Bureau of Local Government Finance Opinion

February 20, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Zalibeth I. Duque Manager-Tax/Legal Department Isla Communications Co., Inc. 22/F Trafalgar Plaza HV dela Costa St., Salcedo Vill. Makati City S i r : This refers to your letter dated August 7, 1997 requesting a ruling on the applicability of local franchise tax to Isla Communications Co., Inc. (ISLACOM). It is contended that ISLACOM is not subject to local franchise tax for reason that Section 14 of RA 7372 granting ISLACOM a congressional franchise which was approved on April 10, 1992, contains the "in lieu of all taxes" clause, quoted as follows: "Sec. 14. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other persons or corporations which are now or hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the business transacted under this franchise by the grantee, its successors or assigns and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof: . . ." Considering, therefore, that RA 7372 having been approved on April 10, 1992 is a later law, its provisions should prevail over those of the Local Government Code (LGC) of 1991, which took effect on January 1, 1992. Accordingly, ISLACOM should be considered exempt from the franchise tax the local governments may impose under Section 137 of the Code. However, the corporation shall be liable to pay the Mayor's permit and other regulatory fees or service charges that the local government concerned may have imposed under a duly-enacted tax ordinance, its exemption being applicable only to local franchise and business taxes. These views are expressed merely for guidance of that Office pursuant to the provisions of Article 287 of the Implementing Rules and Regulations (IRR) of the Code and should not be construed as bearing upon the legality or illegality of a duly-enacted local tax ordinance. ESaITA It is hoped that this will help clarify matters. Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director