Bureau of Local Government Finance Opinion

September 25, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Millard M. Manseguiao Director, Tax and Corporate Services Diaz Murillo Dalupan Certified Public Accountants 5th Floor, Don Jacinto Bldg. Dela Rosa corner Jacinto Sts. Legaspi Village, Makati City Sir : This refers to your letter dated August 31, 2001 relative to the case of your client, Subic International Air Center, Inc. (SIACI), a company classified as a Subic Bay Freeport Enterprise for the purpose of engaging in business as regional executive jet service charterer, maintenance and ground handling service operator, leasing, buying, selling and trading of any and all kinds of aircraft, spare parts and other related items from Building No. 8128, Subic Bay International Airport, Subic Bay Freeport Zone. SIACI contends that as a registered enterprise of Subic Bay Metropolitan Authority (SBMA) it is entitled to the preferential tax benefits under Section 12 of RA No. 7227, known as the Bases Conversion and Development Act of 1992 stated as follows: . . . registered enterprise within the secured area in the zone shall, in lieu of local and national taxes, be liable to the payment of the following, based on gross income earned: (1) To the National Government 3% (2) To the Local Government Units affected by the declaration of the zone 1% (3) To the Special Development Fund to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic and other municipalities contiguous to the base area 1% SIACI claims that notwithstanding the above provision, the City of Pasay has assessed them for deficiency business tax. cTCADI SIACI likewise contends that while it parks some of its aircraft at the domestic airport hangar every now and then for the convenience of its passengers who fly out of Manila to other destinations, it is nevertheless, an SBMA-registered company and as such it is entitled to the "in lieu of local and national taxes" privilege under Section 12 (c) of RA No. 7227, therefore, it is not liable for business tax by the City of Pasay. As could be gleaned from the aforequoted Section 12 of RA No. 7227, exemption privilege or incentive would only apply to those activities undertaken within the secured area in the zone. However, business activities transacted by SIACI thru their office outside the zone will be subject to or liable to pay, any business tax only to the following extent: 1. If the office being maintained is a branch or sales office as contemplated under subparagraph (2) of Article 243 of the IRR, on all sales made thereat, 2. If it is a principal office within the purview of subparagraph (1) of the same Article, in pursuit of its business, only on 30% of the sales made thereat, or TcDIEH 3. If it is neither of the above classification, the company shall only be subject to Mayor's permit and other regulatory fees imposed by the local government unit concerned. In view of the above and in order that this Office could act accordingly on the allegation that the City of Pasay has assessed SIACI for deficiency business tax on the basis that said company parks some of its aircraft at the domestic airport hangar, the matter is being referred to the City Treasurer of Pasay, under a 1st Indorsement of even date, copy enclosed, requesting information as to the basis for the collection of taxes from SIACI together with the copy of ordinance or excerpt thereof levying the business tax herein referred to. As soon as the desired information is received, that Office will be advised accordingly. Very truly yours, (SGD.) JUANITA D. AMATONG Undersecretary <www.blgf.gov.ph/downloads/opinion/localtax/2001/a2001-0913.pdf> last visited January 13, 2014.