Sitel Philippine Corp. v. Commissioner of Internal Revenue

FIRST DIVISION [C.T.A. CASE NO. 10076. February 21, 2022.] SITEL PHILIPPINE CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION MANAHAN , J p : This is a Petition for Review filed by Sitel Philippines Corporation (Sitel) against respondent Commissioner of Internal Revenue (CIR) on April 26, 2019, seeking the refund of the amount of P13,878,079.64, allegedly representing its unutilized input value-added tax (VAT) arising from petitioner's domestic purchases of goods (other than capital goods) and services and purchases of capital goods attributable to zero-rated transactions for the 4th quarter of taxable year (TY) 2016. 1 THE PARTIES Petitioner Sitel is a corporation organized and existing under the laws of the Philippines, with principal place of business at the Ground Floor, One Julia Vargas Building, Ortigas Home Depot Complex, One Julia Vargas Avenue, Barangay Ugong, Pasig City. 2 It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification No. (TIN) 208-780-708-000, as a taxpayer engaged in the business of call center services, per Certificate of Registration OCN 8RC0000065770 issued by the BIR's Large Taxpayer Service. 3 It is also registered with the Philippine Economic Zone Authority (PEZA) as an Information Technology (IT) Enterprise with various sites located at the Baguio Economic Zone, Wynsum Corporate Plaza, One Julia Vargas Building, Eastwood City Cyberpark, Robinsons Cyberpark, Eton Cyberpod Corinthian, Robinsons Luisita, and SM Baguio Cyberzone Building. 4 Petitioner's Puerto Princesa, Palawan site is not registered with PEZA; 5 but the same is registered with the BIR as a "Facility." 6 Respondent CIR is the government official charged with the administration and enforcement of national internal revenue laws and who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. THE FACTS On December 28, 2018, petitioner filed with the VAT Credit Audit Division (VCAD) of the BIR an administrative claim [letter dated December 19, 2018 and Application for Tax Credits/Refunds (BIR Form No. 1914)] 7 seeking the refund of unutilized input VAT attributable to alleged zero-rated transactions for the 4th quarter of taxable year of 2016, in the aggregate amount of P13,878,079.64. 8 AHDacC Thereafter, on March 28, 2019, petitioner, through its counsel, received the letter dated March 21, 2019 from the Office of the Deputy Commissioner-Operations Group of the BIR, informing petitioner that its administrative claim in the aggregate amount of P13,878,079.64 has been denied. 9 Petitioner then filed the present Petition for Review on April 26, 2019. 10 On June 24, 2019, respondent filed his Answer , 11 to the Petition for Review. Respondent transmitted the BIR Records of the case on June 28, 2019. 12 The Pre-Trial Conference was set and held on August 22, 2019. 13 Prior thereto, FT respondent's Pre-Trial Brief was filed on August 16, 2019, 14 while the Pre-Trial Brief for petitioner was posted on August 19, 2019. 15 On September 6, 2019, the parties submitted their Joint Stipulation of Facts and Issues. 16 A Pre-Trial Order dated October 14, 2019 was issued by the Court, 17 deeming the termination of the Pre-Trial. Trial for the case then ensued. Petitioner presented its documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Mr. Ronald P. Portula, 18 petitioner's Senior Tax Analyst; and (2) Ms. Madonna Mia S. Dayego, 19 the Court-commissioned Independent Certified Public Accountant (ICPA). 20 The ICPA's Report was submitted on November 7, 2019. 21 Petitioner filed its Formal Offer of Evidence on December 16, 2019. 22 In the Resolution dated February 11, 2020, 23 the Court resolved to admit petitioner's exhibits, except for: (1) Exhibit "P-19", for failure to submit the duly marked exhibit; and, (2) Exhibit "P-41", for failure to comply with the requisites for admissibility as secondary evidence. On March 3, 2020, petitioner filed a Motion for Reconsideration (of the Resolution dated February 11, 2020), 24 praying that the Court admit Exhibit "P-19" as part of petitioner's evidence for the purpose for which it was offered. In the Resolution dated September 1, 2020, 25 the Court granted petitioner's Motion for Reconsideration , and admitted the said exhibit. Respondent likewise presented his documentary and testimonial evidence. As for the latter, he proffered the testimony of Revenue Officer (RO) Dexter C. Bustillos. 26 On October 22, 2020, respondent's Formal Offer of Evidence was filed. 27 Petitioner filed its Comment [on Respondent's Formal Offer of Evidence dated October 22, 2020] on November 3, 2020. 28 In the Resolution dated December 2, 2020, 29 the Court admitted all of respondent's exhibits, and ordered the parties to file their respective memoranda within thirty (30) days from receipt thereof. The Memorandum for Petitioner was filed on January 7, 2021; 30 and respondent's Memorandum was filed on January 11, 2021. 31 IDSEAH The present case was submitted for decision on February 3, 2021. 32 THE ISSUE STIPULATED BY THE PARTIES The parties agreed to adopt the following solitary issue, and we quote: "WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OF ITS UNUTILIZED INPUT VAT ARISING FROM DOMESTIC PURCHASES OF GOODS (OTHER THAN CAPITAL GOODS) AND SERVICES AND PURCHASES OF CAPITAL GOODS ATTRIBUTABLE TO ZERO-RATED SALES FOR THE 4TH QUARTER OF TAXABLE YEAR 2016 IN THE AMOUNT OF P13,878,079.64" 33 Petitioner's arguments: Petitioner anchors its claim for refund on the provisions of Section 112 (A) of the 1997 National Internal Revenue Code (NIRC) of 1997, as amended. It alleges that it is a VAT-registered entity and generates zero-rated sales from services rendered to Sitel Operating Corporation, a non-resident foreign corporation organized and existing under the laws of the United States and rendered by its Puerto Princesa, Palawan Facility (Palawan Facility). Petitioner further submits that during the 4th quarter of TY 2016, it paid input taxes on its domestic purchases of goods (other than capital goods) and services and purchases of capital goods in the total amount of Php93,081,532.51 and out of this amount, Php57,279,308.91 is directly attributable to zero-rated sales. Out of the Php57,279,308.91, only the amount of Php13,878,079.64 is being claimed as refund by petitioner because it pertains to the input VAT attributable to its zero-rated sales rendered within its Palawan Facility which is outside the PEZA economic zone. Petitioner alleges that the services were paid for in acceptable foreign currency and in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) and that it filed its administrative claim for refund within two (2) years after the close of the quarter when such sales were made. HCaDIS Respondent's counter-arguments: Respondent asserts that petitioner is not entitled to the claim of input VAT refund primarily due to its failure to comply with the requirements provided under Section 112 (A) of the 1997 NIRC, as amended. Moreover, an evaluation of the documents submitted by the petitioner in the administrative level disclosed the following findings and observations: Unallowable input VAT in the aggregate amount of Php413,995.45 were not properly supported by corresponding sales invoices and official receipts in conformance with Sections 110, 113, and 237 of the 1997 NIRC, as amended. Unsupported amortized portion of deferred input VAT amounting to Php707,814.10 for the period claim. Unallowable input VAT of Php206,707.07 for failure to ascertain that the related purchases was delivered to the site which generated zero-rated sales of services. Attached as 'Annex A' in the letter denial is the schedule of purchases of goods not identifiable as delivered is the schedule of purchases of goods not identifiable as delivered to Palawan Site. Respondent also finds the registration of the Palawan site of petitioner as a "Facility" not in accord with the pertinent administrative regulations and maintains that it should have been registered as a "Branch" because sales transactions/activities were being regularly conducted thereat. Being registered as a "Facility" rather than as a "Branch," petitioner avers that all sales transactions conducted therein cannot be considered as zero-rated sales as contemplated by Section 112 (A) of the 1997 NIRC, as amended. THE RULING OF THE COURT We deny the Petition for Review. Section 112 of the 1997 NIRC, as amended by RA No. 10963 34 [otherwise known as the Tax Reform for Acceleration and Inclusion Act (TRAIN law)], provides as follows: "SEC. 112. Refunds or Tax Credits of Input Tax . (A) Zero-Rated or Effectively Zero-Rated Sales . Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however , That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further , That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of 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 or 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 notably between his zero-rated and non-zero-rated sales. xxx xxx xxx (C) Period within which Refund of Input Taxes shall be Made . In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided , That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial." AHCETa Pursuant to the above provision, certain requisites must be complied with by the taxpayer-applicant 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 filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made; 35 2. that in case of full or partial denial of the refund claim rendered within a period of ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with this Court within thirty (30) days from receipt of the decision. 36 With reference to the taxpayer's registration with the BIR: 3. the taxpayer is a VAT-registered person; 37 In relation to the taxpayer's output VAT: 4. the taxpayer is engaged in zero-rated or effectively zero-rated sales; 38 5. for zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; 39 As regards the taxpayer's input VAT being refunded: 6. the input taxes are not transitional input taxes; 40 7. the input taxes are due or paid; 41 8. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; 42 and 9. the input taxes have not been applied against output taxes during and in the succeeding quarters. 43 Relative thereto, it must be emphasized that in cases filed before this Court, which are litigated de novo , party-litigants must prove every minute aspect of their case. 44 Thus, it behooves petitioner to show compliance with each of the foregoing requisites. As a corollary, the absence of any of the said requisites is a valid ground to deny the refund claim. To emphasize, the first requisite pertains to the filing of a claim for tax refund or tax credit of input VAT before the BIR, within two (2) years from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the 4th quarter of taxable year 2016. Counting two (2) years from the close of the said quarter, the pertinent last day for the filing of an administrative claim is December 31, 2018. Considering that petitioner's administrative claim for refund [letter dated December 19, 2018 and Application for Tax Credits/Refunds (BIR Form No. 1914)] covering the said period, was filed with the BIR's VCAD on December 28, 2018, 45 the same was timely made. ScHADI The second requisite requires that in case of full or partial denial of the refund claim rendered within a period of ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with this Court within thirty (30) days from receipt of the decision. Notably, respondent is deemed to have acted on petitioner's administrative claim within the said ninety (90)-day period from December 28, 2018, when the BIR, through OIC-Assistant Commissioner Ma. Luisa I. Belen, issued the letter dated March 21, 2019, 46 denying petitioner's administrative claim. 47 Considering that petitioner received the said Letter dated March 21, 2019 on March 28, 2019, 48 the former had until April 27, 2019 within which to appeal the same before this Court. Since the present judicial claim was filed on April 26, 2019, 49 the same is likewise timely made. Such being the case, petitioner fulfilled both the first and second requisites. We now proceed to the substantive aspects of the claim for refund filed by petitioner. Petitioner contends that since its Palawan Facility does not conduct transactions independently of its Main Office, such site was properly registered as a "facility"; and as such, petitioner's transactions generated through said facility, should be accounted for as sales of the Main Office. Moreover, petitioner points out that the date of registration of the Palawan facility is irrelevant for purposes of the refund claim; that the Main Office was registered with the BIR as early as December 14, 2000; and that at most, any seeming "late registration" of the Palawan Facility should only attract administrative penalties. The Court disagrees with petitioner's contention. DACcIH Section 236 of the 1997 NIRC, as amended, reads, in part, as follows: "SEC. 236. Registration Requirements . (A) Requirements . Every person subject to any internal revenue tax shall register once with the appropriate Revenue District Officer: (1) Within ten (10) days from date of employment, or (2) On or before the commencement of business , or (3) Before payment of any tax due, or (4) Upon filing of a return, statement or declaration as required in this Code. The registration shall contain the taxpayer's name, style, place of residence, business, and such other information as may be required by the Commissioner in the form prescribed therefor. Provided, that the Commissioner shall simplify the requirements of self-employed individuals and/or professionals. A person maintaining a head office, branch or facility shall register with the Revenue District Officer having jurisdiction over the head office, branch or facility. For purposes of this Section, the term 'facility' may include but not limited to sales outlets, places of production, warehouses or storage places. (B) Annual Registration Fee . An annual registration fee in the amount of Five hundred pesos (P500) for every separate or distinct establishment or place of business, including facility types where sales transactions occur, shall be paid upon registration and every year thereafter on or before the last day of January : x x x The registration fee shall be paid to an authorized agent back located within the revenue district, or to the Revenue Collection Officer, or duly authorized Treasurer of the city or municipality where each place of business or branch is registered. xxx xxx xxx" (Emphases supplied) Based on the foregoing provision, it is clear that every person subject to any internal revenue tax, within a certain period of time, is mandated to register with the BIR, and if such person maintains a head office, a branch, or facility, such registration shall be made with the BIR office having jurisdiction over said branch or facility. Moreover, said person or entity is required to pay an annual registration fee in the amount of P500.00 for every separate or distinct establishment or place of business, which specifically includes " facility types where sales transactions occur ." Thus, on the basis of Section 236 of the 1997 NIRC, as amended, a facility is required to be registered with the BIR, and in case sales transactions occur therein, the annual registration fee of P500.00 must be paid. Implementing the said Section 236 of the 1997 NIRC, as amended, for VAT purposes, Section 9.236-1 (a) of Revenue Regulations (RR) No. 16-2005 50 provides as follows: "SEC. 9.236-1. Registration of VAT Taxpayers . (a) In general . Any person who, in the course of trade or business, sells, barters, exchanges goods or properties, or engaged in the sale of services subject to VAT imposed in Secs. 106 and 108 of the Tax Code shall register with the appropriate RDO using appropriate BIR forms and pay an annual registration fee in the amount of Five Hundred Pesos (P500) using BIR Form No. 0605 for every separate and distinct establishment or place of business (save a warehouse without sale transactions) before the start of such business and every year thereafter on or before the 31st day of January. 'Separate or distinct establishment' shall mean any branch or facility where sales transactions occur. HSCATc 'Branch' means a fixed establishment in a locality which conducts sales operation of the business as an extension of the principal office. 'Principal place of business' refers to the place where the head or main office is located as appearing in the corporation's Articles of Incorporation. In the case of an individual, the principal place of business shall be the place where the head or main office is located and where the books of accounts are kept. 'Warehouse' means the place or premises where the inventory of goods for sale are kept and from which such goods are withdrawn for delivery to customers, dealers, or persons acting in behalf of the business. Any person who maintains a head or main office and branches in different places shall register with the RDO which has jurisdiction over the place wherein the main or head office or branch is located . However, the registration fee shall be paid to any accredited bank in the Revenue District where the head office or branch is registered provided that in areas where there are not accredited banks, the same shall be paid to the RDO, collection agent, or duly authorized treasurer of the municipality where each place of business or branch is situated. Each VAT-registered person shall be assigned only one TIN. The branch shall use the 9-digit TIN of the Head Office plus a 3-digit Branch Code. 'VAT-registered person' refers to any person registered in accordance with this section ." (Emphases supplied) On the basis thereof, for VAT purposes, it is explicit that any person who, in the course of trade or business, sells, barters, exchanges goods or properties, or engaged in the sale of services subject to VAT under the law must register with the appropriate Revenue District Office (RDO) for every separate and distinct establishment or place of business, save in the case of warehouses without sale transactions. Notably, the phrase "separate or distinct establishment" has been defined to mean "any branch or facility where sales transaction occur"; and the term branch" as "a fixed establishment in a locality which conducts sales operations of the business as an extension of the principal office." Correspondingly, a facility is akin to a branch if it conducts sales transactions or operations of the business as an extension of the principal office. Relative thereto, it must be pointed out that it is mandated that any person who maintains a head or main office and branches (as defined) in different places must register with the RDO having jurisdiction over the place where the main or head office or branch is located, and must pay the corresponding annual registration fee of P500.00. Furthermore, it is also noteworthy that each VAT-registered person shall be assigned only one TIN; and that the branch shall use the 9-digit TIN of the head office, plus a 3-digit branch code. More importantly, the term "VAT-registered person" is likewise defined to mean "any person registered in accordance with" the above-quoted provision. Conversely, if the concerned person is not registered in accordance with Section 9.236-1 of RR No. 16-2005, such person cannot be treated as a "VAT-registered person." Moreover, consistent with Section 236 of the 1997 NIRC, as amended, and Section 9.236-1 of RR No. 16-2005, pertinent portions of RR No. 7-2012 51 provide as follows: "SECTION 3. DEFINITION OF TERMS. For purposes of these Regulations, the following words and/or phrases shall be defined as follows: xxx xxx xxx 3. 'Taxpayer Identification Number (TIN)' shall pertain to the system-generated reference index number issued and assigned by the BIR to each and every person registered in its database. x x x. The TIN comprises of a 9 to 13 digit numeric code where the first 9 digits is the TIN proper and the last 4 digits is the branch code . The branch code digits may be increased depending on future systems enhancements and policy declarations of the Commissioner of Internal Revenue (CIR). IDTSEH xxx xxx xxx 6. 'Head Office (HO)' refers to the declared specific or identifiable principal place/head office of business as stated in the Articles of Incorporation/Articles of Partnership/Articles of Cooperation/DTI Certificate of Registration, as the case may be, or, in the absence thereof, the place where the complete books of accounts are kept. x x x 7. 'Branch' means a separate or distinct establishment or place of business where sales transactions are conducted independently from the HO. For purposes of these Regulations, branch shall include the following : i. Sales outlet or establishment situated in another location/address other than at the HO; ii. Facility with sales activity ; xxx xxx xxx 8. 'Facility' may include but not limited to place of production, showroom, warehouse, storage place, garage, bus terminal, or real property for lease with no sales activity. A facility shall be registered as a branch whenever sales transactions/activities are conducted thereat . Registration of the 'Facility' with no sales activity is not subject to payment of Annual Registration Fee (ARF). xxx xxx xxx SECTION 6. PRESCRIBED PERIODS TO COMPLETE PRIMARY REGISTRATION Every person subject to any internal revenue tax to be filed/paid periodically shall complete its registration with the BIR as follows: 1. On or before the commencement of business Self-employed individuals, estates and trusts, corporations and their branches , if any: Commencement of business shall be reckoned as defined in Section 3(6) hereof. A person shall be considered to have violated this provision when he/ it proceeded to this stage after the lapse of thirty (30) days from the issuance of Mayor's Permit/PTR by the concerned LGU, or COR issued by the SEC or the date of its first sales transaction prior to its registration . xxx xxx xxx" (Emphases supplied) Based on the foregoing provisions, it is explicit that the term "branch" includes a "(f)acility with sales activity," and that "(a) facility shall be registered as a branch whenever sales transactions/activities are conducted thereat." Moreover, it is likewise clear that the registration of a branch shall be made on or before the commencement of business, and such rule is considered to have been violated by the taxpayer when the latter proceeded to such a state after the lapse of thirty (30) days from, inter alia , the date of its first sales transaction prior to its registration. Anent the TIN of a branch, it now has to have an additional four (4) digits representing the branch code, 52 unlike in the earlier quoted Section 9.236-1 (a) of RR No. 16-2005 which only required three (3) additional digits, for the said branch code. Clearly, applying the foregoing provisions in this case, petitioner has not complied with the foregoing provisions, specifically as regards its Palawan Facility. The records show that petitioner's Palawan Facility (in Puerto Princesa) was not yet registered at the time of the period of the subject refund claim ( i.e. , the 4th quarter of taxable year 2016), and yet it was able to generate sales of call center services therein to Sitel Operation Corporation in the same period, in the aggregate amount of US8408,504.82 (equivalent to P20,083,296.82). 53 Since its Palawan Facility generates sales transactions, this Court rules that petitioner should have registered the same as a branch with the BIR before the commencement or start of its business and paid the corresponding annual registration fee of P500.00, in accordance with the foregoing provisions, specifically Section 9.236-1 (a) of RR No. 16-2005. The fact that petitioner was able to obtain a Certification of Registration of Facility (OCN: 8RC0001131729E) 54 is of no moment. This is so because the same was issued only on August 9, 2017, and thus, it is apparent that the issuance thereof is already after the 4th quarter of taxable year 2016, when the subject sales were made, contrary to the afore-quoted provisions regarding the requirement of prior BIR registration. More importantly, notwithstanding such late registration, the said Palawan Facility was not properly registered with the BIR. In the said Certificate of Registration of Facility, 55 it is clearly indicated that "No Sales Transactions are conducted in this Facility, otherwise, it shall be registered as a branch office." In addition, it is noteworthy that the TIN indicated in the same Certification of Registration of Facility does not bear an additional four (4) digits in the TIN, which should represent the branch code. These are indicia that the same Palawan Facility was not registered with the BIR as a branch, but simply registered as a "facility," i.e. , with no sales activity. The records show that petitioner generated sales for call center services during the subject period. Thus, petitioner should have registered its Palawan Facility as a branch with the BIR. Clearly, petitioner failed to do so as required under Section 236 of the 1997 NIRC, as amended; Section 9.236-1 (a) of RR No. 10-2005, and the pertinent provisions of RR No. 7-2012. Thus, this Court finds that petitioner cannot be considered as a "VAT-registered person," for failure to conform with the registration requirements in accordance with, and pursuant to, Section 9.236-1 (a) of RR No. 16-2005, both during the 4th quarter of 2016 and even thereafter. As such, petitioner cannot be considered to have complied with the third requisite to successfully obtain a credit/refund of input VAT. TAacHE In any event, as regards petitioner's contention that the seeming "late registration" of the Palawan Facility should only attract administrative penalties, we find this to be without merit. Section 258 of the 1997 NIRC, as amended, provides as follows: "SEC. 258. Unlawful Pursuit of Business . Any person who carries on any business for which an annual registration fee is imposed without paying the tax as required by law shall, upon conviction for each act or omission, be punished by a fine of not less than Five Thousand pesos (P5,000) but not more than Twenty Thousand pesos (P20,000) and suffer imprisonment of not less than six (6) months but not more than two (2) years : x x x." (Emphases supplied) Based on the foregoing provision, the non-payment of the annual registration fee on time, may subject the concerned taxpayer to criminal liability, with the imposition of a fine ranging from P5,000 to P20,000, and imprisonment ranging from six (6) months to two (2) years. Thus, there can be no merit in the contention of petitioner that any seeming late registration of its Palawan Facility should only attract administrative penalties. The Court also finds that petitioner failed to comply with the fourth requisite which requires that the taxpayer should be engaged in zero-rated or effectively zero-rated sales. Petitioner claims that during the 4th quarter of TY 2016, the call center services rendered to its non-resident foreign affiliates/clients are subject to zero percent (0%) VAT, pursuant to Section 108 (B) of the 1997 NIRC, as amended, and we quote: "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties . xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate . The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate : (1) Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines which goods are subsequently 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) ;" (Emphases supplied) 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 0%, to wit: 1) The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed; 56 2) The services fall under any of the categories under Section 108 (B) (2), 57 or simply, the services rendered should be other than "processing, manufacturing or repacking goods"; 58 3) The services must be performed in the Philippines 59 by a VAT-registered person; and HDICSa 4) The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules. 60 In a decision involving the same petitioner, the Supreme Court categorically ruled that to fall within the purview of Section 108 (B) (2) of the 1997 NIRC, as amended, "it is not enough that the recipient of the services be proven to be a foreign corporation, rather, it must be specifically proven to be a non-resident foreign corporation." 61 In order to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both a Certification of Non-Registration of Corporation/Partnership issued by the Philippine Securities and Exchange Commission (SEC), and proof of incorporation/registration in a foreign country ( e.g. , Articles/Certificate of Incorporation/Registration and/or Tax Residence Certificate). The first document establishes that the recipient of the service has no registered business in the Philippines, and that it is not engaged in trade or business within the Philippines; while the second document proves that the said recipient of the service is indeed foreign. The said documents have been consistently required by this Court, for purposes of the said first essential element. In fact, in Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte. Ltd. , 62 the Supreme Court affirmed the necessity of presenting the said documents in this wise: "For purposes of zero-rating under Section 108(B)(2) of the Tax Code, the claimant must establish the two components of a client's NRFC 63 status, viz. : (1) that their client was established under the laws of a country not the Philippines or, simply, is not a domestic corporation; and (2) that it is not engaged in trade or business in the Philippines. To be sure, there must be sufficient proof of both of these components: showing not only that the clients are foreign corporations, but also are not doing business in the Philippines. HcDSaT xxx xxx xxx To recall, the CTA found that the SEC Certification of Non-Registration of Company and Authenticated Articles of Association and/or Certificates of Registration/Good Standing/Incorporation sufficiently established the NRFC status of 11 DKS's affiliates clients. The Court upholds these findings. The Court accords the CTA's factual findings with utmost respect, if not finality, because the Court recognizes that it has necessarily developed an expertise on tax matters. Significantly, both the CTA Division and CTA En Banc gave credence to the aforementioned documents as sufficient proof of NRFC status. The Court shall not disturb its findings without any showing of grave abuse of discretion considering that the members of the tax court are in the best position to analyze the documents presented by the parties. In any case, after a judicious review of the records, the Court still do not find any reason to deviate from the court a quo 's findings. To the Court's mind, the SEC Certifications of Non-Registration show that these affiliates are foreign corporations. On the other hand, the articles of association/certificates of incorporation stating that these affiliates are registered to operate in their respective home countries, outside the Philippines are prima facie evidence that their clients are not engaged in trade or business in the Philippines ." (Emphases supplied) Based on its Quarterly VAT Return for the 4th quarter of 2016, petitioner declared that its zero-rated sales therefor is in the aggregate amount of P372,874,273.94. 64 The ICPU report 65 found that the said amount is composed of sales by petitioner of call center services to its affiliates, namely: 1) Sitel Operating Corporation; 2) Sitel Teleservices Canada, Inc.; 3) Sitel Europe Limited; 4) Sitel UK Limited; and 5) Sitel Australia Pty Limited. However, out of the foregoing entities, only Sitel Operating Corporation may be considered as a non-resident foreign corporation doing business outside the Philippines, by virtue of the Certification of Non-Registration of Company dated March 21, 2018 issued by the SEC, 66 and proof of incorporation/registration in a foreign country, particularly in the State of Delaware, United States of America. 67 Correspondingly, at this juncture, it must already be stated that the sales of call center services to the other affiliates of petitioner may not be accorded VAT zero-rating under Section 108 (B) (2) of the 1997 NIRC, as amended. With regard to the second essential element, petitioner presented the Amended and Restated Services Agreement with Sitel Operating Corporation, 68 and the Confirmation Agreements. 69 Based thereon, the scope of services to be rendered by petitioner to Sitel Operating Corporation consists of Customer Care, Client Retention, Technical Support, Collection Services, Item Processing, or Outbound Call Services. Apparently, the said services are not in the same category as "processing, manufacturing or repacking goods," hence, the second essential element was satisfied, insofar as the services to Sitel Operating Corporation are concerned. Nonetheless, petitioner failed to comply with the third essential element. For the purpose thereof, petitioner points to its SEC Certificates, BIR Registration, and the Services Agreements it entered into with Sitel Operating Corporation. However, said documents are wanting of any indication that the subject services were performed in the Philippines. The said SEC Certificates and BIR Registration merely establish petitioner's existence and the fact of registration under Philippine laws. Anent the said Services Agreements, nothing has been stipulated therein as to where the said services are to be performed. In any case, even granting that this Court can simply presume that the subject services were performed in the Philippines, petitioner still cannot be considered as having complied with the said third essential element, simply because it cannot be treated as a "VAT-registered person," as it failed to register with the BIR its Palawan Facility in accordance with, and pursuant to, Section 9.236-1 (a) of RR No. 16-2005, as earlier discussed. ASTcaE In other words, petitioner has fallen short in establishing that its sales of call center services qualify for VAT zero-rating under Section 108 (B) (2) of the NIRC of 1997, as amended. Apropos , it must be emphasized that it is only when the sales of a VAT-registered person are zero-rated or effectively zero-rated that it may have the option of applying for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. 70 Consequently, considering this Court's findings that petitioner is not a VAT-registered person and that its sales of call center services are not subject to VAT zero-rating, it becomes unnecessary to look into petitioner's compliance with the remaining requisites to successfully obtain a credit/refund of input VAT, pursuant to Section 112 of the 1997 NIRC, as amended. Actions for tax refund or credit, as in the present case, are in the nature of tax exemptions. As such, they are regarded as derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund. 71 The pieces of evidence presented entitling a taxpayer to an exemption are also strictissimi scrutinized and must be duly proven. 72 Hence, an applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements. 73 Unfortunately for petitioner, it has failed to prove such entitlement. WHEREFORE , in light of the foregoing considerations, the Petition for Review is DENIED for lack of merit. SO ORDERED. (SGD.) CATHERINE T. MANAHAN Associate Justice Roman G. del Rosario, P.J. and Marian Ivy F. Reyes-Fajardo, J. , concur. Footnotes 1. Statement of the Case, Pre-Trial Order dated October 14, 2019, Docket Vol. I, p. 583. 2. Par. 1, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI), Docket Vol. I, p. 498; Exhibits "P-1" to "P-1-3", Docket Vol. II, pp. 774 to 848. 3. Exhibit "P-2", Docket Vol. II, p. 849. 4. Exhibits "P-34" to "P-34-3", Docket Vol. II, pp. 1070 to 1079. 5. Par. 3, Stipulation of Facts, JSFI, Docket Vol. I, p. 499. 6. Exhibit "P-29", Docket Vol. II, p. 1008. 7. Exhibits "P-25" (including sub-markings) to "P-26", Docket Vol. II, pp. 994 to 1003. 8. Par. 4, Stipulation of Facts, JSFI, Docket Vol. I, p. 499. 9. Par. 5, Stipulation of Facts, JSFI, Docket Vol. I, p. 499; Refer also to Exhibit "P-27", Docket, pp. 1004 to 1005. 10. Docket Volume I, pp. 10 to 31. 11. Docket Volume I, pp. 83 to 91. 12. Compliance dated June 28, 2019, Docket Vol. I, pp. 93 to 95. 13. Notice of Pre-Trial Conference dated June 28, 2019, Docket Vol. I, pp. 97 to 98; Minutes of the hearing held on, and Order dated, August 22, 2019, Docket Vol. I, pp. 456 to 459, and 461 to 462, respectively. 14. Docket Vol. I, pp. 410 to 412. 15. Docket Vol. I, pp. 466 to 481. 16. Docket Vol. I, pp. 498 to 510. 17. Docket Vol. I, pp. 583 to 594. 18. Exhibit "P-43", Docket Vol. I, pp. 110 to 138; Minutes of the hearing held on, and Order dated, October 8, 2019, Docket Vol. I, pp. 571 to 573, and 575 to 576, respectively. 19. Exhibit "P-46", Docket Vol. II, pp. 712 to 716; Minutes of the hearing held on, and Order dated, November 21, 2019, Docket Vol. II, pp. 718 to 723. 20. Oath of Commission dated October 8, 2019 Docket Vol. I, p. 574; Minutes of the hearing held on, and Order dated, October 8, 2019, Docket Vol. I, pp. 571 to 573, and 575 to 576, respectively. 21. Docket Vol. I, pp. 597 to 704. 22. Docket Vol. II, pp. 728 to 773. 23. Docket Vol. II, pp. 1114 to 1116. 24. Docket Vol. II, pp. 1118 to 1123. 25. Docket Vol. II, pp. 1143 to 1145. 26. Exhibit "R-4", Docket Vol. I, pp. 418 to 423; Minutes of the hearing held on, and Order dated, October 20, 2020, Docket Vol. II, pp. 1146 to 1149. 27. Docket Vol. II, pp. 1154 to 1157. 28. Docket Vol. II, pp. 1160 to 1161. 29. Docket Vol. II, pp. 1166 to 1167. 30. Docket Vol. II, pp. 1168 to 1198. 31. Docket Vol. II, pp. 1200 to 1211. 32. Resolution dated February 3, 2021, Docket Vol. II, p. 1214. 33. Issue, JSFI, Docket Vol. I, p. 499. 34. AN ACT AMENDING SECTIONS 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, AND 288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING SECTIONS 35, 62, AND 89; ALL UNDER REPUBLIC ACT 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES. 35. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 166732, 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. vs. Commissioner of Internal Revenue , G.R. No. 182364, August 3, 2010. 36. Based on TRAIN Law provision. 37. 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. vs. Commissioner of Internal Revenue , supra . 38. Id. 39. Id. 40. Id. 41. Id. 42. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue , supra ; and San Roque Power Corporation vs. Commissioner of Internal Revenue , supra . 43. 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. vs. Commissioner of Internal Revenue , supra . 44. Edison (Bataan) Cogeneration Corporation vs. Commissioner of Internal Revenue, et seq. , G.R. Nos. 201665 and 201668, August 30, 2017; Commissioner of Internal Revenue vs. Philippine National Bank , G.R. No. 180290, September 29, 2014; Commissioner of Internal Revenue vs. United Salvage and Towage (Phils.), Inc. , G.R. No. 197515, July 2, 2014; Dizon vs. Court of Tax Appeals, et al. , G.R. No. 140944, April 30, 2008; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue , G.R. No. 145526, March 16, 2007; and Commissioner of Internal Revenue vs. Manila Mining Corporation , G.R. No. 153204, August 31, 2005. 45. Exhibits "P-25" (including sub-markings) to "P-26", Docket Vol. II, pp. 994 to 1003. 46. The 90th day from December 28, 2018 is March 28, 2019. 47. Exhibit "P-27", Docket Vol. II, pp. 1004 to 1005. 48. Par. 5, Stipulation of Facts, JSFI, Docket Vol. I, p. 499; Refer also to Exhibit "P-27", Docket Vol. II, pp. 1004 to 1005. 49. Docket Vol. I, pp. 10 to 31. 50. SUBJECT: Consolidated Value-Added Tax Regulations of 2005. 51. SUBJECT: Amended Consolidated Revenue Regulations on Primary Registration, Updates, and Cancellation. 52. Revenue Regulations (RR) No. 7-2012 dated April 2, 2012. 53. Refer to Exhibits "P-53", "P-54", and "P-55", Docket Vol. I, pp. 639 to 644. 54. Exhibit "P-29", Docket Vol. II, p. 1008. 55. Exhibit "P-29", Docket Vol. II, p. 1008. 56. Sitel Philippines Corporation (Formerly Clientlogic Phil., 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, 2012. 57. Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch) , G.R. No. 152609, June 29, 2005. 58. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , G.R. No. 153205, January 22, 2007. 59. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , supra ; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch) , G.R. No. 152609, June 29, 2005. 60. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra ; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra . 61. Sitel Philippines Corporation vs. CIR , G.R. No. 201326, February 8, 2017. 62. G.R. No. 234445, July 15, 2020. 63. That is, "Nonresident foreign corporation." 64. Exhibit "P-7", Docket Vol. II, pp. 861 to 862. 65. Refer to Exhibits "P-53", "P-54", and "P-55", Docket Vol. I, pp. 639 to 644. 66. Exhibit "P-17", BIR Records, p. 229. 67. Exhibit "P-15", BIR Records, pp. 96 to 99; Exhibit "P-16", BIR Records, p. 124. 68. Exhibit "P-13", Docket Vol. II, pp. 921 to 926. 69. Exhibits "P-13-1" and "P-13-2" Docket Vol. II, pp. 929 and 940. 70. Coca-Cola Bottlers Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 222428, July 19, 2018. 71. Commissioner of Internal Revenue vs. S.C. Johnson & Son, Inc. , G.R. No. 127105, June 25, 1999. 72. Kepco Philippines Corporation v. Commissioner of Internal Revenue , G.R. No. 179961, January 31, 2011 citing Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue , G.R. No. 159490, February 18, 2008. 73. Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 183531, March 25, 2015 citing J.R.A. Philippines, Inc. v. CIR , G.R. No. 171307, August 28, 2013.