Bureau of Local Government Finance Opinion

December 14, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Koi Otsu Asst. Vice-President/General Manager Administration and Finance COMSYS Philippines, Inc. Penthouse 1 (West Wing) Hanston Building, Emerald Avenue Ortigas, Pasig City Sir : This refers to your letter dated August 21, 2000 requesting guidelines for the imposition of interest and surcharges by the local government units re: filing of business permit due to discrepancy of unaudited and audited revenue figures during the filing of renewal of business licenses every January 20th of the year. It is represented that COMSYS Philippines, Inc. (CPI) is a telecommunications construction company wherein sales are based on the percentage-of-completion method. Furthermore, the sales has to be checked & verified before it will be recognized as revenue in the books. Its review cannot be completed within twenty days from year-end. In order to meet the January 20 deadline of paying the business licenses, an unaudited gross sales is submitted as basis for the computation of business licenses while your office is waiting for the completion of the audited financial statements. With this procedure, it is your contention that in some instance, the result between the unaudited and audited financial statement would not be the same. Thus, the following questions: 1. On the ground that initial declared amount is lower than the audited figures, would these discrepancy be charged with interest and surcharges? 2. Or will the fees be recomputed based on the audited figures (without surcharges and/or interest), and make the necessary adjustments? DCESaI Section 168 of R.A. 7160, otherwise known as the Local Government Code of 1991 (LGC) as implemented under Article 256 of the Implementing Rules and Regulations (IRR) states: "ART. 256. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. The Sanggunian may impose a surcharge not exceeding twenty-five percent (25%) of the amount of taxes, fees or charges not paid on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed thirty-six (36) months." On the other hand, Article 257 of the IRR implementing Section 169 of the LGC provides: "ART. 257. Interests on Other Unpaid Revenues. Where the amount of any other revenue due an LGU, except voluntary contributions or donations, is not paid on the date fixed in the ordinance, or in the contract, expressed or implied, or upon the occurrence of the event which has given rise to its collection, there shall be collected as part of that amount an interest thereon at the rate not exceeding two percent (2%) per month from the date it is due until it is paid, but in no case shall the total interest on the paid amount or a portion thereof exceed thirty-six (36) months." In view of the above provisions of law, it is very clear that CPI is liable to pay interest and surcharges on the total amount of unpaid taxes, fees or charges computed based on the difference between the audited and unaudited financial statements. In case the audited revenue figure is lesser than the unaudited, CPI may file a claim for refund or to credit of overpayment pursuant to Section 186 of the same code. It is hoped that this will help clarify matters. DEIHSa Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a2000-0811.pdf> last visited on October 2, 2013.