Bureau of Local Government Finance Opinion

June 27, 2016 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the Regional Director, Bureau of Local Government Finance-Department of Finance, CALABARZON, Region IV-A, 3rd Floor Marcelita Building, National Highway, Barangay Real, Calamba City, the herein attached indorsement dated 14 June 2016. Under the said indorsement, that office is seeking confirmation of the opinion it rendered on the issue raised by Mr. Doroteo P. Rosales , City Treasurer of Lipa, Batangas, on whether it is feasible to exempt the real estate lessors from garbage fee, sanitary fee and annual inspection fee which is likewise being paid by the lessee. Pertinent portion of that office's opinion on the matter as contained in the said indorsement is hereby quoted as follows: "The particular provision in this regard is the Local Government Code of 1991, quoted hereunder: "Sec. 147. Fees and Charges. The Municipality may impose and collect such reasonable fees and charges on business and occupation and except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing, before any person may engage in such business or occupation, or practice such profession or calling." Additionally, "Sec 153. Service Fees and Charges. Local government units may impose and collect such reasonable fees and charges for service, rendered." Likewise, "Art. 244. Common Revenue-Raising Powers. Under this Rule, provinces, cities, municipalities and barangays : "(a) May impose and collect fees and services or user charges for any service rendered by LGUs in an amount reasonably commensurate to such service, provided that no service charge shall be based on capital investments or gross sales or receipts of the person or business liable thereof." On the basis of the foregoing provisions of the Code and IRR, this Office believes that the said city may impose regulatory fees and charges on both lessor and lessees as they operate their respective business separately. EATCcI It is further informed that pursuant to the City's Revised Revenue Code of 1993, both businesses are required to pay all the imposed regulatory fees upon renewal of mayor's permit." Premises considered and invoking the principle of "presumption of validity" of the Revised Revenue Code of 1993 of Lipa City, we therefore find the opinion rendered by that Office to be in accordance with law, the same is hereby confirmed and made part of the records of the Bureau. Further, on the issue of double payment, it is our view that the same does not apply in the herein case as both the real estate lessor and lessees are distinct persons operating their respective business separately. To be precise, the lessor is being obliged to pay the said fees for the property it leases to the lessees. On the other hand, lessees are also required to pay the same kind of fees by the City Government of Lipa for engaging in their respective business activities which are deemed outside and different from the activity of leasing the real property owned by the lessor. Furthermore, it is worth mentioning that the imposition and collection of garbage, sanitary and annual inspection fees require the rendering services by the city officials concerned and such services are performed to each and every entity subject to such fees thus, individually and separately liable. Be guided accordingly. (SGD.) JOCELYN T. PENDON OIC-Executive Director ATTACHMENT 1st Indorsement June 14, 2016 Respectfully forwarded to the OIC-Executive Director, Bureau of Local Government Finance, Department of Finance, 8th Floor, EDPC Building, Bangko Sentral ng Pilipinas Complex, Roxas Boulevard, Manila. This refers to the attached letter dated April 15, 2016 of the City Treasurer, Lipa City, requesting opinion on the contention that the real estate lessors, particularly owners of land, should be exempt from payment of garbage fee, sanitary fee and annual inspection fee, on grounds that the lessees thereon pay the same fee on their leased property upon renewal of their business permits, thus, allegedly resulting to double payment. The particular provision in this regard is the Local Government Code of 1991, quoted hereunder: "Sec. 147. Fees and Charges . The Municipality may impose and collect such reasonable fees and charges on business and occupation and except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing, before any person may engage in such business or occupation, or practice such profession or calling." Additionally, "Sec. 153. Service Fees and Charges. Local government units may impose and collect such reasonable fees and charges for service, rendered." Likewise, "Art. 244. Common Revenue-Raising Powers. Under this Rule, provinces, cities, municipalities and barangays : "(a) May impose and collect fees and service or user charges for any service rendered by LGUs in an amount reasonably commensurate to such service, provided that no service charge shall be based on capital investments or gross sales or receipts of the person or business liable thereof." On the basis of the foregoing provisions of the Code and IRR, this office believes that the said city may impose regulatory fees and charges on both lessor and lessees as they operate their respective businesses separately. It is further informed that pursuant to the city's Revised Revenue Code of 1993, both businesses are required to pay all the imposed regulatory fees upon renewal of mayor's permit. In view thereof, the favor of confirmation of the above mentioned opinion is hereby respectfully requested. (SGD.) EDUARDO L. DEL ROSARIO, CSEE, CEO VI, REA Regional Director Republic of the Philippines City of Lipa Office of the City Treasurer New City Hall Compound, Marauoy, Lipa City Tel. No. (043) 784-2510; 784-2511 April 15, 2016 Mr. Eduardo L. Del Rosario, CSEE, CEO VI Regional Director Bureau of Local Government Finance Region IV-A (CALABARZON) Sir: This concerns payment of regulatory fees of lessors and lessees operating within the territorial jurisdiction of the City of Lipa. Pursuant to the city's Revised Revenue Code of 1993, both businesses pay all the required regulatory fees upon renewal of mayor's permit. However, we have recently been receiving contentions that real estate lessors particularly owners of land, should be exempt from garbage fee, sanitary fee and annual inspection fee (CAI) on grounds that lessees pay them upon renewal of their permits, thus resulting to double payment. Said contention finds basis on Article 233 of the Local Government Code of 1991 which states: DHITCc " Article 233. Fees and Charges. The municipality may impose and collect such reasonable fees and charges on businesses and occupations and, except as reserved to the province in Article 228 of this Rule, on the practice of any profession or calling before any person may engage in such business or occupation, or practice such profession or calling provided that such fees or charges shall only be commensurate to the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance. " In view of the above, is it feasible to exempt real estate lessors from garbage fee, sanitary fee and annual inspection fee (CAI)? We are hoping for your immediate attention on this matter. Very truly yours, (SGD.) DOROTEO P. ROSALES City Treasurer Local Government Code of 1991 Annotations Barangays have limited taxing powers As may be gleaned from the above section, the barangays enjoy limited taxing powers but upgrading of economic activities in the barangay level may result in substantial revenues for the barangay . Establishment of more facilities like rice or corn mills, ferry service and other transportation facilities that may be donated to them or set up by them through barangay funds may increase the barangay income. But barangays have shares in other taxes levied by other LGU's like realty taxes and community tax. ARTICLE FIVE Common Revenue-Raising Powers SEC. 153. Services Fees and Charges. Local government units may impose and collect such reasonable fees and charges for services rendered. Annotations Services may be rendered through LGU's facilities The above section is so wide that it can cover varied kinds of services, like servicing the needs of retailers through use of public market stalls, servicing the needs of livestock raisers or producers through the use of slaughterhouses. It is appropriate for the reader to refer to Section 17 of this Code on basic services and facilities of LGU's, supra. SEC. 154. Public Utility Charges. Local government units may fix the rates for the operation of public utilities owned, operated and maintained by them within their jurisdiction. Annotations Public utilities Charges can be imposed by LGU's in the public use of public utilities, owned, operated or maintained by them. LGU's may operate public utilities including operation of rice plants or refrigeration facilities. (c) Port of Loading The city or municipality where the port of loading is located shall not levy and collect the tax imposable in Article 233 of this Rule unless the exporter maintains in said city or municipality its principal office, a branch, sales office or warehouse, factory, plant, or plantation in which case, the rule on the matter shall apply accordingly. (d) Sales made by route trucks, vans, or vehicles (1) For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer has a branch or sales office or warehouse, the sales are recorded in the branch, sales office or warehouse and the tax due thereon is paid to the LGU where such branch, sales office or warehouse is located. (2) For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer has no branch, sales office or warehouse, the sales are recorded in the branch, sales office or warehouse from where the route trucks withdraw their products for sale, and the tax due on such sales is paid to the LGU where such branch, sales office or warehouse is located. (3) Based on subparagraphs (1) and (2) above, LGUs where route trucks deliver merchandise cannot impose any tax on said trucks except the annual fixed tax authorized to be imposed by the province in Article 231 of this Rule on every delivery truck or van or any motor vehicle used by manufacturers, producers, wholesalers, dealers, or retailers in the delivery or distribution of distilled spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products as may be determined by the sangguniang panlalawigan , and by the city, pursuant to Article 223 of this Rule. cEaSHC (4) In addition to this annual fixed tax, cities may also collect from same manufacturers, producers, wholesalers, retailers, and dealers using route trucks a mayor's permit fee which shall be imposed in a local tax ordinance pursuant to Article 234 in relation to Article 223 of this Rule. PART SEVEN Common Revenue-Raising Powers ART. 224. Common Revenue-Raising Powers . Provinces, cities, municipalities, and barangays : (a) May impose and collect fees and service or user charges for any service rendered by LGUs in an amount reasonably commensurate to such service provided that no service charge shall be based on capital investments or gross sales or receipts of the person or business liable therefor. (b) Shall exercise the power to collect charges for services rendered by LGUs in connection with the operation of public utilities owned, operated, and maintained by them at rates to be fixed by the sanggunian concerned. LGUs may prescribe the terms and conditions, through an appropriate ordinance enacted by their sanggunians , for the use of any public road, pier or wharf, waterway, bridge, or ferry or telecommunication system, funded and constructed by them, and fix reasonable toll fees and service charges for the use thereof provided that the following persons shall be exempted from the payment of said toll fees and charges: (1) Officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission; (2) Post Office personnel delivering mail; (3) Persons who are physically handicapped; and (4) Disabled citizens who are sixty-five (65) years or older. (c) The collection of toll fees and charges may be discontinued by the sanggunian concerned when public safety and welfare so requires. PART EIGHT Community Tax ART. 245. Community Tax. Cities or municipalities may levy an annual community tax in lieu of the residence tax formerly levied and collected in Section 38 of PD 231, as amended. Accordingly, all cities and municipalities shall enact for the purpose, a tax ordinance to take effect as of January 1, 1992. For purposes of enactment of a local tax ordinance levying a community tax, the conduct of a public hearing provided in Article 259 of this Rule shall no longer be required. ART. 246. Levy or Imposition. The levy or imposition of community tax by a city or municipality shall be governed by the following rules and guidelines: (a) Individuals liable to the payment of community tax (1) Every inhabitant of the Philippines eighteen (18) years of age or over who has been regularly employed on a wage or salary basis for at least thirty (30) consecutive working days during any calendar year; (2) An individual who is engaged in business or occupation; (3) An individual who owns real property with an aggregate assessed value of One Thousand Pesos (P1,000.00) or more; (4) An individual who is required by law to file an income tax return. (b) Rate of community tax payable by individuals (1) The rate of community tax that may be levied and collected from said individuals shall be Five Pesos (P5.00) plus an additional tax.