Financial Data Used in LGU Business Permit Renewal

August 4, 2017 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Ernesto Q. Hiansen Executive Director, OSS Center Department of Finance Roxas Boulevard, P. Ocampo St. Manila SUBJECT : Financial Data Used in LGU Business Permit Renewal Dear Executive Director Hiansen : This refers to your letter dated 01 August 2017 requesting for clarification on the following concerns, relative to the above subject, to wit: 1. The basis of LGUs that do not require AFS in determining the gross sales/receipts of a taxpayer applying for business permit renewal; 2. The period within which the LGUs require the submission of AFS, i.e. , at the time of filing of the application in January, or after the filing of ITR in April; and 3. The action of LGU in case of underdeclaration of gross sales/receipts. To answer the first issue, in the absence of Audited Financial Statement (AFS), the local business tax shall be based on the Sworn Declaration of gross sales/receipts 1 by the taxpayer or its Income Tax Return (ITR). 2 In addition, the Presumptive Income Level Assessment Approach (PILAA) may also be resorted to in computing local business tax, only if the taxpayer is unable to provide proof of its gross sales or receipts; 3 provided, that the PILAA is authorized under a duly enacted local tax ordinance and has undergone public hearings and publications. 4 In the event that the LGU requires a taxpayer to submit its AFS, the time of filing of its business permit application shall be concurrent with the prescribed period for the time of payment of taxes provided in the LGC, which is within the first twenty (20) days of January or the extended period as determined in the revenue ordinance enacted by the Sanggunian concerned. 5 Thus, the date of filing of business permit renewal should not be confused with the date of filing of ITRs together with the AFS in April, since these are two different matters used for different purposes and by different taxing authorities. In actual practice, LGUs, like Quezon City, do not really require a follow-on submission of the AFS after April, as they can also compute the gross sales/receipts of the taxpayer through the quarterly Value-Added Tax (VAT) returns submitted to the local treasurer. Lastly, in case of suspected underdeclaration of gross sales/receipts in the renewal of business of a taxpayer, such may be tagged and the local treasurer, or through any of his deputies duly authorized in writing, may examine the books, accounts, and other pertinent records of any person, partnership, corporation, or association subject to local taxes, fees and charges in order to ascertain, assess, and collect the correct amount of the tax, 6 which shall be done after the business renewal period. 7 Any underdeclaration found during the examination shall be subject to surcharge and penalty pursuant to the LGC and the duly enacted local tax ordinance. By way of information, this Bureau issued Memorandum Circular No. 01-001-2017, dated 5 January 2017, to all local treasurers, copy hereto attached, providing for the reminders in the assessment of the LBT, the registration and renewal of business permits and licenses, and payment of community tax, for your reference. We hope we have provided clarity on the matter. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director ATTACHMENT BLGF Memorandum Circular No. 01-001-17 January 5, 2017 Footnotes 1. First Planters Pawnshop vs. City of Pasay , CTA EB No. 501, dated 10 December 2010. 2. JMC No. 01, Series of 2016 dated 30 August 2016. 3. Supra , note no. 1. 4. Ibid. 5. Section 167, LGC. 6. Section 171, LGC. 7. Section B (1), BLGF MC No. 01-001-2017.