Professional Documents
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OUTLINE
I RATIONALE
I. Rationale
In the midst of the recurring global crisis resulting in the financial strain on
government, local government units (LGUs) are face with the challenge to fully marshal local
taxing, regulatory as well as proprietary powers to generate the needed revenues and resources
to finance the delivery of basic services.
The Local Government Code of 1991 defines the legal framework by which LGUs
can generate revenues and mobilize resources. It has given LGUs some degree of autonomy in
making revenue raising decisions, such that LGUs have the option to impose the various tax
subjects enumerated in the Code and they may set the tax rates within a certain limit through an
approved local revenue ordinance. They are also allowed to make tax rate adjustments once
every five years. These codal mandates have provided some degree of dynamism as well as
certainty in the revenue-raising powers of LGUs.
However, such revenue generating and regulatory powers of LGUs are not open-
ended, they must be exercised based on some guiding principles and must be within the
parameters and limits provided by law.
A growing number of complaints from the business sector and ordinary taxpayers
seem to indicate a possible and unwitting abuse or misuse of such powers on the part of the
LGUs, thus negatively affecting compliance. It is also noted that some LGUs have adopted
revenue and regulatory measures beyond their taxing and regulatory powers.
It is in this light that this Guide is formulated in order to provide the reviewing
authorities the necessary tools in ensuring the legality and rationality of LRCs/local revenue
ordinances.
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This Guide is intended for local officials tasked to review local revenue codes. The
Guide uses the Model City Revenue Code which includes provincial and municipal impositions
as working reference.
In general, a higher level Sanggunian shall review the following with respect to the Revenue
Ordinance submitted to it:
“….the power to create its own sources of revenues and to levy taxes, fees, and charges
subject to such guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the
local governments.” (Section 5 Article X of the 1987 Constitution)
Sections 135, 136, 137, 138, 139, 140, 141, 143 (a), (b), (c), (d), (e), (f), (g) and (h)
Sections 147, 148, 149, 151, 152 (a), (b), (c), (d), 153, 154, 155, 156, 157, 158
Section 191
Sections 391 (2), (7), (14)
Sections 444 (2), (3) (iv), (v), (vi), (vii), (ix)
Sections 447(1) (ii),(iii),(iv),(v),(vi), 447 (2) (vi), (vii), (viii), (ix), (x), (xi), (xiv), (xv)
Section 447 (3), (4), (5)
RA 7279 Section 43
Section 133
FOCUS: Chapter I, General Provisions. Articles A, B and C are provisions common to revenue
codes/ordinances. They are generally accepted in the form and style presented.
FOCUS: Land-based taxes are easily explained. Except for special levy, the taxes are based
on assessed values of real properties.
o Provinces – not exceeding one percent (1%) of the assessed value of the
real property
• Additional Levy for the Special Education Fund – For provinces, cities and
municipalities within the Metropolitan Manila Area, a fixed uniform rate of one
percent (1%) of the assessed value of the real property. The levy is in addition
to, and collected at the same time as, the basic real property tax.
• Idle Land Tax – A province, city or municipality within the Metropolitan Manila
Area: not exceeding five percent (5%) of the assessed value of the real property
which shall be in addition to the basic real property tax.
• Special Levy on Lands – LGUs may impose a special levy on lands especially
benefitted by public works or improvements funded by the LGU. The special levy
shall not exceed sixty percent (60%) of the cost of such projects and
improvements, including the cost of acquiring land and such other real property
in connection therewith.
shall not exceed sixty (60) percent of the actual cost of such projects and
improvements, including the costs of acquiring land and such other real
property in connection therewith: provided, further, that the special levy
shall not apply to lands exempt from basic real property tax and the
remainder of the land portions of which have been donated to the LGU
concerned for the construction of such projects or improvements.”
o Sec. 241 of LGC stipulates that: “A tax ordinance imposing a special levy
shall describe with reasonable accuracy the nature, extent, and location
of the public works projects or improvements to be undertaken, state the
estimated cost thereof, specify the metes and bounds by monuments and
lines and the number of annual installment for the payment of the special
levy which in no case shall be less than five (5) nor more than ten (10)
years. The Sanggunian concerned shall not be obliged, in the
apportionment and computation of the special levy, to establish a uniform
percentage of all lands subject to the payment of the tax for the entire
district, but it may fix different rates for different parts or sections thereof,
depending on whether such land is more or less benefited by the
proposed work.”
o Sec. 242 of the LGC states that: “Before the enactment of an ordinance
imposing a special levy, the Sanggunian concerned shall conduct a public
hearing thereon; notify in writing the owners of the real property to be
affected or the persons having legal interest therein as to the date and
place thereof and afford the latter the opportunity to express their
positions or objections relative to the proposed ordinance.”
o Sec. 243 of the LGC provides that: “The special levy authorized herein
shall be apportioned, computed and assessed according to the assessed
valuation of the lands affected as shown by the books of the assessor
concerned, or its current assessed value as fixed by said assessor of the
property does not appear of record in his books. Upon the effectivity of
the ordinance imposing special levy, the assessor concerned shall
forthwith proceed to determine the annual amount of special levy
assessed against each parcel of land comprised within the area
especially benefited and shall send to each landowner a written notice
thereof by mail, personal service or publication in appropriate cases.”
o Sec. 244 of the LGC stipulates that: “Any owner of real property affected
by a special levy or any person having a legal interest therein may, upon
receipt of the written notice of assessment of the special levy, avail of the
remedies provided for in Chapter 3, Title Two, Book II of the LGC.”
o Sec. 245 of the LGC states that: “The special levy shall accrue on the first
day of the quarter next following the effectivity of the ordinance imposing
such levy.”
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The Socialized Housing Tax – LGUs are authorized to impose an additional one-half
percent (0.5%) tax on assessed value of all lands in urban areas in excess of fifty thousand
pesos (Php50,000.00). (Republic Act 7279)
“Urban areas” refers to all cities regardless of their population density and to
municipalities with a population of at least five hundred per square kilometer.
* The fair market value under Section 135 refers to the current approved schedule of market
values used by the assessor.
** Provision on newly started business applies only to tax on printing and publication, and
franchise.
FOCUS: Taxes under Articles E, F, G, H, I and J impositions allocated to provinces which cities
may also impose at rates not exceeding fifty percent (50%) of the amounts allowed for the
province, except the rates for professional and amusement taxes.
The tax on sand, gravel and other quarry resources is not included in the Model as it
is the province that has the exclusive authority to impose such tax. It is only in the case of highly
urbanized city, where the City Mayor issues the permit to extract sand, gravel and other quarry
resources.
FOCUS: Business taxes under Sections 143 of the Local Government Code (LGC), viz:
d) On retailers
Items a), b) c) and e) are provided with graduated schedule of fixed taxes; while
items d), f), g) and h) are percentage taxes. These impositions are enumerated in Section 143.
“(T)he Sanggunian concerned may prescribe a schedule of graduated tax rates for item h) but in
no case to exceed the rates prescribed (t)herein.”
A distinguishing characteristic of this set of taxes is that the tax base (except for
peddlers) is gross sales or receipts for the preceding calendar year.
Tax rates can be increased by not more than 10% once every 5 years is provided by the Code
(Section 191).
ARTICLE L. Other Taxes on Business pursuant to Sections 186 and 143 (h)
a) Tax on Mobile Traders – An annual tax of one percent (1%) on the gross receipts of any
person, who either for himself or commission, travels from place to place and sells
goods or offers to deliver the same, using a vehicle.
[Provinces were authorized under Presidential Decree 231 to impose taxes on peddlers
engaged in the sale of any merchandise or article of commerce within the province using
trucks, motorized bicycles, tricycles or other motorized vehicles. The tax on mobile
traders is impossable on peddlers using vehicles who sell or deliver goods within the city
or municipality.]
b) Tax on Ambulant and Itinerant Amusement Operators – A fixed tax per day prescribed
by the Sanggunian.
c) Tax on Mining Operations (Department of Finance’s Local Finance Circular No. 2-09)
c.1 Mining companies which exclusively operate for the extraction of minerals, metallic
or non-metallic, the tax rate shall not exceed two percent (2%) of their gross receipts
pursuant to Section 143(h) of the LGC Imposed under the ordinance of the local
government unit (LGU) concerned.
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c.2 Mining companies whose operations include the processing of extracted minerals to
finished products shall be taxed on their gross receipts pursuant to Section 143(a) of
the LGC imposed under the ordinance of the LGUs concerned.
c.3 Liability Pay to Real Property Tax – Any person, grantee or concessionaire who shall
undertake and execute mining operations (exploration, development and commercial
utilization) of certain mineral deposits existing within the mining area shall be
subject/liable to real property tax.
c.4 Payment of Mayor’s Permits and Other Regulatory Fees – Mayor’s permits and other
regulatory fees shall be collected before the start of the mining operation of a mining
company pursuant to Sections 147 and 151 of the LGC and as implemented under a
duly-enacted revenue code of the LGU concerned.
d) Tax on Forest Concessions – An annual tax not exceeding two percent (2%) of the gross
receipts for the preceding year.
FOCUS: Taxes under Article L are basically impositions under Section 186 of the LGC.
A Sanggunian may grant tax exemption. A Municipal Mayor cannot, however, waive
the collection of inspection fees, since it is levied under the police power. (DILG Opinion No.
148-1964)
The Rule of the Situs of the Tax also needs emphasis. It is observed that many are
not aware that:
2. “Seventy percent (70%) of all sales recorded in the principal office shall be
taxable by the city or municipality where the factory, project office, plant or
plantation is located.”
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Another mechanism that LGUs could avail of is the Presumptive Income Level
Technique. The methodology is simple but needs explanation and illustration.
• Regulatory fees are impositions in the exercise of the police power, the power to
regulate business and activities.
• Fees shall be commensurate to the cost of regulation, inspection and licensing (Section
147, LGC)
• Fees and charges shall be commensurate to the cost of issuing the license or permit fee
and the expenses incurred in the conduct of the necessary inspection or surveillance
(Article 233, Implementing Rules and Regulations)
• No such fee or charge shall be based on capital investment or gross sales or receipts of
the person or business (Article 233, Implementing Rules and Regulations)
• Barangay, clearances and certifications shall not exceed regulatory fees imposed by the
municipality/city concerned (Section 152 of the Code and Article 240 (c and d) of IRR)
The Model suggests the use of the Philippine business classification set by DTI, for
establishing the size and extent of business operations for purposes of fixing and rationalizing
the fees for Mayor’s Permit. This scheme would abide by the prescription that no regulatory fee
shall be based on capital investment or gross sales or receipts as provided in Article 233 of the
IRR. This will also provide a convenient measure for determining the commensurate cost of
issuing the license and the expenses incurred in the conduct of the necessary inspection or
surveillance in the performance of LGUs’ regulatory function.
The provisions in the Local Revenue Codes should conform with the Consumer Act
of 1992, Republic Act 7394.
The Local Revenue Codes should adopt the Revised Rates of Building Permit Fees
prescribed by the Department of Public Works and Highways pursuant to the National Building
Code.
ARTICLE D. Permit Fee for Zonal/Locational Clearance (adopt updated HLURB Rates)
ARTICLE E. Permit Fee for Inspection and Verification of Subdivision (adopt updated HLURB
Rates)
Articles D and E are in pursuance of Sections 457 (2) (ix) and 457 (2) (x) for cities
and Sections 447 (2) (ix) and 447 (2) (x) in the case of municipalities.
The following permit fees are imposed under the police power for regulation
purposes:
Establish minimum standard size and seating capacity of side cars to ensure
convenience and safety of the riding public.
ARTICLE O. Permit Fee for Agricultural Machinery and Other Heavy Equipment
ARTICLE R. Permit Fee for Temporary Use of Streets, Sidewalks, Alleys, Parks and
Playgrounds
FOCUS:
1. Rationalizing rates
3. Guarding against impositions in restraint of trade, e.g., “taxes, fees and charges and
other impositions upon goods carried into or out of, or passing through the territorial
jurisdiction of local government units in the guise of wharfage, tolls for bridges or
otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or
merchandise.” (Common Limitations) (Section 133 (e), LGC)
An LGU may impose a market entrance fee, but not a market outgoing fee. (DOF
Opinion, April 15, 1993).
In general, fees are collected for the services of a public officer and/or for services
provided by the LGU.
FOCUS:
1. Cost recovery
2. Pricing
City charges are imposed in the exercise of the proprietary nature (as legal persons)
of LGUs.
FOCUS:
1. Cost recovery
2. Pricing
Rate and frequency of increase Section 191 of the Local Government Code
As required by the Local Government Code, the draft Revenue Code needs to be legally
enacted through a legislative act of the Sanggunian and approved by the Local Chief Executive.
Below are the processes involved in said enactment (and/or review of Local Revenue Codes)
for cities and municipalities.
Step 1 a. A short note explaining the need for the ordinance is prepared
Filing and and signed by the proponents and attached to the ordinance.
Numbering b. Three (3) copies of the draft ordinance are filed with the
Secretary to the Sanggunian at least three (3) days before a
regular or special session.
c. The Secretary to the Sanggunian records the proposed
Revenue Code in the logbook and assigns a number to it.
Step 2 a. The Secretary to the Sanggunian reports the ordinance to the
First Reading Sanggunian at its next meeting. The proposed ordinance shall
be included in the calendar of business for the next session.
b. During the session, the draft Revenue Code is referred to the
Committee on Ways and Means or Finance Committee, as
the case may be, for study and the conduct of committee
hearings. There shall be a Technical Working Group (TWG)
created to study the proposed ordinance, to be composed of
the LFC members and the Legal Officer, to be chaired by the
Chair of the Ways and Means Committee.
c. The Committee shall report to the plenary its action within
fifteen (15) days from date of referral.
Step 3 a. Within ten (10) days from filing of the proposed tax ordinance
Publication, by the appropriate Committee, it shall be published for three
Posting and (3) consecutive days in a newspaper of general circulation, or
Notification shall be posted simultaneously in at least four (4) conspicuous
places within the territorial jurisdiction of the city. LGUs who
have websites shall post the proposed ordinance on its
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website.
b. In addition to the publication or posting, the committee shall
send a written notice of the proposed Revenue Code together
with a copy thereof and duly acknowledged, to interested or
affected parties operating or doing business within the
territorial jurisdiction of the city.
c. The notice shall indicate the date(s) and venue of the public
hearing. The public hearing must be held at least ten (10)
days from the sending out of notices, or the last day of
publication whichever, comes later.
(A certification by the newspaper as to the publication and by
the City/Municipal Administrator as to posting, shall be
submitted together with the proposed ordinance by the
Sanggunian.)
to the Sanggunian.
d. The veto shall be communicated by the LCE to the
Sanggunian within ten (10) days, otherwise the ordinance
shall be deemed approved as if the Local Chief Executive
had signed it. The Local Chief Executive may veto an
ordinance only once.
e. The Sanggunian may override the veto of the Local Chief
Executive by two-thirds (2/3) vote of all its members
thereby making the ordinance effective for all legal
intents and purposes.
In case of barangay:
Step 9 a. Within ten (10) days after the approval of the Revenue Code,
Publication or a certified true copy shall be published in full for three (3)
Posting of consecutive days in a newspaper of local circulation.
Approved b. In cases where there are no newspapers of local circulation,
Ordinance the same may be posted in at least two (2) conspicuous and
publicly accessible places, or shall be posted simultaneously
in at least four (4) conspicuous places within the territorial
jurisdiction of the LGU. LGUs with websites shall post the
approved ordinance on its website.
Excerpt 1:
Tax on Transfer of Real Property
1st Indorsement
July 4, 2008
XXX
In this connection, reference is made to Section 135 and 199(1) of the Local
Government Code of 1991 (LGC) which provides as follows:
“(a) x x x
“(l) ‘Fair Market Value’ is the price at which a property may be sold by a
seller who is not compelled to sell and bought by a buyer who is not compelled
to buy;
“x x x.”
On the other hand, Section 25 of the Quezon City Revenue Code, as amended
provides:
XXX
Under the same Section 135, it is clear that the tax base shall only be either
the total consideration involved in the acquisition of the property, or its fair market
value, which, as presumed, is the market value of the subject property reflected or
indicated in the prevailing Schedule of Market Values prepared by the City Assessor
and duly-enacted by the Sangguniang Panlungsod. It must be born in mind that local
government affairs and operations are governed by the LGC and, therefore, unless
there are express and explicit provisions that a local tax shall be based on zonal
values prescribed by the BIR or any valuation determined by a national agency, the
same may not serve or be utilized as basis for determining a local tax.
This Bureau, therefore, is of the view that Section 25 of the Quezon City
Revenue Code, as amended which provides among others that the zonal value of the
property shall be used as basis for purposes of computing the transfer tax partakes of
the nature of an amendments of the LGC and, thus, beyond the authority of the
Sangguniang Panlungsod of Quezon City which enacted the Quezon City Revenue
Code, as amended.
Be guided accordingly.
Excerpt 2:
The collection of local taxes, fees, charges and other impositions shall in no case be let to
any private person.
June 9, 2003
Sir:
XXX
Be guided accordingly.
2nd Indorsement
January 9, 1997
It appears that the said Ordinance was enacted for some reasons, among others,
that the system will minimize if not eventually eradicate incidents of malversation of
funds incurred by some revenue tax collectors of the City.
XXX
From the aforequoted provisions of the law, it is the view of this Bureau that the
collection of a tax, fee or charge is an inherent function of local treasurers, and, therefore,
cannot be let to a private person or entity. “'To allow a private party to collect public
money is fraught with dangerous consequence (fraud, delay, ineptness, etc.) without
being bound by official oaths of public officers. (The Local Government Code of 1991
Annotated, Jose N. Nolledo).”
Moreover, the said provision of law is express and explicit hence, the enactment of
City Ordinance No. 2885 authorizing the acceptance of payment of local taxes through
the different banking institutions partakes the nature of an amendment to the LGC and,
thus, beyond the authority of the Sangguniang Panlungsod of Iligan City which enacted
the subject Ordinance.
The City Treasurer of Iligan City should be advised to confer with the City Mayor
on the matter.
Excerpt 3:
Overlapping Taxing Powers of Cities and Provinces
Republic of the Philippines
DEPARTMENT OF FINANCE
Manila
2nd Indorsement
July 20, 1993
This refers to the basic letter of the City Treasurer of Tagbilaran City
requesting opinion as to whether the Province of Bohol may levy and collect
the amusement tax within the city limits of Tagbilaran City considering that
said city is already imposing the said tax.
“x x x.”
“The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by not more
than fifty percent (50%) except the rates of the professional and
amusement taxes.”
From the above quoted provisions of the Code, it appears that the law
does distinguish as to the class or kind of city which may exercise the taxing
powers of the province. Hence, since we may not distinguish where the law
does not distinguish, all cities, whether component, independent or highly
urbanized, are empowered under the Code to levy the taxes, fees and charges
that provinces and municipalities are authorized to impose.
Under the old Local Tax Code, there was an unequivocal provision that
the exercise of the tax powers of the city extends to all the taxes, fees and
other impositions that the province or municipality may levy and collect, to
the exclusion of the national and provincial governments (Sec. 23, PD 231 as
amended by PPD 426). Stated differently, the exercise by the city of the taxing
powers given to provinces deprives the latter of its authority to impose a
similar tax and grants exclusive power to the city to levy and collect such
taxes, fees and charges.
Excerpt 4:
Amusement
Sir:
This refers to your letter dated March 12, 1993 requesting opinion
regarding the phrase “and other places of amusement” used in Section 2.24
of Article VI of the Provincial Tax Ordinance No. 01-92 enacted by that
province and the query whether “cockpits” and “resorts” fall within the said
phrase. . . . X X X
As to the meaning of “other places of amusement”, attention is invited
to the provisions of Section 131 (b) and (c) of the Local Government Code of
1991 as implemented by Article 220 (b) and (c) of the Implementing Rules
and Regulations (1RR) of the Code, which provides:
XXX
Sir:
X X X
Anent the second query, the governing provision of law on the matter
is Section 138 of the same Code as implemented by Art. 227 (a) of the
Implementing Rules and Regulations (IRR) of the Code, which states:
It is clear that only “quarry resources extracted from public lands” are
subject to local taxes. Thus, quarry resources extracted from private lands is
(are) not within the taxing power of the local government unit, the land being
private property.
2nd Indorsement
November 15, 2002
Respectfully returned to the City Treasurer, Pasig City, the herein preceding
indorsement requesting opinion/ruling on the taxability of the Philippine Stock
Exchange (PSE) in view of the subjoined letters dated February 8, 1999 and March
18, 1999 of Atty. Enrico G. Valdez, in behalf of PSE addressed to that Office and
this Bureau, respectively, protesting the assessment for local taxes from 1994 to
1997 amounting to P7, 337,000.00.
XXX
In 1994, PSE established its principal office and one of its trading floors at
the Philippine Stock Exchange Centre at Pasig City. The other trading floor is
located at the Philippine Stock Exchange Plaza at Makati City. Since that time, PSE
has not paid any business tax to Pasig City and to Makati City due to its position
that its income as a stock market is not subject to any local tax.
However, on January 5, 1999 PSE received a letter dated December 21, 1998
from that Office demanding the payment of P7,337,000.00 representing the local tax
assessment for the years 1994 to 1997. Apparently, PSE was classified as falling
under "banks and other financial institutions" under Section 143(f) of the Local
Government Code of 1991 (LGC).
On February 11, 1999, PSE through its Counsel, protested the assessment
on the ground that its income from 1994 to 1997 are not among those taxable
income of banks and other financial institution under Section 143(f) of the Local
Government Code (LGC) of 1991, enumerated as follows:
1. interest
2. commissions and discounts from lending investors;
3. income from financial leasing;
4. dividends;
5. rentals on property and profit from exchange or sale of property
6. insurance premium
These are the fees collected from companies applying for initial public
offering ("IPO") or additional listing.
These are the fees collected from officers of listed companies and broker
firms in order to get access to or use the Member's Lounge.
These are the fees collected from date vendors, wire agencies, daily
quotations and members who have connections to trading terminals.
Thus, comparing the nature of PSE's gross receipts with the gross receipts
subject to local tax, it is quite clear that none of the former falls under the
enumerated gross receipts subject to local tax.
In view of the foregoing, that Office reconsiders PSE as taxable under either
Section 143(e) or Section 143(h) of the LGC.
"x x x."
On the basis of the aforequoted definition, there is no doubt that PSE may be
considered as a financial institution falling well within the contemplation of Section
131(e) of the Code.
Excerpt 6:
Business Tax on Contractors
February 8, 2008
Sir:
This refers to your letter dated January 22, 2008, relative to the
taxability of the operation of the Aklan Cable Television, Co., Inc. (ACTCI) in
some municipalities, that province.
XXX
The applicable provision of law is Section 143(e) of R.A. No. 7160,
otherwise known as the Local Government Code of 1991 (LGC), that
provides:
“SEC. 143. Tax on Business. - The municipality may
impose taxes on the following businesses:
“x x x
In view hereof, ACTCI is liable for the payment of the local business
tax (LBT) based on the gross sales/receipts derived from its operation in all
the municipalities covered by its franchise.
XXX
February 8, 2008
Sir:
This refers to your letter dated January 22, 2008, relative to the
taxability of the operation of the Aklan Cable Television, Co., Inc. (ACTCI) in
some municipalities, that province.
XXX
XXX
With respect to the query on “Franchise Tax” (Section 137, LGC) and
“Business Tax” (Section 143, LGC), the impositions may be similar in some
aspects but for taxation purposes the terms are different and distinct from
each other.
Excerpt 8:
Dealers
April 4, 2008
Sir:
This refers to the letter dated March 17, 2008 of Ms. Ma. Teresa Y.
Lugue, Chief Financial Officer of Honda Cars Cebu, Inc. relative to the letter
addressed to Mr. George F. Blaylock dated January 16, 2004 on the
classification of car dealers in Quezon City which was classified and taxes as
“dealer” in accordance with Section(s) 143(b), 151 and 191 of the Local
Government Code of 1991(LGC).
In view of the above a request for confirmation is being made that the
classification of car dealers in Quezon City is also applicable to Honda Cars
dealership in Cebu City, Cagayan de Oro and Iloilo City.
XXX
Accordingly, Honda Cars Cebu Inc. should comply with Rule No. 1 to
be classified and taxed as dealer otherwise Rule No. 2 shall apply.
Excerpt 9:
Manufacturers
2nd Indorsement
November 5, 1993
This refers to the basic letter of BRL Food Services and Management
Inc. (BRL for brevity) requesting clarification on the correct classification of
its businesses located in the two (2) different municipalities, Pasig and
Makati. Metro Manila
That Office under 2nd Indorsement dated July 20, 1993, contends
that the business narrated earlier which BRL is engaged in “categorically fits
the definition of a manufacturer in pursuance with the provisions of
paragraph (o) Section 131 of RA. 7160:”
“x x x
“x x x .”
From the abovequoted provisions of the law, it is clear that the law
mandates that business maintaining sales outlet in the place other than
where its principal office is located “shall record the sale in sales outlet
making the sale x x x”. Hence, the Municipal Treasurer of Makati should
instruct BRL to comply with the provisions of the law in recording the sales
of its sales outlet in the municipality where it is located, so that the tax
thereon shall accrue and shall be paid to the municipality which is Makati.
Moreover, the municipality of Pasig can only collect from BRL's office
located therein Mayor's permit/license fee and other fees and charges which
a municipality may impose under its tax ordinances on the subject.
Report of action taken hereon within five (5) days from receipts hereof
is requested.
Excerpt 10:
Peddlers
Republic of the Philippines
DEPARTMENT OF FINANCE
Manila
3rd Indorsement
January 26, 1994
Records further show that Ordinance No. 108, s- 1988 had been
forwarded to this Department for review only on September 21, 1990 per
Resolution No. 229, series of 1990, by the Sangguniang Panlalawigan of the
Province of Negros Occidental, copy enclosed. This Department therefore,
under a 1st Indorsement dated June 10, 1991, copy also enclosed,
suspended the said ordinance on the ground that the increase of the rate of
the subject tax is beyond that provided for under the Local Tax Code, as
amended.
Be guided accordingly.
Excerpt 11:
Retail & Wholesale Transactions
2nd Indorsement
June 23, 1993
“x x x.
“ x x x.
“x x x
“x x x.”
2nd Indorsement
June 22, 1998
Upon perusal of said ordinance, this Bureau finds that the Municipality
imposes an outgoing fee at the rates provided as follows:
By way of comment, it may be stated that the imposition of such fee is not
proper or valid in view of the provisions of Section 133(e) of the Code which states:
“x x x;
“x x x”
Sir:
“(A) x x x
“x x x.
“(a) x x x
“(f) Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or fishermen;”
“x x x”
Sir:
b) Six (6) years from the date of effectivity of the income tax
holiday - which is six (6) years after the date of
commercial operations
a) Construction year
b) Partial year of operations
c) Operations years
4. If the starting year of paying local taxes is 1997, can 1996
receipts which are still under BOI tax exemption be the basis
for computing the assessment9 If not, what is the basis?
On Query No. I
On Query No. 2
On Query No. 3
On Query No. 4
2nd Indorsement
September 4, 2007
The provision of law governing the matter is Section 133(g) of the LGC
of 1991, quoted hereunder:
“ x x x.
“x x x.”
Such guidelines, however, cannot, as they are not meant to, amend
provisions of law, particularly the LGC of 1991. Accordingly, in reply to your
query (Query No 1), it is the considered view of this Bureau that the 60-day
period prescribed under LFC No. 5-93 abovementioned is only directory and
not mandatory, therefore, the failure of any business to observe the same
will not render taxable what the law has expressly exempted from local
taxation.
Issue No. 2:
“x x x
Viewed in the light of the foregoing, UBC is still liable for the 3rd
quarter local business tax (LBT) installment plus an additional LBT which
pertains to its October 1-30, 2006 gross sales considering that UBC’s
exemption commenced only on October 31, 2006 and further that its 2007
LBT liability pertains to its 2006 gross sales (Section 143, LGC).
Be guided accordingly.
Excerpt 15:
Excise tax on articles enumerated under the National Internal Revenue Code, as amended,
and taxes, fees or charges on petroleum products
Sir:
Is Section 138 of the LGC not in conflict with Section 133 thereof?
“(a) x x x;
“x x x.”
With respect to the issuance of permit to extract sand and gravel the
following issues are being raised:
3. Can the inhabitants or land owners along the rivers oppose to the
extraction of sand and gravel along the river beds, if as a result of
the extraction of sand and gravel along the river beds it destroys
the river banks and the bringing of water from the river to the
irrigation system to the rice field is made impossible?
April 1, 2008
Sir:
This refers to your letter dated March 24, 2008 regarding your
pending application for renewal of business permit with Antipolo City.
It bears emphasis however, that the sale of tire, batteries and other
accessories (TBA) as well as services rendered by REPHIL are subject to
business taxes.
1st Indorsement
February 16, 2009
MACRO cited the letter dated April 3, 2003 of this Bureau addressed
to Mssrs. Luis F. Banzon (President, LPG Institute of the Philippines) and
Adelio R. Capco (President, Petron Gasul Dealers Association) which
categorically states that “LPG is not subject to local business tax.”
In this connection and in addition to above opinion, it is worth
mentioning that the Department of Finance (DOF) issued Local Finance
Circular No. 1-05, dated December 8, 2005, copy enclosed, prescribing the
guidelines governing the limitation on the powers of provinces, cities and
municipalities to impose taxes, fees and charges on petroleum products as
provided for under Section 133(h) of the LGC in relation with Section 143(c-
3) thereof.
“x x x.”
Advice of action taken hereon within five (5) days from receipts is
requested.
Sir:
This refers to your undated letter seeking opinion/confirmation as
regards the 3rd Indorsement dated May 22, 2007 of this Bureau attached to
the letter of Atty. Leo M. Zarazosa in behalf of Petronas Energy Philippines
requesting for tax exemption on the sale of Liquefied Petroleum Gas (LPG).
January 8, 2010
Sir:
xxx
“x x x.”
(Sgd)
MA. PRESENTACION R. MONTESA
Executive Director
Copy furnished:
Excerpt 16:
Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code
Sir/Madam:
This has reference to your letter dated August 16, 1999 requesting
opinion, in behalf of your client, Albar Shipping and Trading Corporation
(ASTC), as to whether or not local government units may impose business
taxes on a shipping company based on its charter fees.
“x x x
Excerpt 17:
Taxes, fees or charges for the registration of motor vehicle and for the issuance of all kinds
of licenses or permits for the driving thereof, except tricycles;
Sir:
This refers to your letter dated February 11, 1997 requesting legal
opinion relative to the propriety of Ordinance No. 95-12 imposing an annual
permit fee on operators of transport services
Section 133 (J) and (1) of the Local Government Code of 1991 (LGC)
provide as follows:
“xxx
“x x x
“x x x.”
From the foregoing provisions of the Code, it may be noted that local
governments may not impose taxes on the business of transportation
contractors. By way of comment, therefore, if a business is not among those
subject to tax under the Code, the local government unit may not legally
require such business to secure and pay Mayor's permit before engaging in
the business. However, regulatory fees and service charges may be levied
and collected from such businesses.
Sir:
“(a) x x x
“x x x.”
It is clear that LGUs are authorized to impose taxes, fees and charges
for the registration of motor vehicles as well as the issuance of licenses or
permits for the driving thereof considering that these functions are
performed by the Land Transportation Office.
Sir:
This refers to the letter dated February 21, 1994 of Metaphil, Inc. (MI)
requesting interpretation on the provisions of the Local Government Code
(LGC) of 1991 quoted as follows:
“x x x.
“x x x.”
“x x x.
“(c) On exporters, and or manufacturers, millers,
producers, wholesalers, distributors, dealers or retailers of
essential commodities enumerated hereunder at a rate
prescribed under subsections (a), (b) and (d) of this Section:
“x x x.”
Excerpt 19:
Taxes, fees or charges, on Countryside and Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-
eight (R.A. 6938) otherwise known as the “Cooperatives Code of the Philippines:
respectively; and
a) Exempt
Republic of the Philippines
DEPARTMENT OF FINANCE
BUREAU OF LOCAL GOVERNMENT FINANCE
MANILA
Sir:
“It was noted from your abovestated letter that North Cotabato
Free Farmers Cooperative, Inc. (NCFFCI) is actually protesting the
legality of business taxes, fees or charges imposed by local
government units in that area on cooperatives existing therein,
notwithstanding the provisions on tax exemption of cooperatives
under RA, 6938, otherwise known as the Cooperative Code of the
Philippines. Such being the case, your attention is invited to the
provisions of Sections 133 (n) and 193 of the Code which read as
follows:
‘x x x.
‘SECTION 193. Withdrawal of Tax Exemption
Privileges. - Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed
by all persons, whether natural or juridical, including
government-owned or controlled corporations, except local
water districts, cooperatives duly registered under RA. No.
6938, no-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity of
this Code.’
b) Not Exempt
Sir:
This refers to your letter dated February 16, 2009 requesting legal
opinion or clarification on the taxability of the Cooperative Bank of Cotabato
(CBC) on local taxes such as the real property tax (RPT) and other local
taxes fees and charges.
2) Claim for exemption under Article No. 62 (3) of R.A. 6938 pertains
to the applicable percentage taxes made on transactions with
banks, insurance companies and even non-members; and
3) Article 61 (Tax Treatment of Cooperatives), R. A. 6938 is not
applicable in the case of CBC considering that it is of public
knowledge that it is accepting non-member depositors on loans,
savings and time deposits and even real estate transactions.
In resolving the herein issue, Section 234 (d) of R.A. 7160, otherwise
known as the Local Government Code of 1991 (LGC) is quoted as follows:
“x x x.
Excerpt 20:
Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.
1st Indorsement
May 3, 1993
This refers to the letter dated October 23, 1992 of Mr. Felicisimo O.
Joson, Jr., Administrator of Philippine Overseas Employment
Administration (POEA) requesting exemption from paying the penalty
imposed on delayed payment of transfer tax.
It appears that POEA purchased a lot and building from Delta Motors
Corporation (DMC), and occupied the same since 1984. To effect the transfer
of ownership from DMC to POEA, the latter is being required to pay the
transfer tax to that municipality. However, it appears that it took POEA four
(4) years to finally obtain from the Department of Budget and Management
(DBM) an allocation for payment of said tax, for reason that there has been
no appropriation therefore. Hence, the above request.
“x x x;
“x x x.”
Be guided accordingly,
3rd Indorsement
January 11, 2001
Be guided accordingly.
2nd Indorsement
March 30, 2011
3) In reply to the letter dated December 23, 2010 of the Asst. City
Treasurer of Digos, seeking opinion whether or not the City (Digos)
can collect amusement tax from the Province of Davao del Sur
based on the Tax Ordinance of that City relative to said PBA game,
that Office concurred and held the view of the Provincial Treasurer
that professional basketball games are beyond the taxing
authority of local governments based on the said SC Decision.
On the other hand, the Asst. City Treasurer was of the position that
the provincial government, in sponsoring the said PBA, should pay the
corresponding amusement tax on the admission fees collected during the
PBA game, pursuant to Section 2J.02 of the New Digos Tax Code of 2005.
Clearly, from the above discussions the Provincial Treasurer and the
Assistant City Treasurer of Digos City had taken different positions on the
issue.
Section 140, of R.A. 9640, the law amending Section 140 of the LGC,
and in relation to Section 151 of the LGC, provides that “[T]he province may
levy an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement at a rate of not more than ten percent (10%) of the
gross receipts from the admissions fees. x x x."
Be guided accordingly.
ANNEXES
Local Chief Executives have the authority to “issue licenses and permits and suspend or revoke
the same for any violation of the conditions upon which said licenses or permits had been
issued, pursuant to law or ordinance”.
The LGU may impose reasonable fees and charges on business, but no such fee or charge
shall be based on capital investment, or gross sales or receipts.
Step 1: Divide the total expenses of the office/unit for the preceding calendar year by the
number of permits/licenses issued.
Step 2: Stratify the result by business classification of business and its size (e.g. asset size
or number of employees).
Case B. If the LGU has no separate BPLO/BPLU and personnel are temporarily assigned only
during the tax payment period to perform the work of processing the applications and preparing
the permits/licenses.
Step 2: From the sum in Step 1, add 50% of the amount representing the MOOE.
Step 3: Divide the amount derived from Steps 1 and 2 by the number of permits/licenses
issued to arrive at the per unit cost of the permit issued.
Step 4: Stratify the result by business classification of business and its size (e.g. asset size
or number of employees).
Or calculate regulatory fee using the same principle as the calculation of service fees illustrated
in Annex D.
ANNEXES
Schedule 1
FEES
SERVICES currently LABOR MATERIALS TOTAL VARIANCE
imposed
I. Examination 15.00 40.45 4.50 44.95 (29.95)
Examination with
15.00 16.42 342.00 358.42 (343.42)
Medicine
Examination with
20.00 48.04 4.50 52.54 (32.54)
Certification
Medico-Legal 170.00 2,677.41 28.66 2,706.07 (2,536.07)
II. Laboratory
Year-
Hazard Cash Hazard Total
Position Basic Pay PERA end GSIS S&L PHIC HDMF S.I. Per day Per Hr. Per Min.
Pay Gift Prem. Monthly
Bonus
Nurse I 15,853.00 2,000.00 1,585.30 1,321.08 416.67 1,902.36 1,650.00 187.50 100.00 100.00 1,585.30 26,701.21 1,213.69 151.71 2.53
Doctor 38,560.00 2,000.00 3,856.00 3,213.33 416.67 4,627.20 1,650.00 375.00 100.00 100.00 3,856.00 58,754.20 2,670.65 333.83 5.56
Medical Technologist II 19,786.00 2,000.00 1,978.60 1,648.83 416.67 2,374.32 1,650.00 237.50 100.00 100.00 1,978.60 32,270.52 1,466.84 183.36 3.06
Dental Aide 10,149.00 2,000.00 1,014.90 845.75 416.67 1,217.88 1,650.00 125.00 100.00 100.00 1,014.90 18,634.10 847.00 105.88 1.76
Dentist III 25,734.00 2,000.00 2,573.40 2,144.50 416.67 3,088.08 1,650.00 312.50 100.00 100.00 2,573.40 40,692.55 1,849.66 231.21 3.85
Medical Technologist II 21,849.00 2,000.00 2,184.90 1,820.75 416.67 2,621.88 1,650.00 262.50 100.00 100.00 2,184.90 35,190.60 1,599.57 199.95 3.33
Pharmacist 21,488.00 2,000.00 2,148.80 1,790.67 416.67 2,578.56 1,650.00 262.50 100.00 100.00 2,148.80 34,683.99 1,576.55 197.07 3.28
HEPO II 19,982.00 2,000.00 1,998.20 1,665.17 416.67 2,397.84 1,650.00 237.50 100.00 100.00 1,998.20 32,545.57 1,479.34 184.92 3.08
Pathologist
Blood Pressure
Apparatus 10,000.00 2.00 5,000.00 416.67 18.94 2.37 0.04
Gauzeneck lamp (bulb) 2,500.00 1.00 2,500.00 208.33 9.47 1.18 0.02
Gloves 11.00
Note: In the cost accounting conducted above, only the personal expenses (Schedule 1b) and depreciation of
equipment (Schedule 1c) were considered; the overhead expenses, e.g. power, water and office space,
were not included. In spite of that, there are significant variances in the actual cost of service vis a vis the
service fees or charges being imposed by the LGU (as shown in Schedule 1). In fact, the LGU may opt to
include even the overhead expenses for purposes of full cost accounting.