BLGF Opinion No. 001-2017 CO-LFPS-PPPSD

January 16, 2017 BLGF OPINION NO. 001-2017 CO-LFPS-PPPSD 1st Indorsement Respectfully referred to the Municipal Treasurer, Municipality of Mauban, Quezon , for appropriate action, the herein attached letter dated 06 December 2016 of Mr. Frank Thiel, General Manager, San Buenaventura Power Limited Co. (SBPL), relative to the application for issuance of a Certificate of Exemption for local taxes from the Municipality of Mauban, Quezon, as required under Section 4 of Local Finance Circular (LFC) No. 05-93. HTcADC Representations are made that SBPL, a limited partnership established under the laws of the Philippines with principal office address in Mauban, Quezon, has an existing project in the said Municipality, for the construction and development of a coal-fired power plant. It is likewise represented that SPBL is registered with the BOI as "New Operator of 500 Megawatts Coal-fired Power Plant using High-efficiency Supercritical Boiler Technology" and was granted a pioneer status. Based on the letter of SBPL to that Office, dated 31 August 2016, it contended that it paid the business tax assessment of Three Million Fifty-Seven Thousand Seven Hundred Eighty-Six Pesos and 15/100 (Php3,057,786.15) as evidenced by Official Receipt No. 8524421. Aside from being assessed local business tax, SBPL also claimed that it paid the amount of Three Hundred Two Thousand Nine Hundred Forty (PhP302,940.00) representing the payment for municipal license, Mayor's permit fee, sanitary fee, garbage fee, and sticker fee, with Official Receipt No. 8455127 issued by the Municipal Treasurer as proof of payment. In the main, SBPL vehemently argued that it should not have been assessed a local business tax amounting to Three Million Fifty-Seven Thousand Seven Hundred Eighty-Six Pesos and 15/100 (Php3,057,786.15) on the basis of: (1) Section 133 (g) 1 of the Local Government Code (LGC), and (2) Section 3 2 of Department of Finance (DOF) LFC No. 05-93. On 16 September 2016, Mr. Thiel again wrote that Office and the Office of the Mayor requesting for the issuance of a Certificate of Exemption from local business tax in favor of SBPL. In the said letter, the Certificate of Registration of SBPL signed by the Board Secretary and the Undersecretary of BOI was attached, and the SBPL once again cited different laws and jurisprudence in its request for exemption, namely, (i) Petron Corporation vs. Tiangco, G.R. No. 158881, April 16, 2008 ,where "the Supreme Court recognized that under 133 (g) of LGC, LGUs are disallowed from levying business taxes on business enterprises certified by BOI as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration" ;(ii) Section 133 (g) of LGC ;and (iii) DOF LFC No. 5-93 . On 14 October 2016, that Office responded to the letters of Mr. Thiel stating that a taxpayer claiming a tax exemption must point to a specific provision of law, conferring to it the said exemption, thereby denying SBPL's request and invoking the "lifeblood theory" in taxation. In reply, SBPL recapitulated the fact that under the abovementioned legal and jurisprudential grounds, it is exempt from the payment of local business tax, attaching therewith the Certification issued by the Director of Legal and Compliance Service of BOI, attesting to SBPL's position regarding its exempt status to pay local business tax. As can be gleaned from the series of communications between SBPL and that Office, no final agreement has been reached yet and the issue remains unresolved, hence, the request to this Bureau, citing the following: (a) SBPL maintains that the 60-day period for securing a Certificate of Exemption from the receipt of the BOI registration is not mandatory but merely directory; hence, the Municipal Treasurer of Mauban should issue the Certificate of Exemption despite the fact that the prescribed period had already elapsed; (b) SBPL claimed that no other proof of entitlement should have been required to be submitted to the Office of the Municipal Treasurer except the BOI registration as it is the only requirement stated under the LGC; and (c) That the pendency of the issuance of Certificate of Exemption by the Office of the Municipal Treasurer of Mauban does not bar SBPL from availing the exemption from payment of business taxes granted under Section 133 (g) of LGC. aScITE The foregoing premises and the provisions of law considered, this Bureau concurs with SBPL's view on the non-mandatory nature 3 of the sixty-day period within which the registered enterprise is required to submit its Certificate of Registration to the local treasurer concerned for purposes of availing the tax exemptions. It goes without saying that even after the lapse of the sixty-day period, the BOI-registered enterprise can still avail of the tax exemptions, provided it is able to present its BOI-certified true copy of said Certificate of Registration. Considering the indisputable fact that SBPL was registered with the BOI in 2015 as a pioneer enterprise, it is therefore exempt from LBT from 15 October 2015 to 14 October 2021, in accordance with the abovementioned provision of the LGC. Apropos ,the documentary requirement to be submitted by SBPL, together with its request for a Certificate of Exemption, to the Municipal Treasurer evidencing its non-taxability is no other than the BOI-certified true copy of its Certificate of Registration. No more, no less. Section 4 4 of LFC 5-93 is very explicit in its provision regarding the proof of entitlement. What is not required by law should not be unduly imposed upon as it might only result to unnecessary limitation or undue harassment on the taxpayer. With regard to the third issue on whether or not the pendency of the issuance of Certificate of Exemption by the Municipal Treasurer bars a business enterprise from availing the tax exemption, this Bureau is of the opinion that as long as a business enterprise is able to present its BOI-certified true copy of its Certificate of Registration, being the only documentary proof required by law to be submitted to avail of said exemption, then such business enterprise should be allowed to enjoy its tax-exempt status for the period so permitted, by granting the exemption due to it. Premises considered, and pursuant to the principle of solutio indebiti enshrined under the Civil Code of the Philippines, stating that no one shall unjustly enrich himself at the expense of another, this Bureau deems the request of SBPL to be refunded the amount of Three Million Fifty-Seven Thousand Seven Hundred Eighty-Six Pesos and 15/100 (Php3,057,786.15) that it paid to the Municipal Treasurer of Mauban, Quezon Province representing the LBT imposed on SBPL for the first quarter of FY 2016, in order, subject to existing rules and regulations. In this connection, the Municipal Treasurer of Mauban, Quezon, may confer with the representatives of SBPL for purposes of refunding the aforecited amount. In view thereof, that Office is hereby requested to inform this Bureau of the action taken hereon together with copies of relevant documents, if there be any, within five (5) days from receipt of this letter. This Opinion is issued based on the information provided. If upon subsequent verification or submission of information proves the contrary, this Opinion will be deemed null and void, and without effect. HEITAD Be guided accordingly. (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director Footnotes 1. Section 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx (g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration; xxx." 2. Department of Finance (DOF) LFC No. 05-93 dated 22 October 1993 . "xxx xxx xxx Section 3. Exemption of Pioneer and Non-pioneer Enterprises. xxx xxx xxx a) Pursuant to Section 133 (g) of the LGC and Art. 221 (g) of its Implementing Rules and Regulations (IRR), business enterprises certified to and registered with the BOI as pioneer or non-pioneer shall be exempt from local business taxes for a period of six (6) and four (4) years respectively, from the date of registration; xxx." 3. DOF Opinion dated 24 April 1998 to Mr. Onofre H. Francisco, Sr.,Office of the City Legal Officer, Davao City. 4. Sec. 4. Availment of the Exemption . Within sixty (60) days i. From the receipt of the Certificate of Registration from the BOI ,or; ii. From the effectivity of the tax ordinance or revenue measure imposing a tax on business, or; iii. From the effectivity of the these guidelines, whichever comes later, the President or any duly authorized representative of the registered enterprise, shall submit a BOI-certified true copy of said Certificate of Registration to the Local Treasurer concerned together with a request for a Certificate of Exemption for the appropriate period, as indicated in Section 3. (emphasis supplied)