Bureau of Local Government Finance Opinion

December 19, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. R. A. Salalima 19th Flr. BPI Paseo De Roxas Condominium Center 8753 Paseo de Roxas Salcedo Village, Makati City Dear Atty. Salalima : This refers to your letter of 21 November 1997 requesting in behalf of your client, Telecommunications Technologies Philippines, Inc., or Teletech, opinion on whether or not the corporation is, by express provision of law, exempt from the franchise and business taxes imposed by local governments pursuant to the provisions of the Local Government Code of 1991 (LGC). Representations are made that Teletech is a grantee of a Congressional franchise under RA 7617, as amended by RA 7674, which was approved on June 25, 1992, authorizing it to construct and operate telecommunications facilities within the Philippines with international services, Section 10 of RA 7617 is quoted hereunder: THDIaC "SEC. 10. Tax Provisions . The grantee shall be liable to pay the same taxes on their real estate, buildings and personal property exclusive of this franchise, as other persons or telecommunications entities are now or hereafter may be required by law to pay. In addition thereto, the grantee shall pay to the Bureau of Internal Revenue each year, three per centum (3%) of the gross receipts of its regulated telecommunication services transacted under this franchise, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof: . . . " (Emphasis supplied.) Considering, therefore, that RA 7617 having been approved on June 25, 1992 is a later law, its provisions should prevail over those of the LGC which took effect on January 1, 1992. Accordingly, Teletech should be considered exempt from the franchise and business taxes that local governments may impose under Sections 137 and 143, respectively, of the Code. However, all real properties of the corporation not directly, actually and exclusively used in its telecommunication operations or services shall be subject to the real property taxes that provinces and cities levy under the pertinent provisions of the Code. CSTEHI Moreover, the corporation shall also 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 and should not be construed as bearing upon the legality or illegality of a duly-enacted local tax ordinance. It is hoped that this will help clarify matters. cDHAES Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director