Bureau of Local Government Finance Opinion

January 8, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. John Jonathan L. Lacson Executive Vice President MIS Maritime Corporation Suites 212-217 Cityland III V. A. Rufino corner Esteban Streets Legaspi Village, Makati City Sir : This refers to your letter dated December 17, 2009 requesting confirmatory ruling that MIS Maritime Corporation (MIS for brevity) is exempt from the coverage of local business taxes imposed under Section 143 of the Local Government Code of 1991 (R.A. No. 7160), as implemented by the Makati City Revenue Code. Representations are made that MIS is a domestic corporation organized and existing under Philippine laws with office at Suites 212-217 Cityland 3, V. A. Rufino corner Esteban Sts., Legaspi Village, Makati City, Metro Manila. MIS is engaged in the business of transporting petroleum products (via oil tankers) coming from the local oil refineries for distribution to various oil depots and installations in the Philippines. It is submitted that the local government of Makati City, which has jurisdiction over the principal office of MIS, has persistently assessed and collected local business taxes on freight revenue of the company pursuant to Section 143 of the LGC, as implemented under a duly-enacted revenue of said city. However, MIS contends that the company is exempt from the payment of local business taxes for its freight revenue derived from its business operation as transportation contractor/hauler of petroleum products citing Section 133 (j) of the LGC, quoted as follows: SCaTAc " SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipality, and barangays shall not extend to the levy of the following: xxx xxx xxx (j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code ; (emphasis ours) "xxx xxx xxx." The abovequoted Section 133 (j) of the LGC was further clarified in Section 3 (b) of Local Finance Circular No. 1-05 dated December 8, 2005, which provides: "Section 3. Exemption from Local Taxation. (a) Pursuant to Section 13 (h) of the IRR, local government units are prohibited from imposing taxes on . . . . (b) Haulers of petroleum products who operate as transportation contractors or independent common carriers shall be exempt from local taxes pursuant to Section 133 (j) of the LGC . . . . ." (emphasis ours) In view of the abovequoted provisions of the LGC and LFC No. 1-05, and for the early resolution of the herein issue, attached is a copy of our letter dated November 2, 2007, addressed to Atty. Liberato R. Lapia of Castillo and Lapina Law Firm, bearing on a similar issue, the dispositive portions of which are quoted as follows: ". . . , it is the view of this Bureau that the abovenamed companies may be considered as transport contractors or common carriers and therefor, exempt from taxes on its gross receipts pursuant to Section 133 (j) of the LGC. However, it may be pointed out that said Section is qualified by the phrase " Unless otherwise provided. " The qualifying phrase should be interpreted as referring to Section 186 of the Code which provides that local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated therein. Accordingly, the local government units concerned may impose a tax on the tax base other than the gross receipts of transportation contractors or common carriers." ACTIcS We hope this will help clarify matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director