MAERSK GLOBAL SERVICE CENTRES (PHILIPPINES) LTD. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION MAERSK GLOBAL SERVICES CTA CASE NO. 8549 CENTRES (PHILIPPINES), Members: LTD., Petitioner, - versus- CASTANEDA, JR., Chairperson, CASANOVA, and COTANGCO- MANALASTAS, 11. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. MAR 1 3 2015 / )/ {o:0 < �1 . X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X AMENDED DECISION CASTANEDA, JR., J.: For t his Court's resolution is petitioner's Motion for Reconsideration (of the Decision dated 14 November 2014) filed on December 1, 2014, without respondent's comment thereto, despite due notice as per Records Verification dated January 9, 2015. Pet itioner moves for the reconsideration of the Decision promulgated on November 14, 2014, the dispositive portion of which reads: WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for lack of merit. SO ORDERED. p

AMENDED DECISION CfA CASE NO. 8549 In the assailed Decision, the Court found that petitioner's non- resident foreign client, A.P. Moller-Maersk A/S, is actually doing business in the Philippines since the latter is engaged in international shipping that transports container cargoes to and from the Philippines. Petitioner's sales relating to the shipment of A.P. Moller- Maersk A/S to and from the Philippines comprised of 1.5�/o of petitioner's total sales. The Court, therefore, held that petitioner's sales to A.P. Moller-Maersk A/S cannot qualify for VAT zero-rating, and that the claimed input taxes attributable thereto cannot be refunded. Petitioner argues that the entire services rendered to its client A.P. Moller-Maersk A/S are VAT zero-rated transactions because the small portion of the services relating to the Philippine business of A.P. Moller-Maersk A/S pertained to international shipping operations for the transport of container cargoes to and from the Philippines which were also expressly subject to VAT at zero rate under Section 108(8)(4) of the National Internal Revenue Code ("NIRC'') of 1997, as amended.1 It contends that its sale of services to A.P. Moller- Maersk A/S is entirely zero-rated pursuant to Sections 108(8)(2) and 108(8)(4) of the NIRC of 1997, as amended. While petitioner concedes that a minimal portion or 1.5�/o of the services it rendered to A.P. Moller-Maersk A/S relate to the Philippine portion of the latter's international shipping operations, it contends that such portion is expressly classified as zero-rated under Section 108(8)(4) of the NIRC of 1997, as amended2� Likewise, petitioner contends that if the services rendered to a non-resident foreign purchaser of services engaged in international shipping are not covered under Section 108(8)(2) of the NIRC of 1997, as amended, then a direct exporter, which is established and domiciled in the Philippines would be in a better situation. ~ 1 Ground, Motion for Reconsideration dated December 1, 2014, Docket (vol. II). 2 SEC. 108. Value-added Tax on Sale ofServices and Use or Lease ofProperties. - 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: XXX XXX XXX (4) Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof; XXX XXX XXX

AMENDED DECISION CTA CASE NO. 8549 This is because the local exporter is required to export only 70�/o of its total annual production so that its purchases will be zero- rated under Section 106(A)(a)(3)3 and Section 108(8)(5)4 of the NIRC of 1997, as amended; whereas, a non-resident foreign purchaser engaged in international shipping is required that 100�/o of the service purchased from the Philippines be used for a business that is totally unrelated to the Philippines; otherwise, its entire purchase of services from the Philippines will be subjected to VAT. Petitioner contends that this could not have been intended by the government because it will discourage foreign investments and dampen down export of services and local employment. We resolve to PARTIALLY GRANT petitioner's motion. After a careful evaluation of the arguments presented by petitioner and re-examination of the records of the case, petitioner is qualified to claim refund under Section 108(8)(4) of the NIRC of 1997, but NOT under Section 108(8)(2) of the said law. Petitioner's client, A.P. Moller-Maersk A/S, is actually doing business in the Philippines based on the evidence that 1.5�/o of the total services rendered to it is allocable to the Philippine portion of the latter's international shipping operations. 5 The Court has extensively discussed this in the assailed Decision, the pertinent portion of which reads: )v' 3 SEC. 106. Value-Added Tax on Sale ofGoods or Properties. - (A) Rate and Base of Tax. - XXX XXX XXX (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. -The term 'export sales' means: XXX XXX XXX (3) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; XXX XXX XXX 4 SEC. 108. Value-added Tax on Sale ofServices and Use or Lease ofProperties. - 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: XXX XXX XXX (5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sa les exceed seventy percent (70%) of total annual production. 5 Exhibit "BB", Docket (vol. I), pp. 499-500.

AMENDED DECISION CTA CASE NO. 8549 As to the third requisite, petitioner submitted the following documents to prove that its client A.P. Moller- Maersk A/Sis doing business outside the Philippines: 1. Certificate of Non-Registration of A.P. Moller-Maersk A/S issued by the Security and Exchange Commission (SEC); 2. Certificate of Residency of A. P. Moller- Maersk A/S issued by the Central Customs and Tax Administration of Denmark; 3. Articles of Association for A. P. Moller- Maersk A/S; and 4. Compiled Summary for A.P. Moller-Maersk A/S. From the foregoing, it appears that A.P. Moller- Maersk A/S is doing business outside the Philippines. However, the fact that it is actually doing business in the Philippines is disclosed by Mr. Arthur Arana in the following statements: Q35. You mentioned that A.P. Moller-Maersk A/S is engaged in international shipping that transports container cargoes to and from the Philippines. Would you know if petitioner rendered services to A. P. Moller-Maersk A/S pertaining to shipments of cargoes to or from the Philippines? A35. Yes, the petitioner rendered services to A.P. Moller-Maersk A/S pertaining to shipments of cargoes to or from the Philippines. Q36. Do you know how much of the total sales of services rendered by petitioner in 2009 relate to the shipments of A.P. Moller-Maersk A/S to or from the Philippines? A36. Yes. The petitioner's sales relating to the shipments of A.P. Moller-Maersk A/5 to or from the Philippines would be 9a- approximately 1.5�/o of the total sales.

AMENDED DECISION erA CASE NO. 8549 Q37. How were you able to determine that petitioner's sales relating to the shipments of A.P. Moller-Maersk A/5 to or from the Philippines would be approximately 1.5�/o of the total sales? A37. The computation (0/o) is based on 2009 average headcount of employees supporting the shipments to/from the Philippines over the average headcount of all employees in 2009. Q38. How were you able to determine the 2009 average headcount of employees supporting the shipments to/from the Philippines over the average headcount of all employees in 2009? A38. We monitor on a monthly basis the number of employees providing services to each and every country. Petitioner submitted an Average Headcount Distribution Per Country for the year 2009 to support the approximate portion of A.P. Moller-Maersk A/5' business in the Philippines. Further, the Court-commissioned Independent CPA, Ms. Mary Ann C. Capuchino, noted the following in her report dated April17, 2013: The Company disclosed to us that A.P. Moller-Maersk A/S is engaged in international shipping business and other businesses. A portion of the international shipping business relates to the Philippine business. XXX XXX XXX Based on the above, considering that the export sale of services relating to A.P. Moller-Maersk A/S Philippine portion of its international shipping business is not conducted outside the Philippines, these may Jt-

AMENDED DECISION CTA CASE NO. 8549 no longer be entitled to input VAT refund to the extent of the Philippine portion of such export sale. Therefore, 98.50�/o or P396,459,587.59 (98.50�/o x P402,497,043.24) of the total zero- rated sales of the Company for the month of June, 3rd and 4th quarters of CY 2009 relates to services rendered to non-residents are entitled to an input VAT refund, while 1.50�/o or P6,037,455.65 (1.50�/o X P402,497,043.24) of the total zero-rated sales pertains to the Philippine shipping business of A.P. Moller- Maersk A/S may no longer be entitled to input VAT refund. (Emphasis supplied) Clearly, petitioner was unable to comply with the third requisite because its non-resident foreign client, A.P. Moller-Maersk A/S, is actually doing business in the Philippines. Consequently, petitioner's sales of services to A.P. Moller-Maersk A/S cannot qualify for VAT zero-rating and the claimed input taxes attributable thereto in the amount of P7,862,002.84 cannot be refunded. Accordingly, it is unnecessary to discuss petitioner's compliance with the remaining requisites previously mentioned.6 In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.7, the Supreme Court explained why Section 108(8)(2) cannot apply to a VAT taxpayer claiming refund when the recipient of its services does business in the Philippines, to wit: xxx In short, services other than processing, manufacturing, or repacking of goods must likewise be performed for persons doing business outside the Philippines. This can only be the logical interpretation of Section 102(b)(2). If the provider and recipient of the "other services" are both doing business in the Philippines, the ~ 6 Decision, pp. 18-20, Docket (vol. II). 7 G.R. No. 153205, January 22, 2007, 512 SCRA 124.

AMENDED DECISION CTA CASE NO. 8549 payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section 102(a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the recipient of services. To interpret Section 102(b)(2) to apply to a payer-recipient of services doing business in the Philippines is to make the payment of the regular VAT under Section 102(a) dependent on the generosity of the taxpayer. The provider of services can choose to pay the regular VAT or avoid it by stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102(a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a mandatory exaction, not a voluntary contribution.8 (Emphasis supplied) However, the Court finds that petitioner may claim refund under Section 108(8)(4) of the NIRC of 1997, as amended, which provides: SEC. 108. Value-added Tax on Sale of Services and Use or Lease ofProperties. - 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�/o) rate: XXX XXX XXX (4) Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof;" (Emphasis supplied) This provision must be read in connection with Section 4.108-5 (b)(4) of Revenue Regulations (RR) No. 16-2005, as amended by RR No. 4-2007, to wit: j v 8 Section 102 is now Section 108 of the NIRC of 1997. The renumbering took effect on 1 January 1998 pursuant to Republic Act No. 8424, otherwise known as the Tax Reform Act of 1997.

AMENDED DECISION CfA CASE NO. 8549 Sec. 4.108-5. Zero-Rated Sale ofServices. XXX XXX XXX (b) Transactions Subject to Zero Percent (0�/o) VAT Rate - The following services performed in the Philippines by a VAT-registered persons shall be subject to zero percent (0�/o) VAT rate: XXX XXX XXX (4) Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12�/o) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006;" It was established in the assailed Decision that petitioner's client, A.P. Moller-Maersk A/S, is a non-resident foreign corporation9 engaged in international shipping that transports container cargoes, including shipments of cargoes to and from the Philippines.10 Its "main objects are to carry on shipping, chartering and related business, but it shall be a further object to engage in other transport business, commercial and industrial activities at home and abroad within the scope deemed appropriate by the Board of Directors''11� Consequently, petitioner's sale of services to A.P. Moller- Maersk A/S qualify for zero-rating under Section 108(B)(4) of the NIRC of 1997, as amended, and the claimed input taxes attributable thereto may be refunded. 1- Pertinent to petitioner's judicial claim is Section 112 (A) of the NIRC of 1997, as amended, which provides: 9 Exhibits "E", Docket (vol. I), p. 548; and Exhibit "D", Docket (vol. I), pp. 545-547. 10 Exhibits "B", Docket (vol. I), pp. 525-535; Exhibit "C", Docket (vol. I), pp. 536-544; and Exhibit "BB", Docket (vol. I), pp . 499-500. 11 Exhibit "B", Docket (vol. I), pp 525-535.

AMENDED DECISION CTA CASE NO. 8549 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: Provideft however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the 8angko Sentral ng Pilipinas (8SP): Provided further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods 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: Provideft finally, That for a person making sales that are zero-rated under Section 108 (8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. Thus, in order to be entitled to a refund or tax credit of input VAT payments attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied: 1. the taxpayer must be VAT-registered; 2. there must be zero-rated or effectively zero-rated sales; 3. input taxes were incurred or paid; 4. such input VAT payments were directly attributable to zero-rated sales or effectively zero-rated sales; 5. the input VAT payments were not applied against any output VAT liability; and 6. the claim for refund was filed within the two-year ?v prescriptive period.

AMENDED DECISION CTA CASE NO. 8549 As previously found by the Court, petitioner filed its administrative and judicial claims well within the prescriptive period. We quote the Court's findings: 12 Petitioner filed its administrative claim for the four quarters of taxable year 2009 amounting to P13,120,701.70 with the DOF-OSS on September 1, 2010, which is well within the two-year prescriptive period. XXX XXX XXX The foregoing provision provides that petitioner has 30 days from the receipt of the BIR Commissioner's decision denying the claim to appeal before this Court. On August 30, 2012, petitioner received a letter from the DOF-OSS to that effect. Reckoned from that date, petitioner had until September 29, 2012 within which to file its judicial claim. The instant Petition for Review was filed on September 28, 2012, hence, within the period prescribed by law. As to the first requisite, the Court found that petitioner satisfied the first requisite as it is a VAT-registered taxpayer as evidenced by its Certificate of Registration No. OCN3RC0000466671.13 The Court likewise found that petitioner's client A.P. Moller- Maersk A/S is a non-resident foreign corporation engaged in international shipping that transports container cargoes, including shipments of cargoes to and from the Philippines. 14 Thus, petitioner's sales of services to A.P. Moller-Maersk A/S qualify for VAT zero- rating pursuant to Section 108(B)(4) of the NIRC of 1997, as amended. For the month of June 2009, and the third (3rd) and fourth (4th) quarters of 2009, petitioner derived zero-rated receipts from services rendered to A.P. Moller- Maersk A/S in the amount of P402,497,043.24. The sales were declared in petitioner's VAT Returns for the same period and evidenced by Statements of Accounts (SAs) and VAT zero-rated Official Receipts (ORs), detailed as follows: )k- 12 Decision, p. 7, Docket (vol. II). 13 Exhibit "F", Docket (vol. I), p. 549. 14 Exhibit " E", Docket (vol. I), p. 548; Exhibit "D", Docket (vol. I), pp. 545-547; Exhibit "B", Docket (vol. I ), pp. 525-535; Exhibit "C", Docket (vol. I), pp. 536-544; and Exhibit "BB", Docket (vol. I), pp. 499-500.

AMENDED DECISION CTA CASE NO. 8549 Period Covered VAT Returns Zero-Rated Sales/Receipts 2nd Quarter 2009 (Exhibit No.) p 198,368,128.99 Less: BBB-05 to -06 p 49,003,376.60 April 2009 BBB-01 to -02 May 2009 BBB-03 to -04 99 162,470.39 Sub-total p 148,165,846.99 June 2009 BBB-11 to -12 3rd Quarter 2009 BBB-17 to -18 p 50 202 282.00 4th Quarter 2009 161 222 031.00 TOTAL 191 072,730.24 p 402,497,043.24 Exh. SA No. SA Date Amount Amount Exh. OR No. Amount EEE-1 (in US$) (in PhP) DDD-1 0010 (in US$) EEE-2 006 6/30/2009 1 026 333.00 50 202 282.00 DDD-2 0011 1 070 570.05 EEE-3 1153 833.00 55 557 059.00 DDD-3 0012 1 088 988.95 EEE-4 007 7/31/2009 1 058 858.00 50 995 347.00 DDD-4 0013 1 079 465.00 EEE-5 1135 652.00 54 669 625.00 ODD-S 0014 1135 652.00 EEE-6 008 8/31/2009 1 249 167.00 60 134 134.00 DDD-6 0015 1249 167.00 EEE-7 1 358 764.00 63 905 920.00 DDD-7 0016 1,358 764.00 009 9/30/2009 1451 700.00 67 032 676.00 1451 700.00 8 434 307.00 402,497,043.00 8,434,307.00 010 10/30/2009 011 11/30/2009 012 12/31/2009 TOTAL Having resolved that petitioner had VAT zero-rated receipts for the month of June 2009, and the 3rd and 4th quarters of 2009 in the amount of P402,497,043.24, We now determine the amount of unutilized excess input VAT attributable thereto. For the same taxable period, petitioner reported input taxes in the total amount of P7,865,681.37, detailed as follows: Exhibit Period Covered Input Taxes BBB-05 to -06 2nd Quarter 2009 p 2,745,873.94 BBB-01 to -02 Less: April 2009 p 860,739.22 BBB-03 to -04 May 2009 1, 115,127 .35 770,007.37 BBB-11 to -12 June 2009 p BBB-17 to -18 3rd Quarter 2009 4th Quarter 2009 2,647,619.89 Total 4,448,054.11 p 7,865,681.37 However, petitioner's claim only amounts to P7,862,002.84. The difference of P3,678.53 was accounted for by the Court-~

AMENDED DECISION CTA CASE NO. 8549 commissioned Independent Certified Public Accountant (ICPA)15 as follows: 16 Input VAT credited to Output VAT for the period p 2,839.28 Input VAT per VAT Returns not claimed for the period 839.27 Total Input VAT not Claimed per Petition for Review p 3,678.55* *(P0.02 insignificant difference due to rounding-off) Upon examination of the documents submitted by petitioner to support its declared input taxes, the ICPA noted the following findings: 17 Findings Input Tax Exhibit A. Input taxes on purchases of goods and services properly p 1,622 042.34 HHHH supported for VAT purposes: 4/089/816.75 1. Domestic purchases of goods properly supported with original VAT 324 167.10 Annex I Annex J invoices Annex K 2. Domestic purchases of services properly supported with original Annex L VATORs Annex M 3. Purchases of capital goods exceeding P1M properly supported with Annex N original VAT invoices (Amortization of Input VAT) Annex 0 Subtotal p 6 036,026.19 Annex P B. Input taxes on purchases of goods and services properly p 781477.87 Annex Q supported by VAT invoices and VAT ORs but with exceptions 447/067.15 noted: 131011.50 Annex R 1. Domestic purchases of goods properly supported with original VAT 15 528.10 4 821.43 invoices but does not bear the Company's TIN 2. Domestic purchases of services properly supported with original 140 728.99 VAT ORs but does not bear the Company's TIN 31 051.26 3. Purchases of capital goods exceeding P1M properly supported with original VAT invoices but does not bear the Company's TIN (Amortization of Input VAT) 4. Domestic purchases of goods properly supported with original VAT invoices but the amount of input VAT was not separately indicated 5. Domestic purchases of services properly supported with original VAT ORs but the amount of input VAT was not separately indicated 6. Purchases of capital goods exceeding P1M properly supported with original VAT invoices but does not bear the Company's TIN and the amount of input VAT was not separately indicated (Amortization of input VAT) 7. Domestic purchases of services properly supported with original VAT ORs but the amount of input VAT claimed is less than the input VAT per supporting VAT documents (Amount presented pertains to Input VAT claimed) Subtotal p 848 686.30 Subtotal of items A and B P6,884,712.49 C. Input taxes on purchases of goods and services not properly supported with the required VAT documents: 15 Ms. Mary Ann C. capuchino of SGV & Co. 16 Exhibit "CC-2", Docket (vol. I), p. 642. 17 Ibid, pp. 26-28.

AMENDED DECISION CTA CASE NO. 8549 1. Domestic purchases of services supported with original VAT ORs p 642.07 Annex S but the amount of input VAT claimed was overstated (Amount of overstatement) 331127.96 Annex T 2. Domestic purchases of goods and services supported with original VAT invoices and ORs not dated within the covered period 3. Domestic purchases of goods supported with Non-VAT invoices 733.93 Annex U 4. Domestic purchases of services supported with Non-VAT ORs 13,349.01 Annex V 5. Domestic purchases of goods and services supported only with 75 034.20 Annex W 43,914.76 Annex X photocopies of VAT invoices and ORs 6 . Domestic purchases of goods not supported with original VAT 14,023.33 Annex Y invoices but supported with oriqinal VAT ORs Annex z 7. Purchases of capital goods exceeding P1M not supported with VAT Annex AA invoices but supported with original VAT ORs (Amortization of Input Annex BB VAT) 8. Domestic purchases of goods supported with collection receipts 87,615.00 p 566,440.26 Subtotal D. Input taxes on purchases of goods and services without p 304,237.76 110,290.92 supporting documents: 1. Purchases of capital goods exceeding P1M without supporting p 414,528.68 P7,865,681.43 documents (Amortization of input VAT) 2. Domestic purchases of services without supporting documents Subtotal Total unutilized input taxes for the month of June, 3rd and 4th quarters of CY 2009 per ICPA verification Items under B.1 to B.6, C and D should be disallowed for failure to comply with the invoicing requirements pursuant to Section 113(A) and (B) of the NIRC of 1997, as amended, which provides: 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: ~

AMENDED DECISION CTA CASE NO. 8549 ( 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; (b) If the sale is exempt from value- added tax, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0�/o) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT- exempt, the invoice or receipt shall clearly indicate the breakdown of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value- added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero- rated components of the sale. (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 (Pl,OOO) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer's Identification Number (TIN) of the 1-

AMENDED DECISION CTA CASE NO. 8549 purchaser, customer or client. (Underscoring supplied.) The foregoing is implemented by Section 4.113-1(A) and (B) of RR No. 16-2005, as amended, thus: SEC. 4.113-1. Invoicing Requirements.- (A) 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. 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; fo-

AMENDED DECISION CfA CASE NO. 8549 (b) If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0�/o) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break- down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) In the case of sales in the amount of one thousand pesos {Pl,OOO) 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. (Emphasis supplied.) Out of the P31,051.26 input VAT pertaining to petitioner's domestic purchases of services under item B.7 of the ICPA findings, the amount of P658.93 supported by OR No. 018718 issued by ECK Printing Press on March 26, 2010 shall be disallowed for being outside the period of claim. The remaining input VAT in the amount of P30,392.33 which is duly supported by VAT ORs represents petitioner's valid claim. r Thus, the disallowances per the ICPA's findings are adjusted to P1,799,262.91, as computed below: 18 Exhibit " YYY- 18".

AMENDED DECISION CTA CASE NO. 8549 Findings Disallowed 1) Input taxes on purchases of goods and services Input Tax properly supported by VAT invoices and VAT ORs p 848,686.30 (31 051.26) but with exceptions noted (Item B) 658.93 p 818,293.97 Less: Properly supported but VAT claimed is less 566,440.26 (Item 8.7) 414 528.68 Add: OR dated outside the period of claim P1,799,26 2.9 1 (Exh. YYY-18) 2) I nput t axes on purchases of goods and services not properly supported with t he required VAT documents (Item C) 3) Input taxes on purchases of goods and services without supporting documents (Item D) Total Likewise, the following input VAT in the aggregate amount of ~233,341.01 shall be disallowed from petitioner's claim for failure to meet t he substantiation requirements under t he VAT law and regulations: OR/Invoice OR/Invoice Exhibit Number Date Supplier Input Tax 1. Input tax on purchase of goods which was claimed twice. Continental Associated Food PPP-094 0671 10/7/2009 Products Export Inc. p 8 1 6 . 53 Subtotal p 816.53 2. Input taxes on purchases of services supported by official receipts dated outside the period of claim. PPP-104 0169 1/8/2010 ECK Printing Press p 1,933.89 1,518.38 PPP-107 0168 1/8/2010 ECK Printing Press 428.57 QQQ-1497 67448 10/16/2002 Philscan Travel & Tours Inc. p 3,880.84 Subtotal 3. Input taxes on purchases of services supported by official receipts without the word "VAT" and BIR Authority to Print (ATP} and collection receipts that are "not a valid source of input tax". QQQ-0704 to -0705 PKEOR000416908 8/12/2009 PLDT p 390.49 QQQ-708 & -710 PKEOR000416909 8/12/2009 PLDT 213.75 QQQ-712 to -713 PKEOR000416905 8/12/2009 PLDT 22 339.42 QQQ-716 to -717 PKEOR000416906 8/12/2009 PLDT 12 517.10 QQQ-722 PKEOR000416998 8/12/2009 PLDT 160.71 QQQ-724 to -725 PKEOR000416999 8/12/2009 PLDT 160.71 QQQ-728 to -729 PKEOR000416996 8/12/2009 PLDT 2 400.00 QQQ-732 to -733 PKEOR000416997 8/12/2009 PLDT 190.09 QQQ-736 to -737 PKEOR000417340 8/13/2009 PLDT 160.71 QQQ-740 to -741 PKEOR000417341 8/13/2009 PLDT 160.71 QQQ-744 to 745 PKEOR000422669 8/25/2009 PLDT 300.00 QQQ-748 to -749 PKEOR000254327 9/17/2009 PLDT 1740.00 QQQ-752 to -753 PKEOR000254334 9/17/2009 PLDT 2 400.00 QQQ-756 to -757 PKEOR000254333 9/17/2009 PLDT 13 305.98 QQQ-760 to -761 PKEOR000254331 9/17/2009 PLDT 15,107.20

AMENDED DECISION CTA CASE NO. 8549 QQQ-764 to -765 PKEOR000254339 9/17/2009 PLOT 160.71 390.49 QQQ-768 to -769 PKEOR000254348 9/17/2009 PLOT 373.52 230.59 QQQ-772 to -773 PKEOR000254346 9/17/ 2009 PLOT 375.02 213.75 QQQ-776 to 777 PKEOR000254345 9/17/2009 PLOT 300.00 12/723.37 QQQ-780 to -781 PKEOR000254344 9/17/ 2009 PLOT 370.52 18,250.48 QQQ-784 to -785 PKEOR000254350 9/17/ 2009 PLOT 390.49 160.71 QQQ-788 to -789 PKEOR000430867 9/25/2009 PLOT 1740.00 2 400.00 QQQ-792 to -793 PKEOR000430868 9/25/2009 PLOT 213.75 160.71 QQQ-1554 to -1555 PKDOR000258152 10/13/2009 PLOT 160.71 160.71 QQQ-1558 to -1559 PKDOR000258163 10/13/2009 PLOT 334.52 13 332.46 QQQ-1562 to -1563 PKDOR000258154 10/13/ 2009 PLOT 16 588.35 179.59 QQQ-1566 to -1567 PKDOR000158155 10/ 13/2009 PLOT 16J30.72 300.00 QQQ-1570 to -1571 PKDOR000158162 10/13/ 2009 PLOT 160.71 2 400.00 QQQ-1574 to -1575 PKDOR000258161 10/13/ 2009 PLOT 1 740.00 160.71 QQQ-1578 to -1579 PKDOR000258164 10/13/ 2009 PLOT 213.75 160.71 QQQ-1582 to -1583 PKDOR000258151 10/13/ 2009 PLOT 390.49 160.71 QQQ-1586 to -1587 PKDOR000437429 10/16/ 2009 PLOT 319.52 1 740.00 QQQ-1590 to -1591 PKDOR000437432 10/16/ 2009 PLOT 213.75 390.49 QQQ-1594 to -1595 PKDOR000262809 10/17/ 2009 PLOT 22 697.44 215.59 QQQ-1598 to -1599 PKDOR000449630 10/ 17/ 2009 PLOT 2,400.00 12,656.18 QQQ-1602 to -1603 PKDOR000454232 10/17/ 2009 PLOT 160.71 160.71 QQQ-1606 to -1607 PKDOR000156375 10/26/2009 PLOT 160.71 14/944.72 QQQ-1610 to -1611 PKDOR000156372 10/26/ 2009 PLOT 300.00 P219,534.94 QQQ_-1614 to -1615 PKDOR000156376 10/26/2009 PLOT QQQ-1618 to -1619 PKDOR000156377 10/26/2009 PLOT QQQ-1622 to -1623 PKDOR000262803 11/13/ 2009 PLOT QQQ-1626 to -1627 PKDOR000262802 11/ 13/ 2009 PLOT QQQ-1630 to -1631 PKDOR000262813 11/13/ 2009 PLOT QQQ-1634 to -1635 PKDOR000262810 11/ 13/2009 PLOT QQQ-1638 to -1639 PKDOR000262829 11/13/ 2009 PLOT QQQ-1642 to -1643 PKDOR000262825 11/ 13/ 2009 PLOT QQQ-1646 to -1647 PKDOR000262831 11/13/ 2009 PLOT QQQ-1650 to -1651 PKDOR000267247 12/11/2009 PLOT QQQ-1654 to -1655 PKDOR000267245 12/11/ 2009 PLOT QQQ-1659 to -1660 PKDOR000267249 12/11/2009 PLOT QQQ-1663 to -1664 PKDOR000267246 12/11/ 2009 PLOT QQQ-1667 to -1668 PKDOR000267248 12/ 11/ 2009 PLOT QQQ-1671 to -1672 PKDOR000267251 12/ 11/ 2009 PLOT QQQ-1675 to -1676 PKDOR000267250 12/11/ 2009 PLOT QQQ-1679 to -1680 PKDOR000459231 12/ 12/ 2009 PLOT QQQ-1683 to -1684 PKDOR000459230 12/ 12/2009 PLOT QQQ-1687 to -1688 PKDOR000465828 12/ 28/2009 PLOT QQQ-1691 to -1692 PKDOR000465827 12/28/ 2009 PLOT QQQ-1695 to -1696 PKEOR000465916 12/29/ 2009 PLOT QQQ-1699 to -1700 PKEOR000465920 12/29/2009 PLOT Subtotal 4. Input taxes on purchases of services supported by official receipts with no or incomplete date. QQQ-974 1459186 12/04 DHL Express p 6 8 . 37

AMENDED DECISION CTA CASE NO. 8549 QQQ-977 1459187 - DHL Express 94.23 97.37 QQQ-980 1459188 12/4 DHL Express p 259.97 Subtotal S. Input taxes on purchases of services supported by official receipts but the p 1824.23 380 .56 amount of VAT was not separately indicated. 333 .02 QQQ-1130 2105661 11/27/2009 Globe Telecom Inc. 4 931.55 1 293.66 QQQ-1142 2105662 11/27/2009 Globe Telecom Inc. QQQ-1145 2105663 11/27/2009 Globe Telecom Inc. 85.71 QQQ-1156 2105664 11/27/2009 Globe Telecom Inc. p 8,848.73 P233,341.01 QQQ-1194 2105665 11/27/2009 Globe Telecom Inc. _QQQ-1202 2088060 11/27/2009 Globe Telecom Inc. Subtotal TOTAL Thus, petitioner's substantiated input VAT claim amounted to P5,832,238.18, computed as follows: Input VAT per Returns p 7,865,681.37 Less: Disallowances p 1,799,262.91 1) Per !CPA's findings 233,341.01 2) Per this Court's further verification 3) Input VAT not claimed per Petition 839.27 p 2,033,443.19 for Review p 5,832,238.18 Total Disallowances Substantiated Input VAT Claim A portion, however, of the P5,832,238.18 input VAT shall be applied against petitioner's reported output VAT liability for the subject period of claim in the amount of P2,839.28, broken down as follows : Exhibit .Quarter VATable Sales Output Taxes BBB-05 to -06 2nd Quarter 2009 p 2,678.50 BBB-01 to -02 Less: April 2009 p 321.42 BBB-03 to -04 May 2009 p - p - BBB-1 1 to -12 Sub-total BBB-17 to -18 June 2009 1,339.29 160.71 3rd Quarter 2009 4th Quarter 2009 p 1,339.29 p 160.71 Total p 1,339.29 p 160.71 22,321.43 2,678.57 - - p 23,660.72 p 2,839.28

AMENDED DECISION CTA CASE NO. 8549 Consequently, only the remaining input VAT of P5,829,398.90 can be attributed to petitioner's zero-rated sales for the subject period of claim. Although the substantiated input VAT of P5,829,398.90 was included in petitioner's reported excess input VAT amounting to P13,120,701.7019 for the fourth quarter of 2009, which was carried over to the succeeding quarter20, the same amount remained unutilized since it was deducted as "VAT Refund/TCC claimed" in the first quarter of taxable year 2010.21 Thus, petitioner has sufficiently proven its entitlement to a refund or issuance of tax credit certificate in the amount of P5,829,398.90 representing unutilized excess input taxes attributable to its zero-rated sales for June 2009 and the 3rd and 4th quarters of 2009. WHEREFORE, in view of the foregoing, petitioner's Motion for Reconsideration (of the Decision dated 14 November 2014), is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P5,829,398.90, representing petitioner's unutilized excess input VAT attributable to its zero-rated sales for June 2009 and the 3rd and 4th quarters of 2009. SO ORDERED. ~~ c . Qy-~ . Q .JOAN ITO C. CASTAN EDi(, jR. Associate Justice WE CONCUR: (On Leave) ~ AM ELIA R. COTANGCO-MANALASTAS CAESAR A. CASANOVA Associate Justice Associate Justice 19 Exhibit " BBB-18", Line 27. 20 Exhibit "BBB. 1- 1", Line 20A. 21 Ibid, Line 23D.

AMENDED DECISION CTA CASE NO. 8549 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. Q/2/fAA~-k> C . a:r~~ I Q_ ClUANITO C. CASTANEDAf]R. 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 w � of the opi �o of t Court. ROMAN G. DEL OSARIO Presiding Justice