Bureau of Local Government Finance Opinion

March 4, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Leonardo N. Verdolaga Vice President Finance & Administration Kajima Resources Development Corp. 26th Floor, Citibank Tower 8741 Paseo de Roxas Makati City S i r : This refers to your letter dated February 23, 1998 requesting confirmation of your opinion that the basis of the tax of Kajima Resources Development Corp. (KRDC) payable to Makati City should be thirty percent (30%) of the total gross receipts annually and the balance of seventy percent (70%) is to be allocated to the various municipalities where its project offices are located. Representations are made that KRDC is engaged in general construction activities throughout the Philippines, with principal office in Makati City. Section 5(b) of Local Finance Circular No. 3-95 dated May 22, 1995 of the Department of Finance, prescribing the guidelines governing the power of cities and municipalities to impose business tax on construction contractors, provides as follows: "SEC. 5. Situs Tax . "xxx xxx xxx "(b) For purposes of collection of the tax, the following rules shall apply: "(1) . . .; "(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. "(3) In cases where there are two (2) or more project offices located in different localities, the seventy percent (70%) allocation stated in subparagraph (2)(ii) above shall be prorated among the localities where such project offices are located in proportion to the work accomplished based on the cost of the projects or contracts actually undertaken in the locality during the tax period for which the tax is due. EDIHSC "xxx xxx xxx." On the basis of the aforequoted provisions, this Bureau finds the stand taken by that company on the matter to be in full accord with the law. Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director