Local Business Tax Issues in the Municipality of Odiongan

September 4, 2017 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Siole F. Rios Municipal Treasurer Municipality of Odiongan Province of Romblon SUBJECT : Local Business Tax Issues in the Municipality of Odiongan Dear Ms. Rios : This refers to your letter dated 24 March 2017 seeking the Bureau's opinion on the following local business tax issues in your municipality: 1. Whether or not the municipality has the right to oblige contractors to pay tax whose office is located elsewhere but with projects in the municipality's jurisdiction; and 2. Whether or not a financing company of motorcycle dealer maintaining a satellite office is required to apply for a business license in the municipality where such office is located. In treating the first concern, reference is made to Sections 5 (b) (2) (i) and (ii) of the Local Finance Circular No. 03-95, 1 dated 22 May 1995, copy hereto attached, quoted as follows: " Section 5. Situs of Tax . (b) For purposes of collection of the tax, the following rules shall apply: (2) In cases where there is no branch office, the gross receipts from domestic projects or contracts shall be recorded in the Head/Principal Office and the same shall be allocated as follows: (i) Thirty percent (30%) of the gross receipts shall be taxable by the city or municipality where the principal office is located; and (ii) Seventy percent (70%) of the gross receipts shall be taxable by the city or municipality where the project office is located." Based on the aforequoted provisions of the law, the concerned local government may impose a tax on the 70% of the gross receipts or cost of contract of their project if the contractor maintains a project office in the project site. The term "project office," as applied to contractors, shall mean the office or headquarters used in administering the project or construction being undertaken in the pursuit of business . 2 However, it may not be a fixed place where administrative work is conducted as the term "office" usually connotes, but one that may be transferred from one project site to another . 3 As for the second issue, an LGU where the satellite office of a financing company of motorcycle dealer is located, but where no transactions are made, may only collect Mayor's permit fee and other regulatory fees, as may be provided for under a duly enacted local tax ordinance. We hope we have provided clarity on the matter. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director ATTACHMENT DOF Local Finance Circular No. 03-95 May 22, 1995 Republic of the Philippines Province of Romblon Municipality of Odiongan Office of the Municipal Treasurer March 10, 2017 Hon. Jocelyn T. Pendon OIC-Executive Director BUREAU OF LOCAL GOVERNMENT FINANCE 8th Floor, EDPC Bldg., BSP Complex Roxas Blvd., Manila Subject: Request for Opinion/Ruling on Local Business Taxes Dear Madam: We wish to seek the opinion or ruling of your Honorable Office regarding the following issues: a. As to whether the municipality has the right to oblige Contractors to pay tax on situs whose office are located elsewhere but with projects in our jurisdiction. b. If the Financing Company of Motorcycle Dealer maintaining satellite office need to apply for a business license in the municipality where the satellite office is located. With these, we are requesting your opinion or ruling on this matter, specifically if the Company/Contractors should apply for a business permit and pay local business taxes to this municipality where the projects or satellite office is located. We trust that your Honorable Office will merit your prompt and favorable attention. Sincerely, (SGD.) SIOLE F. RIOS Municipal Treasurer Footnotes 1. Prescribing Guidelines Governing the Power of Cities and Municipalities to Impose Business Tax on Construction Contractors Pursuant to Section 143 (e) of Republic Act No. 7160, otherwise known as the Local Government Code of 1991. 2. BLGF Opinion to Atty. Delfin H. Decierdo of Metaphil, Inc., dated 16 September 1994. 3. Ibid.