Deutsche Knowledge Services Pte., Ltd. v. Commissioner of Internal Revenue

SPECIAL SECOND DIVISION [C.T.A. CASE NO. 9496. February 12, 2019.] DEUTSCHE KNOWLEDGE SERVICES PTE.,LTD. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION CASTAEDA, JR. , J p : THE CASE This is a Petition for Review 1 filed on November 21, 2016 by Deutsche Knowledge Services Pte.,Ltd. to seek the refund or issuance of tax credit certificate (TCC) in the amount of P27,065,518.44, allegedly representing its excess and unutilized input value-added tax (VAT) attributable to zero-rated sales for the second (2nd) quarter of calendar year (CY) 2014. HTcADC THE FACTS Petitioner Deutsche Knowledge Services Pte.,Ltd. is established as a regional operating headquarters (ROHQ) in the Philippines of a multinational company organized and existing under and by virtue of the laws of Singapore, with registered office address at One Raffles Quay, #17-10 South Tower, Singapore 048583. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer, with Taxpayer Identification No. (TIN) 238-763-115-000. 2 Petitioner is licensed by the Securities and Exchange Commission (SEC) to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 3 CAIHTE On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue 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 BIR National Office Building, Agham Road, Diliman, Quezon City. In the 2nd quarter of CY 2014, petitioner claims to have rendered services in the Philippines to persons engaged in businesses conducted outside the Philippines, the payments for which were made in Euro and other acceptable foreign currency and accounted for in accordance with the rules and regulations of Bangko Sentral ng Pilipinas (BSP). 4 Petitioner filed its original VAT Return for the 2nd quarter of CY 2014 with the BIR through electronic filing and payment system (eFPS) on July 21, 2014, 5 alleging that it accumulated excess input tax in the total amount of P27,178,784.99. And out of this total amount, P27,065,518.44 is purportedly attributable to its zero-rated sales, which remained unutilized and/or unapplied against its output VAT liability. 6 aScITE On June 24, 2016, petitioner filed with the BIR Large Taxpayers Regular Audit Division 3 (LTRAD 3) an application for tax credit/refund (BIR Form No. 1914) of its excess and unutilized input VAT for the 2nd quarter of CY 2014 in the amount of P27,065,518.44. 7 There being no action taken by respondent on petitioner's administrative claim for refund, petitioner filed the present Petition for Review before the Court on November 21, 2016. Respondent filed his Answer 8 on December 6, 2016, and interposed the following special and affirmative defenses: " SPECIAL AND AFFIRMATIVE DEFENSES 4. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau. 5. The amount of P27,065,518.44 allegedly representing excess and unutilized input VAT on alleged purchases of goods and services attributable to zero-rated sales for the 2nd quarter of calendar year 2014, was not properly documented. 6. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit. DETACa 7. Petitioner must show that it has complied with the provisions of Section 229 of the NIRC of 1997 on the prescriptive period for claiming tax refund/credit. 8. There is no record of petitioner ever submitting complete documents to substantiate its administrative claim for refund. Such is a requirement, otherwise, the administrative body will have sufficient reason to deny the claim. As held by the Honorable Supreme Court in the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526, 16 March 2007 : xxx xxx xxx The implementing rule for these complete documents required by law is RMO No. 53-98. Annex B-1 of said RMO lists all the required documents as follows: HEITAD xxx xxx xxx Far from complying with the checklist of requirements, petitioner merely stated that it submitted complete documents in support of its administrative claim for refund. This is not a claim for erroneously or illegally collected taxes where petitioner has the discretion of choosing the evidence it deems fit to prove its case. This is a claim for excess but legally collected, unutilized input taxes. It does not have to prove its case because the law already acknowledges it is entitled to refund. Thus, it merely has to substantiate the export sales and the excess/unutilized amount of input taxes attributable to the said export sales. Hence, petitioner's failure to comply with the duly mandated legal requirements in such claims for refund/tax credit warranted the denial by inaction of the administrative claim. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of the government for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people (Mactan Cebu International Airport Authority vs. Marcos, 261 SCRA 667, 690) .Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that claims for refund are required to be done within certain time frames. In the instant petition, the failure of petitioner to comply with such periods is fatal to its cause. aDSIHc Moreover, petitioner's failure to submit documents supporting its claim for refund makes its administrative claim for refund pro-forma .This pro-forma administrative claim should not be taken as proper compliance with the requirements of the law that an administrative claim for refund should have been filed prior to the institution of a judicial claim for refund. Thus, without a validly and duly filed administrative claim for refund, the Honorable Court is without jurisdiction to entertain the Petition for Review. Petitioner's failure to comply with a condition precedent prior to the institution of its petition for review makes it dismissible for absence of jurisdiction on the part of the Honorable Court. The claimant has the burden of proof to establish the factual basis of his claim for tax credit or refund. After all tax refunds, like tax exemptions, are construed strictly against the taxpayer (Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459; Commissioner of Internal Revenue vs. Tokyo Shipping Co.,Ltd.,244 SCRA 332, both cited in Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5392 promulgated October 30, 1998) . Partaking of the nature of exemptions, claims for refund are strictly construed against the claimant and cannot be allowed unless granted in the most explicit and categorical language (Sps. Aguilar vs. Commissioner of Internal Revenue, et al.,CA G.R. SP No. 16432, March 30, 1999) .Being in the nature of tax exemptions, these claims are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the claimant and liberally in favor of the taxing authority (Commissioner of Internal Revenue vs. Procter and Gamble Philippines Manufacturing Corporation, 204 SCRA 377) . ATICcS Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211) ." Respondent filed his Pre-Trial Brief 9 on December 20, 2016, while petitioner's Pre-Trial Brief 10 was filed on January 27, 2017. The pre-trial conference was held on February 2, 2017. 11 The parties filed their Joint Stipulation of Facts and Issues 12 on March 9, 2017, which the Court approved in its Pre-Trial Order 13 dated March 20, 2017. Petitioner presented Ms. Rachel Concepcion 14 and Mr. Emmanuel Y. Mendoza, 15 the Court-commissioned Independent Certified Public Accountant (ICPA),as its witnesses. On July 17, 2017, petitioner filed its Formal Offer of Evidence. 16 Meanwhile, respondent's counsel manifested that the case has no report of investigation and upon motion, the parties were granted a period of thirty (30) days within which to file their respective memoranda. 17 The Court declared the case submitted for decision as of March 6, 2018, 18 considering respondent's Memorandum 19 filed on February 15, 2018 and petitioner's Memorandum 20 filed on March 2, 2018. Hence, this decision. THE ISSUES The parties submitted the following issues 21 for the Court's resolution: Whether or not petitioner is entitled to its claim for refund of or issuance of TCC for excess or unutilized input VAT in the amount of P27,065,518.44 for the 2nd quarter of CY 2014. ETHIDa The main issue may be broken down into the following sub-issues: A. Whether or not petitioner incurred input VAT on its purchases of goods and services attributable to zero-rated sales for the 2nd quarter of CY 2014. B. Whether or not petitioner had zero-rated sales during the 2nd quarter of CY 2014, the consideration for which were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. C. Whether or not the input VAT incurred by petitioner for the 2nd quarter of CY 2014 is duly supported by VAT invoices and official receipts. D. Whether or not the input VAT incurred by petitioner for the 2nd quarter of CY 2014 amounting to P27,065,518.44 was applied against any output VAT or carried over to succeeding taxable periods. TIADCc E. Whether or not petitioner's administrative and judicial claims for input VAT refund were filed within the periods prescribed under the Tax Code. DISCUSSION Pertinent to the resolution of the present case are the provisions of Sections 112 (A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, which provide: "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 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. cSEDTC xxx xxx xxx (C) Period within which Refund or Tax Credit of Input Taxes shall be Made . In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one-hundred-twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." Pursuant to the above-quoted provision, in order to be entitled to a refund or tax credit of unutilized input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied: AIDSTE 1. that the taxpayer is VAT-registered; 2. that the claim for refund was filed within the prescriptive period; 3. that there must be zero-rated or effectively zero-rated sales; 4. that input taxes were incurred or paid; 5. that such input taxes are attributable to zero-rated or effectively zero-rated sales; and 6. that the input taxes were not applied against any output VAT liability. Petitioner is a VAT- registered entity It is undisputed that petitioner is a VAT-registered taxpayer, with Taxpayer Identification No. 238-763-115-000 and BIR Certificate of Registration No. OCN 9RC0000270209. 22 Petitioner's administrative and judicial claims were timely filed Pursuant to Section 112 (A) of NIRC of 1997, as amended, the application for refund or tax credit of unutilized excess input VAT must be filed within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. SDAaTC The present claim covers the second quarter of CY 2014, which closed on June 30, 2014. Counting two years from the said date, petitioner had until June 30, 2016, within which to file its administrative claim for refund or tax credit. Thus, petitioner's administrative claim for the said quarter was seasonably filed on June 24, 2016. As to the timeliness of petitioner's judicial claim, Section 112 (C) of the NIRC of 1997, as amended, provides that the Commissioner of Internal Revenue (CIR) has one hundred twenty (120) days from the date of submission of the complete documents in support of the application for refund or tax credit certificate within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the Court of Tax Appeals within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the Court of Tax Appeals within 30 days. Accordingly, from filing of petitioner's administrative claim on June 24, 2016, respondent had 120 days or until October 22, 2016 to decide on petitioner's claim. Since respondent failed to act on the said claim, petitioner had until November 21, 2016, the last day of the 30-day period, within which to file its judicial claim. Clearly, petitioner likewise timely filed its judicial claim via Petition for Review on November 21, 2016. AaCTcI Petitioner had zero-rated sales during the second quarter of CY 2014 With regard to the third requisite, i.e. , the existence of zero-rated sales, petitioner claims that it rendered services to non-resident entities not engaged in trade or business in the Philippines, the payments for which were made in Euro and other acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. As such, these sales are subject to zero percent (0%) VAT pursuant to Section 108 (B) (2) of the NIRC of 1997, as amended, which states: "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties . xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate . The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently 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); acEHCD (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);" In the case of Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , 23 the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108 (B) (2) of the NIRC of 1997, as amended, the following requisites must be satisfied: 1. the services must be other than processing, manufacturing or repacking of goods; 2. the payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and EcTCAD 3. the recipient of such services is doing business outside the Philippines. Petitioner is licensed by the Securities and Exchange Commission to do business as a regional operating headquarters (ROHQ) in the Philippines, pursuant to the Omnibus Investments Code of 1987, as amended by Republic Act (RA) No. 8756, and its implementing rules and regulations, particularly, 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 development; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 24 Such services are not in the same category as "processing, manufacturing or repacking of goods." Clearly, petitioner complied with the first requisite. SDHTEC In compliance with the third requisite, petitioner presented the following documents to prove that its clients/affiliates are non-resident foreign corporations doing business outside the Philippines: 1. SEC Certifications of Non-Registration of Company; 25 2. IntraGroup Service Agreements; 26 3. Company Registration Documents (Certificate of Registration/Certificate of Incorporation/Association); 27 4. AMInet Company Profile Fact Sheets; 28 and 5. Deutsche Bank Comprehensive List of Shareholdings 2013. 29 However, said documents are insufficient to prove that petitioner's client is a non-resident foreign corporation doing business outside the Philippines. The Certificates of Registration/Foreign Incorporation/Association as well as the List of Shareholdings only prove that the named entities therein were incorporated/organized/domiciled abroad. However, they do not establish that such entities are not doing business in the Philippines. The SEC Certificates of Non-Registration show that the named entities therein are not registered corporations/partnerships in the Philippines. However, it does not necessarily follow that when an entity is not registered here, it is also a non-resident foreign corporations doing business outside the Philippines. HSAcaE Likewise, the Service Agreements only show the names and addresses of petitioner's clients to whom it renders services, but the same do not establish that such clients are non-resident foreign corporations doing business outside the Philippines. In the case of Sitel Philippines Corporation (formerly Clientlogic Phils., Inc.) v. Commissioner of Internal Revenue , 30 the Supreme Court held that while Sitel's documentary evidence, which included Certifications issued by the Securities and Exchange Commission and Agreements between Sitel and its foreign clients, may have established that Sitel rendered services to foreign corporations and received payment therefor through inward remittances, the said documents failed to specifically prove that such foreign clients were doing business outside the Philippines or have a continuity of commercial dealings outside the Philippines. Meanwhile, the Court cannot give credence to the purported foreign business registration print-outs retrieved from the AMInet database, which is a database set up by Deutsche Bank Group. 31 Said documents are not sufficient to establish the fact that the service recipients are non-resident foreign corporations doing business outside the Philippines, as they may be considered self-serving and can be easily manipulated to favor petitioner in view of its affinity with the entity that maintains or keeps the said database. In addition, the business registration documents attached to their counterpart AMInet Company Profile Facts Sheets are not duly authenticated. AScHCD The following table shows whether petitioner complied with the third requisite as it presented the admitted SEC Certificate of Non-Registration and Certificates of Registration/Foreign Incorporation/Association for each of the recipients of the services rendered by petitioner: SEC Certification of Non-Registration (Exhibit) Authenticated Company Registration (Exhibit) DB Consorzio S. Cons. a.r.l. P-5 NONE DB Energy Trading LLC P-5.1 NONE DB International (Asia) Limited P-5.2 NONE DB Services New Jersey, Inc. P-5.3 NONE DBOI Global Services Private Limited P-5.4 NONE DBOI Global Services UK Limited P-5.5 NONE Deutsche Asia Pacific Holdings Pte. Ltd. P-5.6 P-7 Deutsche Asset Management Korea Company Limited P-5.7 NONE Deutsche Bank (China) Co. Ltd.,Shanghai Branch P-5.8 NONE Deutsche Bank (Malaysia) Berhad P-5.9 P-7.1 Deutsche Bank (Suisse) SA P-5.10 NONE Deutsche Bank Aktiengesselschaft Asia Pacific Head Office P-5.11 P-7.2 Deutsche Bank Aktiengesselschaft, Filiale Amsterdam P-5.12 NONE Deutsche Bank Aktiengesselschaft, Filiale Bangkok P-5.13 NONE Deutsche Bank Aktiengesselschaft, Filiale Brussel P-5.14 NONE Deutsche Bank Aktiengesselschaft, Filiale Cayman Islands P-5.15 NONE Deutsche Bank Aktiengesselschaft, Filiale Dubai (DIFC) P-5.16 NONE Deutsche Bank Aktiengesselschaft, Filiale Ho-Chi-Min P-5.17 NONE Deutsche Bank Aktiengesselschaft, Filiale Hong Kong P-5.18 P-7.3 Deutsche Bank Aktiengesselschaft, Filiale Jakarta P-5.19 NONE Deutsche Bank Aktiengesselschaft, Filiale Johannesburg P-5.20 NONE Deutsche Bank Aktiengesselschaft, Filiale Labuan P-5.21 NONE Deutsche Bank Aktiengesselschaft, Filiale London P-5.22 P-7.11 Deutsche Bank Aktiengesselschaft, Filiale Mumbai P-5.23 NONE Deutsche Bank Aktiengesselschaft, Filiale New York P-5.24 P-7.4 Deutsche Bank Aktiengesselschaft, Filiale Paris P-5.25 NONE Deutsche Bank Aktiengesselschaft, Filiale Prague P-5.26 NONE Deutsche Bank Aktiengesselschaft, Filiale Seoul P-5.27 P-7.5 Deutsche Bank Aktiengesselschaft, Filiale Singapur P-5.28 P-7.6 Deutsche Bank Aktiengesselschaft, Filiale Taipei P-5.29 NONE Deutsche Bank Aktiengesselschaft, Filiale Wein P-5.30 NONE Deutsche Bank Aktiengesselschaft, Filiale Zurich P-5.31 NONE Deutsche Bank Aktiengesselschaft, Inlandsbank P-5.32 P-7.7 Deutsche Bank Luxembourg S.A. P-5.33 NONE Deutsche Bank Netherland N.V. P-5.34 NONE Deutsche Bank PGK AG P-5.35 NONE Deutsche Bank Securities, Inc. P-5.36 P-7.8 Deutsche Bank Societa per Azioni P-5.37 NONE Deutsche Bank Trust Company Americas P-5.38 NONE Deutsche Bank Company Delaware P-5.39 NONE Deutsche Bank Trust Corporation P-5.40 NONE Deutsche Bank Sociedad Anonima Espaola P-5.41 NONE Deutsche Group Services Pty. Limited P-5.42 P-7.9 Deutsche Investment Management Americas, Inc. P-5.43 NONE Deutsche Securities, Inc. P-5.44 P-7.10 Deutsche Securities Korea Co. P-5.45 NONE Deutsche Trustees Malaysia Berhad P-5.46 NONE DWS Holding and Service GmbH P-5.47 NONE DWS Investment S.A. P-5.48 NONE OOO "Deutsche Bank" P-5.49 NONE PT Deutsche Securities Indonesia P-5.50 NONE RREEF Management GmbH P-5.51 NONE RREEF Management L.L.C. P-5.52 NONE Consequently, only the sales of services by petitioner to entities which are duly supported by the two required documents will be treated as subject to the 0% VAT rate, pursuant to Section 108 (B) (2) of the NIRC of 1997, as amended. HESIcT In relation to the second requisite, Sections 113 (A) (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1 (A) (2), (B) (1) and (2) (c) of Revenue Regulations (RR) No. 16-05, provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services issue a VAT official receipt which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons . (A) Invoicing Requirements . A VAT-registered person shall issue: xxx xxx xxx (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services . (B) Information Contained in the VAT Invoice or VAT Official Receipt . The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided ,That: AcICHD 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 prominently on the invoice or receipt; xxx xxx xxx (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and" (Emphasis supplied) "SECTION 4.113-1. Invoicing Requirements . (A) A VAT-registered person shall issue: xxx xxx xxx (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services . Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts .Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. caITAC (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 xxx xxx (c) If the sale is subject to zero percent (0%) VAT, the term ' zero-rated sale ' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) Pursuant to the foregoing provisions, the foreign currency remittances referred to under Section 108 (B) (2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts. TAIaHE To prove that it rendered services to its non-resident foreign clients/affiliates and was paid in Euro duly accounted for in accordance with the rules and regulations of the BSP for the second quarter of CY 2014, petitioner presented its Schedule of Zero-Rated Sales, 32 and the related official receipts, 33 sales invoices, 34 and bank inward remittances. 35 Upon scrutiny of the documents submitted, the Court finds that out of the P1,400,103,099.77 36 zero-rated sales declared per VAT Return for the second quarter of CY 2014, only the amount of 19,028,312.32 with peso equivalent of P1,146,413,520.86, as detailed below, qualifies for VAT zero-rating under Section 108 (B) (2) of the NIRC of 1997, as amended: Customer's Name OR No. OR Exh. Ref. OR Amount in Euro Inward Remittance Exh. Ref Valid Zero-rated Sales in Php Deutsche Securities, Inc. 5258 P-12-3 109,714.89 P-12-3B 6,754,632.86 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5264 P-12-5 257,171.95 P-12-5B 15,820,755.45 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5265 P-12-6 421,607.37 P-12-6B 25,936,526.51 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5268 P-12-7 131,460.94 P-12-7B 8,072,957.18 Deutsche Group Services Pty. Limited 5271 P-12-10 70,115.65 P-12-10B 4,312,199.70 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5272 P-12-11 24,704.96 P-12-11B 1,518,852.59 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5273 P-12-12 94,278.01 P-12-12B 5,796,180.19 Deutsche Bank Aktiengesellschaft, Filiale London 5281 P-12-17 1,839,056.20 P-12-17B 112,925,848.28 Deutsche Bank Aktiengesellschaft, Filiale New York 5282 P-12-18 421,558.95 P-12-18B 25,885,506.95 Deutsche Bank Securities, Inc. 5283 P-12-19 161,455.54 P-12-19B 9,914,054.73 Deutsche Bank (Malaysia) Berhad 5289 P-12-23 23,606.23 P-12-23B 1,447,934.60 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5292 P-12-26 215,918.00 P-12-26B 13,243,755.67 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5293 P-12-27 1,194,457.68 P-12-27B 73,264,413.69 Deutsche Bank Aktiengesellschaft, Filiale Seoul 5297 P-12-29 28,760.30 P-12-29B 1,767,361.71 Deutsche Asia Pacific Holdings Pte. Ltd. 5298 P-12-30 8,882.34 P-12-30B 545,832.54 Deutsche Bank Aktiengesellschaft, Filiale London 5302 P-12-34 1,182,412.81 P-12-34B 73,026,573.07 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5315 P-12-43 280,595.65 P-12-43B 16,755,982.49 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5316 P-12-44 428,926.65 P-12-44B 25,613,680.89 Deutsche Securities, Inc. 5321 P-12-46 107,897.61 P-12-46B 6,438,499.64 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5323 P-12-48 134,100.98 P-12-48B 8,002,115.25 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5324 P-12-49 217,354.46 P-12-49B 12,970,042.73 Deutsche Bank Aktiengesellschaft, Filiale New York 5326 P-12-50 40,521.94 P-12-50B 2,425,256.75 Deutsche Bank (Malaysia) Berhad 5328 P-12-52 23,606.23 P-12-52B 1,412,843.72 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5331 P-12-53 24,704.96 P-12-53B 1,478,603.22 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5332 P-12-54 1,133,813.70 P-12-54B 67,850,348.39 Deutsche Bank Aktiengesellschaft, Filiale New York 5333 P-12-55 422,725.00 P-12-55B 25,296,958.86 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5336 P-12-57 99,185.92 P-12-57B 5,935,542.34 Deutsche Bank Aktiengesellschaft, Filiale Seoul 5342 P-12-62 28,760.30 P-12-62B 1,722,722.67 Deutsche Bank Aktiengesellschaft, Filiale London 5345 P-12-64 82,852.00 P-12-64B 4,947,249.51 Deutsche Bank Securities, Inc. 5346 P-12-65 183,901.95 P-12-63B 10,981,133.01 Deutsche Bank Aktiengesellschaft, Filiale London 5353 P-12-70 66,066.40 P-12-70B 3,931,923.43 Deutsche Bank Aktiengesellschaft, Filiale London 5358 P-12-72 2,813,596.51 P-12-72B 167,450,414.11 Deutsche Securities, Inc. 5369 P-12-81 538,670.98 P-12-81B 32,150,044.16 Deutsche Securities, Inc. 5370 P-12-82 107,897.61 P-12-82B 6,439,762.03 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5390 P-12-102 24,704.96 P-12-102B 1,465,207.64 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5391 P-12-103 99,185.92 P-12-103B 5,892,984.44 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5392 P-12-104 217,354.46 P-12-104B 12,913,793.12 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5405 P-12-116 132,435.12 P-12-116B 7,868,436.39 Deutsche Bank Aktiengesellschaft, Filiale London 5408 P-12-119 1,140,999.21 P-12-119B 67,790,777.10 Deutsche Bank Aktiengesellschaft, Filiale Seoul 5418 P-12-126 28,760.30 P-12-126B 1,709,570.64 Deutsche Bank (Malaysia) Berhad 5420 P-12-128 23,606.23 P-12-128B 1,403,202.26 Deutsche Bank Aktiengesellschaft, Filiale New York 5421 P-12-129 500,922.34 P-12-129B 29,775,841.26 Deutsche Bank Securities, Inc. 5421 P-12-129 155,670.00 P-12-129B 9,253,340.97 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5428 P-12-136 369,116.84 P-12-136B 21,941,054.65 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5432 P-12-140 792,843.63 P-12-140B 47,128,235.63 Deutsche Group Services Pty. Limited 5436 P-12-178 248,659.11 P-12-178B 14,780,802.53 Deutsche Group Services Pty. Limited 5437 P-12-179 70,115.65 P-12-179B 4,167,816.64 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5438 P-12-142 257,843.25 P-12-142B 15,326,726.46 Deutsche Bank Aktiengesellschaft, Filiale London 5450 P-12-150 1,646,757.94 P-12-150B 98,586,582.75 Deutsche Asia Pacific Holdings Pte. Ltd. 5455 P-12-155 17,764.68 P-12-155B 1,063,519.46 Deutsche Group Services Pty. Limited 5267 P-12-158 310,779.13 P-12-158B 19,092,482.72 Deutsche Group Services Pty. Limited 5330 P-12-168 70,452.88 P-12-168B 4,216,637.28 TOTAL VALID ZERO-RATED SALES 19,028,312.32 1,146,413,520.86 On the other hand, the remaining amount of P253,689,578.94 shall be denied VAT zero-rating due to the following reasons: ICHDca OR No. OR Exh. Ref. OR Amount in Euro Inward Remittance Exh. Ref. Disallowed Zero-rated Sales Overclaimed zero-rated sales (Amount per inward remittance in Php is lower than the claimed zero-rated sales) Deutsche Securities, Inc. 5258 P-12-3 109,714.89 P-12-3B P1,011.04 Deutsche Group Services Pty. Limited 5271 P-12-10 70,115.65 P-12-10B 7,600.98 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5272 P-12-11 24,704.96 P-12-11B 502.70 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5273 P-12-12 94,278.01 P-12-12B 1,918.37 Deutsche Bank (Malaysia) Berhad 5289 P-12-23 23,606.23 P-12-23B 3,337.24 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5292 P-12-26 215,918.00 P-12-26B 30,524.55 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5293 P-12-27 1,194,457.68 P-12-27B 168,861.68 Deutsche Bank Aktiengesellschaft, Filiale Seoul 5297 P-12-29 28,760.30 P-12-29B 12,941.71 Deutsche Asia Pacific Holdings Pte. Ltd. 5298 P-12-30 8,882.34 P-12-30B 3,996.92 Deutsche Bank Aktiengesellschaft, Filiale London 5302 P-12-34 1,182,412.81 P-12-34B 134,238.15 Deutsche Bank Aktiengesellschaft, Filiale New York 5326 P-12-50 40,521.94 P-12-50B 6,895.62 Deutsche Bank (Malaysia) Berhad 5328 P-12-52 23,606.23 P-12-52B 4,017.08 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5331 P-12-53 24,704.96 P-12-53B 4,204.04 Deutsche Bank Aktiengesellschaft, Filiale Seoul 5342 P-12-62 28,760.30 P-12-62B 3,727.94 Deutsche Bank Aktiengesellschaft, Filiale London 5353 P-12-70 66,066.40 P-12-70B 783.41 Deutsche Bank Aktiengesellschaft, Filiale London 5358 P-12-72 2,813,596.51 P-12-72B 51,821.91 Deutsche Securities, Inc. 5369 P-12-81 538,670.98 P-12-81B 769,154.84 Deutsche Securities, Inc. 5370 P-12-82 107,897.61 P-12-82B 72,383.12 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5390 P-12-102 24,704.96 P-12-102B 4,039.07 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5391 P-12-103 99,185.92 P-12-103B 5,773.84 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5392 P-12-104 217,354.46 P-12-104B 12,652.64 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5405 P-12-116 132,435.12 P-12-116B 7,709.32 Deutsche Bank Aktiengesellschaft, Filiale London 5408 P-12-119 1,140,999.21 P-12-119B 109,382.66 Deutsche Bank Aktiengesellschaft, Filiale Seoul 5418 P-12-126 28,760.30 P-12-126B 854.16 Deutsche Bank (Malaysia) Berhad 5420 P-12-128 23,606.23 P-12-128B 701.09 Deutsche Bank Aktiengesellschaft, Filiale New York 5421 P-12-129 500,922.34 P-12-129B 99,989.73 Deutsche Bank Securities, Inc. 5421 P-12-129 155,670.00 P-12-129B 201,098.21 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 5428 P-12-136 369,116.84 P-12-136B 880,314.35 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 5432 P-12-140 792,843.63 P-12-140B 1,678,829.37 Deutsche Group Services Pty. Limited 5436 P-12-178 248,659.11 P-12-178B 601,587.47 Deutsche Group Services Pty. Limited 5437 P-12-179 70,115.65 P-12-179B 9,516.34 Deutsche Bank Aktiengesellschaft, Filiale Singapur 5438 P-12-142 257,843.25 P-12-142B 596,764.54 Deutsche Bank Aktiengesellschaft, Filiale London 5450 P-12-150 1,646,757.94 P-12-150B 2,355,716.25 Deutsche Asia Pacific Holdings Pte. Ltd. 5455 P-12-155 17,764.68 P-12-155B 821.08 Deutsche Group Services Pty. Limited 5330 P-12-168 70,452.88 P-12-168B 19,491.54 Sub-total P7,863,162.96 Without supporting zero-rated official receipt Deutsche Bank Aktiengesellschaft, Filiale New York 5261 47,602.32 P2,928,409.04 Sub-total P2,928,409.04 Supported by photocopied official receipt Deutsche Group Services Pty. Limited 5329 P-12-183 340,145.38 P-12-183B P20,423,242.58 Sub-total P20,423,242.58 ORs issued were not in the name of Deutsche Bank Aktiengesellschaft, Inlandsbank (issued to DB AG Domestic Bank) Deutsche Bank Aktiengesellschaft, Inlandsbank 5371 P-12-83 35,096.88 P-12-83B P2,171,871.45 Deutsche Bank Aktiengesellschaft, Inlandsbank 5372 P-12-84 7,608.08 P-12-84B 470,804.58 Deutsche Bank Aktiengesellschaft, Inlandsbank 5373 P-12-85 386,522.37 P-12-85B 23,686,256.00 Deutsche Bank Aktiengesellschaft, Inlandsbank 5374 P-12-86 37,309.95 P-12-86B 2,308,821.04 Deutsche Bank Aktiengesellschaft, Inlandsbank 5375 P-12-87 91,970.24 P-12-87B 5,691,318.95 Deutsche Bank Aktiengesellschaft, Inlandsbank 5376 P-12-88 227,988.06 P-12-88B 14,108,398.17 Deutsche Bank Aktiengesellschaft, Inlandsbank 5379 P-12-91 231,958.88 P-12-91B 14,325,525.33 Deutsche Bank Aktiengesellschaft, Inlandsbank 5380 P-12-92 35,519.77 P-12-92B 2,193,661.92 Deutsche Bank Aktiengesellschaft, Inlandsbank 5381 P-12-93 16,495.08 P-12-93B 1,018,718.00 Deutsche Bank Aktiengesellschaft, Inlandsbank 5382 P-12-94 34,309.93 P-12-94B 2,118,943.54 Deutsche Bank Aktiengesellschaft, Inlandsbank 5383 P-12-95 16,421.21 P-12-95B 1,014,155.87 Deutsche Bank Aktiengesellschaft, Inlandsbank 5384 P-12-96 16,118.48 P-12-96B 997,446.68 Deutsche Bank Aktiengesellschaft, Inlandsbank 5385 P-12-97 7,717.99 P-12-97B 476,654.58 Deutsche Bank Aktiengesellschaft, Inlandsbank 5393 P-12-105 88,761.44 P-12-105B 5,481,808.90 Deutsche Bank Aktiengesellschaft, Inlandsbank 5395 P-12-107 132,843.97 P-12-107B 8,105,504.00 Deutsche Bank Aktiengesellschaft, Inlandsbank 5396 P-12-108 34,309.93 P-12-108B 2,070,771.02 Deutsche Bank Aktiengesellschaft, Inlandsbank 5397 P-12-109 240,552.18 P-12-109B 14,518,493.15 Deutsche Bank Aktiengesellschaft, Inlandsbank 5398 P-12-110 7,717.99 P-12-110B 465,818.21 Deutsche Bank Aktiengesellschaft, Inlandsbank 5399 P-12-111 16,495.08 P-12-111B 995,558.24 Deutsche Bank Aktiengesellschaft, Inlandsbank 5400 P-12-112 35,519.77 P-12-112B 2,143,790.75 Deutsche Bank Aktiengesellschaft, Inlandsbank 5401 P-12-113 16,421.21 P-12-113B 991,099.83 Deutsche Bank Aktiengesellschaft, Inlandsbank 5406 P-12-117 27,719.44 P-12-117B 1,715,339.38 Deutsche Bank Aktiengesellschaft, Inlandsbank 5407 P-12-118 59,038.79 P-12-118B 3,590,036.48 Deutsche Bank Aktiengesellschaft, Inlandsbank 5412 P-12-122 88,761.44 P-12-122B 5,357,184.28 Deutsche Bank Aktiengesellschaft, Inlandsbank 5423 P-12-131 16,421.21 P-12-131 976,597.77 Deutsche Bank Aktiengesellschaft, Inlandsbank 5424 P-12-132 7,717.99 P-12-132 459,002.22 Deutsche Bank Aktiengesellschaft, Inlandsbank 5425 P-12-133 16,495.08 P-12-133 980,990.94 Deutsche Bank Aktiengesellschaft, Inlandsbank 5426 P-12-134 240,552.18 P-12-134 14,306,054.40 Deutsche Bank Aktiengesellschaft, Inlandsbank 5427 P-12-135 34,309.93 P-12-135 2,040,470.89 Sub-total P134,781,096.57 Sales to entities not considered as non-resident foreign corporations doing business outside the Philippines (without proof of foreign registration/incorporation) DB Consorzio S. Cons. a.r.l. 5274 4,728.64 P291,709.44 DB Consorzio S. Cons. a.r.l. 5334 4,750.64 284,290.60 DB Consorzio S. Cons. a.r.l. 5447 4,750.64 282,528.79 DB Energy Trading LLC 5261 (28.52) (1,754.50) DB Energy Trading LLC 5318 442.48 26,423.03 DB Energy Trading LLC 5415 371.76 22,781.00 DB International (Asia) Limited 5253 13,512.94 837,188.81 DB International (Asia) Limited 5253 13,512.94 837,188.78 DB International (Asia) Limited 5308 13,543.78 835,219.19 DB International (Asia) Limited 5387 13,543.78 817,432.95 DB Services New Jersey, Inc. 5261 7,142.59 677,541.00 DB Services New Jersey, Inc. 5318 9,261.69 553,068.86 DB Services New Jersey, Inc. 5445 11,071.96 439,399.28 DBOI Global Services Private Limited 5279 4,914.15 301,749.66 DBOI Global Services Private Limited 5279 67,475.30 4,143,269.52 DBOI Global Services Private Limited 5386 4,914.15 302,514.13 DBOI Global Services Private Limited 5386 3,515.78 216,430.74 DBOI Global Services Private Limited 5386 5,067.35 311,945.09 DBOI Global Services Private Limited 5386 84,314.84 5,190,405.31 DBOI Global Services UK Limited 5439 318.49 19,573.24 DBOI Global Services UK Limited 5439 3,987.04 245,029.03 DBOI Global Services UK Limited 5439 4,018.52 246,963.68 DBOI Global Services UK Limited 5439 1,850.11 113,701.06 Deutsche (Suisse) SA 5306 26,010.64 1,606,930.85 Deutsche Asset Management (Korea) Company Limited 5351 4,142.60 253,461.03 Deutsche Asset Management (Korea) Company Limited 5378 4,255.58 260,373.60 Deutsche Asset Management (Korea) Company Limited 5378 4,255.58 260,373.60 Deutsche Asset Management (Korea) Company Limited 5378 4,142.60 253,461.03 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 7,638.26 461,006.11 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 7,563.48 456,492.78 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 7,506.56 453,057.38 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 7,506.56 453,057.38 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 8,062.31 486,599.59 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 8,062.31 486,599.59 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 15,436.57 931,672.03 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5312 15,436.57 931,672.02 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5356 15,917.75 947,876.71 Deutsche Bank (China) Co. Ltd.,Shanghai Branch 5356 15,917.75 947,876.71 Deutsche Bank (Suisse) SA 5301 7,298.26 451,772.66 Deutsche Bank Aktiengesellschaft, Filiale Amsterdam 5276 22.38 1,374.23 Deutsche Bank Aktiengesellschaft, Filiale Amsterdam 5278 6,342.25 389,441.04 Deutsche Bank Aktiengesellschaft, Filiale Amsterdam 5349 6,342.25 378,707.74 Deutsche Bank Aktiengesellschaft, Filiale Amsterdam 5350 252.81 15,095.76 Deutsche Bank Aktiengesellschaft, Filiale Amsterdam 5430 6,342.25 377,184.58 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 5270 7,609.08 467,958.50 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 5280 21,856.46 1,342,079.32 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 5357 7,609.08 453,108.62 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 5360 21,856.20 1,305,832.76 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 5440 20,892.33 1,291,799.00 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 5444 7,609.08 452,525.16 Deutsche Bank Aktiengesellschaft, Filiale Brussel 5305 4,296.65 265,445.96 Deutsche Bank Aktiengesellschaft, Filiale Brussel 5317 4,296.65 256,391.03 Deutsche Bank Aktiengesellschaft, Filiale Brussel 5394 4,296.65 255,872.77 Deutsche Bank Aktiengesellschaft, Filiale Cayman Islands 5261 606.41 37,305.25 Deutsche Bank Aktiengesellschaft, Filiale Cayman Islands 5318 268.71 16,046.22 Deutsche Bank Aktiengesellschaft, Filiale Cayman Islands 5421 359.04 22,075.00 Deutsche Bank Aktiengesellschaft, Filiale Dubai (DIFC) 5295 4,277.59 262,979.13 Deutsche Bank Aktiengesellschaft, Filiale Dubai (DIFC) 5335 4,277.59 255,982.06 Deutsche Bank Aktiengesellschaft, Filiale Dubai (DIFC) 5451 4,277.59 254,395.68 Deutsche Bank Aktiengesellschaft, Filiale Ho-Chi-Min 5307 6,334.03 390,607.61 Deutsche Bank Aktiengesellschaft, Filiale Ho-Chi-Min 5307 8,409.00 518,570.15 Deutsche Bank Aktiengesellschaft, Filiale Ho-Chi-Min 5307 8,409.05 518,570.15 Deutsche Bank Aktiengesellschaft, Filiale Ho-Chi-Min 5327 8,409.05 504,716.48 Deutsche Bank Aktiengesellschaft, Filiale Jakarta 5314 6,975.66 416,556.84 Deutsche Bank Aktiengesellschaft, Filiale Johannesburg 5252 3,071.35 189,464.49 Deutsche Bank Aktiengesellschaft, Filiale Johannesburg 5300 3,167.09 188,595.17 Deutsche Bank Aktiengesellschaft, Filiale Johannesburg 5359 3,167.09 195,596.00 Deutsche Bank Aktiengesellschaft, Filiale Johannesburg 5446 3,167.09 188,352.33 Deutsche Bank Aktiengesellschaft, Filiale Labuan 5290 1,365.27 83,934.54 Deutsche Bank Aktiengesellschaft, Filiale Labuan 5344 1,365.27 81,955.72 Deutsche Bank Aktiengesellschaft, Filiale Labuan 5417 1,365.27 81,194.97 Deutsche Bank Aktiengesellschaft, Filiale Mumbai 5313 9,393.56 566,517.73 Deutsche Bank Aktiengesellschaft, Filiale Mumbai 5313 9,069.63 546,981.79 Deutsche Bank Aktiengesellschaft, Filiale Mumbai 5389 9,352.36 577,591.49 Deutsche Bank Aktiengesellschaft, Filiale Paris 5266 3,822.92 234,763.80 Deutsche Bank Aktiengesellschaft, Filiale Paris 5325 3,822.92 229,454.07 Deutsche Bank Aktiengesellschaft, Filiale Paris 5354 68.60 4,083.52 Deutsche Bank Aktiengesellschaft, Filiale Paris 5355 99.02 5,894.32 Deutsche Bank Aktiengesellschaft, Filiale Paris 5409 3,822.92 227,355.67 Deutsche Bank Aktiengesellschaft, Filiale Prag 5294 316.71 19,470.80 Deutsche Bank Aktiengesellschaft, Filiale Prag 5320 316.71 18,898.82 Deutsche Bank Aktiengesellschaft, Filiale Prag 5403 316.71 18,835.29 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5442 3,181.04 191,872.60 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5442 3,071.35 185,256.37 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5442 3,071.35 185,256.37 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5442 3,167.09 191,031.17 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5442 3,167.09 191,031.17 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5443 (1,922.28) (115,947.26) Deutsche Bank Aktiengesellschaft, Filiale Taipei 5443 3,077.36 185,618.88 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5443 2,957.32 178,378.36 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5443 2,957.32 178,378.36 Deutsche Bank Aktiengesellschaft, Filiale Taipei 5443 2,957.32 178,378.36 Deutsche Bank Aktiengesellschaft, Filiale Tokyo 5311 8,780.37 540,799.06 Deutsche Bank Aktiengesellschaft, Filiale Wien 5263 316.71 19,483.43 Deutsche Bank Aktienqesellschaft, Filiale Wien 5319 316.71 18,898.82 Deutsche Bank Aktiengesellschaft, Filiale Wien 5404 316.71 18,835.29 Deutsche Bank Aktiengesellschaft, Filiale Zurich 5366 3,262.10 196,883.59 Deutsche Bank Aktiengesellschaft, Filiale Zurich 5367 3,163.49 195,763.66 Deutsche Bank Aktiengesellschaft, Filiale Zurich 5368 3,262.10 201,463.71 Deutsche Bank Luxembourg SA 5291 4,594.30 282,449.94 Deutsche Bank Luxembourg SA 5322 4,594.30 274,152.50 Deutsche Bank Luxembourg SA 5411 4,594.30 273,230.97 Deutsche Bank Management (Korea) Company Limited 5452 4,142.60 246,367.59 Deutsche Bank National Trust Company 5261 (56.86) (3,497.92) Deutsche Bank Netherland N.V. 5275 1,675.20 102,864.38 Deutsche Bank Netherland N.V. 5277 17,220.08 1,057,385.94 Deutsche Bank Netherland N.V. 5347 17,220.08 1,028,243.52 Deutsche Bank Netherland N.V. 5348 41.32 2,467.30 Deutsche Bank Netherland N.V. 5429 17,220.08 1,024,107.98 Deutsche Bank PGK AG 5377 881.57 54,039.00 Deutsche Bank PGK AG 5388 640.59 39,744.00 Deutsche Bank PGK AG 5402 560.53 34,478.00 Deutsche Bank PGK AG 5422 623.15 37,423.00 Deutsche Bank Societa Anonima Espaola 5433 13,778.86 819,452.64 Deutsche Bank Societa Anonima Espaola 5435 13,778.86 831,621.17 Deutsche Bank Societa per Azioni 5284 1,182.30 72,711.47 Deutsche Bank Societa per Azioni 5284 4,607.04 283,333.02 Deutsche Bank Societa per Azioni 5341 5,861.15 351,838.70 Deutsche Bank Societa per Azioni 5341 5,861.15 351,838.70 Deutsche Bank Societa per Azioni 5434 5,861.15 348,572.73 Deutsche Bank Trust Company 5318 422.95 25,256.78 Deutsche Bank Trust Company Americas 5254 29,159.62 1,806,572.59 Deutsche Bank Trust Company Americas 5261 2,056.24 126,496.18 Deutsche Bank Trust Company Americas 5282 24,780.28 1,521,614.26 Deutsche Bank Trust Company Americas 5318 2,432.39 145,252.02 Deutsche Bank Trust Company Americas 5337 24,780.28 1,483,967.07 Deutsche Bank Trust Company Americas 5410 1,869.85 112,391.00 Deutsche Bank Trust Company Americas 5415 24,780.28 1,473,726.12 Deutsche Bank Trust Company Delaware 5261 29,140.55 1,792,674.18 Deutsche Bank Trust Company Delaware 5326 29,170.31 1,750,820.38 Deutsche Bank Trust Company Delaware 5445 21,520.00 1,330,608.00 Deutsche Bank Trust Corporation 5261 1,994.18 122,678.36 Deutsche Bank Trust Corporation 5415 1,837.92 110,376.00 Deutsche Bank, Sociedad Anonima Espaola 5269 13,756.86 847,400.03 Deutsche Investment Management Americas, Inc. 5261 3,597.61 221,318.49 Deutsche Investment Management Americas, Inc. 5282 57,770.44 3,547,349.97 Deutsche Investment Management Americas, Inc. 5333 57,770.44 3,457,132.76 Deutsche Investment Management Americas, Inc. 5421 57,770.44 3,435,708.01 Deutsche Securities Korea Co. 5304 5,793.60 358,474.20 Deutsche Securities Korea Co. 5361 5,793.60 346,147.67 Deutsche Securities Korea Co. 5453 5,793.60 344,555.41 Deutsche Trustees Malaysia Berhad 5287 682.64 41,967.58 Deutsche Trustees Malaysia Berhad 5288 680.51 41,836.63 Deutsche Trustees Malaysia Berhad 5431 682.64 40,597.78 Deutsche Trustees Malaysia Berhad 5441 682.64 41,200.64 DWS Holding & Service GmbH 5255 21,466.20 1,329,929.83 DWS Holding & Service GmbH 5299 18,491.06 1,141,987.53 DWS Holding & Service GmbH 5364 18,491.06 1,116,025.34 DWS Holding & Service GmbH 5416 18,491.06 1,099,695.33 DWS Investment S.A. 5262 4,898.04 301,318.61 DWS Investment S.A. 5310 4,067.28 250,511.22 DWS Investment S.A. 5365 4,067.28 245,480.11 OOO "Deutsche Bank" 5303 2,047.67 126,697.88 OOO "Deutsche Bank" 5338 6,408.15 383,752.07 OOO "Deutsche Bank" 5339 6,408.15 384,674.52 OOO "Deutsche Bank" 5449 6,408.15 381,103.77 PT Deutsche Securities Indonesia 5340 591.47 35,505.32 PT Deutsche Securities Indonesia 5340 636.21 38,191.02 PT Deutsche Securities Indonesia 5340 614.27 36,873.99 PT Deutsche Securities Indonesia 5340 614.27 36,873.99 PT Deutsche Securities Indonesia 5340 633.42 38,023.54 PT Deutsche Securities Indonesia 5454 633.42 37,975.61 PT Deutsche Securities Indonesia 5454 633.42 37,975.61 RREEF Management GmbH 5286 22,558.34 1,386,849.30 RREEF Management GmbH 5419 22,558.34 1,343,387.27 RREEF Management LLC 5282 14,461.44 887,993.74 RREEF Management LLC 5337 14,461.44 866,023.33 RREEF Management LLC 5415 14,461.44 860,046.86 Sub-total P87,693,667.79 TOTAL DISALLOWED ZERO-RATED SALES P253,689,578.94 Petitioner had input VAT attributable to its zero- rated sales and were not applied against any output VAT liability After determining that petitioner had valid VAT zero-rated sales for the second quarter of CY 2014 in the amount of P1,146,413,520.86, the Court shall now proceed to determine whether petitioner incurred corresponding input taxes and if said input taxes were not applied against any output VAT liability of petitioner. cDHAES In its Quarterly VAT Return for the second quarter of CY 2014, 37 petitioner declared input VAT of P27,881,900.36 on its current purchases of goods and services, of which the amount of P27,065,518.44 is the subject of the present claim, as shown below: Input tax deferred on capital goods exceeding P1M from previous quarter P952,001.43 Purchase of Capital Goods Exceeding P1M 172,246.92 Total 1,124,248.35 Less: Input tax on capital goods exceeding P1M deferred for the succeeding period 930,408.09 Amortized input tax on capital goods exceeding P1M 193,840.26 Add: Input tax on Purchase of capital goods not exceeding P1M 84,908.46 Domestic purchases of goods other than capital goods 79,350.84 Domestic purchases of services 26,871,989.32 Services rendered by non-residents 651,811.48 Total 27,688,060.10 Total input tax during the quarter 27,881,900.36 Less: Output tax 703,115.37 Excess input tax 27,178,784.99 Divided by total declared sales 1,405,962,394.52 Multiply by total declared zero-rated sales 1,400,103,099.77 Input tax claimed for refund/TCC P27,065,518.44 In support of its input VAT on purchases of goods and services other than capital goods amounting to P27,688,060.10, petitioner presented its Summary Lists of Purchases for the 2nd Quarter of CY 2014, 38 and the related supporting invoices, official receipts, BIR Forms No. 1600 and other documents, 39 which were all examined by the Court-commissioned ICPA, Mr. Emmanuel Y. Mendoza. TCAScE In his Report, the ICPA noted the following exceptions: 40 Input VAT on domestic purchases of goods other than capital goods supported by documents other than VAT Invoices Annex 3-G P685.71 Input VAT on domestic purchases of services supported by documents such as invoices, provisional receipts, billing statements, and statement of accounts Annex 3-H 71,022.82 Input VAT on domestic purchases of services supported by documents dated outside the period of claim Annex 3-I 3,986,174.24 Input VAT on domestic purchases of goods other than capital goods supported by documents dated outside the period of claim Annex 3-J 14,378.68 Input VAT on domestic purchases of goods not exceeding 1 million supported by documents dated outside the period of claim Annex 3-K 39,196.73 Input VAT on domestic purchases of services and goods with no supporting documents Annex 3-L 1,313,758.22 Excess of Input VAT per schedule over the amount of input VAT in the supporting VAT ORs Annex 3-B 19,088.20 Total not properly substantiated input VAT P5,444,304.60 The above-noted exceptions found by the ICPA in the amount of P5,444,304.60 should be disallowed for not being properly substantiated by VAT invoices or official receipts as required under Sections 110 (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. Further verification of the ICPA report, together with the supporting documents, reveals that the additional input VAT of P2,173,945.53 should likewise be disallowed for the reasons stated below: Exhibit Supplier Input VAT per Schedule Input VAT per OR Disallowed Input VAT A. Overclaimed input VAT (Input VAT on purchases of services supported by official receipts wherein the amount of input VAT indicated therein is lower than the amount of claim) P-14-18 Asalus Corporation P52,215.85 P51,283.42 P932.43 P-14-26 Asia PeopleWorks!,Inc. 21,014.41 20,639.14 375.27 P-14-27 Asia PeopleWorks!,Inc. 2,910.76 2,858.77 51.99 P-14-28 Asia PeopleWorks!,Inc. 11,872.74 11,660.73 212.01 P-14-29 Asia PeopleWorks!,Inc. 7,182.01 7,053.76 128.25 P-14-30 Asia PeopleWorks!,Inc. 1,547.00 1,519.37 27.63 P-14-31 Asia PeopleWorks!,Inc. 2,106.86 2,069.24 37.62 P-14-32 Asia PeopleWorks!,Inc. 21,002.04 20,627.01 375.03 P-14-45 BusinessWorks, Inc. 23,940.00 23,512.50 427.50 P-14-46 BusinessWorks, Inc. 9,000.00 8,631.28 368.72 P-14-47 BusinessWorks, Inc. 18,660.00 18,326.78 333.22 P-14-50 CityWay Printing Services 5,269.18 5,175.09 94.09 P-14-84 ePLDT, Inc. 649,814.02 622,770.57 27,043.45 P-14-85 ePLDT, Inc. 148,270.62 145,622.93 2,647.69 P-14-86 ePLDT, Inc. 1,450,257.26 1,144,791.02 305,466.24 P-14-87 ePLDT, Inc. 649,814.02 638,210.20 11,603.82 P-14-94 Exclusive Cars International 26,245.83 26,219.53 26.30 P-14-98 Exclusive Cars International 23,526.65 23,470.57 56.08 P-14-99 Exclusive Cars International 12,091.82 12,015.30 76.52 P-14-117 Global City Car Lease & Transport Corp. 33,226.07 30,982.27 2,243.80 P-14-180 Reuters Limited 329,459.93 323,576.72 5,883.21 P-14-185 Santa Fe Moving and Relocation 1,130.40 1,110.21 20.19 subtotal P358,431.06 B. Input VAT on purchase of services supported by Official Receipt but the amount of VAT is not separately indicated P-14-16 AIG Philippines Insurance, Inc. P1,171,075.68 P-14-128 Headstrong Philippines, Inc. 567,420.00 P-14-135 Innove Communications, Inc. 62,070.22 subtotal P1,800,565.90 C. Input VAT on Purchase of Service supported by Official Receipt dated outside the period of claim P-14-149 Lantro Phils.,Inc. P600.00 P-14-150 Lantro Phils.,Inc. 13,446.43 subtotal P14,046.43 D. Input VAT on purchase of Service supported by documents other than VAT ORs P-14-6 Accent Micro Technologies, Inc. P482.14 P-14-164 Premium Security & Investigation Agency, Inc. 420.00 subtotal P902.14 Total Disallowed Input VAT per this Court's further verification P2,173,945.53 Moreover, part of the total input VAT claim is the amount of P193,840.25, representing the amortization of the input VAT on purchases of capital goods exceeding P1Million, as shown below: ITAaHc Total Input VAT Amortized Input VAT Purchases of capital goods exceeding P1M from previous quarters 2nd Quarter of CY 2010 P824,557.71 P7,939.83 3rd Quarter of CY 2010 517,803.43 32,362.71 4th Quarter of CY 2010 1,230,911.56 76,931.97 1st Quarter of CY 2011 276,516.85 17,282.30 2nd Quarter of CY 2013 448,559.31 28,034.96 3rd Quarter of CY 2013 182,025.53 11,376.60 4th Quarter of CY 2013 203,758.70 12,734.92 Purchases of capital goods exceeding P1M from current quarter 2nd Quarter of CY 2014 172,246.92 7,176.96 TOTAL P193,840.25 The ICPA accounted the amount of P193,840.25 as follows: cSaATC Findings Reference to ICPA Report Total Amount Properly Substantiated Amortization of Input VAT on domestic purchase of capital goods (from 4th Quarter of CY 2013) supported by VAT invoice Annex 4-A P11,541.72 Total properly substantiated Input VAT P11,541.72 Not Properly Substantiated Amortization of Input VAT on domestic purchase of capital goods (from 2010 to 4th quarter of CY 2013) with no available supporting VAT invoice Annex 4-B 173,928.38 Amortization of Input VAT on domestic purchase of capital goods (in 2nd quarter of CY 2014) with no available supporting VAT invoice Annex 4-C 6,638.54 Amortization of Input VAT on domestic purchase of capital goods where amount of purchase were expense out not recorded as capital asset Annex 4-D 1,731.61 Total not properly substantiated Input VAT P182,298.53 Total P193,840.25 Based on the foregoing, the Court finds that the input VAT amount of P182,298.53 should be disallowed because it was not properly substantiated. Further, upon scrutiny of the invoice supporting the input VAT of P11,541.72 under the caption "Properly Substantiated," the Court finds that it should likewise be disallowed because it is supported by invoice, the input VAT amount of which was not separately indicated. CHTAIc Thus, out of petitioner's total declared input VAT of P27,881,900.36 for the second quarter of CY 2014, only the amount of P20,069,809.98 represents its valid input VAT, as computed below: Input VAT per VAT Return P27,881,900.36 Less: Disallowances Per ICPA Report Input VAT on purchases of goods and services other than capital goods exceeding P1M P5,444,304.60 Input VAT on purchases of capital goods exceeding P1M 182,298.53 Per this Court's further verification Input VAT on purchases of goods and services other than capital goods exceeding P1M 2,173,945.53 Input VAT on purchases of capital goods exceeding P1M 11,541.72 7,812,090.38 Valid Input VAT P20,069,809.98 A portion of the valid input VAT of P20,069,809.98, however, shall be applied against the reported output VAT liability of P703,115.37. 41 Consequently, only the remaining input VAT of P19,366,694.61 can be attributed to the entire zero-rated sales amounting to P1,400,103,099.77 and only the input VAT of P15,857,575.46 is attributable to the valid zero-rated sales of P1,146,413,520.86, computed as follows: cHDAIS Valid Input VAT P20,069,809.98 Less: Output tax due 703,115.37 Excess Input VAT 19,366,694.61 Divide by Total Declared Zero-Rated Sales 1,400,103,099.77 Multiply by Valid Zero-Rated Sales 1,146,413,520.86 Excess Input VAT attributable to Valid Zero-Rated Sales P15,857,575.46 Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns, 42 the same remained unutilized until it was deducted as "VAT Refund/TCC Claimed" 43 in its amended Quarterly VAT Return for the second quarter of CY 2016. Therefore, the subject claim no longer formed part of the excess input VAT of P164,806,025.92 44 as of the end of the second quarter of CY 2016 that was carried over/applied to the succeeding third quarter of CY 2016. 45 As such, it eliminates the possibility that the present claim would be applied to future output VAT liability. EATCcI WHEREFORE ,premises considered, the instant Petition for Review is PARTIALLY GRANTED .Accordingly, respondent is ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P15,857,575.46 ,representing the latter's unutilized excess input VAT attributable to its zero-rated sales for the second quarter of CY 2014. SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Catherine T. Manahan, J. ,concurs. Footnotes 1. Docket, pp. 10-16. 2. Par. 2, Stipulated Facts, Joint Stipulation of Facts and Issues (JSFI),docket, p. 112. 3. Exhibit "P-1",Formal Offer of Evidence (FOE) Folder. 4. Par. 4, Petitioner's Memorandum, docket, pp. 300-301. 5. Exhibit "P-3",FOE Folder. 6. Par. 6, Petitioner's Memorandum, docket, p. 301. 7. Exhibits "P-4" and "P-4.a",FOE Folder. 8. Docket, pp. 50-57. 9. Docket, pp. 61-63. 10. Docket, pp. 65-74. 11. Minutes of the Hearing, docket, p. 76. 12. Docket, pp. 112-120. 13. Docket, pp. 132-136. 14. Minutes of the Hearing dated March 20, 2017, docket, p. 137. 15. Minutes of the Hearing dated June 7, 2017, docket, p. 173. 16. Docket, pp. 182-230. 17. Minutes of the Hearing dated August 16, 2017, docket, p. 242. 18. Resolution, docket, p. 326. 19. Docket, pp. 291-297. 20. Docket, pp. 299-325. 21. Stipulated Issue, JSFI, docket, pp. 112-113. 22. Par. 2, Stipulated Facts, JSFI, docket, p. 112; Exhibit "P-2",FOE Folder. 23. G.R. No. 153205, January 22, 2007. 24. Exhibit "P-1",FOE Folder. 25. Exhibits "P-5" to "P-5.52",FOE Folder. 26. Exhibits "P-6","P-6.2","P-6.4" to "P-6.14","P-6.16" to "P-6.37","P-6.40" to "P-6.51",FOE Folder. 27. Exhibits "P-7" to "P-7.11". 28. Exhibits "P-8" to "P-8.52",FOE Folder. 29. Exhibit "P-9",FOE Folder. 30. G.R. No. 201326, February 8, 2017. 31. Answer to Q51, Sworn Statement of Ms. Rachel Concepcion, Exhibit "P-10";Par. 37, Petitioner's Memorandum, docket, p. 312. 32. Annex 1 of Exhibit "P-12" (ICPA Report). 33. Exhibits "P-12-1" to "P-12-184",CD. 34. Exhibits "P-12-1a" to "P-12-184a",CD. 35. Exhibits "P-12-1b" to "P-12-184b",CD. 36. Exhibit "P-30-4",Line 17, CD. 37. Exhibit "P-30-4",CD. 38. Exhibit "P-34",CD. 39. Exhibits "P-14-1" to "P-14-207","P-15-1" to "P-15-19","P-16-1" to "P-16-6","P-22-1" to "P-22-31","P-21-1" to "P-21-47","P-17-1" to "P-17-11","P-18-1" to "P-18-28","P-23-1" to "P-23-8","P-20-1","P-19-1" to "P-19-10",and "P-24-1" to "P-24-15",CD. 40. Exhibit "P-12",ICPA Report, pp. 11-12. 41. Line15B of Exhibit "P-30-4". 42. Exhibits "P-3.4" to "P-3.24". 43. Line 23D of Exhibit "P-3.24". 44. Line 29 of Exhibit "P-3.24". 45. Line 20A of Exhibit "P-3.25".