Bureau of Local Government Finance Opinion

July 24, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the OIC-Regional Director for Local Government Finance, Region IV-MIMAROPA, the herein preceding indorserment relative to the letter dated January 22, 2015 of the Provincial Treasurer of Palawan, requesting confirmation of his opinion on situs of taxation in view of the letter dated December 22, 2014 of the Municipal Treasurer of Taytay, said province. Under the said letter dated December 22, 2014, the Municipal Treasurer of Taytay informed the following: 1. In September 2014, the Office of the Municipal Treasurer sent to VCH Construction (VCH for brevity) the local business tax computation due the said Municipality. 2. The computation was based on Municipal Ordinance No. 092, series of 2010, otherwise known as the "Revised Revenue Code of Taytay, Palawan", particularly Section 2A.02-Imposition of Taxes, par. (E), Article A-Business Tax, Chapter 2-Municipal Taxes. DaIAcC 3. The allocation of 70% of the Total Gross Revenue of the VCH as the basis for the computation is also provided by the same Revenue Code, particularly Section 2A.11. Situs of Taxation, [B], no. 3), while the surcharges imposed was pursuant to Chapter 3, Article A.-Mayor's Permit Fee, Section 3A.03. 4. To date, the local business tax being collected from the contractor amounts to P273,625.65, representing the total business tax and other regulatory fees and penalties up to the third quarter, excluding the penalties yet to be imposed for late payment in the fourth quarter. Based on the documents submitted, the Municipal Treasurer of Taytay imposed the business tax on contractor on VCH pursuant to Section 143 (e) of the LGC, as implemented under Section 2A.02, par. (E) of its Revenue Code. Moreover, as reflected in the computation of business tax made by said Office, it appears that 70% of the total gross revenue of VCH was taxed by said Municipality pursuant to Section 2A.11 [B], No. 3 of the same Revenue Code quoted as follows: "3) In cases where the factory, project office , plant or plantation in pursuit of business is located in this municipality, seventy percent (70%) of all sales recorded in its principal office shall be taxable by this municipality while the remaining thirty percent (30%) of all sales recorded therein shall be taxable by the local government unit where the principal office is located." (Underscoring supplied) In view thereof, the presence of a project office in the Municipality of Taytay is a requirement before the said municipality can impose tax on the 70% of the gross receipts realized from the project or contract undertaken in Taytay and recorded in the principal office of VCH. In this connection, that Office is hereby instructed to conduct an ocular inspection to determine whether or not VCH maintains a project office thereat. In the conduct of an ocular inspection that Office should be guided by the term "project office" as applied to contractors which shall mean "the office or headquarters used in administering the project or construction being undertaken in pursuit of business. However, it may not be a fixed place where administrative work is conducted as the term 'office' usually connotes, but one that may be transferred from one project site to another." Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director