Bureau of Local Government Finance Opinion

July 7, 1994 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned, thru the Regional Director for Local Government Finance, Department of Finance, Region IV, Peoples Mansion Compound, Batangas City, to the Provincial Treasurer, Boac, Marinduque, his within 1st indorsement dated May 18, 1993, requesting comment/legal opinion on whether or not the Philippine Telephone Corporation (PILTEL) operating within the jurisdiction of that province is liable to pay franchise tax pursuant to the provision of Section 137 of RA 7160. It appears that PILTEL informed that Office that said company is not liable to pay the franchise tax imposed under Sec. 9, Art. 3 of Provincial Tax Ordinance No. 1, series of 1992 enacted pursuant to the abovementioned Section of R.A. 7160, in view of the provisions of Sec. 6 of R. A. No. 7293, which is an Act further amending R.A. No. 6030, as amended by R. A. No. 6531, entitled 'An Act granting the Pilipino Telephone Corporation a franchise to install, operate and maintain telephone systems in certain areas throughout the Philippines, extending the term of its franchise to another twenty-five years from date of its expiration, and for other purposes, quoted hereunder: "Sec. 6. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations 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, within thirty (30) days after audit and approval of the accounts, three per centum (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof." (Emphasis supplied) R. A. 7293 became effective on March 27, 1992, while RA 7160 took effect on January 1, 1992. On the other hand, the taxes and other impositions levied under Provincial Ordinance No. 1 of the province of Marinduque, which became effective on February 23, 1992, began to accrue at the beginning of the following quarter, or on April 1, 1992. It follows, therefore, that PILTEL shall be exempt until the term of its franchise which was extended for twenty five (25) years from August 3, 1994, expires. It should be noted, however, that the exemption refers only to the payment of the franchise tax imposable by provinces (and cities) but not to real property and other taxes referred to in Sec. 6 of R. A. 7293. Likewise, the company shall be liable to pay regulatory fees and service charges which the LGU's may impose under duly-approved local tax ordinances. If this issue has not as yet been resolved to date, that Office may to the views expressed herein. LORINDA M. CARLOS Executive Director