Bureau of Local Government Finance Opinion

August 29, 2013 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Dr. Lilia B. de Lima Director General Philippine Economic Zone Authority Roxas Boulevard corner San Luis Street Pasay City Attention: Atty. Procolo M. Olaivar Manager Legal Services Group Madam : We would like to request clarification on whether or not income of PEZA-registered enterprise declared as regular rate and taxed by the Bureau of Internal Revenue (BIR) under the regular rate (30%) is exempt from the local business taxes. We would also like to be clarified as to the nature of this "regular rate" of income and its sources, whether these were earned within or outside the Ecozone conclave. The request is being made in view of the final demand made by the City of Calamba for the settlement of the purported deficiency in the payment of business tax from 2006-2012 in the aggregate amount of SIXTEEN MILLION SIX HUNDRED EIGHT THOUSAND TWO HUNDRED SEVENTY PESOS and 58/100 (PhP16,608,270.58) of Yazaki-Torres Manufacturing, Inc. (YTMI). YTMI claimed that in the inquiry made by it from PEZA, said agency confirmed the exemption of the company from the payment of the business taxes being assessed by said City, the pertinent portion of which is quoted as follows: cHaICD "As regards local government permits, fees, taxes, etc., YTMI continues to be exempt. This is because the enterprise does not shed its PEZA-registered status just because it has realized income from non-PEZA registered, albeit related, activities. For as long as YTMI conducts its business inside the ecozone, it remains exempt from LGU permits/taxes." This Bureau under a letter dated March 18, 2013, addressed to Ms. Eufemia H. Biscocho, Special Assistant to the Division Head, YTMI, expressed the view "that income of YTMI classified as "regular rate" shall be subject to the local business tax imposed under a duly-enacted tax ordinance of the City of Calamba. This Bureau therefore, finds the assessment made by the ICO-City Treasurer in full accord of the law.'' The above request is necessary in order that appropriate action can be taken by this Bureau on requests pertaining to the exemption from local taxes of PEZA-registered enterprises. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director