Requesting for a Confirmation of the Exemption from Business Tax (BT) of BOI-Registered Enterprise Pursuant to Section 133 (g) of the Local Government Code (LGC) of 1991 and DOF Local Finance Circular No. 05-93

March 17, 2016 BLGF OPINION NO. 003-2016 Policy, Planning, Programming and Standards Division Ma. Thristle L. Buxani Tax Counsel Filinvest Land, Inc. Filinvest Building 79 EDSA, Highway Hills Mandaluyong City SUBJECT : Requesting for a Confirmation of the Exemption from Business Tax (BT) of BOI-Registered Enterprise Pursuant to Section 133 (g) of the Local Government Code (LGC) of 1991 and DOF Local Finance Circular No. 05-93 This refers to your letter dated March 7, 2016 requesting for a confirmation of the exemption from business tax of a BOI-registered enterprise pursuant to Section 133 (g) of the Local Government Code (LGC) of 1991 and Local Finance Circular No. 05-93 of the Department of Finance (DOF). Representations are made that Filinvest Land, Inc. (FLI) is a corporation engaged in owning, improving, developing, subdividing, selling, exchanging, leasing and holding for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures and immovable of whatever kind, together with their appurtenances. It is registered with the Bureau of Internal Revenue with Certificate of Registration OCN 8R0000038098 under TIN 000-533-224-000. Further, FLI was registered with the Board of Investment (BOI) on September 26, 2011 as a pioneer enterprise under Certificate of Registration No. 2011-215. However, FLI is being assessed by the local government of Caloocan City for business tax for its BOI registered activity. In relation to the above request, that Office also raises the following queries: 1. From what local government taxes are the corporation (FLI) exempt? 2. When shall the exemption from paying business taxes ceased? EcTCAD 3. Can the receipts which are still under BOI tax exemption be the basis for computing the assessment? If not, what is the basis? In resolving the immediate issue above, Section 133 of the LGC is quoted hereunder, which provides: "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 enterprise 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 xxx xxx." In this connection, please be informed that this Bureau has expressed a uniform view on previous similar queries concerning tax exemption of BOI-registered enterprises. For so long as a business enterprise is certified by the BOI as pioneer or non-pioneer, it shall remain exempt from local taxation for a period of six (6) and four (4) years, respectively, from the date of registration or date of actual commercial operations, as the case may be. Further, for purposes of implementing Section 133 (g) of the LGC, the Department of Finance issued Local Finance Circular (LFC) No. 5-93, dated October 22, 1993, copy attached, pursuant to Article 287 of the IRR, prescribing the limitations, manner and procedures for the imposition of local business taxes on BOI-registered enterprises, the pertinent portion of which is quoted hereunder: "Section 4. Availment of the Exemption. (a) Within sixty (60) days "(i) from 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 these guidelines, whichever comes later, the President or any duly authorized representative of the registered enterprise, shall submit a 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 Sec. 3 above. "xxx xxx xxx." In this connection, it may be stated that guidelines issued by this Bureau relative to the levy and administration of local taxes, fees and charges pursuant to Article 287 of the IRR are only intended to, among others: 1. guide local elective officials in the enactment of local tax ordinances or revenue codes; 2. guide local treasury offices in collecting taxes and other local impositions, as well as in determining or computing tax discounts or penalties and surcharges; and 3. guide the taxpaying public as to the proper interpretation and application of the law and rules governing local taxation. Accordingly, and considering that FLI is a BOI-registered pioneer enterprise said company shall be exempted from the payment of local business taxes for a period of six (6) years reckoned from September 26, 2011, the date of its registration. However, said enterprise shall still be liable to pay the Mayor's permit and other regulatory fees or service charges that the local government unit may have imposed under a duly-enacted local tax ordinance, the exemption being applicable to local taxes only. Query No. 1. From what local government taxes are the corporation exempt? Exemption from the payment of local business taxes (LBT) granted to a BOI-registered enterprise shall be valid to all local governments as law (LGC), supra , provides that the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of "[T]axes 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." 1 Query No. 2. When shall the exemption from paying business taxes cease? Considering that FLI's Certificate of Registration issued by the BOI was issued on September 26, 2011, the tax exemption granted to said Corporation shall end on September 25, 2017 reckoned from the date stated in the said Certificate of Registration, which is September 26, 2011. Query No. 3. Can the receipts which are still under BOI tax exemption be the basis for computing the assessments? If not, what is the basis? Once the tax exemption of FLI expired on September 25, 2017, local business taxes shall be computed based on the gross sales or receipts realized starting September 26, 2017 onwards. HSAcaE We hoped that this will help clarify matters. Very truly yours, (SGD.) JOCELYN T. PENDON OIC-Executive Director ATTACHMENT March 7, 2016 Ms. Jocelyn T. Pendon OIC-Executive Director Bureau of Local Government Finance Department of Finance Manila Re : Filinvest Land, Inc. Exemption from Business Tax for BOI Registered Activity Dear Dir. Pendon: On behalf of Filinvest Land, Inc. (hereinafter FLI), we would like to request for a confirmation of the exemption from business tax of its BOI registered activity pursuant to Section 133 (g) of the Local Government Code of 1991 and DOF Local Finance Circular No. 05-93. FLI is a corporation engaged in owning, improving, developing, subdividing, selling, exchanging, leasing and holding for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures and immovable of whatever kind, together with their appurtenances (copy of its Articles of Incorporation is herein attached as Annex A). It is registered with the Bureau of Internal Revenue with Certification of Registration OCN 8RC0000038098 under TIN 000-533-224-000 (copy of which is herein attached as Annex B). FLI was registered with the Board of Investments on September 26, 2011 as a pioneer enterprise under Certificate of Registration No. 2011-215. FLI is being assessed by the local government of Caloocan City for business tax for its BOI registered activity. In connection therewith, we also raise the following queries: 1. From what local government taxes are the corporation exempt? 2. When shall the exemption from paying business taxes cease? 3. Can the receipts which are still under BOI tax exemption be the basis for computing the assessment. If not, what is the basis? Thank you very much and we anticipate your favorable response to our request. Sincerely, (SGD.) MA. THRISTLE L. BUXANI Tax Counsel Filinvest Land, Inc. Footnotes 1. Section 133 (g), LGC.