Bureau of Local Government Finance Opinion

September 15, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Wilfredo N. Caballero Manager Calapan Telephone System, Incorporated Elbo Street, San Vicente Calapan, Oriental Mindoro S i r : This refers to your letter dated August 18, 1998 requesting opinion relative to the exemption of the Calapan Telephone System, Inc. (CATSI) from the payment of local Franchise, business and property/machinery taxes under the provisions of the Local Government Code of 1991 (LGC). Representations are made that CATSI is a grantee of a congressional franchise pursuant to R.A. 8351 authorizing it to construct and operate telecommunication system and services within the entire province of Oriental Mindoro. Section 11 of R.A. 8351 provides as follows: "Section 11. Tax Provisions . The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee, its successors and assigns shall pay the (expanded) value-added tax under R.A. No. 7716 or a franchise tax of three percent (3%) per annum or at such percentage as may be prescribed by law, on all gross receipts of its telecommunications business transacted under this franchise, whichever is higher. . . ." Considering, therefore, that R.A. 8351, having been approved on September 5, 1997 is a later law, its provisions should prevail over those of the Local Government Code (LGC) of 1991, which took effect on January 1, 1992. TSEHcA Moreover, Section 23 of R.A. 7925, quoted hereunder, which was approved on March 1, 1995 prior to the enactment of R.A. 8351 provides for the equality of treatment in the telecommunications industry. "Sec. 23. Equality of Treatment in the Telecommunications Industry . Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchise and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however , That the foregoing shall neither apply to nor effect provisions of telecommunications franchises concerning territory covered by the franchise, or the type of service authorized by the franchise." Accordingly, CATSI as a telecommunication franchise holder should be considered exempt from the franchise and business taxes that local governments may impose under Sections 137 and 143, respectively, of the Code. However, all real properties of the Corporation not directly, actually and exclusively used in the telecommunication operations or services shall be subject to the real property taxes that provinces and cities may levy under the pertinent provisions of the Code. Moreover, the corporation shall be liable to pay the Mayor's permit and other regulatory fees or services charges that the local government concerned may have local franchise and business taxes. These views are expressed merely for guidance of that Office pursuant to the provisions of Article 287 of the Implementing Rules and Regulations (IRR) of the Code and should not be construed as bearing upon the legality of a duly-enacted local tax ordinance. AcCTaD It is hoped that this will help clarify matters. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-In-Charge