Bureau of Local Government Finance Opinion

March 6, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Honorable Rey T. Uy City Mayor City of Tagum Sir : This refers to your letter dated January 19, 2000, requesting clarification as to whether the taxes due on banks and other financial institutions accrue to the branch where the transaction originated or to its principal office, and whether a guideline to that effect has been issued. In reply, enclosed is a copy of the 1st Indorsement dated April 14, 1997, addressed thru the Regional Director for Local Government Finance, Region IV, to the ICO, Office of the City Treasurer, Lipa City, the pertinent portion of which is quoted as follows: "In this connection, quoted hereunder is the pertinent portion of Local Finance Circular No. 1-93 dated June 16, 1993 prescribing the guidelines governing the power of municipalities and cities to impose a business tax on banks and other banking institutions pursuant to Sections 143(f) and 151 of R.A. 7160, otherwise known as the Local Government Code of 1991, and its Implementing Rules and Regulations (IRR). 'Section 5. Situs of the Tax. For purpose of collection of the tax, the following shall apply (a) All transactions filed with or negotiated in the branch shall be recorded in said branch and the gross receipts derived from said transactions shall be taxable by the city or municipality where such branch is located. This rule shall be applied to: HDIaET 'xxx xxx xxx.' '(b) The gross receipts derived from the transactions made by the Head Office, except gross receipts recorded in the branches, shall be taxable by the city or municipality where said Head Office is located. 'xxx xxx xxx.' "Accordingly, the loans that are being processed and released by the Head Office shall be considered as transactions made by the Head Office and, therefore, the interest income from said loans shall be taxable by the locality where the Head Office is located. The contention that deposits in branches are remitted to the Head Office and that such loans are taken therefrom does not convert the transaction as one made by the branch, especially considering that the Bank would have more than one branch." It is hoped that this will help clarify matters. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a2000-0214.pdf> last visited on October 2, 2013.