Bureau of Local Government Finance Opinion

October 4, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Manuel J. Gosim Accountant Pobar Marine Services, Inc. Rm. 501/502 5th Floor Ermita Center Bldg. 1350 Roxas Blvd. Ermita, Manila Sir : This refers to your letter dated September 26, 2000, inquiring whether your company, Pobar Marine Services, Inc. (PMSI) shall be subject to local taxes imposed by the City of Manila in view of the following: a. Contractors Tax was abolished and replaced by VAT. b. Although subject to VAT, PMSI is zero rated. Representations are made that PMSI is a local licensed crewing/manning agency registered with the Philippine Overseas Employment Administration. It deploys workers to its POEA accredited principal and handle their allottees remittances in return. It is claimed that recently, the City of Manila increased its tax rate for contractors to 1% and the tax imposed on business under Section 21 of the Revenue Code to 5%, respectively. Thus, the above request. ITSCED As to your claim that contractor's tax was replaced by VAT, please be informed that the said tax is a local imposition. The imposition of a national tax to a business establishment does not exempt said establishment from being subjected to a local tax. The reason for this is the fact that said taxes are imposed by two separate and distinct taxing authority which are the national government, in the case of a national tax, and the local government with respect to municipal tax. In view thereof, PMSI is subject to the payment of contractors tax, fees and service charges imposed under a duly-enacted ordinance of the City of Manila. With respect to tax imposed under Section 21 of the Revenue Code of Manila, this Bureau has consistently expressed the view that if a business is already taxed under sub-sections (a) to (g) of Section 143 of the Local Government Code of 1991 (LGC) in relation with Section 151 thereof, such business should no longer be taxed under Subsection (h). Hence, the imposition of business taxes under Section 21 of the Revenue Code of Manila on businesses already subject to tax on contractors of the said Revenue Code will constitute double taxation as the same kind of tax is being imposed twice on the same business. It bears emphasis, however, that the foregoing issue is not a declaration of the nullity or illegality of the subject portion of the Ordinance for reason that such function falls exclusively within the jurisdiction of the Department of Justice. It is hoped that this will help clarify matters. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a2000-0921.pdf> last visited on October 2, 2013.