MACQUARIE OFFSHORE SERVICES PTY LTD. - PHILIPPINE BRANCH v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with CTA Case No. 8660)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION MACQUARIE OFFSHORE SERVICES PTY LTD CTA CASE NOS. 8580 & 8660 PHILIPPINE BRANCH, Members: Petitioner, -versus- BAUTISTA, Chairperson FASON-VICTORINO, and RINGPIS - LIBAN, JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. I 2018 x- - - - - - - - - - - - - - - - - - - - - - c-.-------- - t:-;:r-4 -~ ---.- - - - - - -x DECISION Fabon- Victorino, J.: In these consolidated Petitions for Review, petitioner prays for the refund or issuance of a tax credit certificate (TCC) in the aggregate amount of P20,595,138 .98, allegedly representing excess and unutilized input value-added tax (VAT) for the four quarters of fiscal year (FY) ended March 31, 2011, broken down as follows: FY 2011 ended CTA March 31, Input VAT Case No. 2011 Period Covered Claim 8580 1st Quarter Apr. 1 to Jun. 301 2010 ~ 3,406 989.90 8660 2nd Quarter Jul. 1 to Sep. 30 1 2010 3rd Quarter Oct. 1 to Dec. 31 2010 17118811 4 9 . 0 8 4th Quarter Jan. 1 to Mar. 31 1 20 11 Total p 20,595,138.98 Petitioner Macquarie Offshore Services Pty Ltd. is a foreign corporation registered with the Securities and Exchange Commission (SEC) on April 10, 2008 to operate as

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD. - PHILIPPINE BRANCH VS. CIR a Regional Operating Headquarters (ROHQ), pursuant to the Omnibus Investments Code of 1987, as amended by Republic Act No. 8756, and its implementing rules and regulations. It is authorized to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services, research and development services and product development; technical support and maintenance; data processing and communication and business development, 1 with principal place of business at the 30th Floor, Tower I, The Enterprise Center, Ayala Avenue, Makati City. Petitioner is also registered as VAT-registered entity with the Bureau of Internal Revenue (BIR) with Certificate of Registration (COR) No. OCN 9RC0000266681. 2 Respondent, on the other hand, is the Commissioner of Internal Revenue (CIR), with authority to act on claims for refund or tax credit. He who holds office at the sth Floor, BIR National Office Building, BIR Road, Diliman, Quezon City. He is represented by the Legal Division of Revenue Region No. 8 (South Makati), with office address at the 2nd Floor, BIR Regional Office Building, 313 Sen. Gil Puyat Avenue, Makati City, where he may be served with court processes. 3 As an ROHQ, petitioner provides qualifying services to its affiliates and related parties in the Asia-Pacific Region and other foreign markets. These qualifying services include application testing and monitoring, technology infrastructure, application development and support, and financial administration. As an ROHQ with a limited business 1 Exhibit "P-1", docket, Volume (vol.) III, p. 1401. 1 v.fi 2 Exhibit "P-2", docket, vol. III, p. 1418. 3 Paragraph (par.) 2, Stipulation of Facts, Consolidated Joint Stipulation of Facts and Issue (JSFI), docket, vol. I, p. 472.

DECISION erA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES P1Y LTD.- PHILIPPINE BRANCH VS. CIR purpose, petitioner generally does not generate VAT taxable and VAT-exempt sales. 4 Petitioner states that for FY 2011, it only had one non-resident foreign client, namely, Macquarie Financial Holdings Limited (MFHL), to whom it rendered VAT zero- rated sales of service. 5 MFHL is an entity incorporated, registered, and operating under the laws of Australia. 6 It is not registered with the Securities and Exchange Commission (SEC) to do business in the Philippines either as a corporation or partnership. 7 The services rendered by petitioner to MFHL were pursuant to a Services Agreement dated April 1, 2009, duly signed by the representatives of the parties.8 The services were rendered by petitioner in the Philippines, paid for in Australian Dollars (AUD), inwardly remitted to the Philippines and duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). 9 For the 1st Quarter of FY 2011, petitioner rendered services and issued corresponding invoices to MFHL. 10 However, they were allegedly not paid during the said quarter. Thus, petitioner's quarterly VAT return for the 1st quarter of FY2011 shows zero-entry for its VATable sales/receipts, sales to government, zero-rated sales and exempt sales/receipts. 11 In the course of its operations during the same period, petitioner incurred and paid input VAT arising from its domestic purchases of goods and services. The amounts of its domestic purchases and the corresponding amounts of input VAT were recorded in the quarterly12 and monthly13 summaries. 4 Par 2.1, Petitioner's Memorandum, docket, val. IV, p. 2087. 1./ 5 Par 4, ibid. 6 Exhibit "P-24-a" to "P-24-d", docket, val. III, pp. 1630-1654. 7 Exhibit "P-23-d", docket, val. III, p. 1629. 8 Exhibit "P-20-a", docket, val. III, pp. 1606-1620. 9 Exhibits "P-25-a" to "P-25-e" and "P-26", docket, val. III, pp. 1655-1660. 10 Exhibit "P-15", docket, val. III, p. 1551. 11 Exhibit "P-3", docket, val. III, pp. 1419-1423. 12 Exhibit "P-14", docket, val. III, pp. 1535-1536. 13 Exhibits "P-14-a" to "P-14-c", docket, val. III, pp. 1537-1550.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD. - PHiliPPINE BRANCH VS. CIR Since petitioner did not generate any VATable sales in the 1st quarter, there was no output VAT with which to offset the input VAT it incurred in the same period. Hence, this amount of input VAT was carried over to the succeeding periods and remained unutilized. Petitioner further claims that this same amount of input VAT is wholly attributable to its VAT zero-rated sales in the same period. 14 For the 2nd to 4th quarters of FY 2011, petitioner's quarterly VAT returns show the following VAT zero-rated sales: Quarter VAT Zero-Rated Sales in Pesos 2nd 3rd 110,837' 771.93 15 4th 298,552,653.50 16 231,931,332.30 17 During these quarters, petitioner also incurred and paid input VAT arising from its domestic purchases of goods and services. The amounts of its domestic purchases and the corresponding amounts of input VAT were recorded in its quarterly18 and monthly19 summaries. No VATable sales were generated during the said 2nd to 4th quarters and there was no output VAT with which to offset the input VAT it incurred in the same period. This amount of input VAT was carried over to the succeeding periods and remained unutilized. This same amount of input VAT is also directly attributable to its zero-rated sales for the same period. 20 Petitioner filed its original quarterly VAT returns for the four quarters of FY 2011 on the following dates: 14 Par. 7, Petitioner's Memorandum, supra, p. 2088. 15 Exhibit "P-4", docket, val. III, p. 1424. 16 Exhibit "P-5", docket, val. III, p. 1431. 17 Exhibit "P-6", docket, val. III, p. 1438. 18 Exhibits "P-34", "P-35" and "P-36", docket, val. III, pp. 1713, 1737 and 1762. 19 Exhibits "P-34-a" to "P-34-c", "P-35-a" to "P-35-c" and "P-36-a" to "P-36-c", docket, val. III, pp. 1714-1736, 1738-1761 and 1763-1783. 20 Par. 12, Petitioner's Memorandum, supra, p. 2090.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR Exhibit Quarter Period Date Filed "P-3" 1st April to June 2010 July 26, 2010 "P-4" 2nd July to September October 26, 2010 2010 "P-5" 3rd October to December January 25, 2010 2011 "P-6" 4th January to March 2011 April 25, 2011 Petitioner filed its administrative claim for refund with the BIR Revenue District Office (RDO) No. 47 on the following dates: Exhibit _Quarter Period Date Filed June 29, 2012 "P- 1st April to June 2010 13"21 "P- 2nd to July 2010 to March September 28, 30"22 4th 2011 2012 For the 1st quarter, petitioner filed an administrative claim for refund/TCC in the amount of P3,406,989.90, while for the 2nd to 4th quarters, in the amount of P17, 188,149.08, or a total of P20,595,138.98. On November 27, 2012, petitioner received from RDO No. 47 a Letter of Authority (LOA) dated October 29, 2012 for the period of July 1, 2010 to March 31, 2011 23, with attached formal request for the submission and presentation of additional documents. 24 Petitioner complied and transmitted the requested additional document on January 16, 2013. 25 On February 27, 2013, petitioner wrote a letter to the BIR indicating that the documents submitted on September 28, 2012 and January 16, 2013 constitute complete documents for purposes of its claim for refund/TCC. 21 Docket, vol. III, pp. 1528-1534. 22 Docket, vol. III, pp. 1698-1704. 23 Exhibit "P-31 ", docket, vol. III, p. 1705. 24 Ibid., pp. 1706-1707. 25 Exhibit "P-32", docket, vol. III, pp. 1708-1709. /

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR However, insofar as petitioner's claim for refund for the 1st quarter of FY 2011, no additional documents were required by the BIR. On November 26, 2012 and June 14, 2013, petitioner filed the instant Petitions for Review, docketed as CTA Case Nos. 8580 and 8660, respectively. 26 In his Answers, 27 filed on January 18 and August 8, 2013, respondent avers that petitioner has to prove its entitlement to refund/TCC. Moreover, the claims for refund/TCC were not fully substantiated by proper documents and that petitioner failed to comply with the requirements under Sections 112(A)(B) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended. Lastly, the claims for refund/TCC are strictly construed against petitioner as it partakes the nature of an exemption. At the instance of petitioner, the two Petitions for Review were consolidated 28 . A Pre-Trial Conference for the consolidated cases was conducted 29 after the parties filed their respective Pre-Trial Briefs. On March 10, 2014, the parties filed their Consolidated Joint Stipulation of Facts and Issues30 on March 10, 2014, and the Court issued a Pre-Trial Order31 on March 19, 2014. To substantiate its allegations, petitioner presented as witnesses its resident agents Garry Taylor32 and Timothy John Mulvihill33, its Head of Finance Ailyn B. Perocho, 34 and the Independent Certified Public Accountant (!CPA), Katherine 0. Constantino35 commissioned by the Court. 26 Pars. 8 and 9, Stipulation of Facts, JSFI, supra, p. 473. 27 Docket of CTA Case No. 8580, vol. I, pp. 92-93, and Docket of CTA Case No. 8660, vol. I, pp. 177-178. 28 Resolution dated October 31, 2013, docket of CTA Case No. 8660, vol. I, p. 214. 29 Minutes of the Hearing dated January 20, 2014, docket, vol. I, p. 446. 3o Docket, Vol. I, pp. 472-477. 31 Docket, Vol. I, pp. 492-500. 32 Minutes of the Hearing dated August 28, 2013, docket, vol. I, p. 421. 33 Minutes of the Hearing dated August 11, 2014, docket, vol. III, p. 1358. 34 Minutes of the Hearing dated April 21, 2014, docket, vol. II, p. 857; Minutes of the Hearing dated November 23, 2015, docket, vol. IV, p. 1948. 35 Minutes of the Hearings dated June 19, 2014, docket, vol. III, p. 1274.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR Witness Garry Taylor testified 36 that petitioner is registered and licensed by the SEC to operate as an ROHQ. For the 1st quarter of FY 2011, petitioner rendered services only to one non-resident foreign client and no domestic clients, thus, generating zero-rated sales, which were paid for in AUD inwardly remitted in accordance with the rules and regulations of the BSP. Petitioner likewise generated excess input VAT from its domestic purchases, which were directly attributable to its zero-rated sales. For the 1st quarter of FY 2011, petitioner invoiced MFHL for zero-rated sales of services, however, these sales were not reported for tax purposes for said quarter because MFHL paid the invoices only in the subsequent quarters. Witness Ailyn Perocho declared37 that petitioner is an ROHQ, registered with the SEC and the BIR and licensed to provide services to affiliates and related parties in the Asia- Pacific Region and other foreign markets. Petitioner generated zero-rated sales for the services it rendered for MFHL, which is a non-resident entity registered and doing business in Australia. For such services, petitioner was paid in AUD inwardly remitted in accordance with the rules and regulations of the BSP. All of petitioner's sales of services were made exclusively to MFHL, rendering the said sales of services subject to VAT zero-rating. For FY 2011, petitioner incurred and paid input VAT on its domestic purchases of goods, services, and capital goods in connection with its delivery of services to MFHL. These input VAT for the four quarters of FY 2011 were carried-over to the succeeding quarters but such remained unutilized. After petitioner filed a claim for refund/TCC, the said amount was removed from the category of "VAT carried over". Petitioner thereafter filed claims for refund of unutilized input VAT for FY 2011 with respondent, who failed to act on them, prompting it to elevate the matter to the Court. 36 Sworn Witness Statement of Garry Taylor, docket, val. III, pp. 1666-1690; with cross and re-direct examination see TSN dated August 28, 2013. 37 Sworn Witness Statement of Ailyn Perocho, docket, vols. III and IV, pp. 1845-1876 and 1996-2000; with cross and re-direct examination see TSN dated April 21, 2014. ./

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES P1Y LTD.- PHILIPPINE BRANCH VS. CIR !CPA Katherine 0. Constantino intimated38 that she audited and evaluated petitioner's documents and records in support of its claim for VAT refund/TCC for FY 2011, the result of which is contained in the !CPA Report39 which was submitted to the Court on June 11, 2014. Witness Timothy John Mulvihill, part of the Macquarie Group, and resident agent of petitioner, who replaced witness Garry Taylor, testified40 that petitioner is licensed by the SEC as a ROHQ providing qualifying services to its affiliates and related parties in the Asia-Pacific Region and other foreign markets. Petitioner has only one client, MFHL, an Australian corporation domiciled in New South Wales, Australia. Petitioner provides various services to its lone client MFHL, such as application testing, monitoring, development, support, as well as technology infrastructure support, financial administration and other services as required. MFHL and petitioner are two separate and distinct entities. Petitioner made rental payments in FY 2011 for its office premises, for which official receipts were issued. Such rental payments formed part of the input VAT subject of refund in this case. Petitioner rested per Resolution dated July 20, 201541 and January 27, 201642 � Respondent for his part, presented Revenue Officers Marcvermon Vileo L. Dela Cruz43 and Pamela B. Tianco44 for his defense. Witness Marcvermon Vileo L. Dela Cruz testified45 that he was part of the group of BIR RDO 47 East Makati 38 Sworn Witness Statement of Katherine 0. Constantino, docket, vol. III, pp. 1266-1272; with cross examination, see TSN dated June 19, 2014. 39 Exhibit "P-54", docket, vol. II, pp. 883-1262. 40 Sworn Witness Statement of Timothy John Mulvihill, docket, vols. III, pp. 1288-1297; with cross examination, see TSN dated August 11, 2014. 41 Docket, vol. IV, pp. 1915-1916. 42 Docket, vol. IV, p. 2007. 43 Minutes of the Hearing dated July 18, 2016, docket, vol. IV, p. 2040. 44 Minutes of the Hearing dated October 10, 2016, docket, vol. IV, p. 2041.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD. - PHILIPPINE BRANCH VS. CIR which conducted the examination and evaluation of petitioner's claim for refund/TCC of input VAT for the second to fourth quarters of FY ended March 31, 2011. After audit, the group concluded that petitioner is not entitled to the refund sought, for failure to deduct from the available input VAT in the VAT Returns for the subject period the amount sought for refund. This was however rectified in the subsequent VAT Return filed by petitioner in which the amount for refund for the said period was already indicated. Witness Pamela B. Tianco was also part of the group that examined and evaluated petitioner's claim for refund of input VAT but only for the 1st quarter of FY ended March 31, 201146 � Their examination revealed that petitioner is not entitled to refund/TCC for the same reason that it failed to deduct from the available input VAT in the VAT Returns for the subject period the amount subject of the claim for refund. DISCUSSION/RULING The sole issue submitted by the parties for the determination of the Court is as follows: Whether petitioner is entitled to the refund/TCC for its input VAT payments for the 1st to 4th quarters of FY 2011 in the amount of P20,595,138.98. 47 Sections 112(A) and (C) of the NIRC of 1997, as amended, relevantly provides: SEC. 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, 45 Judicial Affidavit dated July 12, 2016, docket, val. IV, pp. 2016-2020; with cross and re- direct examination, see TSN dated July 18, 2016. 46 Judicial Affidavit dated July 12, 2016, docket, val. IV, pp.2028-2032; with cross examination, see TSN dated October 10, 2016. 47 Par. 10, Stipulation of Issue, supra, pp. 473-474.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD. - PHIUPPINE BRANCH VS. CIR 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 Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sales and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and nonzero- rated sales." XXX XXX XXX "(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. Thus, to be entitled to a refund/TCC of unutilized input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied, to wit: 1) the taxpayer is VAT-registered; 2) there must be zero-rated or effectively zero-rated sales;

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHiliPPINE BRANCH VS. CIR 3) input taxes were incurred or paid; 4) such input taxes are attributable to zero-rated or effectively zero-rated sales; 5) said input taxes were not applied against any output VAT liability; and 6) the claim was filed within the prescribed periods both in the administrative and judicial levels. To determine the competence of this Court to determine the cases, the timeliness of the administrative and judicial claims for refund/TCC must first be determined. As mandated under Section 112(A) of NIRC of 1997, as amended, the administrative claim for refund of input VAT must be filed with the BIR within two years after the close of the taxable quarter when the relevant zero-rated or effectively zero-rated sales were made. The present claims pertain to the alleged input VAT incurred by petitioner for the four quarters of FY ended March 30, 2011 which are allegedly attributable to its reported zero-rated sales for the four quarters of FY 2011. Hence, counting from the close of the taxable quarters on June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, petitioner had until June 30, 2012, September 30, 2012, December 31, 2012 and March 31, 2013 within which to file its administrative claim for refund for the four quarters of FY 2011. Thus, petitioner's administrative claims for the 1st quarter of FY 2011 and 2nd to fourth quarters of FY 2011 were seasonably filed on June 29, 201248 and September 28, 201249, respectively. As to the timeliness of petitioner's judicial appeal, Section 112(C) of the NIRC of 1997, as amended speaks of 48 Exhibit "P-13", docket, val. III, pp. 1528-1534. 49 Exhibit "P-30", supra.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR two periods for filing judicial claim for refund, namely: (1) the period of 120 days for respondent to act on the administrative claim for refund/TCC; and (2) the 30-day period from notice of respondent's adverse ruling or the lapse of the 120 period without any action from respondent within which to file a judicial claim with the Court of Tax Appeals. 5� In the landmark case of Commissioner of Internal Revenue vs. San Roque Power Corporation51 (San Roque Case), the Supreme Court held that the taxpayer can seek judicial review of its claim for refund/TCC in either of the following ways: (1) file the judicial claim within 30 days after the respondent denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period if respondent does not act within that period. 52 Note that the 120-day period begins to run from the date of submission of complete documents supporting the administrative claim. 53 As to when should the submission of supporting documents be deemed "completed" for purposes of determining the running of the 120-day period, the Supreme Court held as follows: Thus, taking the foregoing changes to the law altogether, it becomes apparent that, for purposes of determining when the supporting documents have been completed - it is the taxpayer who ultimately determines when complete documents have been submitted for the purpose of commencing and continuing the running of the 120-day period. After all, he may have already completed the necessary documents the moment he filed his administrative claim, in which case, the 120-day period is reckoned from the date of filing. The taxpayer may have also filed the complete documents on the 30th day from filing of his 50 ROHM Apollo Semiconductor Philippines v. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 51 G.R. Nos. 187485, 196113, and 197156, February 12, 2013. 52 ROHM Apollo Semiconductor Philippines v. Commissioner of Internal Revenue, supra. 53Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue, G.R. No. 182737, March 2, 2016.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHIUPPINE BRANCH VS. CIR application, pursuant to RMC No. 49-2003. He may very well have filed his supporting documents on the first day he was notified by the BIR of the lack of the necessary documents. In such cases, the 120-day period is computed from the date the taxpayer is able to submit the complete documents in support of his application. XXX XXX Lest it be misunderstood, the benefit given to the taxpayer to determine when it should complete its submission of documents is not unbridled. Under RMC No. 49-2003, if in the course of the investigation and processing of the claim, additional documents are required for the proper determination of the legitimacy of the claim, the taxpayer-claimants shall submit such documents within thirty (30) days from request of the investigating/processing office. Again, notice, by way of a request from the tax collection authority to produce the complete documents in these cases, is essential. XXX XXX To summarize, for the just disposition of the subject controversy, the rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any other addition[al] documents to complete his administrative claim, the 120[-]day period allowed to the CIR begins to run from the date of filing. In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period under Section 112 (A) of the NIRC. The 30-day period from denial of the claim or from the expiration of the 120-day period within which to appeal the denial or inaction of the CIR to the CTA must also be respected.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD. - PHIUPPINE BRANCH VS. CIR It bears mentioning at this point that the foregoing summation of the rules should onlv be made applicable to those claims for tax credit or refund filed prior to June 11, 2014, such as the claim at bench. As it now stands, RMC 54-2014 dated June 11, 2014 mandates that: The application for VAT refund/tax credit must be accompanied by complete supporting documents as enumerated in Annex "A" hereof. In addition, the taxpayer shall attach a statement under oath attesting to the completeness of the submitted documents (Annex B). The affidavit shall further state that the said documents are the only documents which the taxpayer will present to support the claim. If the taxpayer is a juridical person, there should be a sworn statement that the officer signing the affidavit (i.e., at the very least, the Chief Financial Officer) has been authorized by the Board of Directors of the company. Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer. The application for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayer/claimant. Thus, under the current rule, the reckoning of the 120-day period has been withdrawn from the taxpayer by RMC 54-2014, since it requires him at the time he files his claim to complete his supporting documents and attest that he will no longer submit any other document to prove his claim. Further, the taxpayer is barred from submitting additional

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR documents after he has filed his administrative claim." (emphasis ours) 54 A fortiori, for claims filed before June 11, 2014, as in the present cases, the taxpayer has 30 days from the time of filing of its administrative claim for refund/TCC within which it should submit all supporting documents. If in the course of the investigation, the BIR requires additional documents, it must notify the taxpayer who has 30 days from notice to comply. Upon submission of additional supporting documents, the 120-day period shall commence, but in all cases, all additional supporting documents must be filed within the two-year period for filing an administrative claim as provided under Section 112(A) of the NIRC of 1997, as amended. In the present consolidated cases, upon the filing of its administrative claim for the first quarter of FY 2011 on June 29, 2012, petitioner simultaneously submitted the documents in support thereof55 � Since no written notice was sent by respondent requiring petitioner to submit additional documents, the 120-day period commenced from the filing of the administrative claim on June 29, 2012, giving respondent 120 days or until October 27, 2012 to act on the said claim. For its part, petitioner had 30 days from October 27, 2012 or until November 26, 2012, to appeal the inaction of the respondent to the Court. Hence, the Petition for Review for the first quarter of FY 2011 docketed as CTA Case No. 8580 was seasonably filed on November 26, 2012. On the other hand, the administrative claim for the 2nd, 3rd, and 4th quarters of FY 2011 was filed on September 28, 2012. But in this case, respondent requested for submission of additional supporting documents through the LOA dated October 29, 2012 with attached letter dated November 12, 201256 requesting for the presentation/submission of petitioner's records covering the period July 1, 2010 to 54 Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue, G.R. No. 207112, December / 8, 2015. ~ 55 Exhibit "P-13", supra. 56 Docket, vol. III, pp. 1706-1707.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD. - PHILIPPINE BRANCH VS. CIR March 31, 2011. Petitioner received the same on November 27, 2012. 57 Evidently, respondent's request for additional documents pertaining to the claim for refund/TCC for 2nd quarter of FY 2011 received by petitioner only on November 27, 2012, was belatedly issued, hence, invalid following the ruling of the Supreme Court that "In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period under Section 112 (A) of the NIRC." To elaborate, since the 2nd quarter closed on September 30, 2010, petitioner had 2 years from the close of the taxable quarter or until September 30, 2012 to file its administrative claim, respondent could no longer issue a request for additional documents beyond September 30, 2012. Note that the request for additional documents was received by petitioner on November 27, 2012, or clearly beyond the 2-year prescriptive period for the filing of the administrative claim. Thus, the 120-day period for the 2nd quarter of FY 2011 shall be reckoned from the filing of the administrative claim on September 28, 2012. The same is true for the 3rd and 4th quarters of FY 2011. In relation to the foregoing, note that from receipt of the LOA with attached request for additional documents on November 27, 2012, petitioner had only 30 days or until December 27, 2012 to comply. However, petitioner submitted additional supporting documents only on January 16, 201358, or 50 days from November 27, 2012, which is obviously beyond the prescribed 30-day period to comply with respondent's request. As such, such submission of additional documents on January 16, 2013, could not be the reckoning point of the 120-day period as it was made beyond the 30-day period from the date of receipt of respondent's request to submit documents. Further, the submission of additional supporting documents for the claim pertaining to the 2nd and 3rd 57 Exhibit "P-31", supra. 58 Exhibit "P-32", supra.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHIUPPINE BRANCH VS. CIR quarters of FY 2011 on January 16, 2013, was also made beyond the prescribed two-year period for filing an administrative claim under Section 112(A) of the NIRC of 1997, as amended because the 2-year prescriptive period for the administrative claim for refund/TCC for the 2nd and 3rd quarters of FY 2011 were only until September 30, 2012, and December 31, 2012. To repeat the Supreme Court ruling - "In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period under Section 112 (A) of the NIRC." Thus, when a taxpayer failed to comply with respondent's request for the submission of additional documents within the prescribed 30-day period, documents submitted upon the filing of the administrative claim shall be deemed complete for purposes of counting the 120-day period for respondent to act. Under the circumstances, respondent had 120 days from September 28, 2012 or until January 26, 2013 to act on the claim at his level. With respondent's inaction, petitioner had 30 days from January 26, 2013 or until February 26, 2013 (February 25, 2013, being a holiday) to appeal to the Court. As such, the Petition for Review covering petitioner's claim for the 2nd, 3rd, and 4th quarters of FY 2011 filed on June 14, 2013 before this Court and docketed as CTA Case No. 8660 was instituted beyond the 30-day prescriptive period59 thereby depriving this Court of jurisdiction to determine the same. It has been held the one hundred twenty (120) and thirty (30)-day periods under Section 112(C) are mandatory and jurisdictional, such that judicial claims filed before the denial of the taxpayer's administrative claim or the lapse of the one hundred twenty (120)-day period in case of the CIR's inaction would be deemed premature, while judicial 59 Procter & Gamble Asia Pte Ltd. vs. Commissioner of Internal Revenue, G.R. No. 205652, / September 6, 2017.

DECISION CfA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR claims filed beyond the thirty (30)-day period after such denial or lapse would be deemed filed out of time. 60 Since only the claim for the first quarter of FY 2011 was timely filed both in the administrative and judicial levels, the Court shall determine petitioner's compliance with the remaining requisites for refund only for said period. Petitioner is a VAT- registered entity and had zero-rated sales Petitioner complied with the first requisite as it is registered with the BIR as a VAT entity under its COR dated June 06, 2008 with Tax Identification No. 261-474-856- 000.61 On the second requisite, i.e., the existence of petitioner's zero-rated or effectively zero-rated sales, Section 108(B)(2) of the NIRC of 1997, as amended, states: SEC. 108.-Va/ue-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (Oo/o) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0�/o) rate: XXX XXX XXX (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); 60 Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue, G.R. No. 197519, November 8, 2017. 61 Par. 5, Stipulation of Facts, JSFI, supra; Exhibit P-2", docket, vol. III, p. 1418.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR In order for the supply of services to be deemed VAT zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended, the following elements must be satisfied: 62 1. the services must be other than processing, manufacturing or repacking of goods; 2. the recipient of such services is doing business outside the Philippines, and 3. payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations. Evidence show that the first condition exists. Petitioner is licensed by the SEC per Company Reg. No. FS200805155 dated April 10, 2008, to transact business in the Philippines as an ROHQ to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication; and business development. 63 Further, pursuant to the Services Agreement64 between the petitioner and MFHL dated April 1, 2009, petitioner shall provide the services set out in Schedule 1 of the agreement such as: (a) Application testing; (b) Application monitoring; (c) Technology infrastructure support; (d) Application development; (e) Application support; (f) Financial administration; and (g) Such other services as MFHL may require from time to time and that the petitioner is willing and able to provide. These services clearly fall within the scope of "services other than processing, manufacturing or repacking of goods" contemplated by the aforementioned provision. 62 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205, January 22, 2007. 63 Exhibit "P-1", supra. 64 Exhibits "P-20" and "P-20-a", docket, vol. III, pp. 1594-1605 and 1606-1620.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR Anent the second requisite, petitioner presented the following documents proving that MFHL is a non-resident foreign corporation doing business outside the Philippines: 1. Certification of Non-Registration of Company issued by the Philippine SEC; 65 2. Services Agreement between petitioner and MFHL; 66 3. Certificate of Registration on Change of Name from Macquarie Group Holdings No. 2 Ltd to MFHL; 67 4. Certificate of Registration of a Company in the name of Macquarie Group Holdings No. 2 Ltd; 68 5. Constitution of MFHL; 69 6. Australian Securities and Investments Commission {ASIC) Company Extract of MFHL; 70 In relation to the third requisite, Sections 113{A){2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), B(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, provide that a VAT taxpayer, like herein petitioner, shall, for every lease of goods or properties and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information: SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall issue: XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. 6s Exhibit "P-23", supra. 66 Exhibits "P-20" and "P-20-a", supra. 67 Exhibit "P-24a", supra. 68 Exhibit "P-24b", supra. 69 Exhibit "P-24c", supra. 70 Exhibit "P-24d", supra.

DECISION // CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD. - PHIUPPINE BRANCH VS. CIR (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: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; XXX XXX XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx" (Emphasis supplied) "SEC. 4.113-1. Invoicing Requirements. - (A) VAT-registered person shall issue: - XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT 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:

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHiliPPINE BRANCH VS. CIR (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; (Emphasis supplied) Pursuant to the foregoing provisions, the foreign currency remittances referred to under Section 108(B)(2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts. In its quarterly VAT returns for the 2nd, 3rd and 4th quarters of FY 2011, petitioner declared a total amount of P641,321, 757.73 zero-rated sales, broken down as follows: Exhibit FY 2011 Zero-Rated Sales "P-3"71 "P-4"72 1st Quarter - "P-5"73 "P-6"74 2nd Quarter p 110,8371771.93 3rd Quarter 298,552,653.50 4th Quarter 231L9 3113 32 �30 Total p 641,321,757.73 In support thereof, petitioner submitted various documents such as summaries of zero-rated sales75, service invoices76, official receipts77, schedule of remittances78, certifications of inward remittances from Hongkong and Shanghai Banking Corporation (HSBC) 79 and the report80 of the Court-commissioned ICPA. 71 Docket, vol. III, p. 1419. 72 Docket, vol. III, p. 1424. 73 Docket, vol. III, p. 1431. 74 Docket, vol. III, p. 1438. 75 Exhibits "P-15", "P-38" to "P-40", docket, vol. III, pp. 1551, 1799-1801. 76 Exhibits "P-22a" to "P-22d", "P-41e" to "P-41hh", "P-55", "P-56" "P-58", and "P-59", docket, vol. III, pp. 1622-1625, 1806-1835. 77 Exhibits "P-22e" to "P-22g", "P-41a" to "P-41d" and "P-41ii", docket, vol. III, pp. 1626- 1628, 1802-1805, and 1836. 78 Exhibit "P-26", supra. 79 Exhibits "P-25a" to "P-25e", supra. 80 Exhibit "P-54", supra.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR A scrutiny of the aforementioned documents shows that while there is a discrepancy amounting to P62,109,500.95 (AUD2,083,248.85)81 between the zero-rated sales reflected per petitioner's Quarterly VAT Returns and that shown in petitioner's VAT zero-rated ORs, the !CPA was able to account for such discrepancy as pertaining to the following: (1) debit notes, which represents billings by MFHL for the recoveries of ISD, human resources, business services, insurance, financial operations and other recoveries from the petitioner, including cross border interest relative to advances made by the petitioner to MFHL, and reimbursement of expenses paid by MFHL in behalf of the petitioner, which are net of the general expenses also paid by petitioner in behalf of MFHL; and (2) revaluation of intercompany balances, which pertains to foreign currency differential from the invoice date and estimated settlement date based on the internal rate being used by the group and the petitioner82� In fine, petitioner was able to prove that it had zero- rated sales for the second, third, and fourth quarters of FY 2011 in the total amount of P641,321,757.73. This is in relation to the allegation of petitioner that it had sales of services and billed MFHL in the first quarter but declared the same only in subsequent quarters because MFHL only paid in subsequent quarters. In fine, petitioner proved that it incurred input taxes in the first quarter attributable to zero- rated sales as seen in the second, third, and fourth quarters of FY 2011. This is allowed under the prevailing VAT system. Petitioner incurred/paid input taxes for the first quarter of FY 2011 81 Zero-Rated Sales per Quarterly VAT Returns In AUD In PHP Zero-Rated Sales per Official Receipts 15 455 513.02 641 321 757.75 Discrepancy 13 372 264.17 579 212 256.80 2,083,248.85 62,109,500.95 82 Exhibit "P-54", supra, pp. 892-894.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD. - PHIUPPINE BRANCH VS. CIR The Court will now determine whether input taxes were incurred or paid for the first quarter of FY 2011. As reflected in petitioner's quarterly VAT return83 for the 1st quarter of FY 2011, the input VAT claim of P3,406,989.90 arose from the amortization of input VAT on purchases of capital goods exceeding P1Million, purchase of capital goods not exceeding P1Million, domestic purchases of goods other than capital goods, domestic purchases of services, and services rendered by non-residents, detailed as follows: 1st Quarter FY 2011 Input Tax Deferred on Capital Goods Exceeding P1Million p 8 389,326.83 from Previous Quarter Add: Input Tax on Capital Goods Exceeding P1Million 993,912.36 Purchased this Quarter p 9 383,239.19 Total Unamortized Input Tax on Capital Goods Exceeding P1Million 8 583,699.24 Less: Input Tax on Purchases of Capital Goods Exceeding p 799,539.95 P1Million Deferred for the Succeeding Period Amortization of Input Tax on Capital Goods Exceeding 184,189.80 P1Million Add: Input Tax on - 398A72.32 2 005,050.84 Domestic Purchases of Capital Goods Not Exceeding P1Million 19,736.99 Domestic Purchases of Goods Other than Capital p 3,406,989.90 Goods Domestic Purchases of Services Services Rendered by Non-Residents Input VAT Claim In support thereto, petitioner presented its Summary of Domestic Purchases with Input VAT84, and the corresponding suppliers' VAT invoices, VAT official receipts, and other documents85, which were all examined by the ICPA. A review of the ICPA Report together with the documents supporting the P2,607,449.9586 input VAT claim 83 Exhibit "P-3", supra. 84 Exhibits "P-14a" to "P-14c", supra. 85 Exhibits P-78 to P-301. 86 Domestic Purchases of Capital Goods not exceeding P1M P 184 189.80

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR on domestic purchases of capital goods not exceeding P1M, domestic purchases of goods other than capital goods, domestic purchases of services and services rendered by non-residents reveals that input taxes amounting to P731,374.99 is not properly substantiated by VAT invoices or official receipts as prescribed under Sections 110(A) and 113(A) and (B) and 237 and 238 of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-8 and 4.113-1 of RR No. 16-05, as amended, hence, should be disallowed. The amount of P731,374.99 is detailed as follows: FINDING Reference to INPUT VAT Purchase of Goods other than Capital ICPA Report Goods (Exhibit "P-54") Domestic purchase of goods supported by TIN VAT/VAT REG TIN Invoice not dated Annex 5-1Q-q p 197,854.53 within the year of claim. Domestic purchase of goods supported by Annex 5-1Q-r 2,098.80 TIN VAT Invoice with incomplete Petitioner's Annex 5-1Q-u 412.50 name (i.e. Macquarie Offshore Services) and with inserted Petitioner's address without Annex 5-1Q-s 2,043.91 countersign. Annex 5-1Q-t 11,145.40 Domestic purchase of goods supported by photocopied TIN VAT Invoice. , 5,696.79 219,251.93 Domestic purchase of goods supported by VAT REG TIN Invoice with inserted Annex 5-1Q-v p 5,388.18 Petitioner's name in a computer printed Annex 5-1Q-w 20,783.55 invoice without countersign. Domestic purchase of goods with supports other than VAT invoice. Domestic purchase of goods without supporting documents at the time of verification Subtotal Purchase of Services Domestic purchase of services supported by TIN VAT/VAT REG TIN OR not dated within the year of claim. Domestic purchase of services supported by Domestic Purchases of Goods Other than Capital 398 472.32 Goods 2 005 050.84 Domestic Purchase of Services 19 736.99 Services Rendered by Non-Residents P2,607,449.95 Total

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR photocopied TIN VAT OR with incomplete Petitioner's name and address (i.e. Macquarie Offshore Services Pty, Makati City) and without VAT breakdown. Domestic purchase of services supported by TIN VAT OR with inserted Petitioner's address without countersign. Annex 5-1Q-x 4,050.00 Domestic purchase of services supported by 141.06 35,635.98 VAT REG TIN OR not dated within the quarter 48,756.00 but within the year of claim issued to 21,109.20 Macquarie Offshore Services Pty Ltd (Phils.) 10,609.31 4L687.84 Inc. Annex 5-1Q-y 51,191.51 Domestic purchase of services supported by 220L714.89 4231_067.52 VAT REG TIN OR with incomplete Petitioner's 810.00 name (i.e. Macquarie Offshore) and/or 41,630.36 inserted TIN without countersign. Annex 5-1Q-z 16,588.39 Domestic purchase of services supported by / computer printed VAT REG TIN OR without Petitioner's address. Annex 5-1Q-aa Domestic purchase of services supported by TIN VAT tape receipt not dated within the quarter but within the year of claim with incomplete Petitioner's name (Macquarie Offshore Services) without Petitioner's address. Annex 5-1Q-bb Domestic purchase of services supported by TIN VAT tape receipt with incomplete Petitioner's name (i.e. Macquarie Offshore Services Pty. Ltd, Macquarie Offshore Services Pty.) without Petitioner's address. Annex 5-lQ-cc Domestic purchase of services supported by TIN VAT/VAT REG TIN tap_e receipt. Annex 5-1_Q-dd Domestic purchase of services with supports other than VAT OR. Annex 5-1Q-ee Domestic purchase of services without supporting documents at the time of verification. Subtotal p Purchase of Capital Goods not Exceeding 1 million Domestic purchase of capital goods not exceeding P1 million supported by Annex 5-1 Q-gg p photocopied VAT REG TIN invoice. Domestic purchase of capital goods (services) not exceeding 1 million by photocopied VAT REG TIN OR with altered Petitioner's name with countersign and with inserted TIN without countersign. Annex 5-1Q-hh Domestic purchase of capital goods (services) not exceeding 1 million by photocopied VAT REG TIN OR with Annex 5-1Q-ii

DECISION 30,026.79 CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES Pn' LTD. - PHIUPPINE BRANCH VS. CIR p 89,055.54 Page 27 of 33 p 731,374.99 Petitioner's TIN in different writing. Domestic purchase of capital goods not exceeding 1 million without supporting documents at the time of verification Subtotal Total Hence, out of the P2,607,449.95 input VAT claim on domestic purchases of capital goods not exceeding P1M, domestic purchases of goods other than capital goods, domestic purchases of services and services rendered by non-residents, only the amount of P1,876,074.96 represents petitioner's valid input VAT, computed as follows: Domestic Domestic Domestic Services Total Purchases of Purchases of Purchases of Rendered by Capital Goods Goods Other not exceeding than Capital Services Non- Residents PlM Goods Input VAT Declared per P184 189.80 p 398 472.32 p 2 005 050.84 p 19 736.99 p 2 607 449.95 Return 89 055.54 219 251.93 423 067.52 - 731 374.99 Less: Disallowances Properly Substantiated P95,134.26 P179,220.39 P1,581,983.32 P19,736.99 P1,876,074.96 Input VAT on Domestic Purchases of Capital Goods Not Exceeding PlM, Domestic Purchases of Goods Other Than Capital Goods, Domestic Purchases of Services and Services Rendered by Non-Residents We proceed to the substantiation of the P799,539.95 amortization of input VAT on capital goods purchases exceeding P1Million which originated from the P8,389,326.83 input tax deferred on capital goods exceeding P1M from previous quarter and P993,912.36 input VAT from purchases during the first quarter of FY 2011, as shown below: Input Tax Deferred on Capital Goods exceeding P1M from 1st Quarter Previous Quarter Add: Input Tax on Capital Goods exceeding P1M Purchased this P8I 389'326.83 Quarter Total Unamortized Input Tax on Capital Goods exceeding P1M 993,912.36 Less: Input Tax on Purchases of Capital Goods exceeding P1M P9,383 239.19 8,583,699.24

DECISION P799,539.95 CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHIUPPINE BRANCH VS. CIR deferred for the succeeding period Amortization of Input Tax on Capital Goods exceeding P1M As correctly found by the !CPA, the input VAT of P85,369.01 related to purchases during the first quarter of FY 2011 and the input VAT in the amount of P1,627,705.43 related to purchases from previous quarter should be disallowed for failure to meet the substantiation requirements prescribed under the VAT law and regulations cited earlier: FINDING REFERENCE TO INPUT VAT Purchases during the First Quarter of FY ICPA REPORT 2011 (Exh. "P-54") a. Without supporting documents Annex 6-1Q p 85,369.01 Purchases from Previous Periods Annex 7-1 188,588.20 a. Input VAT on purchases of capital goods p 73,200.00 exceeding P1 million supported by "TIN VAT" invoice but not an original copy Annex 7-m 115,082.14 b. Input VAT on purchases of capital services Annex 7-n exceeding P1 million supported by "VAT REG TIN" OR but not an original copy Annex 7-o c. Input VAT on domestic purchases of capital 30,427.87 goods exceeding P1 Million supported by Invoices not registered with the BIR Annex 7-p 30,427.87 d. Input tax on domestic purchase of capital - 1,189 979.3587 goods exceeding P1 million supported by p 1,627,705.43 VAT OR dated in the FY ended March 31, p 1,713,074.44 2010 e. Input tax on domestic purchase of capital goods exceeding P1 million supported by VAT OR dated outside the period of claim (FY March 2011) f. Without supporting documents Subtotal Total 87 Input Tax Deferred on Capital Goods Exceeding P1Million from Previous Quarter P8 389 326.83 Less: Properly supported Input VAT 6 761 621.40 With supporting documents but not compliant with the invoicing 437,726.08 requirements (disallowances under letters a to e) P1 189 979.35 Without supporting documents

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR Hence, out of the P9,383,239.19 reported input VAT on purchases of capital goods exceeding P1Million, only the amount of P7,670,164.75 (P9,383,239.19 minus P1, 713,074.44) is validly supported by VAT invoices/official receipts and only the amount of P485,026.65 is creditable/allowable for the first quarter of FY 2011, computed as follows88 : Exhibit Name of Supplier Date of Date of Allowable Monthly Estimated Total Invoice O.R. Input VAT Allowable Life (in Input VAT months) 24-Jul-08 PURCHASES FROM PREVIOUS PERIODS 22-Jul-08 04-Nov-08 P-1786 Hbo Emtb Construction 20-Jun-08 8/26/2009 p 136,758.21 p 4,715.80 29 p 14 147.40 11-May-09 19 806.36 P-1787 Hbo Emtb Construction 20-Jun-08 11-May-09 191,461.50 6,602.12 29 16 340.42 11-May-09 4 821.43 P-1788 Hbo Emtb Construction - 11-Dec-09 157,957.39 5,446.81 29 10 452.33 01-Aug-10 4 874.01 P-1789 Cornersteel Syst. Corp. 8/14/2009 12-0ct-09 96 428.57 1 607.14 60 9 065.74 P-1790 Cornersteel Syst. Corp. 10-Jul-09 01-Aug-10 18 036.00 P-1791 Cornersteel Syst. Corp. 10-Jul-09 01-Aug-10 209 046.65 3 484.11 60 3 003.36 P-1792 Cornersteel Syst. Corp. 10-Jul-09 01-Aug-10 7 252.59 P-1793 Cornersteel Syst. Corp. 10-Jul-09 01-Aug-10 97 480.29 1 624.67 60 2 090.47 P-1794 Cornersteel Syst. Corp. 11/20/2009 01-Aug-10 1 813.15 P-1795 Cornersteel Syst. Corp. 11-Nov-09 01-Aug-10 181 314.82 3 021.91 60 974.80 P-1796 Cornersteel Syst. Corp. 11/20/2009 01-Aug-10 3 899.21 P-1797 Cornersteel Syst. Corp. 11/20/2009 12-Nov-09 360 720.00 6 012.00 60 14 428.80 P-1798 Cornersteel Syst. Corp. 11/20/2009 8 361.86 P-1799 Cornersteel Syst. Corp. 11-Nov-09 12-Nov-09 60 067.29 1 716.21 60 964.29 P-1800 Cornersteel Syst. Corp. 11-Nov-09 P-1801 Cornersteel Syst. Corp. 10/27/2009 12-Nov-09 145 051.86 2 417.53 60 8 758.29 1/22/2009 02-Sep-10 41 809.32 696.82 60 21 587.44 9/25/2009 9/25/2009 36 262.97 604.38 60 2 167.35 9/17/2009 3 607.20 12-Dec-09 19 496.06 324.93 60 12-Feb-09 51.12 10-Dec-09 77 984.23 1 299.74 60 1 423.47 11-Feb-10 10/23/2009 288 576.00 4 809.60 60 843.24 10/23/2009 167 237.28 2 787.29 60 1 028.57 1 138.78 P-1802 Cornersteel Syst. Corp. 11/20/2009 19 285.71 321.43 60 P-1803 10/30/2009 2 828.57 P-1804 Emerson Network 10/13/2009 102,180.00 2 919.43 35 284.69 P-1805 Power (PhiliPPines) Inc. 10/13/2009 917.51 P-1806 Emerson Network 11/20/2009 251 853.43 7 195.81 35 P-1807 Power (Philippines) Inc. 1/18/2010 3 367.35 P-1808 Emerson Network 04-Sep-09 25 285.72 722.45 35 4 469.40 Power (Philippines) Inc. 72 144.00 1 202.40 60 Cornersteel System 1 022.40 17.04 60 Functionsmith Sales & 16 607.14 Services 474.49 35 428.40 Walls In Motion P-1809 Barrington Carpets, Inc. 8/24/2009 281.08 35 P-1810 8/17/2009 P-1811 Automatic Fire Sprinkler 12 000.00 342.86 35 P-1812 System Co. Ltd. - 13,285.71 P-1813 Walls In Motion 11-May-09 379.59 35 10/15/2009 Automatic Fire Sprinkler 33 000.00 942.86 35 System Co. Ltd. 3 321.43 94.90 35 Walls In Motion 10 092.65 P-1814 Lantro (Phil) Inc. 1/22/2010 305.84 33 P-1815 Rcw Construction & 9/29/2009 P-1816 Development Corp. 9/29/2009 117 857.14 1 122.45 35 Alecto General 156,428.57 1 489.80 35 88 Exhibit "P-54", Annex 8, supra, pp. 1243-1250.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR Technology Corporation P-1817 Alecto General 9/29/2009 10/23/2009 109 741.06 1 045.15 35 3 135.45 P-1818 Technology Corporation 10/22/2009 11-Nov-09 1 991.94 P-1819 Alecto General 10/14/2009 11-Nov-09 69 717.86 663.98 35 P-1820 Technology Corporation 10/14/2009 11-Nov-09 16 352.32 467.22 P-1821 10-Dec-09 12-Mar-09 155.74 35 59.85 P-1822 Lantro (Phil) Inc. 10/14/2009 11/13/2009 2 094.64 P-1823 8/26/2009 11/13/2009 19.95 35 15 642.87 P-1824 Lantro (Phil) Inc. 9/28/2009 11/13/2009 6 920.61 P-1825 11/16/2009 10-Dec-09 547 500.00 5 214.29 35 6 920.61 P-1826 Alecto General 9/28/2009 12-Nov-09 242 221.52 6 920.61 Technology Corooration 02-0ct-09 09-0ct-09 242 221.52 2 306.87 35 51.90 P-1827 02-Dec-09 242 221.52 107.13 P-1828 Lantro (Phil) Inc. 10/30/2009 11-Jan-10 2 306.87 35 P-1829 11-Dec-09 1/29/2010 1 816.92 11 020.41 P-1830 Lantro (Phil) Inc. 05-Jan-10 9/25/2009 2 306.87 35 5 362.50 P-1831 8/24/2009 11/23/2009 855.33 P-1832 Lantro (Phil) Inc. 10/13/2009 1/15/2010 17.30 35 295.44 P-1833 10/29/2009 12-Jan-10 843.24 P-1834 Lantro (Phil) Inc. 12/14/2009 3 750.00 35.71 35 674.61 12-Jan-10 168.66 P-1835 Emerson Network 12/14/2009 01-Nov-10 128 571.43 3 673.47 35 Power (Philippines) Inc. 02-Aug-10 39 044.12 P-1836 Powergear Electrical 11/27/2009 187 687.50 1 787.50 35 24 832.72 P-1837 Sales (Pqes) Corp. 12-Nov-09 02-Aug-10 38 775.00 P-1838 Rcw Construction & 13 392.85 285.11 34 33 890.62 P-1839 Development Corp. 12-Nov-09 3/25/2010 9 409.50 7 110.39 P-1840 03-Feb-10 7 527.60 98.48 34 4 988.23 Rcw Construction & 03-Feb-10 3/25/2010 1 881.90 1 388.67 P-1841 281.08 35 P-1842 Rcw Construction & 03-Feb-10 3/25/2010 5 926.34 P-1843 1/22/2010 11-Feb-10 224.87 35 P-1844 Barrington Carpets, Inc. 8/27/2009 02-0ct-09 3 967.63 8/27/2009 56.22 35 716.27 P-1845 Barrington Carpets, Inc. 02-0ct-09 P-1846 9/28/2009 442 500.00 13 014.71 34 7 252.59 P-1847 Barrington Carpets, Inc. 10/29/2009 01-Dec-10 P-1848 09-Jan-09 1/15/2010 281 437.50 8 277.57 34 10 836.73 Salemaire Industries 12/15/2009 11-May-09 Corp. 1/29/2010 384 093.71 11 296.87 34 2 892.87 Salemaire Industries 168.66 Corp. 78 214.29 2 370.13 33 Alecto General 3 754.21 Technology Corporation 54 870.53 1 662.74 33 750.84 Alecto General Technology Corporation 14 812.50 462.89 32 Alecto General Technology Corporation 63 214.29 1 975.45 32 Salemaire Industries Corp. 42 321.43 1 322.55 32 Salemaire Industries 7 878.92 Corp. 238.75 33 Salemaire Industries Corp. 84 642.86 2 417.53 35 Lantro (Phil) Inc. 126 428.57 3 612.24 35 Salemaire Industries 33 750.00 964.29 35 Corp. 85.68 Salemaire Industries 56.22 35 Corp. 75 084.12 Emerson Network 15 016.82 2 145.26 60 Power (Philippines) Inc. 250.28 60 Barrington Carpets, Inc. Cornersteel Syst. Corp. Cornersteel Syst. Corp. P-1849 Functionsmith Sale 12/17/2009 1/22/2010 9 201.60 153.36 60 460.08 80 740.51 6 920.62 P-1850 Lantro (Phil) Inc. 11/16/2009 06-Jan-10 2 306.87 35 p 6,761,621.20 Input VAT Allowable for the First Quarter of FY 2011from P409,145.18 Purchases from Previous Periods P-1689 Integrated Computer 12-Apr-10 30-Apr-10 p 168,107.14 p 4,669.64 36 p 14 008.93 System Inc. 7 004.46 4 212.72 P-1690 Integrated Computer 27-Apr-10 06-Jul-10 84 053.57 2 334.82 36 1 732.14 System Inc. 1 400.89 700.45 P-1691 Integrated Computer 24-May-10 17-Jun-10 50 552.68 1 404.24 36 System Inc. P-1692 Integrated Computer 19-Apr-10 17-Jun-10 20 785.71 577.38 36 System Inc. Integrated Computer P-1693 System Inc. 19-Apr-10 17-Jun-10 16 810.71 466.96 36 P-1693 Integrated Computer 8 405.36 233.48 36

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR System, Inc. P-1694 Integrated Computer 21-May-10 17-Jun-10 65 158.93 1 809.97 36 5 429.91 System Inc. 2 375.36 1 187.68 P-1695 Integrated Computer 05-Dec-10 17-Jun-10 65.98 36 197.95 System Inc. 10 392.86 18 996.43 P-1696 Integrated Computer 05-Dec-10 28-Jun-10 33 621.43 32.99 36 98.97 System Inc. 33 621.43 16 810.71 P-1697 Integrated Computer 30-Apr-10 17-Jun-10 288.69 36 866.07 System Inc. 9 692.68 9 692.68 P-1698 Integrated Computer 13-May-10 17-Jun-10 9 692.68 527.68 36 1 583.04 System Inc. 19 385.36 20 089.29 Integrated Computer 71 785.71 123 214.29 P-1699 System Inc. 69 514.29 933.93 36 2 801.79 18 882.08 P-1699 Integrated Computer 22-Apr-10 28-Jun-10 25 714.29 933.93 36 2 801.79 System Inc. p 908 543.35 P7,670,164.55sg Integrated Computer P-1699 System Inc. 466.96 36 1 400.89 Integrated Computer P-1700 System Inc. 269.24 36 807.72 Integrated Computer P-1700 System Inc. 13-May-10 28-Jun-10 269.24 36 807.72 Integrated Computer P-1700 System Inc. 269.24 36 807.72 Integrated Computer P-1700 System Inc. 538.48 36 1 615.45 P-1701 Functionsmith Sales & 26-May-10 25-Jun-10 334.82 60 1 004.46 Services P-1702 Alecto General 26-May-10 07-Jul-10 2 563.78 28 7 691.33 Technology Corporation P-1703 Rcw Construction & 27-May-10 17-Jun-10 Development Corp. 4 400.51 28 13 201.53 P-1704 Cornersteel Systems 17-May-10 18-Jun-10 1 158.57 60 3 475.71 Corporation P-1705 Functionsmith Sales & 18-May-10 15-Jun-10 314.70 60 944.10 Services P-1706 Functionsmith Sales & 18-May-10 15-Jun-10 428.57 60 1 285.71 Services Input VAT Allowable for the First Quarter of FY 201.1. from Purchases during the same period p 75,881.47 P485 026.65 TOTAL In sum, petitioner's total allowable input VAT amounted only to P2,361,101.61 as computed below: Input VAT on Domestic Purchases of Capital Goods p 1,876,074.96 Not Exceeding PlM, Domestic Purchases of Goods other than Capital Goods, Domestic Purchases of 485,026.65 Services and Services Rendered by Non-Residents P2,361,101.61 Amortization of Input VAT on Purchases of Capital Goods Exceeding PlM Total Substantiated Input VAT Petitioner's input taxes were entirely attributable to zero- rated sales and were not applied against 89 Difference of P0.20 is due to rounding-off.

DECISION CfA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PTY LTD.- PHILIPPINE BRANCH VS. CIR any output VAT liability With reference to the fourth and fifth requisites - that such input taxes are attributable to zero-rated or effectively zero-rated sales, and that they were not applied against any output VAT liability, respectively, evidence show that petitioner's reported sales for the 2nd, 3rd, and 4th quarters of FY 2011 were all zero-rated, the net substantiated input VAT in the amount of P2,361,101.61 is entirely attributable thereto and was not applied against any output tax. Even though the claimed input VAT was carried over by petitioner in its succeeding quarterly VAT returns90, they remained unutilized until it was deducted as "VAT Refund/TCC Claimed"91 in the quarterly VAT return for the first quarter of FY 2013, thus, preventing the carry-over or application of the claimed input VAT in the next taxable periods. In sum, petitioner has sufficiently established its entitlement to refund or issuance of a TCC in the reduced amount of P2,361, 101.61, representing unutilized excess input VAT for the first quarter of FY 2011 attributable to its zero-rated sales for the second, third, and fourth quarters of FY 2011. WHEREFORE, the Petition for Review in CTA Case No. 8660 is DENIED for lack of jurisdiction, while the Petition for Review in CTA Case No. 8580 is PARTIALLY GRANTED. Accordingly, respondent is ORDERED to refund or issue a TCC in favor of petitioner in the amount of P2,361,101.61, representing its unutilized input VAT for the first quarter of FY 2011 attributable to its zero-rated sales for the second, third, and fourth quarters of FY 2011. SO ORDERED. 90 Exhibits "P-7a", "P-8a", "P-9", and "P10" , "P-11", docket, val. III, pp. 1454-1456, 1467- 1469, 1470-1472, 1473-1477 and 1478-1479. 91 Exhibit "P-11", Line 230, supra, p. 1479.

DECISION CTA CASE NO. 8580 & 8660 MACQUARIE OFFSHORE SERVICES PlY LTD.- PHILIPPINE BRANCH VS. CIR We Concur: LOVELt:. BAUTISTA Q:!:.ll. ~ .A!j '- . Associate Justice MA. BELEN M. RINGPIS-LIBAN Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. A( LOVAsE~" c~ateBAJuUsTtIiSceTA Chairperson CERTIFICATION Pursuant to Section 13 of Article VIII 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's Division. Presiding Justice