Authority of Local Government Unit to Impose Taxes on Business Enterprises Operating within PHIVIDEC Industrial Estate-Misamis Oriental Special Economic Zone

June 7, 2013 DILG LEGAL OPINION NO. 022-13 Mr. Leo Tereso A. Magno Administrator PHIVIDEC INDUSTRIAL AUTHORITY PHIVIDEC Industrial Estate-Misamis Oriental Special Economic Zone Tagoloan, Misamis Oriental Dear Sir : This refers to your February 17, 2013 letter to Secretary CESAR PURISIMA of the Department of Finance, requesting for opinion on the following issues, to wit: 1. Whether or not the Local Government Unit (LGU) has the authority to impose taxes upon the business enterprises operating within PIEMO-SEZ; 2. As between the LGU and PIEMO-SEZ, who has the better right to issue business permits to business enterprises operating within PIEMO-SEZ. Considering that this matter was referred to this Department by the Department of Finance and considering that this Department indeed has the mandate to render opinions on this subject matter, this Department shall accordingly act thereon. Thusly, in regard to your first issue, this Department is of the view that the local government units of Tagoloan and Villanueva have no authority to impose taxes on business establishments in PHIVIDEC Industrial Estate-Misamis Oriental Special Economic Zone (PIEMO-SEZ) because of the clear and specific exemption granted to it, being an ECOZONE, by Section 24 of R.A. 7916 (Special Economic Zone Act of 1995) which states that "Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE." ADCEaH Being a mere delegated authority from Congress, the power of the local government units to impose certain kinds of taxes are subordinate to the powers of Congress itself such that if a law is passed after the effectivity of the Local Government Code of 1991 (R.A. 7160) exempting a certain entity from the payment of taxes that are otherwise imposable by such local government units, it only means that Congress is indeed specifically and actually exempting such entity, PIEMO-SEZ in this case, from the taxing authority of its subordinate, the local government units. As regards your second query, we also opine that considering that the requirement and the issuance of business permits are likewise part of the delegated powers of the local government units to tax, the municipalities of Tagoloan and Villanueva have no authority to require and issue business permits to business establishments in PIEMO-SEZ again because of the clear and specific exemption granted to it by the special law on ECOZONES, R.A. 7916. We hope that we have addressed your concerns on the matter. Very truly yours, (SGD.) JESUS B. DOQUE IV Director III, Legal Service