Whether a City may Levy a 3% Tax on a Condo-Hotel Operation which is Subject to VAT under the NIRC

October 6, 2003 DILG LEGAL OPINION NO. 133-03 Atty. Mari D. Fabian Room 2105 Cityland Herrera Tower V.A. Rufino Street, Salcedo Village Makati City Dear Atty. Fabian : This pertains to your letter requesting for our legal opinion on whether or not a city may levy a tax of three percent (3%) on a condo-hotel operation which is subject to the value-added tax under the National Internal Revenue Code. DECSIT We answer in the affirmative. Sections 151 and 143 of the Code respectively provide: "Sec. 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: . . . The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes." (emphasis supplied) "Sec. 143. Tax on Business. The Municipality may impose taxes on the following business: xxx xxx xxx (h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper to tax: Provided, That on any business subject to excise, value-added or percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales of the preceding calendar year. " (emphasis supplied) The phrase " not more than fifty percent (50%) " found under Section 151 has particular reference base of the 2% mentioned under Section 143. Such that the phrase " the rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) " means that the rate in excess of the maximum rate of tax of 2% shall not exceed 50% of said rate of 2%. Hence, a city may impose a maximum rate of 3% of the gross sales or receipts of the preceding calendar year. This is arrived at by adding 1% (50% of 2%) to the base rate of 2%. Such interpretation finds support under the rules on Statutory Construction that the meaning of the law is not to be extracted from any single part, portion or section or from isolated words and phrases, clauses or sentences, but from a general consideration or view of the act as a whole, that is, every part of the statute must be interpreted with reference to the context. We hope we have enlightened you on the matter. Very truly yours, (SGD.) JOSE D. LINA, JR. Secretary Department of Interior and Local Government