Bureau of Local Government Finance Opinion

December 16, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned to the City Treasurer, Pasay City, her within letter dated November 18, 2002 requesting comment or opinion relative to the request for refund of local taxes of Destiny Cable, Inc. (DCI). Representations are made that DCI, on January 16, 2002 and February 27, 2002, requested from that Office a Certificate of Exemption as well as refund of its business taxes paid during the previous years (1997) up to present, citing Article 221 (g) of the Implementing Rules and Regulations (IRR) implementing Section 133 (g) of the Local Government Code (LGC) of 1991. However, that Office denied the above request citing the ruling rendered by the Supreme Court in the Meralco case docketed as G.R. No. 127708 on March 25, 1999. Based on the said ruling, it is the view of that Office that DCI is liable to the payment of franchise tax, as implemented under the duly-enacted tax ordinance of that city. EIAaDC It is worth mentioning that in the aforementioned case of MERALCO, the Supreme Court decision was rendered on the petitioner's claim for refund, for payment made for local franchise tax imposed by the local government unit under its duly-enacted local tax ordinance, based on its congressional franchise which contains the "in lieu of all taxes" proviso. In the instant case at bar, however, DCI's request for exemption and refund is based on Section 133 (g) of the Local Government Code (LGC) of 1991 as implemented by Article 221 (g) of the IRR, quoted hereunder as follows: "ART. 221. Common Limitations on the Taxing and Revenue-raising Powers of Local Government Units . Unless otherwise provided herein, the exercise of the taxing and revenue raising powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following. "(a) . . . . "(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively, from the date of registration; HDATSI "xxx xxx xxx." In addition, franchise tax is one of the local taxes enumerated under the LGC imposable by LGUs and therefore, should be construed to be part of the so called "local business taxes" as mentioned under Section 3 (a) of Local Finance Circular No. 5-93 dated October 22, 1992 of the Department of Finance which provides: " SEC. 3. Exemption of pioneer and non-pioneer enterprises . "(a) Pursuant to Sec. 133 (g) of the LGC and Art. 221 (g) of its IRR, business enterprises certified to and registered with the Board of Investments (BOI) as pioneer or non-pioneer shall be exempt from local business taxes for a period of six (6) and four (4) years respectively, from the date of registration. (Underscoring ours) In consideration of the foregoing, this Bureau reiterates and maintains its previous actions rendered on similar cases that "for so long as a business enterprise is certified by the BOI as pioneer or non-pioneer, it shall remain exempt from local taxation for a period of six (6) and four (4) years, respectively, from the date of registration." ECDaTI With regard to the claim of DCI for tax refund, Section 196 of the LGC as implemented under Article 286 of the Implementing Rules and Regulations (IRR) provides: " ART. 286. Claim for Refund or Tax Credit . All taxpayers entitled to a refund or tax credit under this Rule shall file with the local treasurer a claim in writing duly supported by evidence of payment ( e.g. , official receipts, tax clearance, and such other proof evidencing overpayment) within two (2) years from payment of the tax, fee or charge. No case or proceeding shall be entertained in any court without this claim in writing, and after the expiration of two (2) years from the date of payment of such tax, fee or charge, or from the date the taxpayer is entitled to a refund or tax credit ." (Underlining supplied) It is clear from the above provision of law that claim for refund or tax credit must be filed within two (2) years from the date of payment thereof, or from the date the taxpayer is entitled to the refund. As such DCI could only avail of the tax refund on the payments made from January 16, 2000 to January 15, 2002 which is still within the prescription period of two years. It bears emphasis however, that DCI shall still be liable to pay the Mayor's permit and other regulatory fees or service charges that the City of Pasay may have imposed under a duly-enacted local tax ordinance, the exemption being applicable to local taxes only. aSACED (SGD.) MA. PRESENTACION R. MONTESA Executive Director