Bureau of Local Government Finance Opinion

March 25, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the Asst. City Treasurer, Muntinlupa City, for comment and/or appropriate action, the within letter dated March 8, 2010 of Ms. Jenelyn S. Degayo, Resident Agent, HY-CAD Systems and Engineering Pte. Ltd., inquiring from this Bureau whether the assessment (re-assessment) of P64,774.00, down from the previous assessment of P119,774.00, based on the minimum amount of P5M gross sales imposed on a Representative Office with zero sales , is fair and reasonable. Per representation and verbal communication of Ms. Degayo, it was alleged that the City Government of Muntinlupa had been assessing HY-CAD SYSTEMS AND ENGINEERING PTE. LTD. (HY-CAD for brevity) since CY 2002 based on a fixed minimum amount of gross sales/receipt imposed on a Representative Office. HY-CAD contends that as a Representative Office with zero sales , it is exempt from business tax. However, per legal opinion dated 8 January 2010 of Atty. BYRON SAN PEDRO, LLM, Executive Assistant for Legal Affairs of the Mayor's Office, that City, it was substantiated that R.A. No. 8756 entitled "AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND LICENSING REQUIREMENTS OF REGIONAL OR AREA HEADQUARTERS, REGIONAL OPERATING HEADQUARTERS, AND REGIONAL WAREHOUSES OF MULTINATIONAL COMPANIES, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF EXECUTIVE ORDER NO. 226, OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987", provides incentives only for Regional Headquarter (RHQ) and Regional Operating Headquarters (ROHQs). With due respect to the aforementioned legal opinion of the Executive Assistant for Legal Affairs, Section 143, in relation to Section 151 of the Local Government Code (LGC) of 1991 provides that a local government unit like Muntinlupa City may impose taxes on business enumerated therein based on "gross sales or receipts for the preceding calendar year. . .". Per representation by HY-CAD, it appears that that city is imposing the business tax on a Representative Office based on the fixed minimum amount which clearly runs counter to the provision of the LGC which provides that the business tax imposable by an LGU shall be based on "gross sales or receipts for the preceding calendar year. . .". CIDTcH In this connection and in order that this Bureau can act accordingly on the request of Ms. Degayo, his comment and/or appropriate action on the matter is requested within five (5) days from receipt hereof, together with a copy of the duly-enacted Revenue Code of Muntinlupa or excerpt thereof showing the basis in assessing and levying of local business taxes pursuant to the pertinent provisions of the Local Government Code (LGC) of 1991. Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director