Electric Franchise Holder Subject to 2% Franchise Tax Payable to the CIR or His Duly Authorized Representative

July 1, 1981 BIR RULING NO. 101-81 267-b 000-00 101-81 PHIVIDEC Industrial Authority 4th Floor, DAO I Condominium Salcedo Street, Makati Metro Manila Attention: Mr . Felipe B . Almazan Manager, Legal Division Gentlemen : This refers to your letter dated November 10, 1980 informing this Office that on July 6, 1979, the PHIVIDEC Industrial Authority (PIA) entered into an agreement with the Cagayan (de Oro) Electric Power and Light Company (CEPALCO) whereby PIA granted to CEPALCO the franchise to operate and maintain electric power within its Industrial Estate at Misamis Oriental (PIE-MO) by virtue of the provisions of Section 4(i) of P.D. 538, as amended; that the agreement stipulates that CEPALCO shall remit to PIA 5% of its monthly revenue collection within the Estate, 2% of which represents the franchise tax accruing to PIA which CEPALCO had been remitting since October, 1979; and that since, by virtue of Presidential Decree No. 538, PIA has the right to grant a franchise of this nature to persons of its choice, you contend that the 2% franchise tax should logically go to PIA. cdt In effect, therefore, you are requesting this Office to desist from collecting the said 2% franchise tax from CEPALCO. In reply, please be advised that CEPALCO being an electric franchise holder is subject to the 2% franchise tax which is payable to the Commissioner of Internal Revenue or his duly authorized representative. (Sec. 267(b), Tax Code). While it is true that PIA has the authority under the law to grant and had, in fact, granted the franchise to CEPALCO to operate and maintain electric power, the former had no authority to collect the franchise tax due from the latter. In view thereof, your request cannot be granted for lack of legal basis. Accordingly, CEPALCO should pay the 2% franchise tax due from it to the Revenue Collection Agent of Cagayan de Oro City, who is the duly authorized representative to this Office to receive such payment. Very truly yours, RUBEN B. ANCHETA Acting Commissioner