a nonresident foreign corporation (NRFC) doing business outside the Philippines; and (2) the services enumerated under the Service Agreement do not fall under processing, manufacturing, or repacking of goods. The Court En Banc likewise upheld these findings.

As to the 3rd essential element, this Court originally ruled that petitioner was unable to establish the same, but the Court En Banc decided in favor of petitioner, ruling that it sufficiently proved that the services were performed within the Philippines. Accordingly, the Court En Banc's conclusion shall not be disturbed.

As to the 4th essential element, i.e., that the consideration for the services was paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP, both this Court,

7 A Sitel Philippines Corporation (Formerly Clientlogic Phils., Inc.) v. Commissioner of Internal Scandinavian Contractor Mindanao, Inc., G.R. No. i53205, 22 January 2007. See Commissioner of Internal Revenue v. American Express International, Inc. (Philippine Branch), Revenue, G.R. No. 201326, 08 February 2017; Accenture, Inc. v. Commissioner of Internal Revenue, G.R. No. 190102, 11 July 2012; Commissioner of Internal Revenue v. Burmeister and Wain G.R. No. 152609, 29 June 2005 Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao,

Id.; Commissioner of Internal Revenue v. American Express International, Inc. (Philippine Branch), Inc., supra at note 74 supra at note 75 Id

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No.10124 DECISION Page 15 of 24 X

in the Division Decision, and the Court En Banc did not make a determination on this aspect, and will thus be finally settled herein.

Revenue,79 the Supreme Court explained how to sufficiently prove the 4th essential element for purposes of claiming VAT refund, to wit: In Intel Technology Philippines, Inc. v. Commissioner of Internal

petitioner, e.g., summary of export sales, sales invoices, official sales (a zero-rated transaction) if made by a VAT-registered entity. in the "sale and actual shipment of goods from the Philippines to a Moreover, the certification of inward remittances attests to the receipts, airway bills and export declarations, prove that it is engaged foreign country." In short, petitioner is considered engaged in export To the mind of the Court, these documentary evidence submitted by

fact of payment "in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the juxtaposed with the requirements of Sections io6 (A)(2)(a)() and rules and regulations of the BSP." Thus, petitioner's evidence,

112(A) of the Tax Code, as enumerated earlier, sufficiently establish that it is entitled to a claim for refund or issuance of a tax credit certificate for creditable input taxes.

.

Consequently, petitioner presented the "Certification issued by Hongkong and Shanghai Banking Corporation (HSBC) Limited"8o (HSBC Certification) on the amount of inward remittances that petitioner received from Franchise International S.A.R.L, as well as the Summary List of Sales for Q1 - Q4 2o17.8 The ICPA summarized said information as follows:

Remittance Date Amount remitted per HSBC Certification (in USD) Amount billed based on Summary List of Sales (in PHP) 10 January 2017 07 February 2017 07 March 2017 2,485,082.27 1,423,895.76 739,519.82 123,182,914.88 71,525,090.80 36,724,555.79

07 July 2017 05 April 2017 o4 May 2017 07 June 2017 1,563,495.50 1,452,718.97 1,435,347.57 1,657,215.88 72,941,060.79 71,890,814.88 82,527,753.03 78,878,330.12

0 9 G.R. No. 166732, 27 April 2007; emphasis supplied and italics in the original text. Exhibit "P-42", BIR Records, pp. 46-48. Exhibit "P-23", USB.

Regus Service Centre, Philippines B.V.-ROHQ v.Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 16 of 24

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Remittance Date Amount remitted per HSBC Certification (in USD) Amount billed based on Summary List of Sales (in PHP)

06 September 2017 05 October 2017 04 August 2017 1,406,686.00 1,504,667.04 1,478,707.47 75,696,567.80 70,867,471.43 76,583,012.82 04 November 2017 1,002,686.78 51,722,664.59 06 December 2017 17,737,033.22 1,587,010.16 892,371,569.04 79,831,332.11

On the basis of the above evidence presented, this Court is

rendered to Franchise International S.A.R.L, which constituted its convinced that petitioner has adequately proven that the services it

and accounted for in accordance with the rules and regulations of the recorded sales for CY 2o17, were paid for in acceptable foreign currency

BSP.

Notably, however, in addition to the four (4) essential elements to prove the presence of zero-rated sales, the law, BIR rules, and jurisprudence all require the taxpayer claiming a VAT refund to satisfy substantiation and invoicing requirements. In particular, Section 113 of the NIRC of 1997, as amended by RA 9337,82 provides the VAT invoicing requirements under the law, to wit:

SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons.

(A) Invoicing Requirements. -- A VAT-registered person shall issue:

(s) A VAT invoice for every sale, barter or exchange of goods or

properties; and

() A VAT official receipt for every lease of goods or properties, and

for every sale, barter or exchange of services.

(B) Information Contained in the VAT Invoice or VAT Official Receipt. or VAT official receipt: - The following information shall be indicated in the VAT invoice

() A statement that the seller is a VAT-registered person, followed

by his Taxpayer's Identification Number (TIN); s

32 AMENDED, AND FOR OTHER PURPOSES. 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

Page 17 of 24 CTA Case No. 10124 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION

() The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That:

(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from value-added tax, the term 'VAT- invoice or receipt; exempt sale' shall be written or printed prominently on the

(c) If the sale is subject to zero percent (o%) value-added tax the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated

or VAT-exempt, the invoice or receipt shall clearly indicate

value-added tax on each portion of the sale shall be shown and zero-rated components, and the calculation of the the breakdown of the sale price between its taxable, exempt

separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. on the invoice or receipt: Provided, That the seller may issue

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and

(4) In the case of sales in the amount of One thousand pesos (Pi,ooo) or more where the sale or transfer is made to a VAT-

registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client.83

Implementing the foregoing provision, Section 4.113-1 of Revenue Regulations (RR) No. 16-2oo584 provides as follows:

SEC. 4.113-1. Invoicing Requirements.

(A) VAT-registered person shall issue: -

(1)A VAT invoice for every sale, barter or exchange of goods or properties; and

803 184 Consolidated Value-Added Tax Regulations of 2005. Emphasis supplied

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION Page 18 of 24 CTA Case No.10124|

(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

receipt'. All purchases covered by invoices/receipts other than VAT followed by the word "VAT" in their invoice or official receipts. Said documents shall be considered as a VAT Invoice' or VAT official

Invoice/VAT Official Receipt shall not give rise to any input tax.

duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. VAT invoice/official receipt shall be prepared at least in

(B) Information contained in VAT invoice or VAT official receipt. VAT official receipt: The following information shall be indicated in VAT invoice or

(i) A statement that the seller is a VAT-registered person, followed by his TIN;

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount

includes the VAT; Provided, That:

(a) The amount of tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from VAT, the term VAT-exempt sale shall be written or printed prominently on the invoice or

receipt;

(c) If the sale is subject to zero percent (o%) VAT, the term the invoice or receipt; 'zero-rated sale' shall be written or printed prominently on

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated

the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the or VAT-exempt, the invoice or receipt shall clearly indicate

invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) In the case of sales in the amount of one thousand pesos (Pi,ooo.oo) or more where the sale or transfer is made to a VAT-

registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 19 of 24 X

addition to the information required in () and () of this Section.

Moreover, the SIs and ORs must be duly registered with the BIR

1997, as amended by RA 9337, to wit: as prescribed under Section 237 in relation to Section 238 of the NIRC of

persons subject to an internal revenue tax shall, for each sale or SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. All transfer of merchandise or for services rendered valued at Twenty-five

of transaction, quantity, unit cost and description of merchandise or pesos (P25.oo) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date

nature of service.

SEC. 238. Printing of Receipts or Sales or Commercial Invoices. All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same.

No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially

the person or entity to use the same, and such other information that numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of

may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.85

Verily, in J.R.A. Philippines, Inc. v. Commissioner of Internal Revenue,86 the Supreme Court emphasized the mandatory nature of the invoicing and substantiation requirements, as well as the effect of non- compliance therewith:

Case law dictates that in a claim for tax refund or tax credit, the applicant must prove not only entitlement to the claim but also

therefor. Section uo(A)() of the NIRC provides that creditable input compliance with all the documentary and evidentiary requirements

taxes must be evidenced by a VAT invoice or official receipt, which must, in turn, comply with Sections 237 and 238 of the same law, as

8 Emphasis supplied and italics in the original text G.R. No. 171307, 28 August 2013; Citations omitted, emphasis and italics in the original text.

CTA Case No. 10124 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION Page 20 of 24 X

said invoicing requirements provides sufficient ground to deny a claim for tax refund or tax credit. well as Section 4.1o8.1 of RR 7-95. The foregoing provisions require inter alia, that an invoice must reflect,as required by law: (a) the BIR Permit to Print; (b) the TIN-V of the purchaser; and (c) the word "zero- rated" imprinted thereon. In this relation, failure to comply with the

by petitioner not only lack the word "zero-rated" but also failed to In this case, records show that all of the export sales invoices presented

gainsaid that it failed to comply with the above-stated invoicing required to be able to file a claim for input taxes attributable to zero-rated sales. As held in Microsoft Philippines, Inc. v. CIR: reflect its BIR Permit to Print as well as its TIN-V. Thus, it cannot be requirements, thereby rendering improper its claim for tax refund. Clearly, compliance with all the VAT invoicing requirements is

required to comply with all the VAT invoicing requirements to be able to file for a claim for input The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. A VAT-registered taxpayer is

taxes on domestic purchase for goods or services attributable to zero-rated sales. A "VAT invoice" is an

of RR 7-95. Contrary to Microsoft's claim. RR-7-95 invoice that meets the requirements of Section 4.io8-i expressly states that "[A]ll purchases covered by invoice other than a VAT invoice shall not give rise to any input tax. Microsoft's invoice, lacking the word "zero-rated, is not a "VAT invoice," and thus cannot give rise to any input tax.

invoicing requirements is necessary considering VAT's nature and VAT mandatory due to the word "shall" and not "may". Hence, non- credit or VAT refund.87 Strict compliance with substantiation and compliance with any thereof would disallow any claim for tax To reiterate, compliance with invoicing requirements is

system's tax credit method, where tax payments are based on output and input taxes and where the seller's output tax becomes the buyer's input tax that is available as tax credit or refund in the same transaction. It ensures the proper collection of taxes at all stages of distribution,

3 Eastern Telecommunications Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 183531, 25 March 2015.

Page 21 of 24 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION CTA Case No.10124

or evidence for BIR monitoring purposes.85 facilitates computation of tax credits, and provides accurate audit trail

its zero-rated sales for CY 2o17 In the case at bar, petitioner presented the following ORs to prove

OR Exhibit Reference Amount billed per OR

P-28 P-29 P-25 P-26 P-2 P-30 P-31 P-32 P-34 P-35 P-36 P-3 892,371,569.04 123,182,914.88 75,696,567.80 71,525,090.80 72,941,060.79 36,724,555.79 82,527,753.03 70,867,471.43 51,722,664.59 71,890,814.88 76,583,012.82 78,878,330.12 79,831,332.11

A scrutiny of the above ORs would show that petitioner did not indicate the nature of the services rendered but merely provided certain reference numbers corresponding to the payments it received, in clear violation of the explicit requirement under Section u3 of the NIRc of 1997, as amended, that the nature of service be indicated on the VAT OR. In addition, petitioner did not submit as evidence the billing statements or invoices bearing the reference numbers indicated in the ORs, which would have shown the nature of service rendered by petitioner. Had these documents been presented, the same could have been cross-referenced with the ORs, which would then provide the necessary information to establish the nature and details of the claimed zero-rated sales.

elements pertinent to the 2nd requisite for VAT refund, it nevertheless Therefore, while petitioner was able to prove all the essential

support the existence of VAT zero-rated sales. As such, petitioner failed to comply with the invoicing and substantiation requirements to failed to satisfy the 2nd requisite for entitlement to VAT refund.

8 Team Energy Corporation (Formerly: Mirant Pagbilao Corporation and Sothern Energy Quezon,

Inc.) v. Commissioner of Internal Revenue, G.R. Nos. 197663 and 197770, 14 March 2018.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue CTA Case No. 10124 DECISION Page 22 of 24 X

In view of the foregoing, it becomes futile to look into the petitioner's compliance with the 4th requisite for VAT refund, i.e., that input VAT claimed was due or paid, except transitional input VAT, to the extent that it has not been applied to output VAT, because even assuming that petitioner complied therewith, its failure to comply with the substantiation and invoicing requirements in support of its zero-rated sales is sufficient ground to deny its claim for VAT refund.

In Coca-Cola Bottlers Philippines, Inc. v. Commissioner of Internal Revenue,89 the Supreme Court explained that the burden of proof in refund cases is on the taxpayer-claimant, and that such cases are construed strictly against the taxpayer, to wit:

On a final note, the Court reiterates its consistent ruling that actions for tax refund or credit, as in the instant case, are in the nature

strictissimi juris against the taxpayer, but also the pieces of of a claim for exemption and the law is not only construed in strictissimi scrutinized and must be duly proven. The burden is evidence presented entitling a taxpayer to an exemption is

on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit. Since taxes are the lifeblood of the government, tax laws must be faithfully and strictly implemented as they are not intended to be liberally construed. Thus. in view of petitioner's failure to prove, to the satisfaction of the Court, its entitlement to the grant of tax refund or issuance of tax credit of input VAT in the amount of P123,459,647.7o it inadvertently failed to include in its VAT Return, the Court deems it necessary to deny the same.

WHEREFORE, premises considered, this Court hereby rules that petitioner has NOT COMPLIED with all the requisites to merit a grant of its claim for refund. Accordingly, petitioner's value-added tax refund claim in the amount of Pi2,295,0o5.64, representing unutilized input value-added tax on purchases of services attributable to zero-rated sales for calendar year 2017, is hereby DENIED.

9 G.R. No. 222428, 19 February 2018; Citations omitted and emphasis supplied.

Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue Page 23 of 24 DECISION CTA Case No. 10124

SO ORDERED

JEAN MARIH A. BACORRO-VILLENA

sociate Justice

I CONCUR:

With Separate Concurring Opinion

LANEE S. CUI-DAVID

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.

JEAN MARKE A. BACORRO-VILLENA

Special 2nd Division Acting Chairperson Associate Justice

Page 24 of 24 CTA Case No. 10124 Regus Service Centre, Philippines B.V. - ROHQ v. Commissioner of Internal Revenue DECISION

X X

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Special 2nd Division Acting Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

%.M MA. BELEN M. RINGPIS-LIBAN

Presiding Justice

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SPECIAL SECOND DIVISION

PHILIPPINES B.V., REGUS SERVICE CENTRE, Petitioner, CTA Case No. 10124 Members:

-versus- BACORRO-VILLENA, Chairperson,and CUI-DAVID, JJ

COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. OCT 0 1 2026 4:47 Pm

Y

SEPARATE CONCURRING OPINION

CUI-DAVID, J.:

I concur in the denial of petitioner's Petition for Review. I

to establish that its sales qualify for VAT zero-rating. agree with the conclusion of the ponencia that petitioner failed considering its failure to comply with the applicable invoicing requirements under Section 113 of the National Internal Revenue Code (NIRC) of 1997, as amended, as implemented by Section 4.113-1 of Revenue Regulations (RR) No. 16-2005, as amended.

services rendered be indicated in the official receipts (ORs) whether the statutory requirement that the nature of the I write separately, however, to express a different view on

necessarily requires that the nature of the services be stated in full on the face of the ORs themselves.

The ponencia holds that "petitioner did not indicate the nature of the services rendered but merely provided certain reference numbers corresponding to the payments it received." It consequently concludes that this constitutes "a clear violation of the explicit requirement under Section 113 of the NIRC of 1997, as amended, that the nature of service be indicated on the VAT OR."

Regus Service Centre, Philippines B.V. v. Commissioner of Internal Revenue SEPARATE CONCURRING OPINION CTA Case No.10124

Page 2 of 3

On this point, I respectfully disagree.

Section 113(B)(3) of the NIRC of 1997, as amended, provides:

VAT-Registered Persons. SEC. 113. Invoicing and Accounting Requirements for

(A) Invoicing Requirements.

(B) Information Contained in the VAT Invoice. - The following information shall be indicated in the VAT invoice:

description of the goods or properties or nature of the service; and (3) The date of transaction, quantity, unit cost and

... (Emphasis supplied)

It is my humble position that the indication of reference numbers on the face of the ORs may constitute sufficient compliance with the requirement of indicating the nature of the service in the ORs, provided that the referenced documents are presented in evidence before the Court and clearly and accurately describe the nature of the services rendered.

The decisive consideration should be whether the OR, read together with the document specifically identified by the reference number appearing thereon, enables the Court to ascertain the nature of the particular service for which payment was made. Where the reference appearing on the OR establishes a definite and verifiable link to a contemporaneous supporting document that describes the service rendered, the statutory purpose of requiring the nature of the service to be indicated may still be served.

To categorically disregard an OR merely because the complete description of the service is not written on its face

therein, may unduly elevate form over substance. This is particularly so where the nature of the services cannot without considering the document expressly identified

reasonably be described with sufficient particularity within the limited space available on the OR.

This position finds support in prior decisions of the Court.

T

Regus Service Centre, Philippines B.V. v. Commissioner of Internal Revenue SEPARATE CONCURRING OPINION CTA Case No.10124

Page 3 of 3

Internal Revenue,1 the Court's Second Division disallowed the In Asurion Hong Kong Limited - ROHQ v. Commissioner of

claim for refund not merely because reference numbers were indicated on the ORs, but because the documents to which those reference numbers pertained were not offered in evidence. The same ruling was made by the Court in Nippon Express Philippines Corporation v. Commissioner of Internal Revenue2 and PPD Pharmaceutical Development Philippines Corporation v. Commissioner of Internal Revenue.3 These cases support the view that a reference number appearing on an OR cannot. by itself, establish the nature of the service. The document to which it refers must likewise be presented in evidence to enable the Court to verify the particular transaction and ascertain the nature of the service rendered.

Applying this principle here leads to the same result reached by the ponencia. As the ponencia correctly found, petitioner failed to present in evidence the billing statements or invoices corresponding to the reference numbers appearing on the ORs. The Court, therefore, has no evidentiary basis to ascertain the nature of the services covered by the ORs and, ultimately, whether such services qualify for VAT zero-rating.

of reference numbers in the ORs, in lieu of a complete noncompliance with Section 113, petitioner nevertheless failed description of the Accordingly, while I respectfully disagree that the mere use services, necessarily constitutes

to establish compliance because the documents corresponding to those reference numbers were not presented in evidence

I therefore concur in the denial of the Petition for Review

LANEE S. CUI-DAVID NM

Associate Justice

CTA Case No. 10413, April 24, 2025 CTA Case No. 10416,February 27, 2025 CTA Case No. 10375, June 6, 2024.