AIG SHARED SERVICES CORPORATION (PHILIPPINES) [FORMERLY: CHARTIS TECHNOLOGY AND OPERATIONS MANAGEMENT CORPORATION (PHILIPPINES)] v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY Third Division AIG SHARED SERVICES CTA Case No. 9438 CORPORATION (PHILIPPINES) [Formerly: Members: Chartis Technology and UY, Chairperson, Operations Management RINGPIS-LIBAN, and Corporation (Philippines)], MODESTO-SAN PEDRO, JJ. Promulgated: Petitioner, FEB -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. }{---------------------------------------------------------------------------------------------}{ DECISION RINGPIS-LIBAN,.L.: T he instant Petition for Review flied by petitioner AIG Shared Services Corporation prays that the Court grant its application for value-added tax (VAT) refund / tax credit, and order respondent Commissioner of Internal Revenue to refund and/or issue a tax credit certificate in favor of Petitioner in the amount of P43,912,521.20, allegedly representing excess and unutilized input VAT paid for the four (4) quarters of calendar year (CY) 2014.1 THE PARTIES Petitioner AIG Shared Services Corporation is a foreign corporation organized and existing under the laws of New York, U.S.A., which was duly licensed since September 13, 1977 under SEC No. 152 to operate a regional headquarters in the Philippines. 2 I ts former corporate names were America~ 1 Docket-Vol. 1, p . 402, Pre-Trial Ord er dated June 27, 2017. 2 Docket-Vol. 2, p . 796, Exhibit " P-1".

DECISION CTA Case No. 9438 Page 2 of40 International Underwriters Corporation-Regional Operating Headquarters, AIU Technology and Operations Management Corporation, and Chartis Technology and Operations Management Corporation (Philippines).3 Petitioner is registered with the Bureau of Internal Revenue (BIR) taxpayer under TIN 001-218-732-000.4 Respondent is the Commissioner of the BIR who holds office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.5 Respondent is vested with the power to decide tax cases, including claims for refunds and/or tax credits pursuant to Section 4 of the 1997 National Internal Revenue Code, as amended.6 THE FACTS On March 30, 2016, Petitioner flied its administrative claim for refund of its excess and unutilized input VAT in the amount of P43,912,521.20 for the 1st to 4th quarters of CY 2014.7 Petitioner flied the instant Petition for Review on August 24, 20168 On November 22, 2016, Respondent flied his Answer9, interposing the following special and affirmative defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 4. On the basis of the foregoing allegations and in further support of the Specific Denials herein set forth, respondent respectfully alleges as his defense that: Petitioner is not entitled to its claim for refund considering its failure to satisfy the statutory and administrative requirements provided for by the tax code. 1. Section 112(c) of the 1997 National Internal Revenue Code, as amended, provides as follows, to wi~ 3 /d., pp. 796 to 797, Exhibits "P-1" and "P-2". 4 ld., pp. 799 to 800, Exhibits "P-4" and "P-5". 5 /d. at Note 1, p. 374, Joint Stipulation of Facts and Issue (JSFI). Stipulation of Facts, par. 1.1. 6 /d., par. 1.2. 7 ld. at Note 2, pp. 853 to 866, Exhibits "P-8" and "P-8-a". 8 ld. at Note 1, pp. 10 to 21. 9 ld., pp. 159 to 164.

DECISION CTA Case No. 9438 Page 3 of40 'SEC. 112. Refunds or Tax Credits oflnput 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; X X X X X X (D) 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 (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) 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.' (Emphasis supplied) Pursuant to the afore-quoted prov1s1on of law, (1) the application for tax refund must be filed within two years after the close of the taxable quarter when the sales were made; (2) the CIR is given only a period of 120-day period from the date of submission of complete documents in support of the application within which to decide whether to grant the claim; (3) if the CIR failed to decide with the said 120-day period, the taxpayer may elevate the inaction to the Court of Tax Appeals. (4) The decision or inaction may be appealed within thirty (30) days with the CTA~

DECISION CTA Case No. 9438 Page 4 of40 2. It logically follows that a taxpayer must first submit the complete supporting documents before the 120-day period should commence. Stated otherwise, the administrative claim for refund must be supported by complete documents flled in accordance with Subsections (A) and (B) of Section 112 of the Tax Code. 3. The requirements to submit complete documents in support of an application for refund was further clarified by RMC 54-2014. Accordingly, the application for VAT refund must be accompanied by complete supporting documents as specifically enumerated in Annex 'A' of the RMC. In addition, the taxpayer should attach a sworn statement/affidavit (i) attesting to the completeness of the submitted documents; (ii) stating that the attached supporting documents are the only documents which the taxpayer will present to support the claim; and additionally, (iii) in the case of corporations or other juridical persons, there should be a sworn statement that the officer signing the affidavit (which should at the very least be the Chief Finance Officer) has been authorized by the company's Board of Directors. 4. In a memorandum dated September 30, 2016, the revenue officer assigned to the application for tax refund by [P]etitioner observed that the supporting documents submitted were still lacking. Particularly, he noticed that certified true copies of sales invoices or official receipts were not presented by [P]etitioner. Further, no substantiation in support of the application was made. Thus, he recommended that the application for VAT Credit/refund cannot be given due course. A copy of the memorandum is attached herewith as Annex '1' while the original is part of the BIR Records of this case, which will be forwarded to the Honorable Court. 5. It cannot be overemphasized that failure to submit complete documents to support the application for refund, as required by the Tax Code, is fatal to a taxpayer's claim. Without the submission of documents to support the application, [R]espondent respectfully submits that the application for tax credit/refund is invalid and a mere scrap of paper. 6. However, assuming the documents it submitted together with its administrative claim for refund dated March 30, 2016 are admitted by [P]etitioner as its submission of complete documents, [R]espondent respectfully submits that only these documents, if ever they will be offered as evidence, can be considered by the Honorable Court in determining the propriety of [P]etitioner's claim, pursuant to the well-settled principle that matters not preliminary raised in the administrative level cannot be raised for the first time upon appeay

DECISION CTA Case No. 9438 Page 5 of40 Petitioner has the burden to prove its entitlement to refund. 7. In addition to the foregoing requirements, [R]espondent respectfully submits that in order to be entided to a refund or issuance of a Tax Credit Certificate (TCC) of input VAT due or paid attributable to zero-rated or effectively zero- rated sales, [P]etitioner must prove compliance with the following requisites: 1) that there must be zero-rated or effectively zero- rated sales; 2) that input taxes were incurred or paid; 3) that such input taxes are direcdy attributable to zero-rated or effectively zero-rated sales; 4) that input taxes were not applied against any output VAT liability; and 5) that the claim for refund was flied within the two- year prescriptive period 8. In a claim for tax refund or tax credit, the applicant must prove not only entidement to the grant of the claim under substantive law. It must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit. Hence, the mere fact that [P]etitioner's application for zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. Claims for refund are construed strictly against the taxpayer and in favor of the Government. 9. It is said that taxes are essential to government's very existence hence, the dictum that 'taxes are the lifeblood of the government.' And because taxes are the lifeblood of the nation, the court has always applied the doctrine of strict interpretation in construing tax exemptions. A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception. 10. For this reason, the right of taxation cannot easily be surrendered, statutes granting tax exemptions are considered as a derogation of the sovereign authority. Since tax refunds a~

DECISION CTA Case No. 9438 Page 6 of40 regarded as tax exemptions, therefore, these are to be construed strictissimijuris against the person or entity claiming the exemption. 11. Lasdy, the power of taxation is an inherent attribute of sovereignty; the government chiefly relies on taxation to obtain the means to carry on its operations. Taxes are essential to its very existence; hence, the dictum that 'taxes are the lifeblood of the government.' For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority and are stricdy construed against the person or entity claiming the exemption. Claims for tax refunds, when based on statutes granting tax exemption or tax refund, partake of the nature of an exemption; thus, the rule of strict interpretation against the taxpayer-claimant similarly applies." Respondent transmitted the BIR Records of this case on November 23, 2016. 10 The Court initially set this case for pre-trial conference on March 7, 2017n However, due to the filing of Respondent's Motion to Defer Pre-Trial Conference on March 2, 2017,12 the pre-trial conference was reset to, and held on, May 30, 2017.13 Respondent's Pre-Trial Brief was filed on February 13, 2017,14 while Petitioner's Pre-Trial Brief was submitted on March 3, 2017.15 The parties submitted their Joint Stipulation of Facts and Issues on June 9, 2017.16 In the Pre-Trial Order on June 27, 2017,17 the Court deemed the termination of the Pre-Trial. Thereafter, trial proceeded. During trial, Petitioner presented testimonial and documentary evidence. As part of its testimonial evidence, Petitioner offered the testimonies of the-Y" 10 ld., pp. 168 to 169, Compliance. 11 ld., pp. 171 to 172, Notice of Pre-Trial Conference dated November 24, 2016. 12 ld., pp. 306 to 309. 13 ld., pp. 369,370, and 372 to 373; Resolution dated March 6, 2017, Minutes of the hearing held on, and Order dated, May 30, 2017, respectively. 14 ld., pp. 174 to 176. 15 ld., pp. 311 to 366. 16 ld., pp. 374 to 400. 17 ld., pp. 402 to 432.

DECISION CTA Case No. 9438 following individuals: (1) Ms. Glaiza A. Baroro,18 Petitioner's Accountant III; (2) Atty. Geronimo Randy Recinto,19 General Counsel for Petitioner; and (3) Mr. Edward L. Roguel,20 the Court-commissioned ICPA. 21 On October 9, 2017, Mr. Roguel submitted the ICPA Report.22 Petitioner filed its Formal Offer of Evidence on February 5, 2018.23 Respondent submitted his Conunent (Re: Petitioner's Formal Offer of Evidence) on February 12,2018.24 In the Resolution dated April 17, 2018,25 Petitioner's exhibits were admitted e1 xc'efl/Exhibits~ "P-117" "P-118" "P-119" "P-120" "P-120-d" "P- ' ' ' ' ' ' 111125743523"--"ac'' """",'PP""--PP11--52116647""56''"""',"P"P"-P-P11--51318418"7"6'"'"'","P"P"P--P1-115-3149398""0'"'"'",""PPPa-1--n116d43494""-P"'a'-""1P"'9P-"91P-761-"531,-85a"f0"o'"'r'"""PfPPa--i1-1l1u375r92e1"""''t'o"""PPPp---r111e475s04e2"n""''t' "P- "P- "P- the original for comparison; and Exhibits "P-615" and "P-1701", for not being found in the CD/USB submitted to this Court. On May 7, 2018, Petitioner filed its Motion for Reconsideration [(a) For Reconsideration of the Resolution dated 17 April 2018; and (b) To Recall Witness],26 praying, inter alia, to file an Amended Formal Offer of Evidence. Respondent did not file any objection/opposition thereon.27 In the Resolution dated July 2, 2018,28 the Court reconsidered its Resolution dated April 17, 2018. At the hearing held on July 17, 2018,29 the Court granted Petitioner ten (1 0) days, or until July 27, 2018, to file its Supplemental Formal Offer of Evidence. Thus, on July 25, 2018, Petitioner /V" 18 /d., pp. 183 to 245, Exhibit "P-192"; id. at Note 2, pp. 505, and 507 to 508, Minutes of the hearing held on, and Order dated, August 29, 2017; id. at Note 1, pp. 492 to 497, Exhibit "P-192-b"; id. at Note 2, pp. 732 to 732-b, Minutes of the hearing held on, and Order dated, January 16, 2018. 19 /d. at Note 1, pp. 246 to 305, Exhibit "P-193"; id. at Note 2, pp. 536 to 539, Exhibit "P-193-b"; pp. 732 to 732-b, Minutes of the hearing held on, and Order dated, January 16, 2018; Docket- Vol. 6, pp. 2782 to 2789, Exhibit "P-193-d"; pp. 2790 and 2791, Minutes of the hearing held on, and Order dated, July 17, 2018. 20 ld. at Note 2, pp. 721 to 731, Exhibit "P-195"; pp. 732 to 732-b, Minutes of the hearing held on, and Order dated, January 16, 2018. 21 ld., p. 506, Oath of Commission dated August 29, 2017; pp. 505, and 507 to 508, Minutes of the hearing held on, and Order dated, August 29, 2017. 22 1d., pp. 554 to 702, Exhibit "P-194". 23 ld., pp. 733 to 794. 24 Docket-Val. 6, pp. 2753 to 2754. 25 /d., pp. 2757 to 2759. 26 /d., pp. 2763 to 2769. 27 ld., p. 2774, Records Verification Report dated June 5, 2018 issued by the Judicial Records Division of this Court. 28 ld., pp. 2776 to 2777, Resolution dated July 2, 2018. 29 ld., pp. 2790 and 2791, Minutes of the hearing held on, and Order dated, July 17, 2018.

DECISION CTA Case No. 9438 Page 8 of40 filed its Supplemental Formal Offer of Evidence.30 Respondent submitted his Comment/Opposition (Re: Supplemental Formal Offer of Evidence) on August 2, 2018_3' In the Resolution dated October 17, 2018,32 the Court only admitted Exhibits "P-193-d" and "P-193-e". Consequendy, Petitioner ftl.ed a Motion for Reconsideration (Re: Resolution dated 17 October 2018),33 to which Respondent failed to comment thereon.34 Thus, in the Resolution dated January 3, 2019,35 the Court granted the said Motion for Reconsideration (Re: Resolution dated 17 October 2018), and admitted Petitioner's Exhibits "P-117'', "P-119", "P-120", "P-123", "P-126", "11P75-211""3,' 3""P"P'--1"1P756-21""3,' 4""P"P'--1"18P56-31"",3'a8"n"Pd' -"1"PP5--611"49'00"""P'. -"1P5-81"4'5""P' "-1P5-194"'7""'P"-P16-144"8' ""'P"-P1-6155-a0""'' "P- "P- In the meantime, during the hearing held on October 18, 2018,36 Respondent's counsel manifested that she did not receive a report from the Revenue Examiner who conducted the audit and hence, she would not present any evidence. On January 31, 2019, Respondent ftl.ed his Memorandum,37 while Petitioner's Memorandum was filed on February 8, 2019.38 The instant case was deemed submitted for decision on February 19, 2019. 39 THE ISSUE The parties stipulated the following sole issue for this Court's resolution,40 to wit: "Whether or not [P]etitioner is entided to a refund or the issuance of a tax credit certificate for its unutilized/excess inpu~ 30 ld., pp. 2792 to 2804. 31 ld., pp. 2806 to 2814. 32 ld., pp. 2818 to 2823. 33 ld., pp. 2827 to 2932. 34 ld., p. 2935, Records Verification Report dated November 14, 2018 issued by the Judicial Records Division of this Court. 35 ld., pp. 2937 to 2940. 36 ld., pp. 2824 to 2826, Minutes of the hearing held on, and Order dated, October 18, 2018. 37 ld., pp. 2941 to 2949. 38 ld., pp. 2952 to 2970. 39 ld., p. 2973, Resolution dated February 19, 2019. 40 ld. at Note 1, p. 375, JSFI.

DECISION CTA Case No. 9438 Page 9 of40 VAT payments for the 1st to 4th Quarters of CY 2014, amounting to a total of FORTY-THREE MILLION NINE HUNDRED 1WELVE THOUSAND FIVE HUNDRED 1WENTY-ONE PESOS AND 1WENTY CENTAVOS (Php43,912,521.20)." THE ARGUMENTS OF THE PARTIES Petitioner argues that the administrative and judicial claims were seasonably flied; that it is VAT-registered; that it is engaged in VAT zero-rated sales; that it paid input VAT during the 1st to 4th quarters of CY 2014 from its domestic purchases of goods and services; that Petitioner's input VAT for CY 2014 has not been applied against output taxes; and Petitioner's input VAT is direcdy attributable to its zero-rated sales for CY 2014. On the other hand, Respondent argues that the law requires that only "creditable input taxes" which are "direcdy attributable" may be refunded. Respondent further avers that Petitioner failed to prove that all of its clients are non-resident foreign corporations doing business outside the Philippines. THE RULING OF THE COURT We partially grant the instant Petition for Review. Section 112(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 9337,41 provides: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-rated or Ejfective!J Zero-rated Sales. - Any VAT- registered person, whose sales are zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(l), (2) and (b) and Section lOS(B)(l) 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 whery 41 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

DECISION CTA Case No. 9438 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 direcdy 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 non-zero-rated sales. XXX XXX XXX (C) Period within which Refund or Tax Credit ofInput 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." Based on the foregoing provision, jurisprudence has laid down certain requisites which the taxpayer-applicant must comply with to successfully obtain a credit/refund of input VAT. Said requisites are classified into certain categories, to wit: As to the timeliness of the filing of the administrative and judicial claims: 1. the claim is fl.led with the BIR within two (2) years after the close of the taxable quarter when the sales were made;42 2. that in case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of one hundred twenty (120) days, the judicial claim has been filed with this Court, within thirty (30) days from receipt of the decision or after the expiration of thy 42 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 155732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc., G.R. No. 182364, August 3, 2010.

DECISION CTA Case No. 9438 said 120-day period;43 With reference to the taxpayer's registration with the BIR: 3. the taxpayer is a VAT-registered person;44 In relation to the taxpayer's output VAT: 4. the taxpayer is engaged in zero-rated or effectively zero-rated sales;45 5. for zero-rated sales under Sections 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations;46 As regards the taxpayer's input VAT being refunded: 6. the input taxes are not transitional input taxes;47 7. the input taxes are due or paid;48 8. the input taxes have not been applied against output taxes during and in the succeeding quarters;49 and 9. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be direcdy and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. 50 Petitioner's Administrative and Judicial C:laims were Timely Filed. The first requisite pertains to the filing of the refund claim for tax credit or refund of input VAT before the BIR, which is within two (2) years from the close of the quarter when the sales were made. The instant claim covers the four (4) quarters of <:Y 2014. Counting two (2) years from the respective close of the said quarters, the following table,...../ 43 Steag State Power, Inc. {Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 44 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra. 45 /d. 46/d. 47 /d. 48/d. 49 /d. at Note 44. 50 ld.

DECISION CTA Case No. 9438 indicates the pertinent last days for the filing of an administrative claim for the said four (4) quarters, to wit: Close of the Taxable Last Day to File CY2014 Period Quarter Administrative Claim 1st Quarter January 1, 2014 to March 2nd Quarter March 31,2014 March 31,2016 3rd Quarter 31,2014 4th Quarter April1, 2014 to June 30, June 30, 2014 June 30, 2016 2014 September 30, 2014 September 30, 2016 July 1, 2014 to September December 31,2014 December 31, 2016 30,2014 October 1, 2014 to December 31, 2014 Considering that Petitioner's administrative claim [Application for Tax Credits/Refunds (BIR Form No.1914)], covering the said four (4) quarters, was flied with the BIRon March 30, 2016,51 the same was timely made. The sewnd requisite is to the effect that the judicial claim must have been flied within thirty (30) days from receipt of Respondent's decision or after the expiration of the 120-day period under the afore-quoted Section 112(C). Considering that there is no indication that Respondent issued a decision relative to Petitioner's administrative claim, the determination of the 120+30- day periods, as applied to this case, is shown as follows: Date of Filing of End of 120 days for End of 30 days Administrative Claim the CIR to decide from expiration of March 30, 2016 the claim the 120 davs July 28, 2016 August 27, 2016 Since the instant Petition for Review was filed on August 24, 2016, Petitioner's judicial claim was likewise seasonably flied. Such being the case, Petitioner fulfilled the above-stated first and second requisites. Petitioner is a VAT-registered Person Petitioner likewise complied with the third requisite considering that it is a VAT registered taxpayer.~ 51/d. at Note 2, pp. 853 to 866, see Exhibits "P-8" and "P-8-a". 52 1d., pp. 799 to 800, Exhibits "P-4" and "P-5".

DECISION CTA Case No. 9438 Page 13 of40 Petitioner's Zero-rated or Effectively Zero-rated Sales/ Receipts for CY 2014 Only Amounts to P10,852,469.06 In its Quarterly VAT Returns for the four quarters of CY 2014, Petitioner declared an amount of !'2,131,262,124.17 total sales/receipts which included zero-rated sales/receipts of !'2,086,692,750.89, broken down as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total (Exhibit "P-9") (Exhibit "P-10") (Exhibit "P-11") (Exhibit "P-12") Vatable I' 14,045,332.87 I' 9,578,528.61 I' 10,839,724.33 I' 10,105,787.47 I' 44,569,373.28 Sales/Receipts Zero-Rated 442,612,125.26 501,953,349.75 366,270,294.38 775,856,981.50 2,086,692, 750.89 Sales/Receipts I' 456,657,458.13 I' 511,531,878.36 I' 377,110,018.71 I' 78_5,962_,768.')i' ~ 2,131,262,124.12_ Total Sales/Receipts Petitioner submits that as a Regional Operating Headquarters (ROHQ), it renders qualifying services, including business planning and coordination, corporate finance advisory, training and personal management, technical support, and data processing and communication, to its affiliates in the Asia- Pacific region and other foreign marketsY In CY 2014, Petitioner allegedly rendered such services to a total of seventy-five (75) clients. Seventy-four (74) of those clients are non-resident foreign clients doing business outside the Philippines and one (1) client is a domestic corporation registered with the Philippine Economic Zone Authority (PEZA). 54 Petitioner posits that since the services it rendered to its non-resident foreign clients doing business outside the Philippines were paid for in US Dollars (USD) inwardly remitted to the Philippines through the Petitioner's account with the East West Banking Corporation (East West Bank) and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), the same are classified as VAT zero-rated sales55. Likewise, Petitioner maintains that the services it rendered to AIG Shared Services -Business Processing, Inc., a PEZA-registered entity, are considered export sales and are effectively VAT zero-rated.56 Sale of services to an entity registered with the PEZA/ 53 /d. at Note 1, pp. 184 to 185, Exhibit "P-192". 54 /d., pp. 214 to 215, Exhibit "P-192". 55 /d., pp. 189 to 190, Exhibit "P-192". 56 1d., p. 215, Exhibit "P-192".

DECISION CTA Case No. 9438 Indeed, sales of services to entities registered with PEZA are subject to zero percent (0%) VAT, the pertinent provision of Section 108(B) (3) of the NIRC of 1997, as amended, states: "SEC. 108. Value-added Tax on Safe of Services and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Su!Ject 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 (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;" (Emphasis supplied) The special law specific to this case is Republic Act (RA) No. 7916, as amended by RA No. 8748, otherwise known as "The Special Economic Zone Act of 1995", which provides that an ecozone is considered a separate customs territory, and the business establishments operating within the ecozone are entided to certain fiscal incentives. Sections 8 and 23 of RA No. 7916, as amended by RA No. 8748, provide: "SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Tenitory.- The ECOZONE shall be managed and operated by the PEZA as separate customs territory. The PEZA is hereby vested with the authority to issue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department of Trade and Industry and/or the Department of Finance." "SECTION 24. Exemption form National and Local Taxes. - Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. xxx" (Emphasis supplied)/

DECISION CTA Case No. 9438 Since the ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the ecozone are considered exports to a foreign country subject to zero percent (0%) VAT. This was elucidated by the Supreme Court in the case of Commissioner ofInternal Revenue vs. Toshiba Information Equipment (Phils.), Inc., 51 to wit: "This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5%) preferential tax rate on gross income of PEZA- registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. xxx An ECOZONE or a Special Economic Zone has been described as - xxx [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (lEs), export processing zones (EPZs), free trade zones and tourist/ recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory. Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise~ 57 G.R. No. 150154, August 9, 2005.

DECISION CTA Case No. 9438 Paae lEi of 40 The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10%) VAT58. (Emphasis supplied) In the present claim, Petitioner presented the Certification dated January 16, 2014 issued by PEZA which is valid for the year 2014,59 stating that AIG Shared Services- Business Processing, Inc. is a PEZA-registered Ecozone (IT) Export Enterprise with Registration Certificate No. 03-03-IT dated January 29, 2003 as amended on December 4, 2013 and that it was a qualified enterprise for the purpose of VAT zero-rating of its transactions with local suppliers of goods, properties, and services in accordance with Sections 4.106-6 and 4.108-6 of Revenue Regulations (RR) No. 16-2005, the Consolidated Value-Added Tax Regulations of 2005. Thus, Petitioner's sales of services to AIG Shared Services - Business Processing, Inc. for the four quarters of CY 2014 qualify for VAT zero-rating, pursuant to Section 108(B)(3) of the NIRC of 1997, as amended. However, the same must still be substantiated by VAT zero-rated official receipts (ORs) issued in accordance with Sections 113(A)(1) and (2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(l) and (2), (B)(1) and (2)(c) of RR No. 16-2005, which are all quoted hereunder: "Sec. 113. Invoiting 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/ 58 Now at 12% VAT rate. 59 Exhibit "P-199".

DECISION CTA Case No. 9438 (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%) value-added tax, the term 'zero-rated sale' shall be written or printed prominendy on the invoice or receipt; xxx 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" (Underscoring ours) "SEC. 4.113-1. Invoicing Requirements.- (A) A Vat-registered person shall issue: -xxx (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 evecy 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 invoice/ 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/>"'

DECISION CTA Case No. 9438 Page 18 of40 (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: xxx (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx" (Underlining supplied) In addition to the above requirements, the ORs must be duly registered with the BIR as prescribed under Section 237, in relation to Section 238, both of the NIRC of 1997, as amended, to wit: "SEC. 23 7. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: xxx" "SEC. 238. Printing of Receipts or Sales or Commenial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." After a careful perusal of Petitioner's VAT zero-rated OR,60 it reveals that the same complies with the invoicing requirements pursuant to th(/ 60 Exhibit P-278, O.R. No. BPOOR-0001916, Dated February 6, 2014.

DECISION CTA C;u;g No. 9438 Page 19 of40 foregoing provisions. Thus, petitioner generated zero-rated receipts for CY 2014 from services rendered to AIG Shared Services - Business Processing, Inc. in the amount off'7,401,860.71 61 ($166,655.35). Sale of services to non-resident foreign entities Section 1OS(B) (2) of the NIRC of 1997, as amended, states that: "SEC. 108.-Value-added Tax on Sale of Services and Use or Lease of Properties. - (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other person doing business outside the Philippines which goods are subsequendy exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" Based on the foregoing provision, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), under Section 108(B)(2) of the NIRC of 1997, as amended, to wit: 1. The ree1p1ent of the services is a foreign corporation, and the aforesaid corporation is doing business outside the Philippines, or is a non-resident person not engaged in business who is outside the Philippines when the services were performed;6~ 61 td. at Note 2, p. 891, see Exhibit "P-21". 62 Site/ Philippines Corporation (Formerly Clientlogic Phi/s., Inc.) vs. Commissioner of Internal Revenue, G.R. No. 201326, February 8, 2017; Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205, January 22, 2007; Accenture, Inc. vs. Commissioner of Internal Revenue, G.R. No. 190102, July 11, 2002.

DECISION CTA Case No. 9438 2. The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules;63 3. The services fall under any of the categories under Section 108(B)(2),64 or simply, the services rendered should be other than "processing, manufacturing or repackinggoods';65 and 4. The services must be performed in the Philippines66 by a VAT- registered person. In compliance with the first essential element of proving that its client- affiliates are non-resident foreign corporations doing business outside the Philippines, petitioner presented the related Certifications of Non-Registration of Company issued by the Philippine Securities Exchange Commission (SEC), printed screenshots of foreign government websites and consularized foreign registration which were summarized by the Court-commissioned Independent CPA (ICPA) as follows:67 Name of Company Customer's Name per Consularized Government SEC Official Receipt Foreign website Certificate Registration Screens hots of Non- registration .\IG .WAC AIG AP.\C HOLDINGS PTE. HOLDINGS PTE. I LTD. LTD. P-117-a P-42 AIG AUSTRALIA Lilv!ITED; INTERCO:VfP ANY AIG AUSTRALIA CLEARING HOUSE 2 LIMITED NY-AUS 0106 P-IIS-a P-118-b P-43 ,\IG BUSINESS AIG BUSINESS PARTNERS PARTNERS 3 KABUSHIKI ~\ISH,\ ~\BUSHIKI KAIS~\ P-44 AIG DENMARK/DANISH 4 AIG CLAIMS, INC. BRANCH P-120-a P-120-b P-45, P-45-a AIG .\IG DENMARK/D,\NISH DENMARK/DANISH P-121-a, P-121- 5 BRANCH BR.\NCH b,P-121-c P-121-d P-46 AIG EMPLOYEE ,\IG EMPLOYEE 6 SERVICES INC. SERVICES INC. P-122-a P-47 J\IG EUROPE J\IG Europe Limited P-123-a,P-123-b, Lilv!ITED I CHARTIS 7 EUROPES.A. HQ P-123-c P-48, P-48-a AIGEUROPE C~\RT!S EUROPE LIMITED- SADIREKTION FUR 8 DIREKTION FOR DEUTSCHL\ND P-124-d P-49 63 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao~ Inc., /1 supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), G.R. No. 152609, June 29, 2005. 64 Commissioner of Internal Revenue vs. American Express international, Inc. (Philippine Branch), supra. 65 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra. 66 Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra; Commissioner of Internal Revenue vs. American Express international, Inc. (Philippine Branch), supra. 67 /d. at Note 2, pp. 570 to 571, Exhibit "P-194", Annex B.

DECISION CTA Case No. 9438 P�!!� 21 of 40 DEUTSCHL\ND .\IGEUROPE AIGEUROPE LIMITED- GREECE 9 LIMITED- GREECE AIGEUROPE P-50 SERVICES LIMITED P-51 .\IG EUROPE CHARTIS GLOBAL SERVICES P-52 10 SERVICES LIMITED COMPANY P-126-a ,\IG GLOB,\L P-127-b AIG GLOBAL RECOVERY SERVICES INC/ AIG P-130-a CLAIMS SERVICES, GLOBAL RECOVERY P-133-a II INC. SERVICES P-134-a AIGGLOBAL P-135-c ' REINSURANCE P-136-a OPERATIONS I .\IG GLOB.\L .\IG GLOB,\L P-180-b SERVICES INC RECOVERY ,\IG GLOB.\L P-142-c SERVICES P-143-a I 12 SERVICES INC i\L\L\YSL\ P-144-a P-53 AIG INSUR.,\NCE P-146-e I AIGGLOBAL COI\IPANY CHINA LIMITED REINSURANCE AIG INSUR.,\NCE COl\!PANY OF I 13 OPERATIONS CANADA; CHARTIS P-54 INSUR.,\NCE P-55; P-55-a I .\IGGLOBAL COl\IP.-\NY OF CANADA 14 SERVICES INC AIG j.\P.\N HOLDINGSKK ,\IG GLOBAL SERVICES 15 MALAYS!.\ P-131-b, P-131-c P-56 I P-132-a AIG INSURANCE I COMPANY CHINA I 16 LIMITED P-57; P-57-aJ ,\IG INSUR.,\NCE I I COl\IPANY OF ' 17 CAN,\DA P-58 AIGJAPAN 18 HOLDINGSKK P-59 P-60; P-60-a 19 AIG KOREA INC. AIG KORE.\ INC. P-135-a, P-135-b AIG i\L\U.YSL\ .\IG l\L\LAYSL\ INSUR.,\NCE P-197 BERHAD INSURANCE .-\IG P-142-a, P-142-b l\!ETROPOLITAN 20 BERH.\D CL\ DE SEGUROS Y P-145-a P-61; P-61-a REASEGUROS SA P-146-a, P-146- .\IG ,\IG PAPUA NEW b, P-146-c, P- GUINE,\ METROPOLIT.\N.-\ AIG PROPERTY 146-d C.\SUALTY GLOBAL CL\ DE SEGUROS Y SERVICES INC AIG SERVICES 21 REASEGUROS SA L\TIN Al\!ERICA SL P-62 SUCURS,\L P-63 AIG PAPUA NEW COLOMBIA/ .\IG SERVICES L\TIN P-64 22 GUINEA ,\l\!ERICA S.L. .\IGGLOBAL .\IG PROPERTY SERVICES i\L\L\YSL\ C.\SUALTY GLOBAL .\IG SHARED SERVICES CORP.- 23 SERVICES INC IREL\ND BRANCH AIG SOUTH AFRICA .\IG SERVICES LTD AIG T.\IW,\N LATIN .\MERICA INSUR.,\NCE CO., LTD. 24 S.L. AIG VIETNAM P-65 INSURANCE AIGSHARED COl\IPANY LIMITED P-67; P-67-a SERVICES (M) SDN P-68 P-69 25 BHD P-70 .-\IGSK\RED P-71; P-71-a SERVICES CORP- ? 26 IREL\ND BR.,\NCH AIG SOUTH .\FRICA 27 LTD AIGTAIWAN INSUR.,\NCE CO., 28 LTD. AI G VIETN AI\! INSURANCE 29 COl\IPANY LIMITED

DECISION CTA Case No. 9438 Poge 22 of40 AIU INSURANCE AIU INSURANCE COl\fPANY- JAPAN 30 COMPANY- [AP.\N AMERICAN P-147-a P-72 GENE~\L LIFE P-148-a Ai\ffiRIU ..N P-149-a P-73 INSU~\NCE P-74 GENERAL LIFE P-151-c P-75 COMPANY P-76 INSU~\NCE Al\!ERIC\N HOi\IE P-154-a P-77 .\SSURANCE 31 COl\fPANY COMPANY, UAE P-156-c P-78; P-78-a Ac\!ERIC.\N HO.\IE P-157-d P-79; P-79-a Ai\ffiRIC\N HO,\IE ASSU~\NCE JAPAN P-158-e io.\H.\j.\P..\N)- P-159-b P-80; P-80-a ASSURANCE AIG INSU~\NCE P-160-c P-81 NEWZEAL\ND P-161-c 32 COi\fP,\NY, UAE LIMITED P-82; P-82-a ,\i\IERIC\N P-165-d P-83 AMERIC.\N HOME INTERN.\TION.\L P-167-c GROUPKK P-169-c P-84; P-84-a ASSU~\NCE JAPAN P-150-a P-85; P-85-a P-151-a, P-151-b 33 ji\H.-\jAP..-\1'-Ji P-86 P-87; P-87-a AIG INSU~\NCE P-88; P-88-a NEWZEAL\ND P-89 P-90 34 LIMITED P-91; P-91-a AMERIC\N P-93 P-94 INTERNATIONAL P-95 35 GROUPKK // BRANCH OF ..\IG SIGORTA IN GEORGIA R0#979 / CHARTIS EUROPE BRANCH OF .\IG SIGORT.\ IN S.A., GEORGI..\ GEORGI..\ R0#979 CHARTIS 36 BRANCH AZERBAIJ.\N INSU~\NCE CO. CHARTIS CHARTIS CHILE COl\!PANL\ ,\ZERBAIJ ..-'..N SEGUROS GENE~\LES S..\ 37 INSURANCE CO. AIGCYPRUS Lli\!ITED CH.\RTIS CHILE COi\!PANIA SEGUROS 38 GENERALES SA P-198 P-156-a, P-156-b ,\IG CYPRUS 39 LIMITED CHARTIS EUROPE CH.\RTIS EUROPE P-157-a, P-157- S.A - FINL\ND b, P-157-c 40 SA - FINL\ND CHARTIS EUROPE P-158-a, P-158- CHARTIS EUROPE SA- BELGIUM b, P-158-c, P- CHARTIS EUROPE 41 S.\- BELGIUM SA- FRANCE 158-d CHARTIS EUROPE P-159-a CHARTIS EUROPE SA- ITALY P-160-a, P-160-b CH.\RTIS EUROPE P-161-a, P-161-b 42 SA-F~\NCE SA - NETHERL\NDS AIGEUROPE P-163-a CHARTIS EUROPE LIMITED SUCURS.\L EM PORTUGAL P-165-b 43 S..\- ITALY CHARTIS EUROPE S.\- SP.\IN P-167-a, P-167-b CHARTIS EUROPE CH.\RTIS EUROPE S.-\- SWITZERL\ND 44 SA - NETHERL\NDS BRANCH CHARTIS EUROPE CHARTIS EUROPE SA- CZECH REPUBLIC S..\- PORTUG:\L .-\IG EUROPE LIMITED IREL\ND 45 BRANCH CH.\RTIS EUROPE S,\. POL\ND CH.\RTIS EUROPE 46 SA- SP.\IN CHARTIS EUROPE SA - SWITZERL\ND 47 BRANCH CHARTIS EUROPE SA- CZECH 48 REPUBLIC CHARTIS EUROPE 49 SA-IREL\ND CHARTIS EUROPE 50 SA- POLAND CHARTIS EUROPE CH.\RTIS EUROPE P-168-a, P-168- S. \SWEDEN b, P-168-c 51 SA-SWEDEN CH.\RTIS INSU~\NCE HONG P-169-a, P-169-b CH.\RTIS KONG LTD. CH.\RTIS !NSU~-\NCE HONG INSURANCE LTD., 52 KONG LTD. CHARTIS 53 INSU~\NCE LTD.,

DECISION CTA Case No. 9438 Page 23 of40 SRIL\NK\ SRIL\NM CHARTIS CHARTIS K\ZAKHST.\N K\ZAKHSTAN INSURANCE INSURANCE 54 COJ\!PANY COJ\!PA.NY P-96 CHARTIS KENYA CHARTIS KENYA INSURANCE INSURANCE 55 COJ\!PANY LIMITED COMPANY LIMITED P-172-a P-97 CHARTIS MEMSA CHARTIS MEMSA INSURANCE CO. INSUR.\NCE CO LTD. 0:\L\N LTD 01\L\N 56 BR.\NCH BR.\NCH P-98 CHARTIS MEMS.\ CHARTIS MEMSA INSURANCE CO. INSUR.\NCE CO. LTD. QATAR LTD. QATAR 57 BR.\NCH BR.\NCH P-99 CHARTIS NEW CHARTIS NEW HAMPSHIRE HAJ\!PSHIRE INSUR.\NCE CO. INSUR.\NCE CO, 58 P.\KIST.\N BR.\NC P.\KISTAN BRANC P-175-a P-100 CI-L\RTIS NEW CHARTIS NEW HAl\!PSHIRE 1-L\l\IPSHIRE INSURANCE INSUR.\NCE COMPANY, COl\!PANY, 59 BAHRAIN BAHR.\IN P-176-a P-101 CHARTIS NORTH CI-L\RTIS NORTH 60 AMERICA. ,\1\IERIC.\ P-177-a P-102 CI-L\RTIS SIGORT.\ C!-L\RTIS SIGORTA 61 :\.S. .\S P-103 CI-L\RTIS CI-L\RTIS SINGAPORE SINGAPORE P-179-a, P-179- P-104; P- INSUR.\NCE PTE INSUR.\NCE PTE b, P-179-c, P- 104-a; P- 62 LTD LTD 179-d P-179-e 105-b CHARTISUS; CHARTISUS; CI-L\RTIS US C!-L\RTIS US DOl\IESTIC ,\&H; DOJ\IESTIC A&H; CI-L\RTIS US SRV C!-L\RTIS US SRV 63 DEPTS DEPTS P-180-a P-105 CI-L\RTIS C!-L\RTIS 64 UZBEKISTAN UZBEKISTAN P-181-a P-106 P-107; P- 65 CJSCAIG CJSC AIG 107-a GUAM INSUR.\NCE GUAM INSURANCE 66 ADJUSTERS INC. ADJUSTERS INC. P-183-a P-108 INTERCOJ\!PANY AIGTRAVEL CLE.\RING HOUSE 67 ASSIST, INC. NY- TR.W 0270 P-184-a P-109 CI-L\RTIS C!-L\RTIS P-185-a, P-185- INSUR.\NCE INSURANCE b, P-185-c, P- 68 INDONESL\ INDONESIA 185-d P-185-e P-110 LEXINGTON; LEXINGTON INSURANCE P-111; P- 69 LEXINGTON COJ',!PANY P-186-a P-186-b 111-a NATIONAL UNION NATIONAL UNION FIRE INSURANCE FIRE INSUR.\NCE 70 COMPANY COl\!PANY P-187-a P-187-b ICH (fao NEW NEW!-L\1\IPSHIRE HAMSPSHIRE INSUR.\NCE INSUR.\NCE 71 TI-L\IL\ND T!-L\IL\ND) P-188-a P-188-b P-113 PRIVATE CLIENT PRIVATE CLIENT 72 GROUP GROUP P-189-a P-114 UNITED UNITED GU1\RANTY GU.\R.\NTY 73 CORPOR.-\TION __ CORPOR.\TION -- - ? - - ' - - - -P--1-90--a- - - - '----P-115 ----

DECISION .\IG CORP HRNY; P-191-a P-191-b P-116 CTA Case No. 9438 .\IG CORPORATE Page 24 of40 O&S OPERATIONS DEVELOPl\!ENT; ,\MERIC.\N .o\IG INTERNATIONAL INC.,EMPLOYEE 74 GROUP RELATIONS DEPT.; CI-L\RTIS ENTERPRISE D,\TA l\HN.o\GEl\!ENT; GLOB.\L FINANCE O&S To be considered as non-resident foreign corporation doing business outside the Philippines, the entity must be supported at the very least by both SEC Certificate of non-registration of corporation/partnership and Certificates/Articles of foreign incorporation/association/ registration or any other proof of foreign incorporation/association/registration. These two (2) documents are necessary. The SEC's negative certification establishes that the recipient of the service has no registered business in the Philippines (i.e., not engaged in trade or business within the Philippines). On the other hand, the Certificates/Articles of foreign incorporation/association/ registration prove two things: (1) that the recipient of the service is indeed foreign, and (2) it is engaged in business in the country of incorporation/association/registration (i.e., a showing of a continuity of commercial dealings and intention to establish a continuous business). In this regard, the Court cannot give credence or probative value to the printed screenshots of foreign government websites database which can also be easily manipulated, considering that none from the said foreign governments attested to the authenticity of the said websites and as to the registration of the purported petitioner's foreign clients found therein. Hence, out of the Petitioner's seventy-four (74) clients, the following entities cannot be considered as non-resident foreign corporations doing business outside the Philippines, based on the following stated reasons, to wit: a. Without proof of foreign registration and supported only by SEC Certification of Non-Registration of Company: Name of Company Customer's Name per Official SEC Certificate of Receipt Non-Registration AIG APAC HOLDINGS PTE. AIG .\P.\C HOLDINGS PTE. of Company 1 LTD. LTD. (Exhibit No.) 2 AIG EMPLOYEE SERVICES INC. AIG EMPLOYEE SERVICES INC. P-42 AIG EUROPE Lll\!ITED- CI-Lo\RTIS EUROPE SA- P-47 DIREKTION FOR DIREKTION FUR DEUTSCHLAND I 3 DEUTSCHLAND P-49 /1

DECISION CTA Case No. 9438 Page 25 of40 AIG EUROPE LIMITED- AIG EUROPE LIMITED- P-50 4 GREECE GREECE P-51 AIG EUROPE SERVICES P-52 AIG EUROPE SERVICES LIMITED 5 LIMITED CHARTIS GLOB,-\L SERVICES P-53 COMPANY P-54 AIG GLOBAL CLAIMS AIG GLOBAL RECOVERY P-55; P-55-a 6 SERVICES, INC. SERVICES INC/ AIG GLOBAL RECOVERY SERVICES AIG GLOB,\L RECOVERY 7 SERVICES INC AIG GLOBAL REINSURANCE AIG GLOBAL REINSURANCE 8 OPERATIONS OPERATIONS 9 AIG GLOR\L SERVICES INC ,\IG GLOBAL SERVICES INC .\IG INSURANCE COMPANY OF CANAD,\; CHARTIS ,\IG INSUR.,\NCE COMPANY OF INSUR.,\NCE COi\!P,\NY OF 10 C.\N,\DA C.\N.\DA P-58 P-59 11 AIG fAPAN HOLDINGS KK ,\IG fAPAN HOLDINGS KK P-61; P-61-a AIG MALWSL\ INSUR.,\NCE ,\IG 1\L\LWSIA INSURANCE P-63 BERJ-L\D P-64 12 BERI-L\D P-65 13 ,\IG PAPU,\ NEW GUINEA AIG PAPU,\ NEW GUINEA P-68 P-69 AIG PROPERTY CASUALTY AIG PROPERTY C.\SU,-\LTY P-72 P-73 14 GLOBAL SERVICES INC GLOBAL SERVICES INC P-74 P-77 .\IG SERVICES L\TIN AMERICA AIG SERVICES L\TIN ,\MER!C.\ SL SUCURSAL COLOMBIM AIG 15 S.L. SERVICES L\TIN AMERICA S.L. AIG SHARED SERVICES CORP- AIG SHARED SERVICES CORP.- 16 IREL\ND BRANCH IREL\ND BRANCH 17 ,\IG SOUTH AFRICA LTD ,\JG SOUTH ,\FRICA LTD ,\IU INSUR.,\NCE COMP.\NY- AIU INSURANCE COMP,\NY- j,\P.\N 18 J,\P.\N AMERICAN GENERAL LIFE AMERICAN GENER.,\L LIFE INSUR.,o\NCE COi\!PANY 19 INSUR.,\NCE COMPANY Al\!ERICAN HO:\!E ASSURANCE Al\!ERICAN HOI\!E ,o\SSURANCE 20 COI\!PANY, U,\E COI\!PANY, UAE AMERICAN INTERNATIONAL Al\!ERIC.\N INTERNATIONAL 21 GROUPKK GROUPKK BR.,\NCH OF AIG SIGORTA IN GEORGL\ R0#979 / CI-L\RTIS EUROPE S.A, GEORGL\ BR.,\NCH OF AIG SIGORTA IN 22 BR.,\NCH GEORGL\ R0#979 P-78; P-78-a P-79; P-79-a CJ-Lo\RTIS AZERBAIJAN CI-Lo\RTIS AZERBAIJAN P-87; P-87-a 23 INSURANCE CO. INSUR.,\NCE CO. CI-L\RTIS EUROPE SA- ,\JG EUROPE LIMITED 24 PORTUGAL BR.,\NCH SUCURS,\L EM PORTUGAL CJ-L\RTIS EUROPE SA- CI-L\RTIS EUROPE S.\ - 25 SWITZERL\ND BR.,\NCH SWITZERL\ND BR.,-\NCH P-89 P-91; P-91-a CI-L\RTIS EUROPE S.\- AIG EUROPE LIMITED P-95 26 IREL\ND IREL\ND CHARTIS INSUR.,-\NCE LTD., SRI CI-L\RTIS INSUR.,o\NCE LTD., SRI 27 L\NK-\ L\NK\ CI-L\RTIS K\Z,\KHSTAN CI-L\RTIS KAZ,\KHSTAN P-96 28 INSUR.,\NCE COMPANY INSUR.,\NCE COMPANY P-97 I CI-L\RTIS KENY,\ INSUR.,\NCE CI-L-\RTIS KENY,o\ INSURANCE 29 COI\!PANY Lll\liTED COl\!P.\NY LIMITED P-98 CHARTIS l\!El\!SA INSUR.,\NCE CI-L\RTIS l\!EMSA INSUR.,\NCE 30 CO. LTD. OMAN BRANCH CO LTD Ol\L\N BR.,\NCH CI-L'\RTIS l\!El\!S,o\ INSURANCE CI-L\RTIS MEMS,\ INSURANCE P-99 31 CO. LTD. Q,\TAR BR.,-\NCH CO. LTD. QATAR BR.,o\NCH CHARTIS NEW IL\l\!PSHIRE CHARTIS NEW HAl\!PSHIRE P-100 32 INSUR.,-\NCE CO, P.\KISTAN INSUR.,o\NCE CO, PAKIST,\N //

DECISION BRANC CTA Case No. 9438 Page 26 of40 BRANC CHARTIS NEW l-LI.J\!PSHIRE CHARTIS NEW HJ\J\!PSHIRE P-101 INSURo\NCE COJ\!P"\NY. INSURo\NCE COJ\!PANY, P-102 33 BAHRAIN B.\HRAIN P-103 P-106 34 CfL\RTIS NORTH "\MERICA CHJ\RTIS NORTH AMERICA P-107; P-107-a 35 CfL\RTIS SIGORT,\ AS. CfL\RTIS SIGORTA AS P-108 36 CfL\RTIS UZBEKIST"\N CHJ\RTIS UZBEKISTAN P-109 37 CJSC AIG CJSC AIG P-115 ---------------- GU,\M INSURo\NCE ADJUSTERS GUAM INSURANCE ADJUSTERS 38 INC. INC. INTERCOMPANY CLEARING 39 ,\IG TRo\VEL ,\SSIST, INC. HOUSE NY- TRAV 0270 UNITED GU.\Ro\NTY UNITED GUARANTY 40 CORPORo\TION CORPORATION b. Without SEC Certification of Non-Registration of Company and supported only by Consularized Foreign Registration: Name of Company Customer's Name per Official Consularized Receipt Foreign 41 CHARTIS EUROPE SA- POL\ND CfL\RTIS EUROPE SA- POLAND Registration (Exhibit No.) NATIONAL UNION FIRE NATIONAL UNION FIRE 42 INSURo\NCE COi\!P,\NY INSURANCE COMPANY P-167-a, P-167-b P-187-a c. Supported only by SEC Certification of Non-Registration of Company and the name indicated therein is different from petitioner's client name Name of Company Customer's Name per Official Name of Company Exhibit Receipt per SEC Certificate No. AIG BUSINESS AIG BUSINESS PARTNERS of Non- P-44 PARTNERS KABUSHIKI KAISfL-\ Registration of KABUSHIKI P-76 43 KAISfL\ .\IG INSURANCE NEW Companv P-81 ZEAL\ND LIMITED AIG INSURo\NCE AIG BUSINESS NEW ZEAL\ND AIG CYPRUS LIMITED PARTNERS 44 LIMITED KABUSHI KAISHA ,\i\IERIC.\N .\IG CYPRUS HOJ\IE NEW 45 LIJ\l!TED ZEAL\ND (RQ 030) CfL\RTIS CYPRUS d. Supported by SEC Certification of Non-registration of Company and Consularized Foreign Registration but the name indicated in the latter document is different from petitioner's client nam~

DECISION CTA Case No. 9438 SEC Consularized Foreign Certificate Registration Name of Company Customer's Name per of Non- Exhibit Name of the Official Receipt Registration No. Company indicated AIG of Company DEN!VIARK/DANISH AIG (Exh. No.) P-121-a, in the document 46 BR.\NCH DEN!VIARK/DANISH P-121-b, BRANCH P-46 P-121-c AIGEUROPE 47 AIG CLAIMS, INC. DANSK FILIAL AF PRJV"\TE CLIENT ,\IG P-45, P-45-a P-120-a AGEUROPE DENi\L\.RKjD,\NISH P-114 P-189-a LIMITED UNITED 48 GROUP BRANCH KINGDOM CHARTIS US; PRIVATE CLIENT P-105 AMERJCAN CI-L\RTIS US GROUP INTERN"\TIONAL DOMESTIC .\&H; CHARTIS US; P-93 ADJUSTMENT CHARTIS US SRV CI-L\RTIS US COJ\!P,\NY, INC. DOMESTIC A&H; P-83 49 DEPTS CHARTIS US SRV CHARTIS CAPEX, DEPTS P-82; P-82-a INC. CH.\RTIS EUROPE 50 SA-SWEDEN CI-L\RTIS EUROPE P-180-a NHIG HOLDING SA SWEDEN CORP. CI-L\RTIS EUROPE S.\ P-168-a, AIG Europe Limited 51 -BELGIUM CI-L\RTIS EUROPE P-168-b, UK filial i Sverige SA- BELGIUM P-168-c (formerly Chartis CI-L\RTIS EUROPE Europe Limited UK 52 SA - F!NL\ND CHARTIS EUROPE P-158-a, filial i Sverige) SA - FINL\ND P-158-b, P-158-c, AIG Europe Limited P-158-d (Belgium branch) [formerly Chartis -157-a, Europe Limited] P-157-b, P-157-c AIG Europe Limited sivuliike (formerly Chartis Europe Limited sivuliike) e. Supported by SEC Certification of Non-Registration of Company and documents which cannot be considered as valid proof of foreign incorporation/registration Name of Company Customer's Name per Purported Proof of Foreign SEC CI-L\RTIS EUROPE S.\- Official Receip! Incorporation/Registration Certificate of 53 FR.\NCE AMERlCAN HOJ\IE CI-L\RTIS EUROPE S,\- Non- ASSUR.\NCE JAPAN FR.\NCE registration 54 (AH}, ],\PAN .\l\IERICAN HOi\IE of Company. "\SSURANCE JAPAN (.\HA V.PAN) P-159-a P-84; P-84-a P-150-a to P-150-e P-75 f. Supported by SEC Certification of Non-Registration of Company and Consularized Foreign Registration but without English translatiofY

DECISION CTA Case No. 9438 Page 28 of40 Name of Company Customer's Name per Consularized SEC Certificate Official Receipt Foreign of Non- "".IG GLOBAL SERVICES 55 MALAYSIA "".IGGLOBAL Registration Registration of SERVICES Company ">\IG SHARED SERVICES (1\1) 1\L>\L>\YSL-\ P-131-b, P-131- 56 SDNBHD c P-56 AIGGLOBAL CfL>\RTIS CHILE COI\!P.>\NIA SERVICES P-142-a, P-142- P-67; P-67-a 57 SEGUROS GENERALES S.A. 1\L>\L\YSIA b P-80; P-80-a CHARTIS CHILE P-198 COMPANIA SEGUROS GENERALES S.,>\ Thus, only the following clients of Petitioner are considered as non- resident foreign corporation doing business outside the Philippines, to wit: Name of Company Customer's Name per Official Consularized SEC Certificate of Receipt Foreign Non-Registration 58 AIG "".USTR.ALIA LIMITED .\IG AUSTRALIA LIMITED; Registration of Company i\IG EUROPE LIMITED / INTERCOi\!PANY CLEARING (Exhibit:) (Exhibit:) 59 CfL>\R.TIS EUROPE S.A. HOUSE NY-AUS 0106 P-118-a P-43 AIG INSURANCE ,>\IG EUROPE LIMITED HQ P-123-a, COi\!PANY CHINA P-123-b, P-48, P-48-a 60 LIMITED P-123-c P-57; P-57-a 61 AIG KOREA INC. AIG INSUR.".NCE COMP.>\NY P-132-a P-60 "".IG i\!ETROPOLITANA CHINA LIMITED P-135-b CIA DE SEGUROS Y P-62 RE,>\SEGUROS S.A. AIG KOREA INC. P-197 P-70 AIG TAIW,>\N INSUR.\NCE AIG METROPOLITAN CIA DE P-145-a SEGUROS Y REASEGUROS P-71; P-71-a 62 CO., LTD. SA P-85; P-85-a AIGVIETNAM AIG TAIWAN INSURANCE INSURANCE COi\!P,\NY CO., LTD. P-86 P-88; P-88-a 63 LIMITED AIG VIETNAM INSUR.".NCE P-146-a, P-146-b, CfL\RTIS EUROPE S.\- COMPANY LIMITED P-146-c, P-146-d P-90 64 IT,\LY CfL".RTIS EUROPE SA- ITALY P-160-a, P-160-b P-94 P-161-a, P-161-b P-104; P-104-a; P- CfL\RTIS EUROPE SA - CfL".RTIS EUROPE SA- 65 NETHER.L".NDS NETHERLANDS 104-b CHARTIS EUROPE S"\ - CfL>\RTIS EUROPE SA- SP.>\IN P-163-a P-105 66 SPAIN P-110 CfL>\RTIS EUROPE SA- P-165-b P-111; P-111-a CfL>\RTIS EUROPE S.".� CZECH REPUBLIC 67 CZECH REPUBLIC P-169-a, P-169-b ~ CfL\RTIS INSUR.".NCE HONG P-179-a, P-179-b, CfL\RTIS INSURANCE KONG LTD. P-179-c, P-179-d 68 HONG KONG LTD. GL-\RTIS SING.\PORE P-180-a CfL".RTIS SINGAPORE INSUR.\NCE PTE LTD P-185-a, P-185-b, 69 INSUR.\NCE PTE LTD CHARTIS US; CfL\RTIS US P-185-c, P-185-d DOMESTIC .\&H; CfL\RTIS CHARTIS US ; CfL\RTIS US USSRVDEPTS P-186-a DOMESTIC ,\&H; CfL\RTIS INSUR.\NCE 70 CfL\RTIS US SRV DEPTS INDONESL\ CfL\RTIS INSUR.\NCE 71 INDONESL\ LEXINGTON; LEXINGTON INSUR.\NCE COMPANY 72 LEXINGTON

DECISION CTA Case No. 9438 Page 29 of40 NEW I-1.:\MPSHIRE ICH (fao NEW HAMSPSHIRE P-188-a P-113 73 INSURANCE TI-L\IL>\ND INSURANCE THAIUND) P-191-a P-116 AIG CORP HRNY; Al\!ERICAN ">\IG CORPORATE O&S 74 INTERN"\TION"\L GROUP OPE~\TIONS DEVELOPI\!ENT; AIG INC.,El\IPLOYEE RELATIONS DEPT.; CHARTIS ENTERPRISE DATA 1\L\NAGEI\!ENT; GLOBAL FIN.\NCE O&S Anent the second essential element and in relation to the fifth requisite for the granting of input VAT refund, Petitioner presented the Certifications68 of bank inward remittances issued by East West Banking Corp for the period January 1 to December 31, 2014 purportedly showing the remittances of its foreign clients/affiliates. Considering that said Certifications establish the fact of payment ''in acceptable foreign currency and accounted for in accordance with the roles and regulations of the BSP'~69 Petitioner is considered to have complied with the above-stated second essential element, as well as, to the fifth requisite for the grant of the claim for refund. In any event, equally important to consider is that the said foreign currency remittances referred to under Section 108(B)(2) must be duly supported by VAT zero-rated ORs in accordance with Section 113(A)(2), (B) (1 ), (2) (c) and (3) in relation to Section 237 and 238 of the NIRC of 1997, as amended, and implemented by Section 4.113-1(A)(2), B(1) and (2)(c) of RR No. 16-05 which 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 information stated in the said provisions, as quoted earlier. In the instant case, aside from the Certifications of bank inward remittances, Petitioner also presented its Schedule of Zero-Rated Sales70 and the related 0Rs71 purportedly supporting its total declared zero-rated sales/receipts for the CY 2014 of 1"2,086,692,750.89. A scrutiny of the aforesaid documents shows that Petitioner's sales of services to its client-affiliates considered as non-resident foreign corporations doing business outside the Philippines, which are duly supported by VAT zero- rated ORs and certifications of bank inward remittances, amounted to 1"273,388,511.77 (US$6,175,261.30) for CY 2014, detailed as followy 68 Exhibits "P-1164 to P-1168". 69 Refer to Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007. 70 /d. at Note 2, pp. 890 to 911, Exhibits "P~21", "P-22", "P-23", and ''P-24". 71 Exhibits "P-212 to P-1163".

DECISION CTA Case No. 9438 Page 30 of40 COMPANY NAME O.R.NO. DATE AMOUNT AMOUNT INWARD EXHIBIT INPHP INUSD EXHIBIT REMITTANCE 28-l'eb-14 REFERRENCE 24-lan-14 NO. 28-Feb-14 FIRST QUARTER OF CY 2014 17 clan-14 AIG AUSTRALIA 21-h:b-14 LIMITED 2027 28-Mar-14 3,752,352.32 84,485.80 P-627 C203067RBK022514 P-1165 27-lan-14 2,258,369.51 51,802.63 P-230 1'60115094229000 P-1164 AIG EUROPE llP0-1868 27-Jan-14 I.IMI'J'Eill 03-l'eb-14 243,348.75 03-l'cb-14 CIIARTIS EUROPE 23-lan-14 SX llP0-1929 28-Fcb-14 5,479.10 P-291 1'60129094372000 P-1164 ,\IG 14-lan-14 27-lan-14 ME'l'ROPOI.l'J'ANA 21-l'cb-14 21-l'cb-14 CL\ DE SEGUROS 24-Jan-14 14-Mar-14 Y REASEG UROS 02-Jan-14 S.A. 1958 10-lan-14 23,850.45 585.00 P-560 1'60107433775000 1'-1165 07-Fcb-14 1,438,577.86 32,396.55 P-614 05520000491M P-1165 ,\IG VIETNAM 2014 27-l\far-14 INSURANCE 03-l'cb-14 1,503,930.93 S06408503EEE011 1'-1165 498,031.63 5077700085FC 1'-1164 COMPANY 65,740.17 91941000211'C P-1164 505,209.25 9194100021PC P-1164 I.IMITED 2064 66,687.62 33,681.05 P-663 3266200028FC P-1164 11,375.00 P-240 3266200028FC HP0-1878 1'-241 P-1164 1,501.50 P-272 3609300296FC I P-1164 CHAR'J'IS EUROPE llP0-1879 11,375.00 P-273 SA- ITALY llP0-1910 G1440220110101 1,501.50 llP0-1911 1'60220299968000 Cl L\RTIS J�:UROPE 410,331.74 9,389.16 P-226 S,\ - lli'0-1864 824,669.40 18,856.58 P-290 NI�:TIII.:RLANDS llP0-1928 Cl L\RTIS EUROPE 17,985.45 404.95 P-222 0317100013FC P-1164 SA- SPAIN BP0-1860 173,214.60 3,900.00 P-244 1'60122538308000 A P-1164 CIIAR'J'IS EUROPE HI'0-1882 4,864,468.08 109,551.00 P-607 P-1165 SA- CZECH C733224RilK020414 REPU!li.IC 2007 13,868.54 322.00 P-579 P-1165 2007 21,184,781.65 482,995.65 P-638 2014012100089134 P-1165 CIL\R'J'IS P-553 30945493121111565 P-1165 INSURANCE 5,189,000.58 116,883.43 IIONG KONG 3400049FC P-1164 I :I'D. 7,960,931.19 184,756.01 IR-2013- P-1164 P-1165 CIIAR'J'IS 1977 2,549,181.81 58,959.88 P-220 8863600357FC P-1164 SINt;APORI�: 2038 901,426.54 20,296.00 1'-276 INSURANCE IYJ'E 1951 127,484.64 P-660 5687800008 FC I 5,660,407.00 55,870.06 1'-600 1:m BP0-1858 2,481,412.84 1,423,852.49 5689200008FC 62,587' 777.91 68473000301'C LJo:XINGTON C463544RBK032614 INSURANCE 1'60421182700000 COMPANY NEW I lAMPSIliRE llP0-1914 INSURANCE 2061 Tl IAILAND (ICI Q 2000 SECOND QUARTER OF CY 2014 AIG INSURANCE COMPANY CHIN.\ S064161057F001I157 8100161FC I.IMI'J'I.:D 2194 19-lun-14 645,259.52 14,399.90 P-790 1'-1165 05-May-14 262,304.92 5,995.50 P-710 2014041700075920 2111 05-Mav-14 185,327.42 4,095.00 P-708 P-1165 05-May-14 220,851.45 4,936.00 P-709 2014052300080654 2109 30-May-14 215,175.00 4,750.00 P-759 2014052300080625 P-1 165 30-May-14 1,011.00 P-760 2014062000059091 P-1165 2110 09-Jun-14 45,798.30 262.00 P-782 P-1165 09-lun-14 11,556.07 4,920.00 1'-788 2161 05-May-14 218,169.34 3,731.00 P-705 / 30-Jun-14 164,168.38 5,832.00 P-829 AIG TAIWAN 2162 30-Jun-14 254,508.48 1,337.00 P-830 INSURANCE CO., 2186 05-May-14 58,346.69 2,835.00 P-706 LTD. 2192 126,157.50 2106 2233 2234 2107

DECISION CTA Case No. 9438 AIG VIE'lNAM 2108 05-May-14 101,352.75 2,282.00 P-707 506410618175011 P-1165 INSURANCE 2102 25-Apr-14 1,633,955.70 36,046.00 P-701 586 8200106FC COMPANY 2163 30-May-14 1,375,920.64 30,373.34 P-761 P-1165 I.JMITED 2235 30-jun-14 1,136,591.29 25,631.60 P-831 S064147059Ml01I04 P-1165 884001471'C CIIARTIS 2232 INSURANCE 2185 50641771261,\011387 IIONG KONG 2227 3600177FC J.TD. 2091 CII.\RTIS 30-lun-14 21,805,802.36 487,561.45 P-828 0619599001062514 I P-1165 SINGAPORE 09-Jun-14 14,135,149.41 314,331.35 P-781 P-1165 INSURANCE PTE 30-Jun-14 5,882,817.24 132,666.92 P-823 f/60625107144000 22-.\pr-14 128,532.22 P-690 309465512011 P-1165 ];[']) 5,816,717.06 1,211,529.28 P-1165 54,295,929.52 2014062300038110 354409977911 THIRD QUARTER OF CY 2014 .\IG AUSTR,\J.L\ 2276 31-Jul-14 3,744,215.94 84,436.90 P-871 F60728053166000 P-1165 l.JMITED 2342 03-Sep-14 5,567,925.30 126,753.01 P-936 1'60822493045000 P-1165 2236 10-lul-14 5,131,606.65 113,280.50 P-832 1'60702066243000 P-1165 S064178064B801I077 .\JG J�:UROPE 2237 10-Jul-14 380,219.21 8,512.00 P-833 P-1165 HP0-2072 28-Jul-14 1,798,513.77 40,950.00 P-434 7100181FC P-1166 J.IMITI-:D I 8970000063 2293 11-Aug-14 73,990.56 1,708.00 P-888 1951800220FCIS064 P-1165 Cl !ARTIS EUROPE 2323 27-,\ug-14 107,541.28 2,464.00 P-917 219056AE01 P-1165 S..\. 2373 29-Sep-14 44,442.06 1,004.00 P-966 S064234041 19301 P-1165 2244 15-Jul-14 1,011,322.20 23,133.00 P-840 50642680742101 P-1165 ,\JG INSURANCE 2261 23-Jul-14 1,258.00 P-857 1160617003531000 COMPANY CI-IINA 2262 23-jul-14 56,150.38 13,425.20 P-858 P-1165 I.IMITED 2263 23-lul-14 599,462.03 2,508.00 P-859 1160630344437000 2264 23-Jul-14 109,449.12 9,283.70 P-860 P-1165 AIG TAIWAN 2326 29-Aug-14 405,140.67 12,425.00 P-920 1160709163686000 P-1165 INSURANCE CO., 2343 03-Sep-14 546,141.05 5,211.00 P-937 F60826481969000 P-1165 I :J'D. 2351 11-Sep-14 226,704.56 14,201.60 P-945 116082603 7 548000 P-1165 ,\IG Vll-:-tN,\M 2352 11-Sep-14 624,444.35 17,593.80 F60908251870000 P-1165 INSUIL\NCI�: 2357 15-Sep-14 765,418.27 22,928.00 P-946 1160908252304000 P-1165 C<)MPANY 1,002,177.56 1'6091403756000 J.IMITED 2329 29-. \ug-14 P-950 Cl 1.\RTIS INSURANCE 2325 27-Aug-14 420,814.88 9,570.50 P-923 201408260002556 1'-1165 IlONG KONG 2370 29-Sep-14 1688400233FCIS064 2269 23-Jul-14 2,917,436.89 66,730.63 P-919 P-1165 1:m. 2259 19-Jul-14 1,291,364.79 29,390.20 P-963 2330450001 P-1165 2334 30-Aug-14 1,163,608.23 26,663.80 P-865 S0642670D36D01 l'-1165 CIIARTIS 2367 25-Sep-14 4,452,090.03 101,253.12 P-855 S06420312M401 P-1165 SINC;,\PORJ�: 2271 23-Jul-14 3,423,459.43 78,464.15 P-928 C2481110CP071614 P-1165 INSUIL\NCE PTE 3,182,423.72 72,573.76 P-960 P-1165 J.TD 2330 29-, \ug-14 3,852,278.17 88,268.62 l'-867 237323019 P-1165 NI�:W IL\MPSIIIRI; 26538825 INSURANCE 2335 01-Sep-14 6,052,671.13 137,784.52 P-924 20140716000787743 P-1165 Tl IAIJ.AND (ICI-Q 2014082000038500 19,537,626.55 447,277.16 P-929 8554200240JIC P-1165 68,488,638.78 1,559,052.17 FOURTH QUARTER OF CY 2014 .\JG AUSTR,\J.L\ 2573 24-Dcc-14 20,818,194.78 469,098.33 P-1163 F6121405507000 P-1165 J.IMITED 2467 17-Nov-14 17,136,161.44 392,853.09 P-1060 1'61 030290287000 2461 31-0ct-14 P-1054 S06430008E5.\01 P-1165 .\IG f�:UROPE 93,751.20 2,088.00 P-1165 ~

DECISION CTA Case No. 9438 Page 32 of40 I.IMITED I 2503 24-Nov-14 108,590.37 2,422.00 1'-1095 S064325059 1'301 P-1165 2457 29-Ckt-14 273,825.13 6,241.74 P-1050 1'61 027057710000 P-1165 CIIARTIS EUROPE 2566 428,919.42 9,590.00 1'-1156 1'-1165 2449 24-D~.:c-14 1'61218034329000 S.A 2538 45,667,836.52 1,019,598.94 1'-1 042 I'D DTSOOOOO106014 1'-1165 ATCi TNSURANCI�: 2387 24-Dec-14 807,982.23 17,985.91 1'-1128 P-1165 2470 696,166.45 15,957.97 P-980 1110001410290076 P-1165 COMPANY Cl IIN1\ 2495 13-D~.:c-14 371,059.43 8,449.12 P-1 063 2014121000071636 1'-1165 I.IMI'J'ED 445,251.83 10,071.80 P-1087 2014092900094150 1'-1165 2440 07-0ct-14 2014103000071993 ,\](;KOREA INC:. 07-Nov-14 2014112000076517 22-Nov-14 AIGTAIWAN INSURANCE CO., 29-0ct-14 1,168,426.76 26,470.46 1'-1 033 7924000289JS P-1165 J:J'D. AIG \'IE'INAM INSURANCE C<>MPANY LJMI'J'ED 88,016,165.56 1,980,827.36 TOTAL 273,388,511.77 6,175,261.30 As for the third essential element, records show that Petitioner is an ROHQ licensed 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 development72� Pursuant to the service agreements73 entered into between Petitioner and its non-resident foreign client-affiliates doing business outside the Philippines, the services provided by Petitioner for the subject period of claim, included among others, information technology (IT) services, administrative and other certain services to assist the AIG group of companies. These services clearly fall within the scope of "services other than processing, manufacturing or repacking of goods", hence, complying with the third essential element. Lasdy, as to the fourth essential element, out of the aforementioned service agreements, only the following have a provision as to where the services are to be performed by the Petitioner, to wit: COMPANY NAME SERVICE AGREEMENT SERVICE PROJECT Exhibit Statement of Work LOCATION LEXINGTON /LEXINGTON P-186, INSURANCE COMPANY Chartis Technology and Operations Docket, "f\Ianagement Corporation Vol. 6, p. (Philippines) Ground, 61h, 7th and grh Floors, The 2615 Paragon Corporate Center Madrigal Business Park ~ Alabang, Muntinlupa City, Philippines 72 /d. at Note 2, pp. 796 to 798, Exhibits "P-1" to "P-3". 73 Exhibits "P-123" 11 P-132" "P-135" "P-137" "P-145" "P-146" "P-160" 11 P-161" "P-163" 11 P-165" "P- ' I I I I I I I I I 169", "P-179", 11 P-18511 , "P-186", "P-188", and 11 P-152".

DECISION CTA Case No. 9438 Page 33 of40 No other document was presented by Petitioner to prove that the services it rendered to its other non-resident foreign client-affiliates doing business outside the Philippines were performed in the Philippines. In fine, only Petitioner's sales of services to "Lexington/Lexington Insurance Company" in the amount of !'3,450,608.35 (US$79,255.88) qualifies for VAT zero-rating under Section 108(B)(2), in relation to Section 113(A)(2), (B)(1), (2)(c) and (3), both of the NIRC of 1997, as amended. Accordingly, out of the !'2,086,692,750.89 zero-rated sales/receipts declared in Petitioner's 2014 Quarterly VAT Returns, only the amount of P1 0,852,469.06 qualifies for VAT zero-rating, in compliance with the fourth and fifth requisites: COMPANY O.R. AMOUNT AMOUNT INWARD ! NAME NO. REMITTANCE DATE INPHP INUSD EXHIBIT REFERENCE EXHIBIT l'-1164 Zero-rated Sales under Section 108(0), '2) ofthe NIRC of1997, as amended NO. P-1164 LEXINGTON BPO- 10-]an-14 2,549,181.81 58,959.88 P-220 5687800008 PC I l'-1166 INSURi\NCE 1858 07-Feb- 901,426.54 20,296.00 P-276 COMPANY BPO- 5689200008FC 1914 14 6847300030FC Subtotal 3,450,608.35 79,255.88 8970000063 Zero-rated Sales under Section 108(B)(3) ofthe NIRC of1997, as amended AIG Shared Services- Business Processing, BPO- 06-Feb- Inc. 1916 14 7,401,860.71 166,655.35 P-278 TOTAL 10,852,469.06 245,911.23 Having found that Petitioner had VAT zero-rated sales/receipts on!J in the total amount ofP10,852,469.06 for the subject period of claim, there is only a partial compliance with fourth and fifth requisites for the grant of refund or tax credit of input VAT in the instant case. The Court shall then proceed to determine whether Petitioner complied with the remaining requisites pertaining to the input VAT being claimed for refund or issuance of a tax credit certificate Claimed Input VAT Not Transitional Input Taxes The claimed input taxes do not appear to be transitional input taxes, as understood under Section 111 (A) of the NIRC of 1997, as amended, to w i /

DECISION CTA Case No. 9438 Page 34 of40 "SEC. 111. Transitional/ Presumptive Input Tax Credits. - (A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person who elects to be a VAT- registered person shall, subject to the filing of an inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax." Transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisitions of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer.74 Since there is no showing that the claimed input VAT are transitional input VAT, Petitioner has complied with the sixth requisite for the grant of an input VAT refund. Input VAT Being Claimed were Due or Paid In its Quarterly VAT Returns for CY 2014, Petitioner reflected available input VAT in the total amount of .P50,253,294.16, arising from its amortization of input VAT on purchases of capital goods exceeding .P1 million, domestic purchases of goods other than capital goods and domestic purchases of services. Since Petitioner had likewise incurred an output tax due for the same period amounting to .P5,348,324.79, Petitioner's excess input tax amounted only to 1"44,904,969.37, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter CY 2014 (Exhibit 11P-9")15 (Exhibit "P- (Exhibit up. (Exhibit P 11 - 10")76 1PJ)77 12")711 Input Tax Deferred on Capital I' 3,213,881.34 I' 3,062,741.41 79 I' 2,752,398.26 3,528,541.31 3,213,881.34 Goods exceeding Pl ~fillion from Previous Quarter 74 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 158885 and ~ 170680, April 2, 2008. 75 /d. at Note 2, pp. 870-871. 76 /d., pp. 872-873. 77 ld., pp. 874-875. 78 /d., pp. 876-877. 79 The input VAT carried over was lower by 1>19,148.93.

DECISION CTA Case No. 9438 Page 35 of40 Add: Input Tax on Capital Goods 179,825.06 136,315.43 1,150,397.17 1,820,604.46 ! exceeding Pl ~fillion Purchased this 3,081,890.34 2,752,398.26 3,528,541.31 3,287,142.12 Quarter I' 311,816.06 I' 446,658.58 374,254.12 Less: Input Tax on Purchases of 4,851,647.18 4,851,647.18 Capital Goods exceeding Pl ~fillion 1,655,621.41 332,205.86 497,498.59 1,649,376.28 deferred for the succeeding period 12,320,419.12 11,218,322.86 ~\mortization of Input Tax on 1'14,287 ,856.59 1'11,997,187 .30 422,514.93 583,310.82 2,993,653.02 8,418,766.01 13,652,756.87 45,610,264.86 Capital Goods exceeding 1'1 l\lillion 1,685,439.94 1,149,423.43 9,215,535.06 14,733,566.28 50,253,294.16 1'12,602,416.65 1'10,847, 763.87 1,300,766.92 Add� Current Input Tax on: 7,914,768.14 1,212,694.50 5,348,324.79 Domestic Purchases of Goods 13,520,871.78 44,904,969.37 Other than Capital Goods Domestic Purchase of Services Total Available Input Tax Lus: Output Tax Due Excess Input Tax Out of the excess input VAT of P44,904,969.37 for CY 2014, Petitioner is claiming refund only in the amount of P43,912,521.20 alleging that the same is attributable to its zero-rated sales of services for the same period. In support of its claim for refund/issuance of tax credit certificate, Petitioner submitted its Summary List of Purchase Transaction ReliefB0 and the related suppliers' official receipts and invoices, and other documents81 , which were all examined by the ICPA. The results of the ICPA's verification of Petitioner's reported input VAT of P50,253,294.16 are summarized as follows: 82 Findings Input VAT Reference to Exhibit !CPA Report P-1169 to P-1869 -Exhibit P- (except for Exhibits under Annex 0) 194 P-1870 to P-1874 Total Input VAT with No Noted Exceptions I' 44,215,699.38 Annex H P-1875 to P-1915 With Noted Exceptions: 15,544.39 Annex I P-1916 to P-1996 1. Purchase of service supported by V~>\T OR which did not 1,133,647.80 Anne~J P-1997 show the VAT amount separately 3,478,882.99 P-1998 to P-1999 2. Invoices/ official receipts which are out of AnnexK P-2000 to P-2001 period 3,188.57 P-1201 to P-1204; P- 139,615.72 ~-\.nnex L 1295 to P-1208; P- 3. Invalid supporting documents 50,425.20 Annex M 1360 to P-1362; P- 4. No original copies of the supporting AnnexN 1410 to P-1419; P- 1466 to P-1471; P- documents examined / 5. Incorrect TIN 6. No TIN indicated 7. Purchase of services duly supported by VAT offtcial receipts but with alteration on the TIN of the Company 374,624.42 Annex 0 80 Exhibits "P-2002 to P-2013". 81 Exhibits "P-1169 to P-2001". 82 Jd. at Note 2, pp. 566 to 567, Exhibit "P-194".

DECISION 1513 to P1514; P-1568 CTA Case No. 9438 to P-1583; P-1647 to Page 36 of40 P-1652; P-1698 toP- 1755; P-1812; and P- 8. No supporting documents Subtotal 1837 Total Input VAT per Returns as accounted for by the !CPA 841,665.65 Annex P 6,037,594.74 1'50,253,294.1283 As correcdy found by the ICPA, the claimed input tax due or paid of 1>6,037,594.74 should be disallowed for not being properly substantiated by VAT invoices (for domestic purchases of goods) and official receipts (for domestic purchases of services) as prescribed under Sections 11 O(A) and 113(A) and (B), 237 and 238 of the NIRC of 1997, as amended, in relation to Sections 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-05, as amended. Furthermore, Petitioner's claimed input tax paid in the amount of 1>960,387.95 related to its domestic purchases of services, should likewise be disallowed because the supporting official receipts do not show the VAT component separately from the purchase amount, which is in violation of the earlier quoted Section 113(B)(2)(a) of the NIRC of 1997, as amended, as implemented by Section 4.113-1(B)(2)(a) ofRR No. 16-05, as amended. Below is the breakdown of the additional input VAT disallowance ofJ>960,387.95: Supplier's Name Document Type Document Input Exhibit No. RUBICON PRINT AND GR..\PHICS INC. and Number Date VAT P-1172 :VL-\RSMAN DRYSDALE TR..-\VEL, INC. OR 7814 I' 1,178.64 P-1225 :\L-\RSMAN DRYSDALE TR..-\VEL, INC. OR 354246 10-]an-14 P-1226 NEXUS TECHNOLOGIES INC. OR 354245 10-Jan-14 4,267.99 P-1231 FUJI XEROX PHILIPPINES, INC. OR 49421 10-Jan-14 467.70 P-1260 FUJI XEROX PHILIPPINES, INC. OR199411 12-Feb-14 P-1261 I :\L-\RSlvL-\N DRYSDALE TR..-\VEL, INC. OR199410 14-Feb-14 341,966.94 P-1262 l\L\RSlvL-\N DRYSDALE TR..-\VEL, INC. OR356191 07-Feb-14 903.44 P-1263 l\L-\RSl\L-\N DRYSDALE TR..-\VEL, INC. OR 356190 07-Feb-14 P-1264 i\L\RS:\L-\N DRYSDALE TR..-\VEL, INC. OR 356192 07-Feb-14 2,471.66 P-1265 l\L-\RSi\L-\N DRYSDALE TR..-\VEL, INC. OR 356620 07-Feb-14 4,730.94 P-1266 l\L\RSlvL'\.N DRYSDALE TR..-\VEL, INC. OR 356622 21-Feb-14 P-1266 MARSi\L'\.N DRYSDALE TR..-\VEL, INC. OR 356622 21-Feb-14 540.00 P-1267 RG l\IEDITRON INC OR 356621 21-Feb-14 2,169.01 P-1301 INNOVE COMMUNIC.\TIONS INC. OR05042 21-Feb-14 P-1309 INNOVE CO!\!l\IUNIC.-\TIONS INC. OR 411475 13-l\lar-14 108.00 P-1310 COLL'\.BERA SOLUTIONS PRIV,-\TE OR 412166 10-l\lar-14 8,685.61 LIMITED 14-l\lar-14 P-1354 FUJI XEROX PHILIPPINES, INC. OR 0581 160.43 P-1355 FUJI XEROX PHILIPPINES, INC. OR 204987 08-Apr-14 4,860.00 P-1356 COLL\BER..-\ SOLUTIONS PRIV"-\TE OR 204988 25-i\pr-14 34,821.43 LIMITED 25-Apr-14 15,388.82 P-1403 PRIME TECHNOLOGY SPECIALISTS INC OR 0624 15,221.49 P-1404 OR 8104 30-May-14 16-May-14 13,046.40 ~ 1,836.86 2,196.45 5,097.60 10,418.81 83 With minor difference of !>.04 as compared to the reported amount of !>50,253,294.16.

DECISION CTA Case No. 9438 Page 37 of40 JOE RILEY & ASSOCL\TES INC. OR 0034 11-Jun-14 123.195.46 P-1445 OR 9586 23-Jun-14 141,428.57 P-1458 WVC DEVELOPMENT CORPO~\TION OR 211978 27-Jun-14 P-1459 OR 209127 06-Jun-14 3,514.88 P-1460 FUJI XEROX PHILIPPINES, INC. OR 211979 27-Jun-14 1,836.86 P-1461 OR211979 25-lun-14 2,506.17 P-1461 FU]l XEROX PHILIPPINES, INC. OR 362959 24-Jun-14 P-1462 OR 362187 09-Jun-14 326.31 P-1463 FUJI XEROX PHILIPPINES, INC. 1,404.00 OR 0691 31-Jul-14 8,403.19 P-1487 FUJI XEROX PHILIPPINES, INC. OR 0042 04-Jul-14 P-1507 OR 363643 14-]ul-14 33,052.80 P-1508 ~L\RSJ\L\N DRYSDALE~\VEL, INC. OR 214036 08-Aue-14 37,404.10 P-1565 OR0738 26-Sep-14 P-1643 ~L-\RSJ\L-\N DRYSDALE~\ VEL, INC. OR 221752 10-0ct-14 972.00 P-1692 COLL\.BE~\ SOLUTIONS PRIV,\TE OR 221753 10-0ct-14 801.23 P-1693 LIMITED OR 0751 31-0ct-14 58,602.85 P-1694 OR 227921 23-Dec-14 1,836.86 P-1804 JOE RILEY & ASSOCIATES INC. OR 227920 23-Dec-14 845.60 P-1805 56,059.78 ~L\RSJ\L\N DRYSDALE T~\VEL, INC. OR 1541 19-Dec-14 4,352.04 P-1806 OR 372308 05-Dec-14 4,014.23 P-1807 FUJI XEROX PHILIPPINES, INC. OR 372308 05-Dec-14 P-1807 OR 372310 05-Dec-14 3,582.00 P-1808 P30PLE4U, INC. 2,224.80 (222.00) FUJI XEROX PHILIPPINES, INC. 3,708.00 P960,387.95 FUJI XEROX PHILIPPINES, INC. P30PLE4U, INC. FUJI XEROX PHILIPPINES, INC. FUJI XEROX PHILIPPINES, INC. GOLDEN ARIES AIRE SYSTEM INCORPO~\TED l\L\RSMAN DRYSDALE T~\VEL, INC. ~L-\RSJ\L\N DRYSDALE T~\VEL, INC. ~L-\RS~L-\N DRYSDALE~VEL, INC. -- ---------------------- TOTAL Thus, based on the foregoing, Petitioner complied with the seventh requisite, i.e., the input VAT was due or paid, but only to the extent of P43,255,311.47, computed as follows: Total Input VAT per Quarterly VAT Returns for CY 2014 p 50,253,294.16 Less: Disallowances p 6,037,594.74 Per !CPA Report 960,387.95 Per this Court's further verification Total Disallowances p 13,338,755.65 Valid Input VAT Due or Paid 1'43,255,311.47 Input VAT Not Applied Against Any Output Tax During and in the Succeeding Quarters is Only P37,906,986.68 Deducting the output tax liability for 2014 of Petitioner from these available input VAT yields an excess input VAT due or paid amounting to P37,906,986.68, as shown below: Valid Input VAT Due or Paid I' 43,255,311.47 Less: Output VAT Due for 2014 5,348,324. 79 /

DECISION j P37 ,906,986.68 CTA Case No. 9438 Page 38 of40 I Excess Valid Input VAT Due or Paid Although the said amount of P37,906,986.68 formed of the input VAT claim of P43,912,521.20 carried-over by Petitioner in its succeeding Quarterly VAT Returns,84 the same remained unutilized until it was deducted as 'VAT Refund/TCC Claimed" in its Quarterly VAT Return for the first quarter of CY 2016.85 Therefore, the subject claim no longer formed part of the excess input VAT of PS5,476,003.61 86 as of the end of the first quarter of CY 2016. Hence, Petitioner is, in effect, deemed to have fulfilled the eighth requisite for the refund/tax credit of input VAT. Determined Excess Input Taxes Due or Paid Must Still be Allocated to the Valid Zero-rated or Effectively Zero-rated Sales/Receipts to Ascertain the Refundable Amount To reiterate, the ninth reqwstte is to the effect that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be direcdy and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. As stated earlier, for the CY 2014, Petitioner's reported total sales/receipts consisted of both zero-rated sales/receipts and VATables sales/receipts. However, considering that Petitioner's input VAT cannot be direcdy identified with specific sales, We shall allocate the excess valid input VAT ofP37,906,986.68 proportionately on the basis of the volume of its sales, as follows: Valid Zero-Rated Sales/Receipts Per this Court's Verification I' 10,852,469.06 Divided by the Total Sales/Receipts per 2014 Quarterly 'VAT Returns 2,131,262,124.17 Multjplied by Valid Excess Input VAT Due or Pajd X 37,906,986.68 Excess Valid Input VAT Due or Paid Allocated to Zero-Rated Sales/Receipts I' 193,023.84 L._ - -� -� -- - - -- -� - - - - - Such being the case, Petitioner has refundable excess input VAT in the amount of P193,023.84 which can be attributed to its valid zero-rated sales/receipts amounting to P10,852,469.06/ 84 Exhibits "P-2015 to P-2018" (1st to 4th Quarters of CY 2015), and Exhibit P-2019 (1st Quarter of CY 2016). 85 Exhibit "P-2019", Line 23D. 86 Exhibit "P-2019", Line 29.

DECISION CTA Case No. 9438 Page 39 of40 WHEREFORE, in light of the foregoing discussions, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, Respondent is ORDERED to refund or to issue a tax credit certificate in favor of Petitioner in the amount of P193,023.84, representing the latter's unutilized excess input VAT attributable to its zero-rated sales/receipts for the four (4) quarters ofCY 2014. SO ORDERED. 0!::-r <.._ 0 ~ ...-) � MA. BELEN M. RINGPIS-LIBAN Auodate JUJ�tite WE CONCUR: ERL~.UY Associate Justice 'ustice 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. ERL~P' .UY AJJodate juJtia Chairpmon

DECISION CTA Case No. 9438 Page 40 of40 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 �