VESTAS SERVICES PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION VESTAS SERVICES CTA CASE NO. 9544 (EB No. PHILIPPINES, INC., 2479) Petitioner, Members: -versus- RINGPIS-LIBAN, PJ, and MODESTO-SAN PEDRO ,]]. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. SEP 0 2 2026 x-------------------------------------------------------~--~~:~-~~~~---------~x DECISION RINGPIS-LIBAN, PJ.: THE CASE T his is a remanded case fo r the further determination of the other requisites for petitioner Vestas Services P hilippines, Inc.'s claim of input value- added tax 01AT) refund or tax credit certificate for the Yd quarter of calendar year (CY) 2014, pursuant to this Court En Bane's Decision dated October 14, 2022,1 and Resolution dated l\IIarch 8, 2023, 2 rendered in CTA EB No. 2479, and E ntry of Judgment dated April 8, 2023. 3 ANTECEDENTS O n February 27, 2017, petitioner flied a Petition for Review before this Court, praying that judgment be rendered ordering respondent to refund to 4 petitioner its excess and / or unutilized input VAT credits in the amount of !>1 86,802,326.96 for the y d quarter of CY ending D ecember 31, 20~ 1 Docket - Vol. 3, pp. 1461 to 1500. 2 Docket- Vol. 3, pp. 1543 to 1550. 3 Docket- Vol. 3, p. 1552. 4 Docket- Vol. 1, pp. 10 to 37.

CTA Case No. 9544 (EB No. 2479) After trial, on November 11, 2020, this Court, through its former Third Division, promulgated a Decision,' which denied petitioner's Petition for Ret;iew for insufficiency of evidence, the dispositive portion of which reads: "WHEREFORE, in light of the foregoing considerations, the mstant Petition for Re!)iew is DENIED for insufficiency of evidence. SO ORDERED." Petitioner then filed its 1\iotion jor Reconsideration (Re: Decision Dated .11 Not;ember 2020) on December 18, 2020, 6 to which respondent posted his Comment/ Opposition (on Petitiomr's Alation for Recomideration) on January 27, 2021 7 In the Resolution dated May 19, 2021, 8 the Court denied petitioner's Motion for lack of merit. Consequently, on June 15, 2021, petitioner filed with the Court En Bane its Petition for Rn;iew, 9 which was docketed as CTA EB Case No. 2479. Respondent submitted his Comment/ Opposition (on Petitioner's Petition for Review) on June 27, 2021. 10 In the Resolution dated October 14, 2021, 11 the Court En Bane submitted the Petition for Review for decision. On October 14, 2022, the Court En Bane rendered its Decision, 12 the dispositive portion of which reads: "WHEREFORE, the foregoing considered, the Petition for Review flied by petitioner Yestas SctTiccs Philippines, Inc. on 15 June 2021 is hereby GRANTED. The assailed Decision dated 11 )iovember 2020 and Resolution dated 19 ~lay 2021, respectinly, of the Court's Third Di,·ision in CT/1. Case No. 9544, entitled VeJ!aJ SemiceJ l'hilippineJ, Inc. JJ. CommzJ-,ioner o/ lntemal Rmnue are hereby REVERSED and SET ASIDE. AccordinglY, let the case be REMANDED to the Court in Di,·ision for further determination of the other requisites for the claim of input Value-"\dded Tax refund or Tax Credit Certificate from the third quarter of calendar year 2014. SO ORDERED." Respondent then posted his Aiotion for Recomideration on November 7, 13 2022, to which petitioner ftled a Comment/ Opposition (fo the Motion for r 5 Docket- Vol. 3, pp. 1315 to 1334. 6 Docket- Vol. 3, pp. 1335 to 1348. 7 Docket- Vol. 3, pp. 1356 to 1364. 8 Docket- Vol. 3, pp. 1370 to 1374. 9 Docket- Vol. 3, pp. 1375 to 1420. 10 Docket- Vol. 3, pp. 1451 to 1455. 11 Docket- Vol. 3, pp. 1458 to 1459. 12 Docket- Vol.3, pp. 1461 to 1500. 13 Docket- Vol. 3, pp. 1510 to 1520.

CTA Case No. 9544 (EB No. 2479) Reconsideration dated 07 November 2022) on January 16, 2023 14 In the Resolution dated i\Iarch 8, 2023, 15 the Court denied respondent's Aiotion for Reconsideration for lack of merit. The Court En Bane then issued the Entry ofJudgment dated :\pril 8, 2023, 16 which states that the Decision rendered on October 14, 2022 has "become final and executory, respondent's i\Iotion for Reconsideration thereof having been denied in a Resolution promulgated on i\Iarch 8, 2023, without any appeal being taken thereon, and is hereby recorded in the Book of Entries of Judgments." In the Resol11tion dated June 23, 2025, 17 this Court directed the parties to submit within five (5) days from notice their respective .\Ianifestations, informing this Court of any supervening event that may affect the disposition of the case, after which, the case shall be deemed submitted for decision. On July 1, 2025, petitioner filed its i\1anife.rtation, 18 while respondent posted his Manifestation on July 4, 2025. 19 The present case was submitted for decision on September 15, 2025. 20 THE STIPULATED ISSUE The parties submit the following issue for this Court's resolution: "2.1 Whether VSPI is entitled to a refund or to the issuance of tax credit certificate in the amount of Php186,802,326.96 representing its excess and/ or unutilized input\',\T attributable to its zero-rated sales of goods and services for the third quarter of CY 2014." 21 Petitioner's arguments: Petitioner argues that it is entitled to the refund of its excess and/ or unutilized input VAT in the amount of P186,802,326.96 which is attributable to its zero-rated sales for the 3"1 quarter of CY 2014;" that respondent's denial of petitioner's claim for refund for the 3'd quarter of CY 2014 is incorrect and If/ 14 Docket- Vol. 3, pp. 1525 to 1540. 15 Docket- Vol. 3, pp. 1543 to 1550. 16 Docket- Vol. 3, p. 1552. 17 Docket- Vol. 3, pp. 1155 to 1156. 1s Docket- Vol. 3, pp. 1163 to 1165. 19 Docket- Vol. 3, pp. 1171 to 1172. 20 Minute Resolution dated September 15, 2025, Docket- Vol. 3, p. 1175. 21 Par. 2.1, Stipulation of the Issue, Joint Stipulation of Facts and Issues, Docket- Vol. 2, p. 861. 22 Arguments/Discussions, petitioner's Memorandum, Docket- Vol. 3, at p. 1279.

CTA Case No. 9544 (EB No. 2479) without basis; 23 and that the input V"\T, noted by the Independent Certified Public "\ccountant (ICPA) as exceptions, should be allowed and recognized. 24 Respondent's counter-arguments: In his Answer, 25 respondent argues that petitioner's claim for tax refund in the amount of P186,802,326.96, representing the alleged excess and unutilized input VAT arising from its importation and domestic purchases of goods and services attributable to its zero-rated sales for the 3'" quarter of taxable year ending December 31, 2014 evidently failed to comply with the substantiation requirements prescribed under Revenue Regulations (RR) No. 16-2005, in relation to Revenue ;\lemorandum Circular (RL\-!C) No. 54-2014 and Rlv!C No. 2-2014, as well, as to the conditions/requirements prescribed under Sections 112(A) (C) (D), 113 and 237 of the 1997 Tax Code; that petitioner failed to comply with the conditions/ requirements prescribed under Revenue Memorandum Order :.Jo. 16-07 and Iu\IC No. 29-09, in relation to Section 110 (A) of the 1997 Tax Code; that the amount subject of the claim for tax refund does not pertain in full to its input VAT attributable to its zero-rated sales for the 3'" quarter of taxable year ending December 31, 2014; and that petitioner's claim for refund in the amount of P186,802,326.96 was already denied by respondent in his letter denial dated January 27, 2017, for lack of factual and legal bases. THE COURT'S RULING The Petition for Review is partly meritorious. Requisites for the grant of the refund or issuance of a tax credit certificate under the law. To reiterate, Section 112 of the "Jational Internal Revenue Code (NIRC) of 1997, as amended by Republic .\ct (R,\) 1\:o. 933 7, 26 provides: "SEC. 112. Rejirnc!J or'/(,,,. Cmli!J o/fnpnt Tax. - (:\) Zem·Rated or E{Jictir,ely Zem-Rated Sake - ;\ny VAT-registered person, whose sales are zero-rated or cffecti\rely 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 inpy 23 Arguments/Discussions, petitioner's Memorandum, Docket- Vol. 3, at p. 1288. 24 Arguments/Discussions, petitioner's Memorandum, Docket- Vol. 3, at p. 1301. 25 Docket- Vol. 11 at pp. 95 to 96. 26 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

CTA Case No. 9544 (EB No. 2479) 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: ProJJided, bowwe~; That in the case of zcro~rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2), the acceptable foreign currenc1· exchange proceeds thereof had been dulv accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Prot•ided, fintiJeJ; That where the taxpaver is engaged in zero~rated or effectivelv zero~ rated sale and also in taxable or exempt sale of goods or properties or setTices, and the amount of creditable input tax due or paid cannot be directh· and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the ,·olume of sales: Prot•ided, Jinal!y, That for a person making sales that are zero·rated under Section 108(B)(6), the input taxes shall be allocated ratablv between his zero·rated and nonzero~ rated sales. XXX XXX XXX (C) l'e~iod witbin wbic!J Rejimd or Tax Credit o/ Input Taxes shall be Made. - In proper cases, the Cotnmissioncr shall grant a refund or issue the tax credit certiflcare for creditable input taxes within one hundred twentY (120) days from the date of submission of complete documents in support of the application flied in accordance with Subsection (c\) 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 thirtv (30) days frotn the receipt of the decision denying the claim or after the expiration of the one hundred twentv day~pcriod, appeal the decision or the unacted claim with the Court of Tax c\ppeals." Pursuant to the foregoing, jurisprudence has laid down certain requisites which must be complied with by the taxpayer~applicant to successfully obtain a credit/ refund of input VAT. Said rcqu1s1tes are classified into certain categories, to wit: "\s to the timeliness of the filing of the administrative and judicial claims: 1. the refund claim is filed \Vith the BIR within two (2) years after the close of the taxable quarter when the sales were made; 27 2. in case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of 120 days, the judicial claim has be? " 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. lila. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010.

CTA Case No. 9544 (EB No. 2479) filed with this Court, within thirty (30) days from receipt of the decision or after the expiration of the said 120-day period; 28 With reference to the taxpayer's registration with the BIR: 3. the taxpayer is a V"-\T-registered person/ 9 In relation to the taxpayer's output VAT: 4. the taxpayer is engaged in zero-rated or effectively zero-rated sales;30 5. for zero-rated sales under Section 106(c\)(2)(a)(1), (2), and (b); and 108(B)(l) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for 1n accordance with Bangko Sentraf ng Pi!ipinas (BSP) rules and regulations; 31 As regards the taxpaver's input V"-\ T being refunded: 6. the input taxes are not transitional input taxes; 32 7. the input taxes are due or paid; 33 8. the input taxes claimed arc 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; 34 and 9. the input taxes have not been applied against output taxes during and in the succeeding quarte7 28 Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 29 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. 3o Id. 31Id. "Id. 33 Id. 34 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; and San Roque Power Cotporation vs. Conunissioner of Internal Revenue, supra. 35 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.

CTA Case No. 9544 (EB No. 2479) In addition, in claims for VAT refund/credit, applicants must satisfy the substantiation and invoicing requirements under the NIRC and other implementing rules and regulations (IRR) 36 Thus, petitioner's compliance with all the VAT invoicing requirements is required to be able to ftle a claim for input taxes attributable to zero-rated sales. 37 The invoicing and substantiation requirements should be followed because it is the only way to determine the veracity of the taxpayer's claims. 38 i\Ioreover, it must be pointed out that compliance with all the Vc\ T invoicing requirements provided by tax laws and regulations is mandatory. 39 Strict compliance with substantiation and invoicing requirements is necessary considering VAT's nature and V,\T system's tax credit method, where tax payments are based on output and input taxes and where the seller's output tax becomes the buyer's input tax that is available as tax credit or refund in the same transaction. It ensures the proper collection of taxes at all stages of distribution, facilitates computation of tax credits, and provides accurate audit trail or evidence for BIR monitoring purposes." 0 Furthermore, 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." 1 Thus, it behooves petitioner to show compliance with each of the foregoing requisites and invoicing requirements. As a corollary, the absence of any of the said requisites is already a valid ground to deny the refund claim. i\Ioreover, it must be emphasized that Section 113 of the NIRC of 1997, as amended by RA No. 9337, provides the VAT invoicing requirements under the law, to wit: "SEC. 113. Immio.ng and A,wunting RequimJien/.1 jor VAT-I'gzjimd PerJOilJ. ~ (A) fm,oi,ing Requiremenl.r. - A VAT-registered person shall i s s y 36 Team Energy Corporation vs. Commissioner of Internal Revenue, et seq., G.R. Nos. 197663 and 197770, March 14, 2018. 37 J.R.A. Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 171307, August 28, 2013. 38 Nippon Express (Philippines) Corporation vs. Commissioner of Internal Revenue, G.R. No. 191495, July 23, 2018. 39 Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183531, March 25, 2015. 40 Team Energy Corporation vs. Commissioner of Internal Revenue, et seq., supra. 41 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 a!., 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.

CTA Case No. 9544 (EB No. 2479) (1) """ V"-\ T invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for everv sale, barter or exchange of sen·ices. (B) InjomJation Contained in tbe VAT lil!Joice or VAT OjJi<ia! Receipt. ~ The following information shall be indicated in the \'AT invoice or VAT official receipt: (1) "\ statement that the seller is a Vc\T-registered person, followed by his Taxpayer's Identification Number (Tii\); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the nlue-added tax: Pm!JI'ded, That: (a) The amount of the tax shall be shown as a separate item in the 1n\·o1ce or rece1pt; (b) If the sale is exempt from value-added tax, the term 'VAT- exempt sale' shall be written or printed prominenth· on the itn-oice or receipt; (c) If the sale is subject to zero percent (0° 1o) value-added tax, the term 'zero-rated sale' shall be written or printed prominenrJy on the invoice or receipt; (d) If the sale invoh·es goods, properties or services some of which are subject to and some of which arc V.l,T zero-rated or VAT-exempt, the im·oice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Ptv1Jtded, That the seller may issue separate in\·oices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the sctTice; and (4) In the case of sales in the an1ount of One thousand pesos (P1 ,000) or more where the sale or transfer is made to a V :\ T-registered person, the name, business style, if am·, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client. , XXX XXX XXX. Implementing the foregoing provision, Section 4.113-1 of RR No. 16- 2005"2 provides as follows: "SEC. 4.113-1. Invoicing Requiremeny 42 Consolidated Value-Added Tax Regulations of 2005. SUBJECT:

CTA Case No. 9544 (EB No. 2479) (A) A VAT -registered person shall issue: (1) A VAT im·oice for c,·ery sale, barter or exchange of goods or properties; and (2) A. V"". T official receipt for every lease of goods or properties, and for every sale, barter or exchange of sen-ices. Only VAT-registered persons are required to print their TIN followed by the word '\' c\ T' in their im·oice or official receipts. Said documents shall be considered as a 'VAT lm·oice' or VAT official receipt. All purchases cm-crcd by invoices/receipts other than VAT lm·oice/Vc\T Official Receipt shall not gin rise to anv input tax. \'AT invoice/official receipt shall be prepared at least in duplicate, the original to be gi,·cn to the bm·er and the duplicate to be retained bY the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. -The following information shall be indicated in VAT im·oice 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 V.-\ T; Provided, That: (a) The amount of tax shall be shown as a separate item in the in\-oice or receipt; (b) If the sale is exempt from VAT, the term 'VAT-exempt sale' shall be '\vrittcn or printed prominently on the inYoicc or receipt; (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the in\-oice or receipt; (d) If the sale inYoh-cs goods, properties or services sotne of which are subject to and some of which are VAT zero-rated or VKI'- exempt, the invoice or receipt shall clearly indicate the break-down of the sale pncc between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) In the case of sales in the amount of one thousand peso (P1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business srde, if am·, address and TIN of the purchaser, custotncr or client, shall be indicated in addition to the infortnacion required in (1) and (2) of this Sectiy

CTA Case No. 9544 (EB No. 2479) Anent the above-stated first, second and third requisites, the same have been previously found to have been complied with by petitioner, as this Court has mled in its Decision dated November 11, 2020. As for the fourth requisite, i.e., that the taxpayer is engaged in zero-rated or effectivelv zero-rated sales, the same has been settled by this Court En Bane in its Decision dated October 14, 2022, declaring that "[s]ince petitioner has duly complied with the requirements under Section 25 of R/1. [No.] 9513, it thus ably established that its declared sales for the entire period of claim qualify for Vc\ T zero-rating." In any event, this Court will still look into petitioner's compliance with the invoicing requirements under the V"\T law vis-a-vis petitioner's compliance with the Jom1h requisite. As pointed out earlier, Section 113(,\) and (B) of the NIRC of 1997, as amended, and Section 4.113-1 of RR No. 16-2005, require that BIR-registcred VAT sales invoices (Sis) must support the sale of goods, whereas BIR- registcred VXr official receipts (ORs) must substantiate the sale of services. The Sis and ORs must contain all the information required under the said law and regulations. Out of the f'1,494,848,562.00 declared total sales/receipts for the 3'd quarter of 2014, ;..rr. Glenn Ian D. Villanueva of Reyes Tacandong & Co., the ICPA, verified that sales amounting to f'60,831,912.87 were not properly supported by ORs, summarized as follows: 43 Details Total Total zero-rated sales per \'AT return" !'1 ,494,848,562.00 LeJJC Disallowed zero-rated sales a) Sales to EDC Burgos Wind Power Corporation not supported b1· ORs 60,831 ,912.87" Prooerlv substantiated zero-rated sales 1'1,434,016,649 .13 Regarding petitioner's sales to EDC in the amount of P1 ,434,016,649 .13, petitioner presented the following BIR-registered ORs, to \vit: OR Zero-Rated Zero-Rated Exhibit"' OR Date Currency No. Sales Sales in Peso "P-44" 151 July 14,2014 , css 2,422,025.86 l'1 05,408,987.45 "P-46" 153 July 22, 2014 css 1,082,107.00 46,919,077.41 "P-49" 156 .\ug. 22, 2014 L'SS 1,082,107.00 47,406,025.56 "P-51" 158 Sept. 18,2014 L'SS 1,442,810.00 64,220,915.91 43 tv Exhibit "P-36", Docket- Vol. 3, at p. 1022. 44 Line 17, Exhibit "P-9", Docket- Vol. 1, p. 255. 45 Par. 3.l.a, Exhibit "P-36", Docket- Vol. 3, pp. 1026 to 1027. 4 6 CD (Exhibit "P-289").

CTA Case No. 9544 (EB No. 2479) OR Zero-Rated Zero-Rated Exhibit4(' OR Date Currency No. Sales Sales in Peso "P-45" 152 July 15,2014 PHI' - 420,081,036.80 "P-4 7" 154 July 23, 2014 PHI" - 224,994,182.00 ''P-48" 155 Aug. 22, 2014 PHI' - 224,994,182.00 "P-50" 157 Sept. 18, 2014 PHI' - 299,992,242.00 Total 1"1,434,016,649 .13 On the other hand, petitioner's claimed sales/ receipts in the amount of !'60,831,912.87 must be disallowed for being unsupported by BIR-registered VAT ORs, which is in violation of Section 113(,\)(2) of the NIRC of 1997, as amended, and Section 4.113-1(_\)(2) ofRR l'\o. 16-2005. Thus, in relation to the fourth requisite, the Court finds that out of the total declared zero-rated sales/receipts in the amount of !'1,494,848,562.00 for the 3'd quarter of 2014, only the effectively zero-rated sales/receipts derived by petitioner from services rendered to EDC amounting to !'1,434,016,649.13, duly covered by BIR-registered VAT ORs, qualifY for VAT zero-rating under Section 15(g) of R.\ No. 9513, in relation to Section 108(B)(3) of the NIRC of 1997, as amended, for the purpose of determining the amount to be refunded to petitioner, if any. As for the fifth requisite, which is to the effect that petitioner must prove that the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations under Sections 106("\)(2)(a)(1), (2) and (b), and 108(B)(1) and (2), all of the NIRC of 1997, as amended, since the legal basis for petitioner's effectively zero-rated sales of !'1,434,016,649.13 is Section 108(B)(3) of the same law, the present case need not show compliance with the said Jtjtb requisite. The input VAT being claimed do not appear to be transitional input taxes. As for the sixth requisite, records show that the claimed input taxes do not appear to be transitional input taxes, as understood under Section 111 (:\) of the NIRC of 1997, as amended, to wit: "SFC. 111. Tmmitinnrll/ Pmrrmptil•r fnJ>II! Tnx C"mi'P

CTA Case No. 9544 (EB No. 2479) (A) TranJilional Inplfi Tax Cmli!J.- A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning im·entorv of goods, materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whiche,•er is higher, which shall be creditable against the output tax." To be sure, transitional input tax credits operate to benefit newly V.'\ T- registered persons, whether they previously paid taxes in the acquisitions of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to V:\ T status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer."7 Since there is no showing that the claimed input taxes are transitional input taxes, petitioner has complied with the sixth requisite for the grant of an input V:\ T refund. Not all of the input VAT being claimed for refund were duly substantiated. Anent the seventh requisite, it is extremely important that the input taxes claimed for refund are properly supported to prove that the same are due or paid in accordance with Section 11 0("'\) of the l'\IRC of 1997, as amended, which provides as follows: "SF.C. 110. Tax c,~ditJ.- (A) Cmlitable Input Tax. - (1) Any input tax e,·idenced by a VAT im·oice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: (a) Purchase or importation of goods: (i) For sale; or (ii) For connrsion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of busincss;y 47 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, eta!., et seq., G.R. Nos. 158885 and 170680, April 2, 2009.

CTA Case No. 9544 (EB No. 2479) (iv) For use as materials supplied in the sale of seJTice; or (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code. (b) Purchase of sen·ices on which a nlue-added tax has actually been paid. (2) The input tax on domestic purchase or importation of goods or properties hi' a V/1T -registered person shall be creditable: (a) To the purchaser upon consummation of sale and on importation of goods or properties; and (b) To the importer upon pal'ment of the nlue-added tax prior to the release of the goods from the custody of the l3ureau of Customs. l'm1•ided, That the input tax on goods purchased or imported m a calendar tnonth for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread e\·enly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (1'1 ,000,000): l'mviderl. hoJve?;er, That if the estimated useful life of the capital good is less than fi,·e (5) years, as used for depreciation purposes, then the input V :\ T shall be spread onr such a shorter period: l'ml•ided,jillallj·. That in the case of purchase of sen·ices, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon pavment of the compensation, rental, rovaltl' or fee." The above provisions arc implemented by Sections 4.110-1 to 4.110-3 of RR No. 16-2005, as amended by RR 1\:o. 4-2007,"' which provides as follows: "SECTIO"' 4.110-1. C1rdil.• For I11p111 'frlx. - 'I11p111 Ia.~ means the \';\T due on or paid hi' a \' :\T-registcrcd person on importation of goods or local purchases of goods, properties, or services, including lease or usc of properties, in the course of his trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. 111 of the Tax Code. It includes input taxes which can be dll·ectly attributed to transactions subject to the VAT plus a ratable portion of an\' input tax which cannot be clirecth· attributed to either the taxable or exempt acti,·ity. Any input tax on the following transactions evidenced b,· a \'AT invoice or official receipt issued by a \'AT-registered person in accordance tay with Sees. 113 and 237 of the Tax Code shall be creditable against the output 48 Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, SUBJECT: Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005

CTA Case No. 9544 (EB No. 2479) (a) Purchase or importation of goods (1) For sale; or (2) For conversion into or intended to form part of a finished product for sale, including packaging materials; or (3) For use as supplies in the course of business; or (4) For use as raw materials supplied in the sale of setYices; or (5) For use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code, (b) Purchase of real properties for which a VA. T has actually been paid; (c) Purchase of setYices in which a vxr has actually been paid; (d) Transactions 'deemed sale' under Sec. 106 (B) of the Tax Code; (e) Transitional input tax allowed under Sec. 4.111-1 (a) of these Regulations; (f) Presumpti1·e input tax allowed under Sec. 4.111-1 (b) of these Regulations; (g) Transitional input tax credits allowed under the transitot\' and other prm·isions of these Regulations. SECTION 4.110-2. Pmom Wbo Can A/){ul of"!he Inp11t Tax Cmlzi - The input tax credit on importation of goods or local purchases of goods, properties or services bv a\',-\ T-registered person shall be creditable: (a) To the importer upon pa1·ment of \'Xr prior to the release of goods from customs custody; (b) To the purchaser of the domestic goods or properties upon consummation of the sale; or (c) To the purchaser of sen-ices or the lessee or licensee upon pa\'lnent of the compensation, rental, royaltY or fee. SECTION 4.110-3. C/aimjor Jnp11t Tax on Depmiab!e GooriJ.- Where a VAT-registered person purchases or in1ports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One ~lillian pesos (P1,000,000.00), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner: (a) If the estimated useful life of a capital good is fin (5) years or more - The input tax shall be spread e\'enh· m·er a period of sixty (60) tnonths and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or itnportation~ of this type of capital goods shall be diddcd by (}() and the quotient will be the amount to be claimed montly

CTA Case No. 9544 (EB No. 2479) (b) If the estimated useful life of a capital good is less than five (5) years - The input tax shall be spread e\·enly on a monthly basis by di,·iding the input tax by the actual number of months comprising the estimated useful life of a capital good. The claim for input tax credit shall commence in the month that the capital goods were acquired. \'Vhere the aggregate acquisition cost (exclusi\·e of V,-\ T) of the existing or finished depreciable capital goods purchased or imported during any calendar month docs not exceed one million pesos (P1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition. Capital goodJ or propettieJ refers to goods or properties with estimated useful life greater than one (1) year and which are treated as depreciable assets under Sec. 34(F) of the Tax Code, used directly or indirectly in the production or sale of taxable goods or setTices. The aggregate acquisition cost of depreciable assets in any calendar month refers to the total price, excluding the vxr, agreed upon for one or tnore assets acquired and not on the payments actually tnadc during the calendar tnonth. Thus, an asset acquired on installment for an acquisition cost of more than 1'1,000,000.00, excluding the \'AT, will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed 1'1,000,000.00. XXX XXX xxx" Meanwhile, Section 4.110-8 of RR No. 16-2005 provides for the substantiation requirements of input tax credits, as follows: "SECTION 4.110-8. Su!JJtantiation o/fnput Tax Cmlit.r.- (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or setTices is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero- rated sales, or subjected to the 5"/, Final \'Vithholding Y :\T, must be substantiated and supported by the following documents, and must be reported in the inforn1ation returns required to be subnlltted to the Bureau: (1) For the importation of goods- import entry ot other equi,·alent document showing actual payment of\':\ T on the imported goods. (2) For the domestic purchase of goods and properties - invoice showing the information required under Sees. 113 and 237 of the Tax Code. (3) For the purchase of real property - public instrument i.e., deed of absolute sale, deed of conditional sale, contract/ agreement to sell, etc., together with V,\ T im-oice issued by the seller. (4) For the purchase of sen·ices - official receipt showing the information required under Sees. 113 and 237 of the Tax C:~

CTA Case No. 9544 (EB No. 2479) A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit onlv if it shows the information required under Sees. 113 and 237 of the Tax Code. (b) Transitional input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the BIR. (c) Input tax on 'deemed sale' transactions shall be substantiated with the im·oice required under Sec. 4.113-2 of these Regulations. (d) Input tax from payments made to non-residents (such as for sen·ices, rentals and royalties) shall be supported by a copy of the :'vlonthly Remittance Return of \'alue .\dded Tax Withheld (BIR Form 1600) ftled by the resident pavor in behalf of the non-resident evidencing remittance of \'AT due which was withheld by the payor. (c) Ad,·ance \'c\T on sugar shall be supported b,. the Payment Order showing payment of the ad,·ance \'.\ T." Thus, in order to prove entitlement to credits for input taxes due or paid, the same must be evidenced by VAT invoices (for domestic purchases of goods) or ORs (for domestic purchases of services) issued in accordance with Sections 113(A) and (B), 237 and 238 of the NIRC of 1997, as amended, as implemented by Section 4.113-1 (.·\) and (B) of RR No. 16-2005, as amended, as the case may be, as well as, the import entrv or other equivalent documents showing actual payment of VAT (for importation of goods) and BIR Form No. 1600 with corresponding payment confirmation (for services rendered by non- residents). In its Quarterly Va!~~e-Added Tax Return for the yc~ quarter of 2014, petitioner reported an aggregate amount of P186,802,326. 96 input VAT arising from the domestic purchases and importation of goods other than capital goods, domestic purchases of services and services rendered by non-residents, which is the subject of the present claim for refund, as shown below:"" Source of Input VAT Amount Domestic purchases of goods other than capital goods .!' 416,438.76 Importation of goods other than capital goods 4,232,287.92 Domestic purchases of serv-ices 176,971,348.56 Services rendered bv non-residents 5,182,251.12 TOTAL INPUT VAT P186,802,326.96 To support the above input VAT, petitioner presented, among others, its suppliers' ORs, Sis and other purchase documcnts; 50 importation documen? . . . 49 Exhibit "P-9", Docket- Vol. 1, at p. 255. so Exhibits "P-76" to "P-128" and "P-139" to "P-252", CD (Exhibit "P-289"). 51 Exhibits "P-256" to "P-285" and "P-256-A" to "P-277-A", CD (Exhibit "P-289").

ITA Case No. 9544 (EB No. 2479) and J'v1onthly Remittance Retum of Va!m-Added Tax and Other Perrentage TaxeJ Withheld (BIR Forms No. 1600) with pavment confirmation from EFPS., 52 which were all examined by the ICPA. Based on the ICP A's findings, out of the total input VAT claim of !'186,802,326. 96 for the 3'" quarter of 2014, only !'137 ,663,355.11 represents valid and properly substantiated input V.\T, while !'49,138,971.85 are exceptions, summarized as follows: 53 Particulars Reference Amount Total A. Properly substantiated input VAT Domestic purchase of goods and services a) Input V"\ T on purchases of goods :\nnex D- p 416,414.83 supported b\· original sales in,·oices 3 b) Input VAT on purchases of services ,\nnex D- 269,303.83 supported with original ORs 1 c) Input VAT on purchases of sen·ices supported lJI' original ORs with erasures countersigned by c\nnex D- 128,671,294.68 1"129,357,013.34 authorized represcntati,·e/ s of 2 supplier and with notarized sworn statements of correction Importation of non-capital goods I a) Input V:\ T on importation of non- capital goods supported by certified "-\nnex F- 3,208,666.00 true copies of IEIRD, E2fll, and 1 bank settlement advice" Purchase of services from non-residents a) Input VAT on purchases of scn"iccs _\nncxes from non-residents supported b1· G-1 and 5,097,6 75.77 BIR Form 1600 and alphalist of G-2 payees. ' Total properly substantiated input VAT 1'137,663,355.11 B. Input VAT with exceptions a) Input VAT on domestic purchases of I Annexes goods and services : E-1 to 1"48,030,773.98 E-11 b) Input VAT on importations i Annexes 1,023,621.92 F-2 to F-4 c) Input VAT on purchases of services 84,575.95 1'49,138,971.85 fro1n non-residents Total unutilized excess input VAT per VAT return for the 3'" quarter ended September 30, 2014 P186,802,326.96 ~ /' 52 Exhibits "P-72" to "P-74-A", CD (Exhibit "P-289"). 5 3 Exhibit "P-36", Docket- Vol. 3, at p. 1034. 54 Bank Settlement Advices were validated by Bank of the Philippine Island (BPI), refer to the Certification from BPI on Remittance of Customs Duties and VAT to Bangko Sentral ng Pilipinas for the account of Bureau of Customs (BOC), Exhibit "P-130", CD (Exhibit "P-289").

CTA Case No. 9544 (EB No. 2479) The total excepuons amounting to 1'49,138,971.85 noted by the ICP.\ are detailed as follows: 55 Details Reference Input VAT Domestic purchase of goods and services a) Purchase of sen·ices supported b1· original Annex E-1 1'71,214.24 ORs with incorrect or no natne indicated I b) Purchase of sen•ices supported by original ORs where the TIN and/ or address is incorrect Annex E-2 22,960.68 or not indicated c) Purchase of sen·iccs supported by original OR Annex E-3 2,114.13 \Vith no nature of sen·ices or payment indicated d) Purchase of sen·ices supported by certified true copy of ORs with no nature of scn·iccs or Annex E-4 4,482,795.14 payment indicated e) Purchase of sen·ices supported bY original ORs where VAT base and/ or VAT amount is "-\nncx E-5 630,772.13 incorrect or not separateh' indicated f) Purchase of sen•ices supported bv certified true copy of OR where YAT base and/ or YAT c\nnex E-6 2,666,628.00 atnount is incorrect or not separately indicated g) Purchase of sen·ices supported bv original .Annex E-7 150,374.30 ORs dated outside the period of claim h) Purchase of sen·ices supported bY certified true copy of ORs dated outside the period of ,-\nnex E-8 764,441.90 claim i) Domestic purchases of setTiccs not properly .-\nnex E-9 4,426,326.85 supported by V c\ T ORs j) Unsupported purchases of services c\nnex E-10 34,813,123.38 k) L'nsupported purchase of goods .·\nnex E-11 23.23 Subtotal - Domestic purchase of goods and services P48,030,773.98 Importation of non-capital goods a) Importation of goods supported by certified true copies of IEIRD but '\Vere not supported Annex f'-2 1'7,014.00 with bank settlement advice and other proof of payment b) Importation of goods supported by certif1ed true copies of IEIRD witl1 blank IEIRD "-\nnex F-3 211,235.00 number and no proof of YA T payment c) Cnsupported importation of non-capital goods "-\nnex f'-4 805,372.92 Subtotal - Importation of non-capital goods P1,023,621. 92 Purchase of services from non-residents Per 3'd Quarter Y.-\ T Return Exhibit "P-9" 1'5,182,251.72 Annexes G-1 Vn: Per BIR form 1600 and i\L\P 5,097,67 5. 77 .. and G-2 Subtotal - Purchase of services from non-residj:nts . •.•1 ' .• P84,575.95 (unaccounted I unsupported) 1'. '.' :,' ' 'l·· ·' 55 Exhibit "P-36", Docket- Vol. 3, at pp. 1032 to 1034. '-;·i ;v

CTA Case No. 9544 (EB No. 2479) Details I Reference Input VAT Total Exceptions 1'49,138,971.85 The above exceptions found by the ICP,\ in the aggregate amount of !'49,138,971.85, should be disallowed for failure to meet the substantiation and invoicing requirements under the VAT law and regulations. In addition, the input VAT from purchases of services in the amount of !'14,571.42 shall also be disallowed for the supporting official receipts were denied admission by the Court for failure to present the originals for comparison, 56 detailed as follows: Annex OR ' Reference Exhibit Name of Supplier No. Input VAT D-1 "P-131" G & J C ni-Global Car Rental Inc. ' 1040 i p 7,285.71 D-1 "P-132" G & J l;ni-Global Car Rental Inc. 1046 II 7,285.71 Total I 1'14,571.42 Based on the foregoing, relative to petitioner's compliance with the seventh requisite, out of the !'186,802,326. 96 total reported input vxr, only the amount of !'137 ,648,783.69 represents petitioner's valid input VAT due or paid for the 3"1 quarter of 2014, computed as follows: Total Reported Input VAT 1'186,802,326.96 LeJJ~ Disallowances Per !CPA Report I P49,138,971.85 Per Court's further ,-erification I 14,571.42 49,153,543.27 Valid Input VAT P137 ,648, 783.69 A portion of the valid input VAT of ?137,648,783.69 is attributable to petitioner's zero-rated sales/receipts for 3rd quarter of2014. To reiterate, the eigbth requisite is to the effect that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectivelv zero-rated sales and taxable or exempt sales, and the input taxes cannot be directlv and entirely attributabley 56 Resolution dated March 15, 2019, Docket- Vol. 3, at p. 1213.

CTA Case No. 9544 (EB No. 2479) any of these sales, the input taxes shall be proportionately allocated based on sales volume. In the present case, there being no reported sales subject to 12% V.\T or exempt sales, but only zero-rated sales, the entire amount of 1'137,648,783.69 properly substantiated input VAT is attributable to the 1'1 ,494,848,562.00 entire declared zero-rated sales/ receipts for the 3'd quarter of2014. However, as stated earlier, petitioner was able to properly substantiate only the amount of 1'1 ,434,016,649.13 out of its total declared zero-rated sales/receipts of 1'1,494,848,562.00. Thus, regarding petitioner's compliance with the ezghth requisite, only the amount ofP132,047,253.86 represents its valid input V~\T attributable to Its valid zero~rated sales/receipts of 1'1 ,434,016,649.13, as computed below: Valid input VAT attributable to total zcro~rated sales/receipts p L\7 ,648,783.69 :'\lultiplied by: Valid zero-rated sales/receipts 1,434,016,649.13 Di,·ided by: Total declared zero-rated sales/receipts 1,494,848,562.00 Valid input VAT attributable to valid zero-rated sales/receipts 1"132,047 ,253.86 The subject input taxes have not been applied against output taxes during and m the succeeding quarters. :\s already pointed out, petitioner had no reported output tax for the 3'd quarter of 2014 since its reported sales/receipts were all zero-rated sales/ receipts. Thus, it had no output V .:\T against which the input VAT claim of P186,802,326.96 may be applied or credited. It was ascertained that petitioner did not carry-over the claimed input V ,\ T of !>186,802,326.96 to the Qumter!J; Value-Added Tax Rettrm for the 4'h quarter of 2014, 57 thus preventing the carry-over or application of such input taxes in the next taxable quarter/ s58 Hence, petitioner is deemed to have fulfilled the ninth requisite for the refund of input V"\ T under Section 112(.-\) of the r-;mc of 1997, as amended. In sum, petitioner has sufficiently proven its entitlement to the refund in the amount ofP132,047,253.86, representing excess and unutilized input YAT attributable to its zero-rated sales for the 3'd quarter of 20~ 57 Exhibit "P-14", Docket- Vol. 2, pp. 581 to 582. 58 Exhibits "P-15" to "P-17-C", Docket- Vol. 2, pp. 583 to 606.

CTA Case No. 9544 (EB No. 2479) ACCORDINGLY, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND in the reduced amount of P132,047,253.86 in favor of petitioner representing its excess and/ or unutilized input V/<. T attributable to its zero-rated sales/ receipts for the 3'd quarter of CY 2014. SO ORDERED. ~. ~ r-_ MA. BELEN M. RINGPIS-LIBAN Presiding Justice WE CONCUR: MARIAR01 cc CERTIFICATION Pursuant to "\rticle VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. MA. BELEN M. RINGPIS-LIBAN Presiding Justice