Bureau of Local Government Finance Opinion

July 19, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Henry Lim Bon Liong President, SP Properties, Inc. 2nd Floor, Sterling Place 2302 Pasong Tamo Extension Makati City Sir : This refers to your letter dated October 24, 2000 requesting opinion whether SP Properties, Inc. (SP for brevity) is liable from payment of business taxes under Articles 232 (b) and (h) and 243 of the Implementing Rules and Regulations (IRR) of the Local Government Code (LGC) of 1991 vis-a-vis Sections 2A.01 and 2C.ol of Municipal Tax Ordinance No. 93-0047 s. 1993 of Silang, Cavite. Representations are made that SP is engaged in the development of real estate for light and medium industries with principal office in Caloocan City. It operates the Sterling Technopark at Silang, Cavite comprising about thirty-six (36) hectares. In September 2000, the Licensing Officer of Silang informed that SP should pay its business taxes thereat corresponding to seventy percent (70%) of the gross receipts with penalties for alleged failure to pay said business taxes. SP claims that it paid in full its, business tax in Caloocan City. All sales of real properties are done either in Caloocan City or Makati City where the appropriate taxes are paid, e.g. , capital gains taxes, documentary stamp taxes and transfer taxes. SP claims further that only lands or real properties are situated in Silang where real estate taxes are paid. SIcCTD Citing Article 243 (b) (2) of the IRR and Section 2B.01 of Municipal Tax Ordinance No. 93-0047 s. 1993, quoted hereunder, SP contends that it is an industrial estate developer or engaged in horizontal development of real estate. It is not engaged in any development or construction of any condominium project or building. In the case of condominium developer, the owner/developer maintains project office at the place where the condominium project is located. "Article 243. Situs of the Tax. (a) . . . "(b) Sales Allocation (1) . . . "(2) In cases where there is no such branch, sales office or warehouse in the locality where the sale is made, the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall accrue to the city or municipality where said principal office is located. "xxx xxx xxx." "Section 2b.01 "(3) In case where there is a factory, project office, plant or plantation in pursuit [sic] of business, thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located and seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, the plant or plantation is located. LGUs where only experimental farms are located shall not be entitled to the sales allocation herein provided for." cHSIAC In a letter dated February 13, 2001, the Municipal Treasurer of Silang failed to establish the nature of business of SP. However, it must be pointed out that by your own admission, SP is an industrial estate developer or is engaged in horizontal development of real estate. There is no doubt therefore, that SP is real estate developer and as such, maintains a project office for purpose of project implementation and the monitoring of project activities, that is to see to it that the project will be implemented according to plan and schedule. In view of the above, SP shall be subject to, or liable to pay, the business tax on the basis of the seventy percent (70%) of its gross receipts realized, pursuant to Section 143 (h) of the LGC as implemented under Municipal Tax Ordinance No. 93-0047 of Silang. Accordingly, SP may request the City Treasurer of Caloocan to remit directly to the Municipality of Silang, without penalty, on the basis of its own tax rates, the amount collectible by said municipality. And considering that municipalities have lower tax rates compared to cities, the excess of the seventy percent (70%) paid to Caloocan City shall be tax credited by said City to the account of SP for future liabilities. It is hoped that this will help clarify matters. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director <www.blgf.gov.ph/downloads/opinion/localtax/2001/a2001-0219.pdf> last visited January 16, 2014.