Bureau of Local Government Finance Opinion

February 3, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Messrs: Eugene T. Mateo President & General Counsel Luis Jovito A. Santos, Jr. Vice President of Finance TVI Resource Development Phils., Inc. 22nd Floor, Equitable PCI Bank Tower 8751 Paseo de Roxas, Makati City Gentlemen : This refers to your letter dated January 21, 2010, requesting clarification on the exemption from local business taxes of a BOI-registered enterprise. Representations are made that TVI Resources Development Phils., Inc. (TVIRD) is a domestic corporation duly registered and existing under the laws of the Philippines. TVIRD is engaged in the business of prospecting, exploration and of mining, milling, concentrating, converting, smelting, treating, refining, preparing for market, manufacturing, buying, selling, exchanging and otherwise producing/dealing in all kinds of ore, metals and minerals, and in the products and by-products of every kind and description and by whatsoever process the same can be or may be produced. Further, TVIRD was previously registered with the Board of Investments (BOI) as a non-pioneer enterprise, New Export Producer of Dore Bullion (Gold & Silver) under Registration No. EP-2005-069, which expired on May 2009. Thereafter, TVIRD secured another BOI Registration No. 2007-221 as non-pioneer with pioneer incentives for being located on a "less developed area", as a New Producer of Copper Concentrates with Gold, Silver and Zinc Values. Under its present registration, the company was granted an Income Tax Holiday (ITH) for six (6) years from June 2008 or from the actual start of commercial operations. aIcSED Section 133 of the LGC quoted hereunder, provides as follows: "Section 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: "xxx xxx xxx "(g) Taxes on business enterprise certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively, from the date of registration; IaAScD "xxx xxx xxx." In this connection, please be informed that this Bureau has expressed a uniform view on previous similar queries concerning tax exemption of BOI-registered enterprises. For so long as a business enterprise is certified by the BOI as pioneer or non-pioneer, it shall remain exempt from local taxation for a period of six (6) and four (4) years, respectively, from the date of registration or date of actual commercial operations, as the case may be. For purposes of implementing Section 133 (g) of the LGC, the Department of Finance issued Local Finance Circular (LFC) No. 5-93, dated October 22, 1993, pursuant to Article 287 of the IRR, prescribing the limitations, manner and procedures for the imposition of local business taxes on BOI-registered enterprises, the pertinent portion of which is quoted hereunder: "Section 4. Availment of the Exemption . (a) Within sixty (60) days "(i) from receipt of the Certificate of Registration from the BOI, or "(ii) from the effectivity of the tax ordinance or revenue measure imposing a tax on business, or SCETHa "(iii) from the effectivity of these guidelines, whichever comes later, the President or any duly authorized representative of the registered enterprise, shall submit a certified true copy of said Certificate of Registration to the local treasurer concerned together with a request for a Certificate of Exemption for the appropriate period, as indicated in Sec. 3 above. "xxx xxx xxx." In this connection, it may be stated that guidelines issued by this Bureau relative to the levy and administration of local taxes, fees and charges pursuant to Article 287 of the IRR are only intended to, among others: 1. guide local elective officials in the enactment of local tax ordinances or revenue codes; 2. guide local treasury offices in collecting taxes and other local impositions, as well as in determining or computing tax discounts or penalties and surcharges; and aDSTIC 3. guide the taxpaying public as to the proper interpretation and application of the law and rules governing local taxation. Accordingly, and considering that TVIRD is a BOI-registered non-pioneer enterprise with pioneer incentives, as a New Producer of Copper Concentrates with Gold, Silver and Zinc Values, said corporation shall be exempt from the payment of local business taxes for a period of six (6) years reckoned from November 21, 2007, the date of its registration. However, said enterprise shall still be liable to pay the Mayor's permit and other regulatory fees or service charges that the local government unit may have imposed under a duly-enacted local tax ordinance, the exemption being applicable to local taxes only. SacDIE It may be emphasized that for purposes of local taxation, all sales transacted by the New Export Producer of Dore Bullions (Gold & Silver) under BOI Registration No. EP-2005-069 that had expired on May 2009, shall be recorded in a separate book of account. In like manner, all sales transactions under BOI Registration No. 2007-221, which is still under the Income Tax Holiday (ITH) arrangement, shall be recorded in a separate set of books of accounts. We hope that this will clarify matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director