Bureau of Local Government Finance Opinion

January 20, 2017 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully forwarded to the OIC Executive Director, Bureau of Local Government Finance, Department of Finance, Manila ,the within letter dated January 6, 2017 of the OIC Municipal Treasurer of Claver, Surigao del Norte, requesting comment/opinion on the payment under protest made by TAGANITO HPAL (THPAL) CORP.,a multi-national company which operates a mineral processing plant in the said municipality. THPAL is registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Export Enterprise at the Taganito Economic Zone in the same Municipality of Claver, Surigao del Norte. The company claimed that it has started its commercial operations in October 2013 and was accordingly granted a 4-year Income Tax Holiday by PEZA, per letter dated 18 February 2015 from Ms. Mary Harriet O. Abordo, then Deputy Director General for Operations/Officer-in-Charge of PEZA, copy attached. On December 20, 2016, the Municipal Assessor of Claver, Surigao del Norte informed the company of its tax liability for CY 2017 and subsequently served Tax Declarations covering the listed properties. On December 27, 2016, the company tendered advance payment on real property tax for CY 2017 in the amount of Five Hundred Sixty Nine Million Two Hundred Ninety Nine Thousand Two Hundred Twenty Pesos and 24/900 (P569,299,220.24), net of 20% discount, to the Office of the Municipal Treasurer of said municipality. However the 4th quarter CY 2017 tax due in the amount of P141,216,948.20 was paid under protest claiming that its ITH incentive expires on September 30, 2017 and that by that time it shall be subjected to the special Gross Income Tax (GIT) regime of five percent (5%) under Section 24 of R.A. 7916 (Special Economic Zone Act of 1995). Hence, this inquiry of the OIC Municipal Treasurer of Claver, Surigao del Norte, on whether the company is no longer liable for the payment of the Provincial Imposition on real property tax beginning on October 1, 2017 since this is the subject of the protest made by the company. Further, this Office is also in a quandary on the surrounding issues, to wit: 1. As to the computation of tax period, since under pertinent Sections of R.A. 7160, the real property tax is an annual ad valorem tax that accrues on the 1st day of January and the grant of 20% discount is for advanced prompt payment of tax due for the ensuing year or years. (Sections 232, 246, 251, R.A. 7160) 2. Real property tax is a provincial or city imposition and it is only the collection thereof that is deputized to the Municipal Treasurer of the municipality where the property is located, whenever imposed by the province which has jurisdiction over it. And, the distribution of proceeds in cases where the province is the taxing authority is: 35% province; 40% municipality; and 25% barangay. (Sections 247, 271 [a], R.A. 7160) 3. The shift in tax regime to 5% Gross Income Tax Incentive will result to 3%-remittance to the national government and 2%-direct remittance to the municipality where the enterprise (LGU-Claver) is located. The foregoing are submitted for clarificatory opinion from that level. (SGD.) ELVIRA S. DARADAR, REA OIC Regional Director