Bureau of Local Government Finance Opinion

September 1, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer, Lipa City, for appropriate action, the herein letter dated August 25, 2010 of Mr. Mariano D. Martinez, President, Bon Giorno Homes, Inc. (BGHI) regarding their query on the contractor's tax. It is claimed that after several requests to the City of Lipa, the Sangguniang Panlunsod and the City Treasurer's Office failed to provide a copy of a city ordinance stating that the payment of the contractor's tax is a pre-requisite of a building permit application. Neither is this pre-requisite found in the city's citizen's charter. Moreover, it is claimed that in a letter dated July 8, 2010, the City Treasurer is requesting assistance from BGHI to collect the tax due from its contractors. As a compromise, the Office of the City Engineer allowed BGHI to collect the tax from its contractors along with the application for an occupancy permit for the housing units it is presently constructing. Hence the following queries are being posed: "1. Can we be required or mandated by the City Treasurer and the Office of the City Engineer to withhold the contractor's tax from our payment to our contractor and remit the same to the City Treasurer? "2. If not, what is our justification and what do we do if we are not given an occupancy permit? It must be stressed however that BGHI should be treated as a separate and distinct juridical entity. Failure on the part of the contractors to settle its obligation cannot be made a condition precedent for the issuance of a building permit and occupancy permit to BGHI. aDSIHc On the claim that the city has no means to collect taxes from the contractors of BGHI, it must be pointed out that it is mandatory for the said contractors to apply for a Mayor's permit for the construction of the building. Upon issuance of the Mayor's permit, the contractor's tax shall be paid based upon the contract price, in case the project is completed within the year. On the other hand, the tax on multi-year project shall initially be based on the total contract price, payable in equal annual installments within the project term. Upon completion of the project, the taxes shall be recomputed on the basis of the gross receipts of the preceding calendar year and the deficiency tax, if there be any, shall be collected or the excess tax payments shall be refunded. It is emphasized however that the above stipulations for the multi-year project as well as a project completed within the year shall be provided under a duly enacted tax ordinance. Advice of action taken hereon within five (5) days from receipt hereof is requested. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director