BIR Ruling

June 20, 1972 Theo. H. Davies & Co., Far East, Ltd. 222 Buendia Avenue Makati, Rizal Gentlemen : This is in reply to your letter dated January 6, 1970, requesting permission that Bogo Medellin Milling Co., Inc., your principal, be allowed to pay a portion of the income tax due from it to the municipality of Bogo, Province of Cebu. The records show that Bogo-Medellin Milling Co., Inc. is a domestic corporation organized and existing under the laws of Republic of the Philippines; that it operates a sugar central in the Municipality of Medellin, Province of Cebu, and the same is engaged in the manufacture of centrifugal sugar; that said corporation has its principal administrative offices and plant at Medellin, Cebu i.e. that it maintains complete offices: Accounting, Sales, Administrative, Factory and a Warehouse in Medellin, Cebu; that said corporation has no branch office in factory outside of Medellin, Cebu; that the corporation obtains the sugar canes to be processed in its mill not only in Medellin, but also in the neighboring municipalities of Bogo, Daan-Bantayan, and finally, the said corporation is being managed by that Corporation. It is alleged by the Municipality of Bogo that the establishment of the Bogo-Medellin Milling Co., Inc., was conceived on the idea that the sugar mill would be supported with raw materials from the two municipalities of Bogo and Medellin; that the municipality of Medellin alone cannot supply the raw materials needed by the sugar central; and that the business of the sugar central is not exclusively done in the municipality of Medellin but extends continuously to the Municipality of Bogo, the sugar central having railways in Bogo through which the raw materials destined to the sugar central are transported. Pursuant to Sections 46 and 51 of the Tax Code, as implemented by Revenue Memorandum Circular No. 19-66 dated April 11, 1966, a corporation, partnership or association should file its income tax return with, and pay the income tax due therefrom, to the Collection Agent of the city or municipality where the principal office of its business is located and its books of accounts are kept. If the tax is payable in installment, i. e., the tax due is in excess of five hundred pesos, the first installment as well as the second installment should be paid to the collection agent of the city or municipality where the return is filed. Where a corporation, partnership or association has branches or factories in one or more cities or municipalities other than the city or municipality where the principal office of its business is located, it should file its return with, and pay the tax due to the collection agent of the latter. However, the corporation, partnership or association may apportion the second installment among the cities and/or municipalities where it has branches or factories and pay to each of them the portion allocated to them. In the instant case, there is no showing that the corporation has a branch office or factory in Bogo. Such being the case, under the aforesaid Revenue Memorandum Circular No. 19-66 the corporation cannot be required to pay a portion of the income tax due from it to the said municipality. The fact the Municipality of Bogo, is a supplier of raw materials in the needed in the sugar mill of the corporation which materials are transported by railways passing through the said municipality is not in compliance with the aforesaid Revenue Memorandum Circular No. 19-66. Furthermore, if the said claim of the municipality of Bogo is sustained, then all taxpayers who are manufacturers, may be, required to pay a portion of their income tax to cities or municipalities where their raw materials come from. In view thereof, it is regretted that your request cannot be granted for lack of merit. cd Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue