Bureau of Local Government Finance Opinion

May 6, 1993 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer, General Santos City for comment the herein copy of the letter dated February 16, 1993 of Kenram (Philippines), Inc. (KPI) requesting clarification on the venue or place of payment (tax situs) of local taxes payable by said company. Representations are made that the storage tank of KPI for the palm oil shipped to Manila is located at the Port of that city and that no sale is consummated therein. In this connection, information is requested as to whether KPI has a warehouse located in the said city. Return hereof within ten (10) days from receipt is requested. LORINDA M. CARLOS Executive Director ATTACHMENT Republic of the Philippines DEPARTMENT OF FINANCE Manila May 6, 1993 Mr. Ernesto V. Santos Treasurer-Director Kenram Philippines, Inc. 5th Floor, Strata 100 Bldg. Emerald Avenue Pasig, Metro Manila S i r : This refers to your letter dated February 16, 1993 requesting clarification on the venue or place of payment (tax situs) of local taxes payable by your company, Kenram Philippines, Inc. (KPI) and the effectivity of local tax ordinances enacted pursuant to the Local Government Code of 1991 (RA 7160). cdtai Representations are made that the sale, invoicing and collection of KPI are made and consummated in the principal office located in Pasig, Metro Manila. No single sale is consummated in the plantation and farm office located in Isulan, Sultan Kudarat. Likewise, no sale is consummated at the Port of General Santos City where the storage tank for the palm oil shipped to Manila is located. Additionally, in a letter dated March 10, 1993, representations were made further that the plantation is solely planted with palm trees that bear fruits known as Fresh Fruit Bunches. The fruits are milled by another company for extraction of palm oil, all of which is sold domestically. It was noted, however, that in another letter dated February 19, 1993 of KPI requesting classification for local tax purposes, representations were made that kernel are also extracted from the nuts of the fresh fruits and these are cleaned, dried and packed in bags for export. In replay, in its letter dated March 5, 1993, this Department expressed the view that KPI is subject to the business tax provided for under Sec. 143(c) (2) of the Local Government Code of 1991, which pertains to "agricultural" products. For further clarification, this view pertains to both the palm oil sold domestically and the kernels that are exported, considering that both agricultural products and exports fall under Sec. 143 (c)(2) aforementioned. On the basis of the foregoing, the query raised in your subject letter of February 16, 1993, are hereby answered as follows: A. Tax Situs The law applicable is Sec. 150 of the Code, as implemented under Art. 243(c)(3) of the Implementing Rules and Regulations (IRR) of the Code, quoted hereunder: "Art. 243. Situs of the Tax . . . . "(b) Sales Allocation . . . "(3) In cases where there is a factory, project office, plant or plantation in pursuit of business, thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located and seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, plant or plantation is located. LGUs where only experimental farms are located shall not be entitled to the sales allocation herein provided for." cd "xxx xxx xxx" Considering the above provisions of law seventy percent (70%) of the sales of KPI recorded in its principal office in Pasig, Metro Manila shall be taxable by the municipality of Isulan, Sultan Kudarat, where its plantation is located, while the remaining thirty percent (30%) shall be taxable by the municipality of Pasig, Metro Manila, where its principal office is located. It bears emphasis, however, that before said tax may be collected the same must first be levied under an enabling local tax ordinance of the aforesaid LGUs. As regards your representation that no sale is made in General Santos City where a storage tank for palm oil is located, the matter is being referred to the City Treasurer of General Santos City for comment under a separate letter of even date, copy enclosed. cdasia B. Effectivity of Local Tax Ordinances . As a general rule, the effectivity date of local tax ordinances are embodied in the ordinance itself. However, attention is invited to the pertinent provision of the IRR, particularly Art. 276(a) thereof, quoted hereunder: "Art. 276. Publication of Tax Ordinances and Revenue Measure - . . . "In case the effectivity of any tax ordinance or revenue measure falls on any date other than the beginning of the quarter, the same shall be considered as falling at the beginning of the next ensuing quarter and the taxes, fees, or charges dues shall begin to accrue therefrom. cd "xxx xxx xxx" It is correct to state that local tax ordinances have no retroactive effect. Therefore, in the event that the local government unit has failed to enact a new tax ordinance pursuant to the provisions of the Local Government Code of 1991, only the rate levied in the existing tax ordinance shall be collectible. Very truly yours, By Authority of the Secretary: LORINDA M. CARLOS Executive Director Bureau of Local Government Finance