Re: Principles of Community Tax

August 16, 2016 BLGF OPINION NO. 020-2016 CO-LFPS-PPPSD Atty. Tomas M. Guno Atty. Ana Rosario N. Padua Rodrigo Berenguer & Guno Suite 1517, 15th Floor, AIC-Burgundy Empire Tower ADB Avenue Corners Garnet & Sapphire Roads Ortigas Center, Pasig City SUBJECT : Re: Principles of Community Tax Dear Atty. Guno and Atty. Padua : This has reference to your letter dated 26 May 2016 requesting for a legal opinion on the following issues regarding the imposition of Community Tax: EcTCAD 1. Who are required to pay Community Tax in a particular city or municipality ( i.e. , individuals or juridical persons or both, in what circumstances) in the light of Sections 157 and 158, Article VI of the Local Government Code (LGC)? 2. In the case of an Individual, where should Community Tax be paid ( i.e. , in the place of residence or place of employment) in the light of Section 160, Article VI of the LGC? 3. In the case of an individual obliged to pay Community Tax, who are required under the law to pay said tax to the taxing local government unit? The individual himself or his or her employer residing/operating in that particular government unit in the light of Sections 157 and 158, Article VI of the LGC? 4. For purposes of complying with the above ordinance, who are the employees covered by the said requirement? All employees or only employees who are residents of Pasig City in the light of Sections 157, 158 and 160, Article VI of the LGC? 5. Should the Business establishment employer then require their employees to pay and settle their community tax, and if so, in what local government unit? Their place of residence or Pasig City, where the business establishment employer maintains its principal office? 6. Can the City of Pasig hold the business establishment employer liable if the employees (individuals) do not pay their Community Tax and therefore be not able to supply the details of payment ( i.e. , community tax certificate number, date, place of issue and amount paid)? 7. The responsible officer cites that in case of delay in payment, there is 2% penalty per month of delay of payment of Community Tax, deadline of which was 28 February 2016, but penalty counts from January in case of late payment. We assume that this is based on the last paragraph of Section 161 of the Local Government Code and the First paragraph of Section 63 in the attached ordinance. May we ask for confirmation of this assumption. 8. In case, there is delay in the payment of Community Tax, who will be primarily liable? The individual or the employer? Assuming it is the individual and the individual fails to pay the penalty, can the employer be held liable for the accruing 2% monthly penalty in the light of Section 161 of the Local Government Code? 9. In case the business establishment employer, will be held liable for the penalty (for January to May 2016), can the latter ask for its waiver considering that the written reminder requiring said business establishment to submit the listing was only 1 April 2016 In resolving the abovementioned issues, quoted hereunder are some of the relevant provisions of the Implementing Rules and Regulations (IRR) implementing the provisions of the Local Government Code (LGC) of 1991 pertaining to community tax. " ARTICLE 246. Levy or Imposition . The levy or imposition of community tax by a city or municipality shall be governed by the following rules and guidelines: (a) Individuals liable to the payment of community tax (1) Every inhabitant of the Philippines eighteen (18) years of age or over who has been regularly employed on a wage or salary basis for at least thirty (30) consecutive working days during any calendar years; (2) An individual who is engaged in business or occupation; (3) An individual who owns real property with an aggregate assessed value of One Thousand Pesos (P1,000.00) or more; HSAcaE (4) An individual who is required by law to file an income tax return. (b) x x x (c) Juridical persons liable to the payment of community tax Every corporation, no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay community tax of Five Hundred Pesos (P500.00) and an additional tax, which, in no case, shall exceed Ten Thousand Pesos (P10,000.00) in accordance with the following schedule: (d) x x x (e) Place of Payment (1) Community tax shall be paid in the city or municipality where the residence of the individual is located or in the city or municipality where the principal office of the juridical entity is located. (2) It shall be unlawful for any city or municipal treasurer to collect community tax outside the territorial jurisdiction of the city or the municipality. (3) In case of branch, sales office or warehouse where sales are made and recorded, corresponding community tax shall be paid to the LGU where such branch, sales office or warehouse is located. (4) Any person, natural or juridical, who pays community tax to a city or municipality other than the city or municipality where his residence, or principal office in the case of juridical persons, is located shall remain liable to pay such tax to the city or municipality concerned. (f) Time for Payment (1) Community tax shall accrue on the first (1st) day of January of each year and shall be paid not later than the last day of February of each year. (2) x x x. (3) x x x. (4) Corporations established and organized on or before the last day of June shall be liable for the payment of community tax for that year. Corporations established and organized on or before the last day of March shall have twenty (20) days within which to pay the community tax without becoming delinquent. Corporations established and organized on or after the first day of July shall not be subject to community tax for that year. (g) Penalties for the payment If the tax is not paid within the prescribed period, there shall be added to the unpaid amount an interest of twenty-four percent (24%) per annum from the due date until it is paid." The provisions aforequoted provide for the guidelines pertaining to the imposition of Community Tax such as but not limited to the following: the persons liable , the place of payment as well as the time when the said tax should be settled. HESIcT From the provisions aforequoted, it is clear that the said tax should be borne or settled by the individual himself or by the juridical person itself in the place of residence in case of individuals, or in the place where the principal office is registered in cases of juridical entities. Thus, the employer cannot be held liable for the employee's failure to settle their individual liability. In relation to the issue, enclosed for reference is our letter dated 03 June 2005 addressed to Follosco Morallos & Herce Law Office , pertinent portions of which are quoted as follows: "xxx, there is no provision in the LGC empowering local government units to transfer community tax liability from the taxpayer-employee to his/her employer. Sec. 163 of the LGC provides: " Section 163. Presentation of Community Tax Certificate on Certain Occasions . (a) When an individual subject to the community tax. . . receives any salary or wage from any person or corporation, it shall be the duty of any person, officer or corporation. . . from whom any salary or wage is received to require such individual to exhibit the community tax certificate. x x x" This directs the employer to require the employee to exhibit his community tax certificate, not to pay the community tax in behalf of the employee. Cebu City, therefore, has no legal basis to collect from USJ-R the community taxes, assuming they are indeed unpaid, of the teachers. We also confirm your position that Cebu City may not penalize USJ-R by collecting from it the taxes, assuming that it failed to perform its duty of requiring the employees to pay their professional tax or of requiring them to exhibit their community tax certificate. If the taxes are indeed unpaid, the remedy of Cebu City is to collect from the teachers themselves, not USJ-R. As against USJ-R, which may have failed to comply with an applicable city ordinance to require its employees x x x to exhibit their community tax certificate, at best, the local government of Cebu City could invoke Section 516 of the LGC, which provides that: Section 516. Penalties for Violation of Tax Ordinances . The sanggunian of a local government unit is authorized to prescribe fines or other penalties for violation of tax ordinances but in no case shall such fines be less than One thousand pesos (P1,000.00) nor more than Five thousand pesos (P5,000.00), nor shall imprisonment be less than one (1) month nor more than six (6) months. Such fine or other penalty, or both, shall be imposed at the discretion of the court. The sangguniang barangay may prescribe a fine no less than One hundred pesos (P100.00) nor more than One thousand pesos (P1,000.00). x x x," AcICHD Further, the data that are being required by the City Government of Pasig as stated in your query pertaining to the employees are as follows: 1. Name and Address 2. Total salaries, wages and allowances 3. Community tax certificate number, date, place of issue and amount paid Therefore, even if the employees are not residents of the host city, the data being asked pertaining to the community tax of its employees may still be provided and the said juridical entity may still be held liable for the penalty for its failure to submit the required listing provided under Section 63, b of the governing ordinance of Pasig City, quoted as follows: " Section 63. Penalties for Delinquency . a) x x x b) Failure to submit the required listing shall subject the operator or administrative officer as the case may be to a penalty of fifty (P50.00) pesos for every month of delay or fraction thereof." We hope that we have clarified matters. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director