MANULIFE DATA SERVICES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION MANULIFE DATA SERVICES, CTA CASE NO. 9881 INC., Members: Petitioner, - versus- RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and, FERRER-FLORES,JJ. COMMISSIONE R OF Promulgated: INTERNAL REVENUE, NOV 2 3 2023 Respondent. J>~ 0'2..e~~ ......... ~ X ------------------------------------------------------------------------------------------------------------- X DECISION RINGPIS-LIBAN, J.: THE CASE The Petition for Review prays that the Court: 1. Grant petitioner, as a matter of right, the refund/issuance of a tax credit certificate in the total amount of P96,275,284.20, representing the excess and unutilized input value-added tax 0'AT) paid for the 1st to 4rh quarters of calendar year 2016, and order respondent to refund / issue a tax credit certificate in favor of petitioner in the amount of P96,275,284.20; or, in the alternative; 2. Allow petitioner to present evidence to prove its entitlement to the refund / issuance of tax credit certificate in the total amount of P96,275,284.20, representing excess and unutilized input VAT paid for the 1" to 4'h quarters of calendar year 2016, and after trial, ordjl

DECISION CTA Case No. 9881 respondent to refund/issue a tax credit certificate in favor of petitioner in the amount of P96,275,284.20.1 THE PARTIES Petitioner Manulife Data Services, Inc. is a foreign corporation duly registered with and authorized by the Securities and Exchange Commission (SEC) to operate as a Regional Operating Headquarters (ROHQ) in the Philippines, under SEC Certificate of Registration No. FS200603505. As such, it is engaged in the business of providing qualifying services to its affiliates and related parties in the Asia-Pacific region and in other foreign markets.' It is also registered with the Large Taxpayers Services Division of the Bureau of Internal (BIR) Revenue District Office No. 126, as shown by its Certificate of Registration No. 8RC0000525020, issued by BIR Revenue District Office 126.3 Respondent, on the other hand, is the Commissioner of the BIR who holds office at the S'h Floor, BIR National Office Building, Agham Road, Dillman, Quezon City. 4 He is vested with the power to decide tax cases, including claims for refunds and/or tax credits pursuant to Section 4 of the 1997 National Internal Revenue Code (NIRC), as amended.5 ANTECEDENTS (ADMINISTRATIVE LEVEL) On March 28, 2018, pennoner ftled with respondent, through BIR Regular LT-Audit Division III, its administrative application for refund / tax credit of its excess and unutilized input VAT for the whole period of calendar year 2016, together with its supporting documents in accordance with Annex A.1 of Revenue Memorandum Circular (RMC) No. 17-2018.6 Subsequently, on June 27, 2018, petitioner received the letter from the BIR dated May 30, 2018, wherein its claim for refund was denied on the sole ground that it failed to comply with "the submission of Certificate of Incorporation from the foreign country as certified by an authorized official of the Non-Resident Foreign Corporation (NRFC) pursuant to Revenue Memorandum Circular No. 17-2018/ 1 Statement of the Case, Pre-Trial Order dated August 22, 2019, Docket- Vol. 4, p. 1673. Refer also to par. 1(c), Stipulation of Facts, Joint Stipulation of Facts and Issue (JSFI), Docket- Vol. 4, p. 1635 2 Par. 2(a), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1635; Exhibits "P-1" and "P-2" [N.B.: Unless otherwise indicated, any of petitioner's exhibits referred to in this Decision is found on the expanding brown envelope labelled as "Marked Exhibits (Envelope 1 of 2)]. 3 Par. 2(b), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1635; Exhibit "P-3". 4 Par. 1(a), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1634. 5 Par. 1(b), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1634. 6 Exhibits "P-11" and "P-12". 7 Par. 13, Facts, Petition for Review, vis-a-vis par. 1, Answer, Docket- Vol. 1, pp. 15 and 245, respectively. Refer also to par. 1(d), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1635.

DECISION CTA Case No. 9881 PROCEEDINGS BEFORE THIS COURT The present Petition for Review was flied on July 24, 2018.8 Respondent flied his Answer on February 26, 2019, 9 interposing the following special and affirmative defenses, to wit: (1) the petition must be dismissed for failure of petitioner to substantiate its administrative claim for refund; (2) petitioner is not entided to refund in the amount of P96,275,284.20; (3) administrative agencies in the exercise of their rule-making power can formulate rules and regulations in order to achieve the declared policies as laid down by Congress; (4) taxes paid and collected by the BIR are presumed to have been made in accordance with law, rules and regulations and the burden to prove otherwise is upon petitioner; and (5) claims for refund are construed stricdy against the claimant for the same partake the nature of exemption from taxation, and as such, they are looked upon with disfavor. On March 8, 2019, respondent transmitted the BIR Records, consisting of fifteen (15) folders. 10 The Pre-Trial Conference was set and held on June 13, 2019. 11 Prior thereto, Respondent's Pre-Trial Brief was submitted on April 5, 2019, 12 while petitioner's Pre-Trial Briefwas flied on June 4, 2019.13 On July 8, 2019, the parties flied their Joint Stipulation ofFacts and Issue,14 which the Court admitted and approved in its Resolution dated July 25, 2019,15 thereby deeming the termination of the Pre-Trial. The Pre-Trial Order dated August 22, 2019 was then issued. 16 Trial then ensued, with the parties presenting and offering their respective documentary and testimonial evidence. Petitioner offered the testimonies of the following individuals, namely: (1) Mr. Inigo P. Garcia, 17 petitioner's Finance Director; (2) Ms. Clarissa L. ~ 8 Docket- Vol. 1, pp. 10 to 24. 9 Docket- Vol. 1, pp. 245 to 257. 10 Docket- Vol. 1, pp. 261 to 263. 11 Notice of Pre-Trial Conference dated March 4, 2019, Docket- Vol. 1, pp. 259 to 260; Minutes of the hearing held on, and Order dated, June 13, 2019, Docket - Vol. 4, pp. 1576, 1580 to 1582. 12 Docket- Vol. 1, pp. 291 to 294. 13 Docket- Vol. 1, pp. 297 to 331. 14 Docket- Vol. 4, pp. 1634 to 1644. 15 Docket- Vol. 4, p. 1656. 16 Docket- Vol. 4, pp. 1673 to 1689. 17 Exhibit "P-99", Docket - Vol. 1, pp. 339 to 383; Minutes of the hearing held on, and Order dated, October 3, 2019, Docket- Vol. 4, pp. 1705 to 1706.

DECISION CTA Case No. 9881 Magarao, 18 petitioner's Accounting Specialist; and, (3) Mr. Glenn Ian D. Villanueva, 19 the Court-commissioned Independent Certified Public Accountant (ICPA).20 The partial ICPA Report was posted on December 23, 2019,21 and the final ICPA Reportwas filed on January 27,2020.22 On February 18, 2020, petitioner filed its Formal Offer of Evidence, 23 to which respondent filed his Comment [Re: Petitioner's Formal Offer of Evidence] on February 21, 2020. 24 In the Resolution dated June 19, 2020, 25 the Court admitted all of petitioner's offered exhibits, except the following: 1. Exhibits "P-1" to "P-1-b"' "P-2" to "P-2-c"' "P-5"' "P-6"' "P- 7"t1"35oPP"435'--"-""a33''P""80""P-,-"PP4-c"'8-7-P"13""-'-P5d6'5""""-4P"3'''P"-1"""3-t"PPP18o'---0-413""d"96P7P"' ""'"--"3'5"tPt24P"oo-"P--1d"3"-1t"P1P9o"'7-"-4"3"'"tP97'Po"---P"-5dd3P"-5""2P4-'"'2-2-"e1"6"tP"Po1'"'--'-""53b"P"P08P"P--"'"-4-5'3'22"53""7P--PaP""b-"-1-'"5't32o"'18"P"""P-"P'-a'-P2-""4"5-8P'P336"-""-3'"1P5'-'"3-c3""P3""P"P'-8''-2--4"""59bPPP76"""----'' a7""6"PP34'"--"66'"t19Po"""P-'5"-tP6o7"P4-''"7--Pat37o"--06c'"""1"P,-tPoe-"-5"P67'"-4P"-7-dP-4b7"-""'60'' 2-"""d"PPP"'--'-5"76P"845P-"-"6a-''72"""1-'PPa""-"-'P56'-"9"67P"P"4--7-t6tbo2o3""""'"P"PttoPo--56-""976PP-4--g-e-76"c"23'"' -'-""dd"PP""P--''6-6""707PP4""---'' d9to"5'"",P"P"-P8-7-695-6d"""' ,'"""PPP---789767"-'''e,""aPnt-od79""P"P'--8"96P8--"i7,"9'f-o"aPr"-f'8a"i8lPu"-r'8e"1Pt"o-'9s"1uP"b-' 8m"5Pi"t-'9th4"eP"'-d8"u6Ply"- marked exhibits; 2. E40x"hitboit"sP"-P4-03-"d'"",P"-P4-"4'1""Pt-o4-"aP"-' 4"1P--d9"",' "P-34" to "P-34-c" ' "P- "P-44" to "P-44-d" , "P- 45" to "P-45-b", "P-46"' "P-46-a"' "P-48"' "P-48-a"' "P-58- a", "P-60-a"' "P-67-a"' "P-68" to "P-68-e"' "P-69-a"' "P-69- b" "P-71-a" ""PP--17317-b-9"5' ""'P-"7P7--1a3"7' -"9P6-"8'4""'P"-P1-3874--9a8""' '"P"-P8-41-3b7"-' "P-' 137-89", ' 108", "P-137-109", "P-138-200", "P-138-215", "P-138-216~ " 18 Exhibit "P-100", Docket - Vol. 3, pp. 1336 to 1356; Minutes of the hearing held on, and Order dated, November 7, 2019, Docket- Vol. 4, pp. 1736, and 1738 to 1739, respectively. 19 Exhibit "P-102", Docket- Vol. 5, pp. 2063 to 2070; Minutes of the hearing held on, and Order dated, February 12, 2020, Docket- Vol. 5, pp. 2074 to 2076. 20 Oath of Commission dated November 7, 2019, Docket- Vol. 4, p. 1737; Minutes of the hearing held on, and Order dated, November 7, 2019, Docket - Vol. 4, pp. 1736, and 1738 to 1739, respectively. 21 Exhibit"P-101", Docket- Vol. 4, pp. 1752 to 1798. 22 Exhibit "P-101-1", Docket- Vol. 4, pp. 1819 to 2020. 23 Docket- Vol. 5, pp. 2077 to 2111. 24 Docket- Vol. 5, pp. 2114 to 2116. 25 Docket- Vol. 5, pp. 2122 to 2125.

DECISION CTA Case No. 9881 p"Pre-s1e3n8t-2o3ri3g"in' al"sP-fo1r38c-o2m3p9a"r' isaonnd; "P-138-283"' for failure to 3. t4E8o77x'"h",Pi"bP"-i1P-t41s-083"-98P6-"-81'5"2"2,1P"f"'-o'9"r"0PnP"-o-'71t6"3Pb"8'e--9i"2n2P1g"-77'f"o8'"u"P"'n-P9d"-P31i"-3n8'80t-"h"4Pe'7-1"6rPe3"c'8-o8-a4r2nd2"ds'" "P-83"' "P- to "P-138- "P-140-63" of the case; and, 4. Exhibits "P-138-163", "P-138-165", "P-138-176", "P-138- 186", "P-138-187"' "P-138-229"' "P-138-344" ' and "P-138- 359", for being unreadable/blank. Subsequently, on June 29, 2020, petitioner filed a Motion to Reopen with Motion to Recal/,26 praying for the Court to (1) reopen the case for the reception of the corrected official receipts/invoices and the certifications issued by its domestic suppliers; (2) allow the court-commissioned Independent CPA, Mr. Glenn Villanueva, to render a supplemental report on these corrected receipts/invoices; and (3) recall Mr. Villanueva to testify on his supplemental report. On the same day, petitioner ftled a Motion to Reset Hearing. 27 Petitioner further ftled a Motion for Reconsideration (Re: Resolution dated 19 June2020) on July 7, 2020.28 Respondent failed to ftle his comment on the said Motion to Reopen and Motion for Reconsideration of petitioner.29 In the Resolution dated January 21, 2021, 30 the Court: (1) granted petitioner's Motion to Reopen with Motion to Recall; (2) set a Commissioner's Hearing on March 2, 2021 for the comparison of the originals of Exhibits "P- 3", "P-4", "P-4-a", and "P-9"; (3) set the hearing for the recall of the Court- commissioned ICPA; and (4) held in abeyance the resolution on petitioner's Motion for Reconsideration. On May 10, 2021, the ICPA's Final Report was posted.31 At the hearing held on October 19, 2021, the Court-commissioned ICPA, Mr. Glenn Ian D. Villanueva, testified on direct examination.32 / 26 Docket- Vol. 5, pp. 2126 to 2130. 27 Docket- Vol. 5, pp. 2132 to 2134. 28 Docket- Vol. 5, pp. 2137 to 2142. 29 Records Verification Report dated December 18, 2020 issued by the Judicial Records Division of this Court, Docket- Vol. 5, p. 2149. 30 Docket- Vol. 5, pp. 2153 to 2155. 31 Exhibits "P-101-2" and "P-101-2-a", Docket- Vol. 5, pp. 2159 to 2359. 32 Exhibits "P-155" and "P-155-a", Docket- Vol. 5, pp. 2417 to 2422; Minutes of the hearing held on, and Order dated, October 19, 2021, Docket- Vol. 5, pp. 2414 to 2416.

DECISION CTA case No. 9881 Within the extended period, 33 petitioner's Supplemental Formal Offer of Exhibits was posted on November 8, 2021. 34 Respondent failed to file his comment thereon.35 In the Resolution dated March 11, 2022,36 the Court partially granted petitioner's Motion for Reconsideration (Re: Resolution dated 19 June 2020), and a831d37"m'"" '"itt"PotPe-"1-dP20E-6"3"'x3'h"-P"icbP-"i1-,t2s1"7"P""P-t'3o-"51P"""-'Pt2"-o8P1""1-'P3-b"6-P1""'-'-b2"""9PP'"--"'31P7"2-P""2'-t"3o"0Pto""-P'1"-"3P3P"-7-'2-3-"d1cP"""-'''1"""4PPP"---'353"8"2P"'"'-"1"tPo5P-"-6"3'"P8"'--P"3aP-2"1--' 67e""""P'''-"""3PPP8---- b"556toP945" --'"""g4'"Pt"9P"o-'"P-7"3"-0tPP68o--4--d6"c5-"P0"a5,'-""-"4''b"P9P"""--'PP-7d3"--1"866P"'-41-'d"5-"P""b6P'-t""o5"-'' 07P""""2-PPP3'"---"9566tP"61o5'---"5"ae"'1P""P""''--P'47""-"P2P26P"---6d5-'6"5"7"23'P'"t'"o"'-t'4Po"""2P-PP7-"-a-P-3665"-"2'635--"-t7aoeaP"-""d-' "''4""P""3'PP-P""-7--'P6356"3--47P5c"""8-"'4t"'too7"'"P""P""P-PP-t6o7---95645""93"4P'"-'--dd""4t"P"Po7''---7""7"dPP0P4""----' a"' "P-74-b"' "P-74-c"' "P-74-d"' "P-75"' "P-77"' "P-79"' "P-79-a"' "P-81"' "P-85" "P-86" to "P-86-d" "P-86-e" to "P-86-i"' "P-88"' "P-91"' "P-94" ' "P- 95", "P'-96", "P-97", and "P-' 98"; but still denied the following: 1. Exhibits "P-3"' "P-4"' "P-4-a"' and "P-9"' for failure to submit the duly marked exhibits; and 2. Exhibits "P-34" to "P-34-c", "P-40" to "P-40-d", "P-41" to "P-41-d"' "P-44" to "P-44-d"' "P-45" to "P-45-b"' "P-46"' "7o6P7r8i--"g4ai"n6to'a-al"s""PP'f--o"86rP48-c"-4o'e8m"""'Pp'"-a"P8rP4i-s-6-o4a9n8"-.'-aa"a"'n'"d"PP-"-6P59-88--b4a"-"'b' """P'P-f-7o61r0--afaa""i'l'u""rPeP--76to17--pbar""e'' s""ePPn--t In the same Resolution, the Court further resolved petitioner's Supplemental Formal Offer of Exhibits, and admitted Exhibits "P-101-2", "P-141- 91" to "P-141-120", and "P-155". For his part, respondent presented the testimony of Revenue Officer Marc Denison C. Andrey~ 33 Motion for Extension of Time {To File Supplemental Formal Offer of Exhibits), Docket - Vol. 5, pp. 2473 to 2475; Resolution dated November 15, 2021, Docket- Vol. 5, p. 2487. 34 Docket- Vol. 5, pp. 2488 to 2491. 35 Records Verification Report dated February 3, 2022 issued by the Judicial Records Division of this Court, Docket- Vol. 5, p. 2495. 36 Docket- Vol. 5, pp. 2499 to 2506. 37 Exhibit "R-5", Docket- Vol 1, pp. 270 to 273; Minutes of the hearing held on, and Order dated, June 9, 2022, Docket- Vol. 5, pp. 2507 to 2509.

DECISION CTA Case No. 9881 Respondent ftled his Formal Offer ofEvidence on June 13, 2022,38 to which petitioner did not ftle any comment thereon. 39 In the Resolution dated September 14, 2022,40 the Court admitted all of respondent's offered evidence. Respondent ftled his Memorandum on September 28, 2022; 41 while petitioner's Memorandum was posted on November 7, 2022.42 The case was deemed submitted for decision on November 24, 2022.43 THE ISSUES The parties stipulated the following issues for this Court's resolution, vtz.: "a. Whether or not petitioner is entitled to a refund or issuance of a tax credit certificate for its unutilized/excess input VAT payments for the 1" to 4"' Quarters of CY 2016 amounting to a total of NINETY-SIX MILLION TWO HUNDRED SEVENTY-FIVE THOUSAND TWO HUNDRED EIGHTY-FOUR CENTAVOS (PHP 96,275,284.20); and, PESOS AND TWENTY b. Whether the BIR's denial of petitioner's administrative claim - on the basis of petitioner's non-compliance with Revenue Memorandum Circular No. 17-2018- is valid."44 Petitioner's arguments: Petitioner, in insisting that it is entitled to a refund, argues that it is a uVarernAimusTitinitl-tgirazenefgcrdioesmsitneorpieuftdstfodVernoeAtmiigTtyens;itscitcuhdraiprrteeuncirtctclyhyis;aastetehntsargitbaoiguftetgapdboalioiedndstizoneaprintuosd-trzVaseetArarovbT-ilcreaeintsse;adclteahsslaaeltnpedaistiasdfroeybrxeyccaearislnse2wn0aad1nra6ddr, year 2016, and not applied against output tax quarters; and that its administrative and judicial in the same or succeeding claims were timely filed. In addition, petitioner is of the view that Revenue Memorandum Circular (RMC) No. 17-2018 was unpublished~ 38 Docket- Vol. 5, pp. 2510 to 2513. 39 Records Verification Court, Docket- Vol. Report dated July 21, 2022 issued by the Judicial Records Division of this 5, p. 2521. 40 Docket- Vol. 5, pp. 2523 to 2524. 41 Docket- Vol. 5, pp. 2525 to 2537. 42 Docket- Vol. 5, pp. 2546 to 2554. 43 44 Resolution dated November 24, 2022, Docket- Vol. 5, p. 2557. Stipulation of Issues, JSFI, Docket- Vol. 4, p. 1635.

DECISION CTA Case No. 9881 Respondent's counter-arguments: Respondent contends that the petition must be dismissed for failure of petitioner to substantiate its administrative claim for refund; that petitioner is not entitled to refund in the amount of P%,275,284.20; that administrative agencies in the exercise of their rule-making power can formulate rules and regulations in order to achieve the declared policies as laid down by Congress; and that claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation and as such, they are looked upon with disfavor. THE COURT'S RULING The present Petition for Review is partly meritorious. The Court has exclusive appellate jurisdiction to review by appeal decisions of the Commissioner of Intemal Revenue in cases involving refunds ofintemalrevenue taxes. To reiterate, respondent contends that since he rendered a decision, the jurisdiction of this Court shifts from a trial court to an appellate tribunal; that this Court should conftne itself to whether the ftndings of respondent are consistent with law; and that this Court is confmed to a more limited issue of whether the denial was proper given the evidence submitted at the administrative level. While We partly agree with respondent, Our concurrence with his contentions does not sustain his defense. His denial in the amount of P%,275,284.20 was not proper. Indeed, since respondent rendered a decision on the subject claim for refund, the Court, upon appeal thereof, shall exercise its appellate jurisdiction over the claim. In Pilipinas Total Gas, Inc. vs. Commissioner ofInternal Revenue,45 the Supreme Court said: "At this stage, a review of the nature of a judicial claim before the CTA is in order. In Atlas Consolidated Mining and Development Corporation v. CIR,"' it was ruled " / 45 G.R. No. 207112, December 8, 2015. 46 G.R. No. 145526, March 16, 2007.

DECISION CTA Case No. 9881 x x x First, a judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim. Therefore, as in evecy anneal or netition for review. a netitioner has to convince the annellate court that the quasi-judicial agency a guo did not have any reason to deny its claim. In this case, it was necessacy for netitioner to show the CTA not only that it was entitled under substantive law to the grant of its claims but also that it satisfied all the documentacy and evidentiacy requirements for an administrative claim for refund or tax credit. Second, cases flied in the CTA are litigated de novo. Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim. A distinction must, thus, be made between administrative cases appealed due to inaction and those dismissed at the administrative level due to the failure of the taxpayer to submit supporting documents. If an administrative claim was dismissed by the CIR due to the taxpayer's failure to submit complete documents despite notice/request, then the judicial claim before the CTA would be dismissible, not for lack of jurisdiction, but of the taxpayer's failure to substantiate the claim at the administrative level. When a judicial claim for refund or tax credit in the CTA is an appeal of an unsuccessful administrative claim, the taxpayer has to convince the CTA that the CIR had no reason to deny its claim. It, thus. becomes imperative for the taxpayer to show the CTA that not only is he entitled under substantive law to his claim for refund or tax credit. but also that he satisfied all the documentar.y and evidentiar.y requirement for an administrative claim. It is, thus, crucial for a taxpayer in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place. Consequently, a taxpayer cannot cure its failure to submit a document requested by the BIR at the administrative level by filing the said document before the CTA." (Emphases and underscoring added) Based on the foregoing jurisprudential pronouncements of the High Court, it is necessary for a petitioner to show to this Court not only that it is entitled under substantive law to the grant of its claims but also that it satisfied all the documentary and evidentiary requirements for an administrative claim for refund or tax credit. Simply put, it is crucial for a taxpayer in a judici~

DECISION CTA Case No. 9881 claim for refund or tax credit to show that its administrative claim should have been granted in the first place. There are two (2) matters which must be shown by petitioner before this Court, upon appeal of an unsuccessful administrative claim, to wit: first, all documentary and evidentiary requirements for an administrative claim were satisfied at the BIR level, and second, the taxpayer's entitlement to the claim for refund or tax credit under substantive law. The first matter involves a review or determination whether respondent has basis in fact and/or in law of his denial of the administrative claim; while the second matter to be proved entails a determination of petitioner's compliance with the requisites established by law. More significantly, while the second matter to be shown is in accord with the principle that cases filed in this Court are litigated de novo, the first matter is concerned with the proper exercise of this Court's appellate jurisdiction as conferred by law. Relative thereto, it must be remembered that appellate jurisdiction is the authority of a court higher in rank to re-examine the final order or judgment of a lower court which tried the case now elevated for judicial review." The BIR should not have disallowed the amount of ?96,275,284.20. In the letter dated March 30, 2018 issued by Asst. Commissioner Teresita M. Dizon,48 the latter informed petitioner as follows, to wit: "This refers to your application for Tax Credit / Refund of excess or unutilized VAT paid arising from domestic purchases of goods and services in accordance to Section 112(A) of the National Internal Revenue Code of 1997 ('NIRC') attributable to zero-rated sales for the period January 1 to December 31, 2016 in the total amount of Ninety-Six Million Two Hundred Seventy- Five Thousand Two Hundred Eighty-Four and 24/100 (P96,275,284.20). In reply, please be informed that after careful review and evaluation of your application, the same has been DISAPPROVED by the Large Taxpayers Service of this Bureau for non compliance with the submission of Certificate of Incorporation from the foreign countcy as certified by an authorized official of the Non Resident Foreign Corporation (NRFC) pursuant to Revenue Memorandum Circular No. 17- 2018, which amends certain provisions of RMC Nos. 89-2017 anjv 47 Garcia, eta/. vs. De Jesus, eta!., etseq., G.R. Nos. 88158 and 97108-09, March 4, 1992. 48 Exhibits "P-16"; and "R-4", BIR Records (Main Folder), p. 501.

DECISION CTA Case No. 9881 54-2014 on the processing of claims for issuance of Tax Refund/Tax Credit Certificate in relation to amendments made in the NIRC of 1997, as amended by RA No. 10963 (TRAIN Law) and Section 108 of the NIRC." (Underscoring added) Based on the foregoing, respondent denied the petitioner's administrative claim for refund on the ground that it failed to provide Certificate of Incorporation from the foreign country as certified kY an authori:;;,ed q[ficial of the non-resident foreign corporation (NRFC), as required by RMC No. 17-2018, which amends certain provisions of RMC Nos. 89-2017 and 54- 2014. Indeed, the requirement for the submission of certificate of incorporation from the foreign country certified by an authorized official of the NRFC is found in Annex A.1 (Revised Checklist of Mandatory Requirements for Claims for VAT Refund, Pursuant to Section 112 (A) of the Tax Code, as Amended by RA. No. 10963) of RMC No. 17-2018, to wit: "3. SALE OF GOODS OR SERVICES XXX XXX XXX 3.4 For sale of services to non-resident foreign corporation (NRFC) covered under Sec. 108 (B) (2), proofs that the NRFC-buyer of the services is not doing business in the Philippines (e.g. Original copy of the certification from the SEC that the NRFC is not a registered corporation in the Philippines and a certificate of incorporation from the foreign country as certified by an authorized official of the NRFC) XXX XXX " XXX. (Emphasis and underscoring added) However, a reading of item 3.4 of Annex A.1 (Revised Checklist of Mandatory Requirementsfor Claims for VAT Refund, Pursuant to Section 112 (A) ofthe Tax Code, as Amended by RA No. 10963) shows that it does not aim to restrict or confine the supporting documents only to those specifically mentioned as the abbreviation "e.g." was, in fact, intentionally placed at the beginning of the prov1s1on: "e.g. Original copy of the certification from the SEC that the NRFC 1s not a registered corporation in the Philippines and a certificate of incorporation from the foreign country as certified by an authorized official of the NRFC" (Emphasis supplied) Hence, re~pondent'~ interpretation i~ inaccurate.~

DECISION CTA Case No. 9881 The abbreviation "e.g." stands for the latin words "exempli gratia", which simply means "for the sake of an example". 49 It is thus apparent that the amendment to item 3.4 of Annex A.1 did not contemplate any restriction on the documentary requirements that may be submitted by the taxpayer to prove that its NRFC clients are not doing business in the Philippines. Thus, We find petitioner's contention meritorious that the submission of consularized charter documents of its clients, sans certification of the authorized officials of the respective NRFCs, should have been considered substantial compliance. In Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., 50 the Court clarified that an essential condition to qualify for zero-rating under Section 108(B)(2) is that the service-recipient must be doing business outside the Philippines. Likewise, following the pronouncement in Burmeister, the Court in Accenture, Inc. vs. Commissioner of Internal Revenuel1 emphasized that a taxpayer claiming a VAT refund or credit under Section 1OS(B) has the burden to prove not only that the recipient of the service is a foreign corporation, but also that the said corporation is doing business outside the Philippines, thus: "The evidence presented by Accenture may have established that its clients are foreign. This fact does not automatically mean, however, that these clients were doing business outside the Philippines. After all, the Tax Code itself has provisions for a foreign corporation engaged in business within the Philippines and vice versa, to wit: SEC. 22. Dejinztions. - When used in this Title: XXX XXX XXX (H) The term "resident foreign cotporation" applies to a foreign corporation engaged in trade or business within the Philippines. (I) The term 'nonresident foreign cotporation' applies to a foreign corporation not engaged in trade or business within the Philippines. (Emphasis in the original) Consequently, to come within the purview of Section 108 (B) (2), it is not enough that the recipient of the service be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident foreign corporation. There is no specific criterion as to what constitutes 'doing' or 'engaging in' or 'transacting' business. We ruled thus in Commissioner ofInternal Revenue v. British Overseas Airways Cotporation: .... There is no specific criterion as to what constitutes 'doing' or 'engaging in' or 'transacting/ 49 https://thelawdictionary.org/exempli-gratia/last accessed on October 26, 2023. 50 G.R. No. 153205, January 22, 2007, 541 Phil. 118. 51 G.R. No. 190102, July 11, 2012.

DECISION erA Case No. 9881 business. Each case must be judged in the light of its peculiar environmental circumstances. The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization. 'In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character.' A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that claim. Tax refunds, like tax exemptions, are construed strictly against the taxpayer." (Emphasis supplied and citations omitted) In Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte. Ltd,52 the Supreme Court affirmed this Court's decision on the sufficiency of presenting the following documents: "ProofofNRFC Status For purposes of zero-rating under Section 108(B)(2) of the Tax Code, the claimant must establish the two components of a client's NRFC status, vi:::; (1) 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. Such proof must be especially required from ROHQs such as DKS. That the law expressly authorizes ROHQs to render services to local and foreign affiliates alike only stresses the ROHQ's burden to distinguish among their clients' nationalities and actual places of business operations and establish that they are seeking refund or credit of input VAT only to the extent of their sales of services to foreign clients doing business outside the Philippines. To recall, the CTA found that the SEC Certification of Non- Registration of Company and Authenticated Articles of Association and/ or Certificates of Registration/Good Standing/Incorporation sufficiently established the NRFC status of 11 of DKS's affiliates clients. The Court upholds these findings. The Court accords the CTA's factual fmdings with utmost respect, if not fmality, because the Court recognizes that it has necessarily developed an expertise on tax matters. Significantly, both the CTA Division and CTA En Bane gave credence to the aforementioned documents as sufficient proof of NR.FC status. The Court shall not disturb its findings without any showing of 52 G.R. No. 234445, July 15, 2020. ~

DECISION CTA Case No. 9881 grave abuse of discretion considering that the members of the tax court are in the best position to analyze the documents presented by the parties. In any case, after a judicious review of the records, the Court still do not fmd any reason to deviate from the court a quo's fmdings. To the Court's mind, the SEC Certifications of Non-Registration show that these 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." (Emphasis and underscoring added). Clearly, respondent's disallowance of the refund claim amount of 1"96,275,284.20, representing petitioner's total unutilized input VAT is improper. The same cannot, therefore, be sustained by this Court. Having dealt with the first matter anent the denial of petitioner's administrative claim, We shall proceed with the determination of petitioner's entitlement to the claim for refund or tax credit and compliance with the requisites set forth by law. Requisites for refund or tax credit of input VAT established bylaw. Pertinent to the resolution of the instant case is Section 112(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 10963 53 , otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN Law), which reads as follows: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Effectively Zero-Rated Sales. -Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Ptlipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods of properties o / 53 AN ACT AMENDING SECllONS 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, AND 288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-8, AND 265-A; AND REPEALING SECTIONS 35, 62, AND 89; ALL UNDER REPUBLIC ACT 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

DECISION CTA Case No. 9881 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,finaily, 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 XXX XXX (C) Period within which Refund ofInput Taxes shaii 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 flied in accordance with Subsections (A) and (B) hereof: Provzded, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial. In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)-day period shall be punishable under Section 269 of this Code." (Emphases added) From the afore-quoted provlSlon, jurisprudence has laid down the following requisites for claiming refund or tax credit of unutilized or excess input VAT attributable to zero-rated or effectively zero-rated sales, vi::;;: As to timeliness of the filing of the administrative and judicial claims: 1. The claim is flied with the BIR within two (2) years after the close of the taxable quarter when the sales were made;54 2. In case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of ninety (90) days, the judicial claim shall be flied with this Court within thirty (30) days from receipt of the decision or after the expiration of the said 90- day period;55 Concerning the taxpayer's registration with the BIR: / 54 Intel Technology Philippines, Inc. vs. Commissioner of Intemal Revenue, G.R. No. 155732, April 27, 2007; San Roque Power Corporation vs. Commissioner ofIntemal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc., G.R. No. 182364, August 3, 2010. 55 Refer to Energy Development Corporation vs. Commissioner of Intemal Revenue, G.R. No. 203367, March 17, 2021; Commissioner of Intemal Revenue vs. CE Casecnan Water and Energy Company, Inc., G.R. No. 212727, February 1, 2023; and Commissioner of Intemal Revenue vs. Vestas Services Philippines, Inc., G.R. No. 255085, March 29, 2023.

DECISION CTA Case No. 9881 3. The taxpayer is a VAT-registered person;56 In relation to the taxpayer's out;put VAT: 4. The taxpayer is engaged in zero-rated or effectively zero-rated sales;57 5. For zero-rated sales under Sections 106 (A)(2)(1) and (2); 106 (B); and 108 (B)(1) and (2) of the NIRC of 1997, as amended, the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the Bangko Sentral ng Pilipinas (BSP) rules and regulations;58 As regards the taxpayer's input VAT being refunded: 6. The input taxes are not transitional input taxes;59 7. The input taxes are due or paid;60 8. 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;61 and 9. The input taxes have not been applied against output taxes during and in the succeeding quarters. 62 fT and _?d Requisites: Petitioner's administrative and judicial claims were timely filed. The first requisite pertains to the filing of the refund claim for tax credit or refund of input VAT before the BIR, within two (2) years from the close of the quarter when the sales were made.(""' 56 Intel Technology Philippines, Inc. vs. Commissioner of Int ernal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra. 57 /d. 58 /d. 59 /d. 60 /d. 61 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; and San 62 Roque Power Corporation vs. Commissioner ofInternal Revenue, supra. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra.

DECISION CTA Case No. 9881 The present claim covers 1" to 4'h quarters of calendar year 2016. Counting two (2) years from the respective close of the quarters, the following table indicates the last day for filing administrative claim, to wit. Period Covered Close of the Taxable Last day to File Quarter Administrative Claim january to March 2016 (1" Quarter) April to June 2016 (2"' Quarter) March 31,2016 March 31,2018 July to September 2016 (3'' Quarter) june 30,2016 june 30, 2018 October to December 2016_(4'h Quarter) September 30, 2016 September 30, 2018 December 31,2016 December 31, 2018 By filing the Application for Tax Credits/Refunds in the amount of P%,275,284.20 covering all the taxable quarters provided above on March 28, 2018,63 the administrative claim was filed within the reglementary periods. The second requisite necessitates that the judicial claim must have been flied within thirty (30) days from receipt of respondent's decision or after the expiration of the 90-day period under the afore-quoted Section 112(C) of the NIRC, as amended. Such being the case, from the filing of petitioner's administrative claim on March 28,2018, respondent had ninety (90) days or until June 27, 2018, to act on the said claim. Notably, respondent is deemed to have acted on petitioner's administrative claim within the said ninety (90)-day period from March 28, 2018, when petitioner received respondent's Letter of Denial dated May 30, 2018, signed by Assistant Commissioner Teresita M. Dizon, on June 27, 2018.64 Counting thirty (30) days from petitioner's receipt of the said letter, it had until July 27, 2018 within which to appeal its claim for refund before this Court. Since the present judicial claim was timely filed on July 24, 2018,65 this Court is clothed with jurisdiction to take cognizance of the present case. Hence, petitioner has complied with the first and second requisites. Jd Requisite: Petitioner is a VAT- registered entity. The parties stipulated that petltloner is registered with the Large Taxpayers Services under BIR Revenue District Office No. 126, as shown by its Certificate of Registration No. 8RC0000525020. 66 With this admission, 63 Exhibits "P-11" and "P-12". /V""' 64 Par. 1(d), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1635; Exhibit "P-16". 65 Docket- Vol. 1, pp. 10 to 24. 66 Par. 2(b), Stipulation of Facts, JSFI, Docket- Vol. 4, p. 1635.

DECISION CTA Case No. 9881 respondent is deemed to have admitted the existence and authenticity of such certificate of registration with the BIR albeit only the provisionally marked exhibit was presented by petitioner. In Bcryas and Matudcry vs. The Sandiganbcryan,67 the Supreme Court held that stipulations are valid and binding. Once the stipulations are reduced into writing and signed by the parties and their counsels, they become binding on the parties who made them. They become judicial admissions of the fact or facts stipulated. Thus, while We were constrained to deny petitioner's BIR Certificate of Registration due to its failure to submit the duly marked certified true copy,68 the contents of the provisionally marked exhibit thereof, 69 attached to the records of this case, were considered by this Court in view of the above-stated stipulation of the parties. Undisputedly then, petitioner fulfilled the third requisite. <fh and 5'h Requisites: Petitioner had zero-rated sales or efl'ectively zero- rated sales. The fourth and fifth requisites mandate that the taxpayer be engaged in zero-rated or effectively zero-rated sales and for zero-rated sales under Sections 106(A)(2)(a)(1), (2) and (b), and 108(B)(1) and (2), and that the acceptable foreign currency exchange proceeds thereof have been duly accounted for in accordance with BSP rules and regulations. In its originally filed Quarterly Value-Added Tax Returns (BIR Form No. 2550-Q) for the 1" to 4'h quarters of calendar year 2016, 70 petitioner reported total sales of P3,657,414,971.20, which included zero-rated sales of P3,549,857,592.33, broken down as follows: Period (2016) VATable Sales Zero-rated Sales Total Sales 1st quarter I" 14,928,221.69 I" 848,398,915.01 I" 863,327,136.70 844,829,808.89 2nd quarter 35,843,258.51 856,327 832.38 880,673,067.40 26,696,583.12 1,000,301,036.05 883,024,415.50 3"' quarter 30,089,315.56 P3,S49,857 ,592.33 1,030,390,351.61 4'h quarter P107 ,557,378.88 P3,657 ,414,971.21 Total However, on October 17, 2016, petitioner filed its amended Quarterly Value-Added Tax Return for the 2"d quarter of calendar year 2016, in which it declared input tax carried over from previous period in a decreased amount of P88,116,966.69. 7 / 67 G.R. No. 143689-91, November 12, 2002. 68 Commissioner's Report dated March 2, 2021, Docket - Vol. 5, pp. 2156 to 2157; and Resolution dated March 11, 2022, Docket- Vol. 5, pp. 2499 to 2506. 69 Exhibit "P-3". 70 Exhibits "P-5" to "P-8". 71 Exhibit "P-123", Line 20A, USB.

DECISION CTA Case No. 9881 Nevertheless, petitioner's reported total VATable sales, total zero-rated sales and total sales for the the 1" to 4'h quarters of calendar year 2016 in the amounts of P107,557,378.88, P3,549,857,592.33, and P3,657,414,971.21, respectively, remain the same. Petitioner claims that the foregoing zero-rated sales are derived from the sale of services to the following NRFCs,72 the consideration for which were allegedly paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations ofBSP, to wit: 1. JH FUNDS 2. JOHN HANCOCK LIFE INSURANCE COMPANY 3. MAMUSLLC 4. MANULIFE (INTERNATIONAL) LTD 5. MANULIFE (VIETNAM) LIMITED 6. MANULIFE ASSET MANAGEMENT (HONG KONG) LIMITED 7. MANULIFE ASSET MANAGEMENT (SINGAPORE) PTE. LTD. 8. MANULIFE ASSET MANAGEMENT (VIETNAM) 9. MANULIFE ASSET MANAGEMENT LIMITED (MUTUAL FUNDS) 10. MANULIFE ASSET MANAGEMENT MALAYSIA 11. MANULIFE BANK 12. MANULIFE FINANCIAL ASIA LIMITED MANULIFE INFORMATION & TECHNOLOGIES SERVICES 13. (CHENGDU) 14. MANULIFE INSURANCE BERHAD (MALAYSIA) 15. MANULIFE INSURANCE BERHAD (RAS MY) 16. MANULIFEJAPAN 17. MANULIFE SINGAPORE PTE LTD REG NO. 198002116D 18. MANULIFE TECHNOLOGY & SERVICES SDN BHD 19. MANULIFE THAILAND 20. MANULIFE-SINOCHEM LIFE INSURANCE CO., LTD. 21. PT. ASURANSI JIWA MANULIFE INDONESIA 22. PT. MANULIFE ASET MANAJEMEN INDONESIA 23. THE MANUFACTURERS' LIFE INSURANCE COMPANY Relative to the foregoing zero-rated sales, Section 1OS(B) (2) of the NIRC of 1997, as amended, reads as follows: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently /J./ 72 Exhibit "P-30"; Par. 9, IV. Facts, Petition for Review, Docket- Vol. 1, p. 18.

DECISION CTA case No. 9881 exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentra! ng Pi!ipinas (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 added) Based on the foregoing prov1s1ons, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%) under Section 108(B)(2) of the NIRC of 1997, as amended, 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;73 2. The services fall under any of the categories under Section 108(B)(2)/4 or simply, the services rendered should be other than "processing, manufacturing or repacking goods";75 3. The services must be performed in the Philippines 76 by a VAT-registered person; and, 4. The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules.77 As to the first essential element, as discussed earlier, to prove that its clients are NRFCs for purposes of VAT zero-rating under Section 108(B)(2) of the NIRC of 1997, as amended, petitioner must prove that: (1) the client was established under the laws of a foreign country; and, (2) it is not engaged in trade or business in the Philippines. To be sure, there must be sufficient proof /""' 73 Site/ Philippines Corporation (Formerly C/ientlogic Phils. Inc.) vs. Commissioner of Internal Revenue, G.R. No. 201326, February 8, 2017; Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205, January 22, 2007; Accenture, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 190102, July 11,2012. 74 Commissioner ofInternal Revenue vs. American Express International, Inc. (Philippine Branch}, G.R. No. 152609, June 29, 2005. 75 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra. 76 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. 77 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.

DECISION CTA Case No. 9881 Page 21 of 4S of both of these requirements to establish that the clients are foreign corporations and are not doing business in the Philippines.78 Thus, petitioner must submit for its NRFC clients both: (1) the SEC Certificate of Non-Registration of Corporation/Partnership; and (2) Proof of Certificate/Articles of Foreign Incorporation/Association showing the state/province/ country where the entity was organized. To be sure, the SEC Certificate of Non-Registration shows that the foreign client is not engaged in trade or business in the Philippines. On the other hand, the Certificate/Articles of Foreign Incorporation/Association proves that the client was established under the laws of a foreign country. Together, these two (2) documents prove the two (2) requisites necessary to establish the NRFC starus of a client. In this case, the following table shows whether petitioner complied with the first essential element as it presented evidence of the said SEC Certificate of Non-Registration and Certificates of Registration/ Foreign Incorporation/ Association for each of the recipients of the services rendered by petitioner: Client's Name SEC CertificateI Articles of Certification of 1 JH Funds Incorporation/ Non- Registration 2 John Hancock Life Insurance Company Registration (Exhibit Nos.} (Exhibit Nos.) 3 MAMUSLLC None "P-81" "P-35" 4 Manulife (International) Ltd "P-36" None "P-85" 5 Manulife (Vietnam) Limited "P-39" "P-38" to "P-38-d" "P-88" None 6 Manulife Asset Management (Hong Kong) Limited "P-43" "P-42" to "P-42-a" 7 Manulife Asset Management (Singapore) Pte. Ltd. None None "P-51" "P-50" 8 Manulife Asset Management (Vietnam) "P-79-a" 9 Manulife Asset Management Limited (Mutual None None Funds) None "P-53-a" None 10 Manulife Asset Management Malaysia "P-56-a" "P-56" 11 Manulife Bank "P-58" "P-60" 12 Manulife Financial Asia Limited "P-91" "P-62-a" 13 Manulife Information & Technologies Services "P-65" None (Chengdu) "P-77" 14 Manulife Insurance Berhad (Malaysia) "P-131"79 15 Manulife Insurance Berhad (RAS MY) None 16 Manulife Japan None 17 Manulife Singapore Pte Ltd Reg No. 198002116D "P-64" to "P-64-b" 18 Manulife Technology & Services Sdn Bhd None _-/ 78 Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte. Ltd., G.R. No. 234445, July 15, 2020. 79 Please refer to the USB.

DECISION "P-94" None CTA Case No. 9881 "P-67" None Page 22 of 45 "P-69" None "P-71" None 19 Manulife Thailand "P-75" None 20 Manulife-Sinochem Life Insurance Co., Ltd. 21 Pt. Asuransi Jiwa Manulife Indonesia 22 Pt. Manulife Aset Manajemen Indonesia 23 The Manufacturer's Life Insurance Company On the basis of the foregoing, only the following clients of petitioner can be considered NRFCs, to wit: Client's Name SEC Certificate/ John Hancock Life Insurance Company Certification Articles of Incorporation/ Manulife (International) Ltd of Non- Ree:istration Manulife Asset Management (Hong Kong) Limited Ree:istration Manulife Asset Management (Vietnam) "P-35" Manulife Financial Asia Limited "P-36" Manulife Insurance Berhad (Malaysia) "P-38 to P-38-d" Manulife Singapore Pte Ltd Reg No. 198002116D "P-39" "P-42 to P-42-a" "P-43" "P-51" "P-50" "P-56-a" "P-56" "P-60" "P-65" "P-131" "P-64" to "P-64-b" Relative to the second essential element in order for the foregoing clients to be considered as NRFCs, only the following have Service Agreements with petitioner, to wit: 1. Services Agreement made on October 25, 2007 which shall remain in force until terminated in accordance with its terms, and Addendum to Seroice Agreement dated October 31, 2007 which is deemed to have commenced on May 1, 2006 and shall continue thereafter until terminated in accordance with its terms, between John Hancock 4& Insurance Compaf!.V (U.SA.) and petitioner;80 2. Business Processing Services Agreement between Manul�fe anternationali Limited and petitioner made on April 10, 2006 and shall remain in force until terminated in accordance with its terms;81 3. Services Agreement between Manulife Asset Management (Vietnam) Compa1f,y Limited and petitioner made on May 3, 2012 and shall remain in force until terminated in accordance with its terms;82 4. Master Administrative Services Agreement and Service Level Agreement between Manu!�& Financial Asia Limited and / 80 Exhibits "P-32 to P-32-e" and "P-33 to P-33-c". 81 Exhibits "P-37 to P-37-d". 82 Exhibits "P-49 to P-49-d".

DECISION CTA Case No. 9881 petitioner made on November 16, 2015 and shall remain in force until terminated in accordance with its terms;83 5. Services Agreement between Manulife Insurance Berhad (Malqysia) and petitioner made on April 23, 2010 and shall remain in force for a period of one (1) year and shall automatically renew for successive one (1) year periods unless terminated earlier in accordance with the provisions thereof;84 and 6. Master Services Agreement between Manulife Singapore Pte. Ltd. and petitioner made on July 2, 2012 and shall remain in force until terminated in accordance with its terms. 85 Notably, these Service Agreements provide that petitioner shall furnish, in general, administrative and other business processing services to support the operations of the above-stated clients. Certainly, the services it renders are not in the same category as "processing, manufacturing or repacking of goods", hence, petitioner satisfactorily complied with the second essential element. Anent the third essential element, it was determined that the aforementioned Service Agreements have provision as to where the services are to be performed by petitioner, i.e., in the Philippines, except for the Master Administrative Services Agreement and Service Level Agreement between Manulife Financial Asia Limited and petitioner. Nevertheless, petitioner's Finance Director, Mr. Inigo P. Garcia, testified through his Sworn Statement as follows: "18. Q: How does MDSI [petitioner] render services to these foreign clients? A: Each foreign client transfers its business processes to MDSI. The scope and extent of the transferred business processes are embodied in the service contracts typically, but not always, denominated as 'Master Agreement' (or MSA) or 'Service Level Agreement' (or SLA). For each client, one or more SLAs can be executed, depending on the business process or processes transferred to MDSI. Once the Agreements are implemented, MDSI regularly reports to the foreign client its output and performance. All of MDSI's services are conducted in-house through the aid of telecommunications devices and computers. None of its services are performed outside of its premises." (Underscoring added) /' 83 Exhibits "P-54 to P-54-d" and "P-55 to P-55-b". 84 Exhibits "P-59 to P-59-g". 85 Exhibits "P-63 to P-63-d".

DECISION CTA Case No. 9881 In view thereof, petitioner has shown compliance with the third essential element, again insofar as the specifically identified NRFCs are concerned. As regards the fourth essential element and in relation to the fifth requisite86 for the granting of the input VAT refund, petitioner presented an electronic copy of its bank statements for the months of January to December 2016 issued by Citibank87 and the Summary of Inward Remittances per Bank Statements for calendar year 2016,88 purportedly showing the foreign currency remittances of its clients to petitioner. However, it is equally important to consider that the VAT zero-rated sales, to which the said foreign currency remittances correspond, must be duly supported by VAT zero-rated official receipts (ORs) in accordance with Section 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, to wit: "SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons.- (A) Invoicing Requirements.- A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: (a) The amount of the tax shall be shown as a separate item in the invoice or receipt; XXX XXX XX~ 86 For zero-rated sales under Sections 106 (A)(2)(1) and (2); 106 (B); and 108 (B)(1) the NIRC of 1997, as amended, the acceptable foreign currency exchange proceeds duly accounted for in accordance with the Bangko Sentral ng Pi/ipinas (BSP) and (2) of regulations. have been rules and 87 Exhibits "P-111" to "P-122", USB. 88 Annex B of the 2215 to 2216. Final ICPA Report dated May 10, 2021 (Exhibit "P-101-2"), Docket- Vol. 5, pp.

DECISION CfA case No. 9881 (c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; XXX XXX XXX (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 (1,000) 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." (Underscoring added) Section 4.113-1(A)(2), B(1) and (2)(c) of Revenue Regulations (RR) No. 16-2005, as amended, which implements the foregoing, also states: "SEC. 4.113-1. Invoziing Requirements. - (A) A VAT-registered person shall issue: - (1) A VAT invoice for every sale, barter or exchange of goods or properties; an (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 Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (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: (a) The amount of tax shall be shown as a separate item in the invoice or receipt; XXX XXX XXX (c) If the sale is subject to zero percent (0%) VAT, the term 'zero- rated sale' shall be written or printed prominently on the invoice or receipt; /

DECISION CTA Case No. 9881 (d) In the case of sales in the amount of one thousand pesos (1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) of this Section." (Underscoring added) To support its zero-rated sales of services, petitioner submitted the VAT zero-rated ORs 89 issued to its clients for calendar year 2016, which were examined by the Court-commissioned ICPA. Per the ICPA's examination, out of the reported zero-rated sales of P3,549,857,592.33, the amount of P1,285,176,757.55, broken down below, pertained to sales of services to the following clients considered NRFCs doing business outside the Philippines: Name of Client Summary ofVAT Amount John Hancock Life Insurance Company (USA) Zero-Rated ORs p 1,183,516,727.98 Manulife Financial Asia Limited issued to NRFC'" Manulife (International) Ltd 55,507,714.39 Manulife Singapore Pte Ltd AnnexA-2 42,718,437.80 Manulife Insurance Berhad (Malaysia) AnnexA-3 2,487,136.82 Manulife Asset Management (Vietnam) Annex A-5 Company Limited Annex A-6 632,805.39 AnnexA-9 313,935.17 Annex A-10 P1,285,176,757.55 Total Upon verification, the amount of P1,285,176,757.55 was found to be duly substantiated by VAT zero-rated ORs, which were compliant with the invoicing requirements. However, a scrutiny of the Summaries of VAT Zero-Rated ORs issued to NRFCs and the Summary of Inward Remittances per Bank Statements for calendar year 2016 reveals that out of the substantiated sales of P1,285,176,757.55, the amount ofP3,446,024.47, as detailed hereunder, has no proof of payment in acceptable foreign currency accounted for in accordance with rules and regulations of the BSP as the same cannot be traced to the inward remittances per bank statements(v' �89 Exhibit "P-110", USB. 9 Final !CPA Report dated May 10, 2021 (Exhibit "P-101-2"), Docket - Vol. 5, pp. 2205 to 2206, 2208 to 2209 and 2212 to 2213.

DECISION Exhibit Reference per CTA Case No. 9881 "Summary of Inward Rem. per Bank ORs Statements for CY Name of Client Exhibit No. Doc No. Gross Amount 2016"92 Manulife (International) 5434 Amount (in PhP)91 Ltd "P-11 o�� (page 40 5432 (in US$) "P-122" (page 2 of 5) Manulife Singapore Pte 2,890,626. 97 Ltd of 50) 58,082.04 "P-122" (page 2 of 5) Total 555,397.50 "P-110" (page 38 11,175.00 3,446,024.47 69,257.04 of 501 While there are exhibit references (to bank statements) indicated per the Summary of Inward Remittances per Bank Statements for calendar year 2016 for the sales in the amounts of US$58,082.04 and US$11,175.00, the bank statement, however, shows that the amount of US$58,082.04 actually pertains to Manulife Singapore Pte Ltd while the amount of US$11,175.00 actually pertains to Manulife Life Insurance Company. Thus, since no inward remittances in the amounts of US$58,082.04 and US$11,175.00 can be traced to the bank statements as coming from Manulife (International) Ltd and Manulife Singapore Pte Ltd, respectively, the same cannot qualify for VAT zero-rating. Hence, only the sales of services in the amount of P1,281,730,733.08, as computed below, satisfied the fourth essential element and the fifth requisite, i.e., the sales were paid for in acceptable foreign currency and accounted for in accordance with BSP rules and regulations: Substantiated Zero-Rated Sales to NRFC p 1,285,176,757.55 Less: Sales not traced to inward remittance 3,446,024.4 7 Valid Zero-Rated Sales p 1,281,730,733.08 Thus, under the fourth requisite, petitioner was able to establish that its sales of services to NRFCs for the calendar year 2016, in the aggregate amount of P1,281,730,733.08, qualify for VAT zero-rating as provided in Section 108(B) (2) of the NIRC of 1997, as amended. 6'h Requisite: The input taxes being claimed do not appear to be transidonalinput taxes. In its Petition for Review,93 petitioner alleged to have generated total input VAT in the amount of P109,182,169.66 for calendar year 2016, out of which the amount of P%,275,284.20 is the subject of the claim for refund, as shown below:~ 91 Converted based on rates per PDS as used by !CPA in Summary of VAT Zero-Rated ORs issued to these NRFCs. 92 Annex B of the Final !CPA Report dated May 10, 2021 (Exhibit "P-101-2"), Docket- Vol. 5, p. 2215 93 Docket- Vol. 1, pars. 10.1 and 10.2, p. 14.

DECISION CTA Case No. 9881 PeriodJ2016) Capital goods Amortization of Domestic purchases Domestic TOTAL not exceeding capital goods of goods other than purchase of exceeding p 15,343,698.90 P1MiUion PlMillion capital goods services 28,252,755.01 1'1 quarter 1'1 04,991.08 I' 3,250,029.87 p 791,855.21 I'll'196,822.74 26,091,590.27 39,494,125.48 2nd quarter 312,731.85 3,441,778.28 1,21 5,295.11 23 282,949.77 P109,182,169.66 1,453,549.39 20,309,950.53 12,906,885.46 3rd quarter 260,078.79 4,068,011.56 34,182,455.05 820,778.29 88,972,178.09 P96,275,284.20 4111 quarter 258,346.61 4,232,545.53 4,281,478.00 TOTAL 936,148.33 14,992,365.24 Less: Total Output VAT for calendar year 2016 Unutilized Input VAT claim However, its Quarterly VAT Returns for the four (4) quarters of calendar year 2016 show that the total input VAT from domestic purchases of goods and services declared by petitioner amounted to only 1"109,137,383.76, which, when offset against the output VAT of 1"12,906,885.46, would result to an unutilized input VAT amount of only 1"96,230,498.30, as shown below: 111 quarter94 2nd quarter95 3�d quarter96 4th quarter97 Total Input Tax Deferred on I' 37,277,073.00 p 34,496,866.65 p 37,216,982.61 I' 46,406,175.14 I' 155,397,097.40 Capital Goods Exceeding 469,823.49 6,161,894.20 13,257,204.06 3,198,525.91 23,087,447.66 P'l Million from Previous 34,496,866.66 37,216,982.74 46,406,175.09 45,372,155.52 163,492,180.01 Quarter p 3,250,029.83 p 3,441,778.11 p 4,068,011.58 p 4,232,545.53 p 14,992,365.05 Add: Input Tax on Purchase I' 104,991.08 p 312,731.85 p 260,078.79 p 258,346.61 p 936,148.33 of Capital Goods 791,855.21 1,215,295.11 1,453,549.39 820,778.29 4,281,478.00 exceeding Pl Million 11,196,822.74 23,282,949.77 20,265,164.82 34,182,455.05 88,927,392.38 Less: Input Tax on Purchase of Capital Goods Pl2,093,669.03 P24,810,976. 73 P21,978,793.00 P35,261,579,95 p 94,145,018.71 exceeding Pl Million Pl5,343,698.86 P28,252,754.84 P26,046,804.58 P39,494,125.48 Pl09,137,383.76 1,791,386.60 4,301,191.02 3,203,589.97 3,610,717.87 12,906,885.46 deferred for the succeeding period Pl3,552,312.26 P23,951,563.82 P22,843,214.61 P35,883,407.61 p 96,230,498.30 Amortized Input Tax Current Input Taxes: On Purchase of Capital Goods not exceeding PI Million On Domestic Purchases of Goods Other than Capital (ioods ( )n Domestic Purchase of Services Total Current Input Taxes Total Input Taxes for the period Less: Output VAT Excess Input VAT Inasmuch as only the input VAT worth 1"96,230,498.30 was declared in the VAT Returns, out of the unutilized input VAT claim of 1"96,275,284.20, and that the difference thereon in the amount of 1"44,785.90 was not supported or reconciled, the determination of the refundable amount shall be confined to the declared unutilized input VAT claim of 1"96,230,498.30.~ 94 Exhibit "P-5", Expanding brown envelope labelled as "Marked Exhibits (Envelope 1 of 2)". 95 Exhibit "P-123". 96 Exhibit "P-7", Expanding brown envelope labelled as "Marked Exhibits (Envelope 1 of 2)". 97 Exhibit "P-8", !d.

DECISION CTA Case No. 9881 The claimed input taxes do not appear to be transitional input taxes, as understood under 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 percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax." Parenthetically, transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisitions of their beginning 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. 98 Since there is no showing that the above-stated input VAT is transitional input VAT, petitioner has complied with the sixth requisite for the grant of an input VAT refund. 7h Requisite: A portion of the input taxes being claimed were due or paid. Anent the seventh requisite in claiming VAT refund, it is important for petitioner to provide supporting documents to prove that the input taxes claimed during the calendar year 2016 are actually due or paid in accordance with Section 11 O(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 ;v' 98 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 158885 and 170680, April 2, 2009.

DECISION CTA Case No. 9881 (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code. (b) Purchase of services on which a value-added tax has actually been paid. (2) The input tax on domestic purchase or importation of goods or properties by a VAT-registered person shall be creditable: (a) To the purchaser upon consummation of sale and on importation of goods or properties; and 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 if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1 ,000,000.00): Promded, 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: Promded,final(y, 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 4.110-1 to 4.110-3 of RR No. 16-2005, to wit: "SECTION. 4.110-1. Credzts 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, properties, or services, including lease or use of properties, in the course of his trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. 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;/

DECISION CTA Case No. 9881 (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 senrtces; 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) Purchases of services in which a VAT has actually been paid;" "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 (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 Depmiab/e 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 p~rchased 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. ;/

DECISION CTA Case No. 9881 Capital goods or properties refers to goods or properties with estimated useful life greater than one (1) year and which are treated as depreciable assets under Sec. 34(F) of the Tax Code, used directly or indirectly in the production or sale of taxable goods or services. The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price, excluding the VAT, 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, excluding the VAT, 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, as follows: "SEC. 4.110-8. Substantiation ofInput Tax Credits. - (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau: 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 showing the information required under Sees. 113 and 237 of the Tax Code. A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code." It is categorically mentioned in the above provisions that in order to be entitled to input tax credits, the same must be evidenced by VAT invoices (for domestic purchases of goods) or ORs (for domestic purchases of services) issued in accordance with Section 113 of the NIRC of 1997, as amended, as quoted earlier./

DECISION CTA Case No. 9881 Furthermore, the sales invoices and ORs must be duly registered with the BIR pursuant to Section 237, in relation to Section 238, both of the NIRC of 1997, as amended, which respectively provide: "SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: x x x" "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 numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and the Revenue Regulations are clear. It is reasonable and must be strictly complied with, as it is the only way to determine the veracity of the claim. 99 In support of its reported input VAT of P109,137,383.76 from its domestic purchases of goods and services, petitioner submitted various supporting documents, 100 which were examined by the Court-commissioned ICPA. Based on the findings of the ICPA, the input VAT in the aggregate amount of P49,985,791.85, as detailed below, are disallowed for failure to meet the substantiation and invoicing requirements earlier quoted: ~ 99 Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 179961, January 31, 2011. 100 Exhibits "P-137-1" to "P-137-299", "P-138-1" to "P-138-646", "P-139-1" to "P-139-32", "P-140- 1" to "P-140-68" and "P-141-1" to "P-141-90" except for the denied Exhibits.

DECISION CTA Case No. 9881 Particulars Reference to Input VAT Final !CPA Purchases ofgoods other than capital goods Report101 I' 692,555.20 21,955.20 Purchases of goods supported by documents other than Annex E-3 original invoices Annex E-4 22,374.21 Purchases of services reported as purchases of goods supported by documents other than original ORs Annex E-7 1,310.36 553,541.43 Purchases of goods supported by original invoices where the Annex E-8 quantity, unit cost, description of the goods, tax base and/or Annex E-9 3,954.80 amount of VAT is not separately indicated/incomplete and/ or Annex E-ll 2,734.19 improperly presented Annex E-12 658,867.76 Annex E-15 137,086.39 Purchases of services reported as purchases of goods Annex F-2 2,181 '146.34 supported by original ORs where amount of VAT is Annex F-3 76,950.00 incorrectly computed and nature of service/payment is not Annex F-4 2,756.78 indicated Annex F-7 13,856,656.84 Purchases of goods supported by original invoices where the 5,328.14 name, TIN and/or registered address are not indicated, Annex F-8 605,973.93 incorrect, incomplete and/or unreadable Annex F-9 Purchases of services reported as purchases of goods Annex F-10 820,870.63 supported by original ORs where nature of service/payment is 15,614,597.99 not indicated Annex F-11 Purchases of goods supported by original invoices where Annex F-14 ~ erasures/alterations are not countersigned and/or do not have notarized statements Purchases of goods without supporting documents Purchases of services Purchases of services supported by non-VAT ORs Purchases of services supported by documents other than original VAT 0 Rs Purchase of goods reported as purchase of services supported by documents other than original invoices Purchases of services supported by original ORs where amount of VAT is not separately indicated Purchases of services supported by original ORs where name, TIN, address and/or nature of services is not indicated, incorrect, incomplete or unreadable Purchases of goods reported as purchases of services supported by original invoices where name, TIN and/or address is not indicated, incorrect or incomplete Purchases of services supported by original ORs where nature of service/payment is not indicated and/or incorrect Purchases of services supported by original ORs with erasures and/or alterations which cannot be ascertained if made by authorized personnel from the supplier/made without authority Purchases of services without supporting documents Purchases of capitall!oods not exceedin2 P1 million !Ol Exhibit "P-101-2" (soft copies in USB).

DECISION CTA Case No. 9881 Purchases of capital goods supported by original invoices Annex H-2 143,282.80102 whose aggregate cost exceeded PI million during the month Annex H-3 Annex H-4 3,311.52 but reported as "capital goods not exceeding Pl million" in the 105,766.59 vat return and not subjected to amortization (unamortized 36,078.28 portion) 314,969.97 Domestic purchase of capitalizable services Oabor component) 157,151.99 not supported by VAT OR 12,631,113.23 Purchases of capital goods supported by documents other 158,189.09 than original invoices 94,775.27 Domestic purchase of capitalizable services not exceecling PI Annex H-6 408,475.54 million supported by VAT OR where address and nature of Annex H-7 160,975.94 services are not inclicated for the 3rd quarter of CY 2016 Annex K-1 285,656.14 Domestic purchases of capitalizable services not exceeding PI million supported by VAT ORs where nature of services is not Exhibit P-143 inclicated Annex I-3 Unsupported purchases Purchases of capital goods exceeding Pl million Amortization of input VAT on purchases of capital goods exceecling PI million prior to CY 2016 without supporting documents Purchases of capital goods exceecling PI million not supported by original VAT sales invoices Purchases of capital goods exceecling PI million supported by Annex I-5 original VAT sales invoices where the name, TIN and/or Annex I-6 Annex I-7 address is not indicated, incomplete or incorrect Purchases of capitalizable services exceecling PI million supported by original VAT ORs where the name, TIN, address and/or nature of services/payment is not inclicated, incomplete or incorrect Purchases of capitalizable services exceecling PI million supported by original VAT ORs where nature of services/payment is not inclicated Purchases of capital goods exceecling PI million supported by Annex I-8 original foreign currency but peso equivalent cannot be determined and address is incorrect and/or incomplete 102 Computation of adjusted unamortized portion of P143,282.80: Total Unamortized Input VAT per Annex H-2 P144 032.45 Less: One month amortization of input VAT on purchases with incorrect remaining 749.65� life used in comQuting unamortized amount: P143 282.80 Remaining Remaining / life life (in mos.) (in mos.) as of as of Monthly 12/31/16 12/31/16 Input VAT per Annex as should Difference Amortization Date of H-2 be (in mos.) per Annex Name of SUQQiier Purchase [a] [b] [c=a-b] H-2 MICRODATA SYSTEMS AND MANAGEMENT, May 20, INC 2016 53 52 1 P714.29 ewe INTERNATIONAL August CORP. 24 2016 56 55 1 35.36 Total P749.65 Actual Unamortized Input VAT

DECISION Annex l-9 227,385.39 CTA Case No. 9881 Page 17 (0.09) P49,985,791.85 Purchases of capital goods exceeding PI million without supporting documents Rounding off differences- Q2 andQ3 Total In addition to the above disallowances, further verification reveals that the input VAT amounting to f>19,050,844.39 should be disallowed for the grounds stated hereunder: Name of Supplier Exhibit No. Doc. No. Input VAT Input VAT on purchases ofnoncapitalgoods supported by VATinvoices but with unreadable details PHILIPPINE FOODSERVICE GROUP CORP "P-137-59" 000006021 I' 9,428.57 S.".N MIGUEL FOODS INC. "P-137-127" 1121-11678836 PHILIPPINE VENDING CORPORATION "P-137-166" 35,357.14 000015488 17,812.13 Input VAT on purchases ofnoncapitalgoods supported by VATinvoices with incomplete date/without date/dated outside the period ofclaim and/or the TIN or address ofpetitioner was not indicated CONTRADE INTEGRATED DEPOT, INC. "P-137-120" 37974 4,863,05 "P-137-121" 041336 158.57 FOTOLINE EXPRESS, INC. JEBSEN AND JESSEN COMMUNICATIONS (P) "P-137-122" 3085014371 2,547.36 INC. "P-13 7-123" 3085014372 27,318.24 JEBSEN AND JESSEN COMMUNICATIONS (P) 6,043.29 INC. 35,357.14 ROBINSONS SUPERMARKET CORPORATION "P-137-124" 0016039 28,285.71 SAN MIGUEL FOODS INC. "P-137-125" 1121-11677206 187.50 1,782.86 SAN MIGUEL FOODS INC. "P-137-128" 1121-11678042 4,928.57 5,585.14 CARE 1ST CORPORATION "P-137-132" 016283 MAXITECH MANUFACTURING, INC. "P-137-134" 9990 803.25 ACCENT MICRO TECHNOLOGIES INC. "P-137-141" 197724 ACCENT MICRO TECHNOLOGIES INC. "P-137-142" 198135 994.50 ROSE PHARMACY, INC. "P-137-168" 3712-L-0040852 87,353.57 ' Input VAT on purchases ofnoncapitalgoods supported by documents other than VAT I invoice 589.29 SANCHEZ, MICHAEL JEROME G. (SWEET "P-137-135" 0072 INCANTATIONS CONFECTIONERY) "P-137-148" 1020255694 GB DISTRIBUTORS INC. "P-137-172" 0152 SISON,ALLEINIE 0. (STAPLES EVENTS SERVICES) Input VAT on purchases ofservices reported as purchases ofnoncapitalgoods supported by VAT ORs but the nature ofservices and/or the TIN and/or address ofpetitioner was/were not indicated FLYING COLORS DIGITAL IMAGING CENTRE "P-137-171" 1138 240.00 CO. "P-137-173" 2261 2,448.60 "P-137-174" 8161 3,358.93 CALVELO ENGINEERED SYSTEMS "P-137-175" 8162 1,853.57 ARKIGRAFIX CORPORATION ARKIGRAFIX CORPORATION 22500 935.57 CEBU GRAPHICSTAR IMAGING CORP. "P-137-176" 60545 482.14 CEBU GRAPHICSTAR 1!>.1AGING CORP. "P-13 7-177" 60544 236.25 QUALIPRINT INC. "P-13 7-178" 16832 ARKIGRAFIX CORPORATION "P-137-258" 7728 15,974.40 FLYING COLORS DIGITAL Il>.1AGING CENTRE 851.79 CO. "P-137-259" 1168 "P-137-260" 2,839.29 PROGRESSIVE PRINTING PALACE, INC. "P-137-261" 10416 482.14 PROGRESSIVE PRINTING PALACE, INC. "P-137-262" QUALIPRINT INC. 10432 ,./ 16573 ,_ ~

DECISION "P-137-263" 16600 723.21 CTA Case No. 9881 "P-137-264" 7850 455.36 "P-137-265" 7990 455.36 Page 37 of 45 "P-137-266" 59261 600.00 "P-137-267" 0365 192.86 QUALIPRINT INC. "P-137-268" 10446 385.71 ARKIGRAFIX CORPORATION "P-137-269" 16693 482.14 ARKIGRAFIX CORPORATION "P-137-270" 8083 2,892.86 CEBU GRAPHICSTAR IMAGING CORP. "P-137-271" 8146 448.39 EPAGES MARKETING CORP "P-137-272" 000063 5,340.11 PROGRESSIVE PRINTING PALACE, INC. "P-13 7-273" 0000081219 6,240.15 QUALIPRINT INC. "P-137-274" 0000081218 353.57 ARKIGRAFIX CORPORATION "P-137-275" 0000081217 977.46 ARKIGRAFIX CORPORATION "P-137-277" 8181 8,142.86 ]ADA INFINITE WORKFORCE SERVICES INC. "P-137-278" 60546 969.60 ]OLLIBEE FOODS CORPORATION "P-137-279" 0000097715 347.36 JOLLIBEE FOODS CORPORATION "P-137-280" 0000100189 3,440.57 JOLLIBEE FOODS CORPORATION "P-137-281" 0000100188 330.00 ARKIGRAFIX CORPORATION "P-137-282" 0000100191 330.00 CEBU G~-\PHICSTAR IMAGING CORP. "P-13 7-284" 57856 2,916.96 JOLLIBEE FOODS CORPORATION JOLLIBEE FOODS CORPORATION 21,447.64 JOLLIBEE FOODS CORPO~-\TION ]OLLIBEE FOODS CORPORATION 27.40 THE NEW ALBERGUS INC. 302.20 Input VAT on purchases ofservices supported by VAT ORs but input VAT amounts per OR are lower than the amounts per claim (Overclaimed input VAT) 3,129,163.27 TWC BUILDING ADMINISTRATION INC. 185.39 _[1'480,427.20per claim less 1'458,979.56 f><r VAT OR] "P-138-30" 0053 2,982,858.61 DALOCANOG, ROMEO T. (ROMSTREL "P-138-37" 1633 17,955.00 GENERAL MERCHANDISE) "P-138-38" 10879 1,800.00 !1'1,534.29 per claim less 1'1,506.89 per VAT OR] "P-138-98" 15655 "P-138-106" 665 75:03 FIRST COMMONWEALTH HOTEL CORP. "P-138-124" 0001471 !1'7,071.43 per claim less 1'6,769.23_j>er VAT ORL 60.35 UP NORTH PROPERTY HOLDINGS INC. [1'4,153,427.51 per claim less 1'1,024,264.24 per VAT 250.72 OR] 47,520.00 SEBASTIEN HOTEL INC. 1,800.00 !1'13,660.71 per claim less 1'13,475.32 per VAT OR] 5,089.28 ALIPROPERTYPARTNERSCORP [1'3,995,708.91 per claim less 1'1,012,850.30 per VAT 72.09 OR] ,.� Input VAT on purchases ofservices supported by VAT ORs but tbe TIN and/or address of petitioner and/or nature ofservice was/were not indicated 1\!YNIMO INC "P-138-66" 18594 RENTOKIL INITIAL (PHILIPPINES) INC. "P-138-68" 252499 UPS DELBROS INTERN"-\TIONAL EXPRESS LTD. "P-138-69" 0324923 INC UPS DELBROS INTERNATIONAL EXPRESS LTD. "P-138-70" 0324922 INC UPS DELBROS INTERNATIONAL EXPRESS LTD. "P-138-71" 0324921 INC "P-138-74" MK00053821 SGV & CO "P-138-78" l'OWEREDGE SOLUTIONS PHlLS.INC. "P-138-79" 1351 ATLANTICA FIRE SAFETY SYSTEMS, INC "P-138-80" 6363 TNT EXPRESS WORLDWIDE (PHILS.), INC. 0985321

DECISION "P-138-81" 0985322 48.06 CTA Case No. 9881 "P-138-82" 0985320 48.06 Page 38 of 45 "P-138-84" 32742 16,702.48 "P-138-85" 32741 16,590.15 TNT EXPRESS WORLD'WIDE (PHILS.), INC. "P-138-86" 13753 1,271.79 TNT EXPRESS WORLDWIDE (PHILSJ, INC. SMS CEBU INC "P-138-89" 0012264 600.00 SMSCEBU INC "P-138-93" 0094350 6,636.53 BIGFOOT PROPERTIES, INC. "P-138-94" 33303 17,248.80 NISCE MAMURIC GUINTO RIVERA AND "P-138-96" 12265 600.00 ALCANTARA DELSAN OFFICE SYSTEMS CORPORATION "P-138-99" 318655 2,142,86 SMSCEBU INC "P-138-100" 3310 1,958.04 "P-138-104" 33304 17,803.36 NISCE MAMURIC GUINTO RIVERA AND "P-138-107" 363 88,664.40 ALCANTARA "P-138-108" 2,889.15 MANILA BULLETIN PUBLISHING "P-138-109" 694368 28,438.39 CORPORATION "P-138-110" 14119 WIZARDSGROUP, INC. 3467 990.00 SMSCEBU INC "P-138-112" 4188 202,546.52 jOE RILEY & ASSOCIATES INC. SUNSTAR PUBLISHING INC. "P-138-113" !2516 705.48 ISLAND STAY INC HUMAN CAPITAL ASIA INC. "P-138-114" !2514 600.00 STAGES PRODUCTION SPECIALIST, INC. "P-138-115" 0013954 26,898.84 NISCE MAMURIC GUINTO RIVERA AND "P-138-116" 0012515 600.00 ALCANTARA "P-138-117" 260994 90.00 "P-138-118" 260995 11,136.86 NISCE MAMURIC GUINTO RIVER.". AND "P-138-120" 2,838.00 ALCANTARA "P-138-122" 3466 2,700.00 "P-138-126" 015884 31,071.43 CONSTANTINO GUADALQUIVER & CO. "P-138-128" 50708 5,089.28 "P-138-129" 6,044.81 NISCE MAMURIC GUINTO RIVERA AND "P-138-130" 6505 567.50 ,".LCANTARA "P-138-131" 1028224 671.51 "P-138-134" 1012264 148,604.06 RENTOKIL INITIAL (PHILIPPINES) INC. "P-138-135" 1012262 65,264.38 RENTOKIL INITIAL (PHILIPPINES) INC. "P-138-136" 65,264.38 HUMAN CAPITAL ASIA INC. "P-138-138" 0061 3,096.43 FMR CORPORATION "P-138-139" 1366 2,889.15 NEXUS TECHNOLOGIES INC. "P-138-140" 1365 2,889.15 ATLANTICA FIRE SAFETY SYSTEMS, INC "P-138-141" 01192 9,230.36 CANON 1\lARKETING (PHILIPPINES), INC. 697291 TNT EXPRESS WORLDWIDE (PHILS.), INC. "P-138-142" 697292 2,136.62 TNT EXPRESS WORLDWIDE (PHILS.), INC. 5754 TWC BUILDING ADMINISTR..",TJON INC. "P-138-146" 48,067.54 F&\1.,\,IRCONDITIONING CORPORATION 0062 F&\1 AIRCONDITIONING CORPORATION "P-138-147" I ,038,!60.48 SEBASTIEN HOTEL INC. "P-138-631" 0000538 26,893:00 SUNSTAR PUBLISHING INC. "P-138-633" 26,723.52 SUNSTAR PUBLISHING INC. "P-138-642" 0000539 67,809.28 ALTEO DIGITAL AN DPRINTERS INC. "P-141-1 00" 0159892 26,894.34 0!59893 JACINTOS, SOFIA L. (2K15 MANPOWER 172752 / SERVICES) 0149702 CSC INFOR..\1ATION TECHNOLOGY (PHILIPPINES) INC. CSC INFORI\1ATION TECHNOLOGY (PHILIPPINES) INC. BAYAN TELECOMMUNICATIONS, INC. BAYAN TELECOJVHv!UNICATIONS, INC. BAYAN TELECOMMUN!C.HIONS, INC. B,".YAN TELECOMMUNICATIONS, INC

DECISION erA case No. 9881 BAYAN TELECO~h'V!UNICATIONS, INC I I "P-141-114" 0175463 92,288.62 Input VAT on purchases ofservices supported by VAT ORs but the input VAT amounts 14,560.71 were not s~rate!x__indicated 1,221.22 RIZON PROPERTY HOLDINGS INC. "P-138-83" 3465 837.98 DELSAN OFFICE SYSTEMS CORPORATION "P-138-1 03" 85632 18,642.86 GLOBE TELECOM INC "P-138-111" 3293461 1,993.36 RJZON PROPERTY HOLDINGS INC. "P-138-132" 3751 18,342.86 DELSAN OFFICE SYSTEMS CORPORATION "P-138-133" 85634 RJZON PROPERTY HOLDINGS INC. "P-138-148" 3673 600.00 2,400.00 Input VAT on purchases ofservices supported by VAT DRs dated outside the period of claim or with unreadable date 192.86 4,203,623.41 NISCE MAMURIC GUINTO RIVERA AND "P-138-67" 11855 },LCANTARA "P-138-87" 24318 2,400.00 "P-138-144" 3191466 4,146,394.54 ~IYNIMO INC "P-138-149" 0017889 608,406.36 GLOBE TELECOM INC "P-138-150" 322817 4,928.57 UP NORTH PROPERTY HOLDINGS INC. "P-138-151" 0001540 ~-\.NILA BULLETIN PUBLISHING "P-138-1 52" 0001542 17,848.10 CORPORATION "P-138-153" 128,191.46 "P-138-154" 3836 24,960.42 ALIPROPERTYPARTNERSCORP "P-138-155" 34546 20,357.14 ALI PROPERTY P"-\.RTNERS CORP "P-138-156" 0066 428,571.43 RIZON PROPERTY HOLDINGS INC. "P-138-157" 01640 SJ\!SCEBUINC "P-138-305" 10048 24,107.14 6163 24,866.95 TWC BUILDING ADJ\!INISTRATION INC. 20,980.81 SEBASTIEN HOTEL INC. 25,470.33 21,360.35 SIGNUM AUDIO VISUAL TOT"-\.L VENTURES INC. 21,360.35 Input VAT on purchases ofservices supported by documents other than VAT OR 25,575.20 PACIFIC CEBU RESORT INT'L. INC. "P-138-88" A2015-000906 21,448.29 PHILIPPINE LONG DISTANCE TELEPHONE "P-138-180" PBMCR000364434 COMPANY "P-138-185" PBJ\!CR000343739 26,373.63 "P-138-222" PBMCR000369543 PHILIPPINE LONG DISTANCE TELEPHONE "P-138-223" PBMCR000368589 20,980.81 COMPANY 20,754.63 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 20,754.63 PHILIPPINE LONG DISTANCE TELEPHONE _21,113.~ COMPANY / PHILIPPINE LONG DISTANCE TELEPHONE "P-138-224" PBMCR000371725 COMPANY PHILIPPINE LONG DISTANCE TELEPHONE "P-138-225" PBMCR000373524 COMP"-\.NY PHILIPPINE LONG DISTANCE TELEPHONE "P-138-236" PBMCR000375018 COMPANY PHILIPPINE LONG DISTANCE TELEPHONE "P-138-237" PBMCR000377122 COMPANY PHILIPPINE LONG DISTANCE TELEPHONE "P-138-241" PBMCR0003431 08 COMPANY PHILIPPINE LONG DISTANCE TELEPHONE "P-138-629" PBMCR000338443 COMPANY PHILIPPINE LONG DIST.-\.NCE TELEPHONE "P-138-630" PBMCR000338442 COMPANY PHILIPPINE LONG DISTANCE TELEPHONE _i:OMPANY _ - - - - - "P-138-632" PBMCR000342473 -

DECISION CTA Case No. 9881 PHILIPPINE LONG DISTANCE TELEPHONE "P-138-636" PBMCR000346951 20,344.59 COMPANY "P-138-637" PBMCR000350045 453,27 "P-138-639" PBMCR000352579 PHILIPPINE LONG DISTANCE TELEPHONE "P-138-640" PBMCR000356422 20,779.95 COMPANY "P-138-641" PBMCR000356421 20,779.95 20,779.95 PHILIPPINE LONG DISTANCE TELEPHONE "P-138-643" PBMCR000358808 20,863.17 COMPANY "P-138-645" PBMCR000365947 48,818.75 24,632.61 PHILIPPINE LONG DISTANCE TELEPHONE "P-138-646" PBMCR000367344 COMPANY 2,812.50 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 33,685.71 8,951.14 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 25,446.42 PHILIPPINE LONG DISTANCE TELEPHONE 8,653.95 COMPANY 5,205.36 PHILIPPINE LONG DISTANCE TELEPHONE 7,832.16 COMPANY 18,772.92 Input VAT on purchase ofservices supported by document with notation "THIS 1,607.14 DOCUMENTIS NOT VALID FOR CLAIMING INPUT TAX" COMPUTER SUPPORT CENTER, INC. "P-138-72" 7007 Input VAT on purchase ofcapitalgoods not exc eed i n g I" 1 million supported by VAT invoice dated outside the period ofclaim ULTRA MODULAR CONCEPTS INC. "P-139-15" I 6745 Input VAT on purchase ofcapitalgoods not exceeding 1"1 million supported by VAT invoice but the TIN and address ofpetitioner were not indicated \'ILL1\IAN COMPUTER SYSTEM INC. "P-139-19" 9922 Input VAT on purchases reported as capitalgoods not exceeding I"I million, though the month in which the same were purchased not subjected to amortization (Input VAT exceed t-1 million, supported by VATinvoices but in succeedinlf calendar yearsj103 claimedin calendaryear 2016 but for amortization SOFRE.-\ FURNISHINGS "P-139-16" 0225 ACCENT MICRO TECHNOLOGIES INC. "P-139-17" 197576 SOFREA FURNISHINGS "P-139-18" 273 Input VAT on purchase ofcapitalizable services not exceeding 1'1 million supported by VAT OR but the nature ofservice was not indicated BARRINGTON CARPETS INC. "P-139-38" 0282A Input VAT onpurchases ofcapitalizable services exceeding 1'1 million supported by VAT ORs hut the nature ofservice was not indicated GOUDIE ASSOCIATES MANILA LIMITED "P-140-25" 4771 COMPANY "P-140-30'' 16858 DATA CENTER DESIGN CORPORATION 103 Detailed computation of the Input VAT amounts: Used Amortization life in Amortization for Date of Input VAT Useful CY during CY succeeding Purchase claimed Life 2016 Name of Supplier March 22, 2016 CYs [a] SOFREA FURNISHINGS (b] (c] 'd =a -;- b x c] [a - d] ACCENT MICRO TECHNOLOGIES INC. 2016 P30 535.71 60 10 P5 089.29 P25,446.42 June 22, SOFREA FURNISHINGS 2016 9 796.93 60 7 1142.98 8,653.95 June 24, 2016 5.892.86 60 7 687.50 5.205.36 /""

DECISION CTA Case No. 9881 Input VAT on purchases ofcapitah'zable services exceedi ng PJ million supported by documents other than VAT OR BARRINGTON CARPETS INC. "P-140-26" 1848 134,400.80 BARRINGTON CARPETS INC. "P-140-27" 2053 10,902.24 EXQUISITE INTERIOR SUPPLY CORPORATION "P-140-32" 2895 11,142.86 P19,050,844.39 Total In sum, out of the total reported input VAT of P109,137,383.76, only the amount ofP40,100,747.52, as computed below, represents petitioner's valid input VAT due or paid for calendar year 2016, in compliance with the seventh requisite, computed as follows: Total Input VAT per Quarterly VAT P49,985, 791.85 p 109,137,383.76 Returns 19,050,844.39 69,036,636.24 Less: Disallowances P40,100,747.52 Per !CPA findings Per Court's further verification Valid Input VAT eh Requisite: The valid input VAT of P40,100, 747.52 shall be proportionately allocated on the basis ofsales volume. The eighth reqmstte is to the effect 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. sale As earlier mentioned, petitioner reported zero-rated sales and taxable subject to 12% VAT for calendar year 2016 in the following amounts: Vatable Sales p 107,557,378.88 Zero-Rated Sales 3,549,857,592.33 Total Sales P3,657 ,414, 971.21 Since petitioner's input VAT cannot be directly or entirely attributed to any of the sales transactions, the valid input VAT of P40,100,747.52 shall be allocated proportionately on the basis of the volume of its total sales, thus: Total Vatable Sales for the period I' 107,557,378.88 Divided by the Total Sales for the period 3,657,414,971.21 Multip_lied by Total Valid Input VAT for the period 40,100,747.52 Valid Input VATAllocated to Total Vatable Sales p 1,179,284.09 /

DECISION CTA Case No. 9881 Total Zero-Rated Sales for the period I' 3,549,857,592.33 Divided by the Total Sales for the period 3,657,414,971.21 Multiplied by Total Valid Input VAT for the period 40,100,747.52 Valid Input VATAllocated to Total Zero-Rated Sales p 38,921,463.43 Thus, as regards petitioner's compliance with the eighth requisite, only the amount of P38,921 ,463.43 represents its valid input VAT attributable to total zero-rated sales for calendar year 2016. !Jh Requisite: The subject input taxes were not applied against output taxes during and in the succeeding quarters. Having determined that petitioner had valid input VAT attributable to its zero-rated sales, we now determine whether the same was not applied against its output VAT liability during and in the succeeding quarters, relative to the ninth requisite for the successful prosecution of an input VAT refund claim. In the recent case of Chevron Holdings, Inc. (Fo17JJer!J Caltex Asia Limited) vs. Commissioner ofInternal Revenue,104 the Supreme Court En Bane held that the input tax attributable to zero-rated sales, may at the option of the VAT-registered taxpayer, be: (1) charged against output tax from regular 12% VAT-able sales, and any unutilized or "excess" input tax may be claimed for refund or the issuance of tax credit certificate; or (2) claimed for refund or tax credit in its entirety, and such option is vested with the taxpayer-claimant, to wit: "Thus, the input tax attributable to zero-rated sales may, at the option of the VAT-registered taxpayer, be: (I) charged against output tax from regular 12% VAT-able sales. and any unutilized or "excess" input tax may be claimed for refund of the issuance of tax credit certificate; or (2) claimed for refund or tax credit in its entirety. It must be stressed that the remedies of charging the input tax against the output tax and applying for a refund or tax credit are alternative and cumulative. Furthermore, the option is vested with the taxpayer-claimant. xxx" (Emphases added) Applying this pronouncement, records show that petitioner chose the first option, i.e., its total input VAT was applied against its output VAT for calendar year 2016 and the remaining unutilized input VAT is the subject of the present claim for refund. 105 Hence, the refundable input VAT shall be computed net of output tax liability. /1/ 104 G.R. No. 215159, July 5, 2022. 105 See Petition for Review, Docket- Vol. 1, par. 10.2, p. 14.

DECISION CfA Case No. 9881 Considering that petitioner's valid input VAT allocated to total vatable sales, in the amount of P1,179,284.09, is not enough to cover the output VAT liability for the said sales, in the amount of P12,906,885.46,106 the valid input VAT allocated to total zero-rated sales, in the amount of P38,921 ,463.43, shall then be utilized against the remaining output VAT due of P11,727,601.37, resulting to an excess input VAT allocated to total zero-rated sales in the amount ofP27,193,862.06, as computed below: Output VAT due per Quarterly VAT Returns p 12,906,885.46 Less: Valid Input VAT allocated to Vatable Sales 1,179,284.09 Output VAT still due p 11,727,601.3 7 Valid Input VAT allocated to Total Zero-Rated Sales Less: Output VAT still due p 38,921,463.43 Excess Input VAT Allocated to Total Zero-Rated Sales 11,727,601.37 p 27,193,862.06 Consequently, only the remaining input VAT of P27,193,862.06 can be attributed to the entire zero-rated sales of P3,549,857,592.33 and only the excess input VAT of P9,818,762.53 is attributable to the valid zero-rated sales ofP1,281,730,733.08, computed as follows: Excess I11put VAT Allocated to Total Zero-Rated Sales p 27,193,862.05 Divided by the Total Zero-Rated Sales Multiplied by the Valid Zero-Rated Sales 3,549,857,592.33 Excess Input VAT Attributable to Valid Zero-Rated Sales 1,281 ,730,733.08 p 9,818,762.53 Needless to state, the amount of P9,818,762.53 is included in the amount of P96,275,284.20, subject of the refund claim. Moreover, although the claimed amount of P96,275,284.20 was carried- over by petitioner in its succeeding Quarterly VAT Returns, 107 the same remained unutilized until it was deducted as "VAT Refund/TCC claimed"108 in its Quarterly VAT Return for the 1" quarter of calendar year 2018. Accordingly, the subject claim no longer formed part of the excess input VAT ofP110,139,217.20109 as of the end of the 1" quarter of2018, to be carried over /Y" 106 Breakdown of Output VAT: Period Quarterly VAT Return Output VAT (2016) p 1 791,386.60 1"_Quarter (Exhibit No.) 2nd Quarter 4 301 191.02 3'd Quarter ''P-5" 3 203 589.97 4'h_Quarter "P-123" 3,61Q,717.87 Total "P-7" "P-8" 1"12,906,885.46 107 Exhibits "P-144" to "P-148", USB. r-V 108 Exhibit "P-148" (Line 230), USB. 109 Exhibit "P-148" (Line 29), USB.

DECISION CTA Case No. 9881 to the succeeding quarters. As such, it eliminates the possibility that the excess valid input VAT of P9,818,762.53 would be utilized or applied against any future output tax liability for the succeeding quarters. In fine, peuuoner was able to satisfy the ninth reqwstte and has sufficiently proven its entitlement to the refund or issuance of a tax credit certificate in the amount of P9,818,762.53, representing excess and unutilized input VAT attributable to its zero-rated sales for the 1" to 4'h quarters of calendar year 2016. WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the amount of P9,818,762.53, representing the latter's excess and unutilized input VAT attributable to its zero-rated sales for the 1" to 4'h quarters of calendar year 2016. SO ORDERED. ~ We.... ~ c...__ MA. BELEN M. RINGPIS-LIID\N Associate Justice WE CONCUR: :--_...._.........-~~� {On Leave) MARIA ROWENA MODESTO-SAN PEDRO Associate Justice Cl O~t ON~ G4w <'ER. ltER~ -I:J.lORES Associate Justice

DECISION CTA Case No. 9881 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. L. ~ ~ "-- MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson 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