Bureau of Local Government Finance Opinion

September 29, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Clara Beltran-Sanchez The Bengzon Firm SOL Bldg., 112 Amorsolo St. Legaspi Village 1229 Makati City M a d a m : This refers to your claim for tax refund in behalf of your client, the Manila Representative Office-Chiyoda Fire Marine and Insurance Co. Ltd. (CHIYODA for brevity). It was represented that Chiyoda was granted authority to open a Representative Office which activities are limited only to studying possible investments in the Philippines and it is not in any way doing an insurance business, i.e., making or proposing to make an insurance contract. It appears, however, that in the application of a Mayor's permit, Chiyoda was classified and assessed by the Licensing and Permit Division of the City of Makati as an insurance corporation doing business thereat levying a basic fee of Four Thousand Pesos (P4,000.00) pursuant to Section 4.A.01 (o) of the Makati Municipal Ordinance No. 92-072. Chiyoda submitted however that the proper basis for assessment should have been Section 4.A.01 (bb)(5) of the said ordinance imposing a basic fee of Three Hundred Pesos (P300.00) for maintaining an office, such as a liaison office. Chiyoda paid under protest the amount of Seventy Nine Thousand Eight Hundred Nineteen Pesos and Fifty Centavos (P79,819.50). In a letter dated October 6, 1997, the City Treasurer of Makati gave due course to the protest and granted the refund of excess payment in the form of tax credit. However, Chiyoda claimed that the amount is substantial for purposes of exhausting the credit of the company, thus, it cannot expend the tax credit within an immediate period or even for the next ten (10) years. Hence, Chiyoda finds that a tax refund would be more appropriate under the circumstances. In a letter dated March 5, 1998, this Bureau informed that as a rule, refund of excess amounts of taxes paid to a local government are in the form of tax credits. It is only in cases where the taxpayer concerned does not have any future tax obligations that cash refund may be allowed. Hence, in a letter dated May 8, 1998, Chiyoda informed that its authority under the Insurance Commission has been again extended until April 3, 2000. It is not known at this time whether said Representative Office will remain in the Philippines beyond said period, thus, the request to rule in favor of Chiyoda. In this connection and considering the above information, it may be stated that the tax credit granted to Chiyoda shall be applied only to their tax obligations until April 3, 2000, the date when its extension will cease. The balance of the tax credit shall be refunded in cash unless the authority of Chiyoda to operate a Representative Office shall be extended. DIcTEC The City Treasurer of Makati is being furnished a copy of this letter for her information and guidance. Very truly yours, (SGD.) ANGELINA M. MAGSINO (Deputy Executive Director) Officer-In-Charge