Tax 3-1: Local Government Taxation PDF

**Tax 3-1: Local Government Taxation** GENERAL PRINCIPLES ================== Local Autonomy -------------- Right of territorial and political subdivisions to enjoy relative independence in governance, with the authority to manage their own affairs and address local needs (Art X, Sec 2, 1887 Const...

**Tax 3-1: Local Government Taxation** GENERAL PRINCIPLES ================== Local Autonomy -------------- Right of territorial and political subdivisions to enjoy relative independence in governance, with the authority to manage their own affairs and address local needs (Art X, Sec 2, 1887 Constitution) ### **Concept**: Local autonomy, rooted in decentralization, transfers governing power from the national to local units, making governance more responsive and accountable by giving communities control over local matters. ### **Example**: The LGC allows municipalities to issue fishing privileges and set fees within their waters, enabling them to manage resources, generate revenue, and address local needs. Legal Foundation Of Local Government Power To Tax ------------------------------------------------- **1. Section 5, Article X, 1987 Constitution -** Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the local governments. **2. Section 129 of Republic Act No. 7160 (Local Government Code) -** Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units. ### **Concept**: LGUs have the constitutionally granted power to create their own sources of revenue and levy taxes, fees, and charges. This power is essential to their autonomy and self-reliance. It allows them to raise funds for local services and development projects tailored to their communities\' needs. However, this power is not absolute and is subject to limitations set by Congress to ensure responsible and accountable exercise. Local Taxing Authority ====================== The **Sanggunian** of the local government unit concerned shall exercise the power to impose a tax, fee, or charge or to generate revenue under this Code through an appropriate **ordinance** (132). Local Tax Ordinance ------------------- #### Kinds of Local Tax Ordinances 1\. Those imposing a fee or tax specifically authorized by the Local Government Code for the local government units to impose. 2\. Those imposing a fee or tax not specifically enumerated under the LGC or taxed under the provisions of the NIRC or other applicable laws (under its Residual Taxing Power). (Sec. 186, LGC) #### Requisites of a Valid Tax Ordinance (DPP) 1\. Satisfy the requirements of procedural and substantive **Due** process; 2\. **Public** hearing is required with quorum, voting and approval and/or veto requirements complied with (Secs. 53-55, LGC); and 3\. **Publication** of ordinance within 10 days from approval for 3 consecutive days in a newspaper of general circulation and/or posting in at least 2 conspicuous and publicly accessible places. Accrual of Tax -------------- - The National Government cannot share from the tax levied by the LGUs. - LGUs can share from the National Government through Internal Revenue Allotment (IRA). THE LOCAL GOVERNMENT UNIT HAS THE POWER --------------------------------------- 1\. To create its own sources of revenue 2\. To levy taxes, fees and charges 3\. To prescribe penalties for tax violations. (Sec. 516, LGC) 4. Grant local tax exemptions 5\. Power to adjust local tax rates 6\. Residual Powers Statutory and Residual Power To Tax ----------------------------------- #### **Statutory Power to Tax** This is the explicitly granted authority given (LGUs) by the national legislature, such as through the (LGC), to impose specific taxes, fees, and charges. It ensures uniformity and consistency in local taxation across the country, empowering LGUs to generate revenue while preventing arbitrary or overly burdensome taxes. This power supports local autonomy, enabling LGUs to be self-reliant and responsive to their communities\' needs. #### Residual Power to Tax LGUs can impose those taxes, fees and charges besides those specifically enumerated by the Local Government Code under its residual taxing power. Included also are those not specifically taxed under the rule of preemption (186) ### Residual power to tax allows LGUs to levy taxes beyond those explicitly listed in national laws like the LGC, provided certain conditions are met. This power gives LGUs flexibility to address local revenue needs that the national legislature may not have anticipated, promoting innovation in local governance while still being subject to limitations to prevent overreach. #### LGU's may exercise its residual taxing power to impose taxes on those 1\. Not specifically enumerated in LGC 2\. Not taxed under the provisions of the NIRC, as amended, 3\. Not taxed under other applicable laws #### Conditions in the exercise of residual taxing powers 1\. That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy; 2\. That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose. #### Limitations of the Residual Power 1\. Constitutional limitations on taxing power; 2\. Common limitations on the taxing power of local government units as prescribed in Section 133 of LGC; (doctrine of pre-emption) 2012 3\. Fundamental principles governing the exercise of the taxing power by local governments as prescribed under Section 130, LGC, particularly the requirement that they must not be "unjust, excessive, oppressive, confiscatory, or contrary to declared national policy" (Sec. 186, LGC); 4\. The requirement prescribed in Section 186 of the LGC, which directs that the ordinance levying such residual taxes shall not be enacted without any prior public hearing conducted for the purpose; 5\. The principle of pre-emption. ### **PRINCIPLE OF PRE-EMPTION OR EXCLUSIONARY DOCTRINE** Where the National Government elects to tax a particular area, it impliedly withholds from the local government the delegated power to tax the same field. This doctrine principally rests on the intention of the Congress. Conversely, should Congress allow municipal corporations to cover fields of taxation it already occupies, then the doctrine of pre-emption will NOT apply. FUNDAMENTAL PRINCIPLES ====================== PIE CUP UP (SEC. 130) --------------------- 1\. Shall be **Uniform** in each local LGU; ### \*\*Uniformity in taxation\*\* means that all subjects within the same class are taxed at the same rate. This principle **allows for different tax rates across various classes as long as the rates are consistently applied within each category**. In the \"G.R. No. 11572\" case, the uniform billboard tax was upheld as constitutional, demonstrating that uniformity is maintained when tax laws are applied consistently within defined classifications. 2\. Shall be **Equitable** and based as much as possible on the taxpayer's ability to pay; 3\. Levied for **Public** purposes; 4\. Shall not be **Unjust**, excessive, oppressive, or confiscatory; 5\. Shall not be **Contrary** to law, public policy, national economic policy, or in restraint of trade; ### Taxation as **a restraint of trade** occurs when a tax unfairly limits or hinders business activities, imposing undue burdens that restrict free trade or competition. Such taxation is considered unconstitutional if it disproportionately impacts certain businesses. For example, a tax that targets small online retailers with higher rates, making it difficult for them to compete with larger companies, could be seen as a restraint of trade. 6\. Collection of local taxes and other impositions shall not be let to any **Private** person; 7\. Revenues collected under the Code shall **Inure** solely to the benefit of, and subject to disposition by the LGU levying the tax or other imposition unless otherwise specifically provided therein, and ### When a tax \***inures** solely to the benefit of (LGU) levying the tax, the LGU exclusively uses the revenue generated from that tax for its local projects, services, and development initiatives. Local tax revenue is not shared with the national government. This ensures that the benefits of the tax are directly felt within the community where it was imposed. 8\. Each LGU shall, as far as practicable, evolve a **Progressive** system of taxation. ### Progressive taxation is a system of taxation where, as far as practicable, **higher tax rates are applied to those who have a greater ability to pay**. In the context of local taxation, (LGU) should strive to develop a progressive system of taxation. This principle is enshrined within the fundamental principles governing local taxation in the Philippines. COMMON LIMITATIONS ON LOCAL TAXING POWERS ========================================= C^2^ G^2^ DEEP^2^ BR^2^ AIN (SEC. 133) -------------------------------------- 1\. **Income** tax **Exception**: when levied on banks and other financial institutions; 2\. **Documentary** stamp tax; 3\. **Estate** tax, inheritance, gifts, legacies and other acquisitions mortis causa; **Exception**: When otherwise provided by the Code, i.e. tax on transfer of real property (Sec.135, LGC); ### Duplication is authorized so Preemption here does not exist. The doctrine of pre-emption will not apply if Congress explicitly allows municipal corporations to tax areas that the national government already taxes. 4\. **Customs** duties, registration fees of vessels and wharfage on wharves, tonnage dues and all other kinds of customs fees, charges and dues; **Exception**: Wharfage on wharves constructed and maintained by the local government unit concerned; 5\. Taxes, fees, charges and other impositions upon **Goods**: a\. Carried into; or b\. Out of; or c\. Passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise. 6\. Taxes, fees or charges on **Agricultural** and aquatic products when sold by marginal farmers or fishermen; 7\. Taxes on **Business** enterprises a\. Certified by the Board of Investments (BOI) as pioneer or non-pioneer b\. For a period of 6 and 4 years, respectively, FROM THE DATE OF REGISTRATION; ### **Note**: However, the grant of the Income Tax Holiday for registered enterprises under E.O. 226 (Omnibus Investment Code of 1987) is subject to the following rules: a. FULLY EXEMPT - for six (6) years from COMMERCIAL OPERATION for pioneer firms and for four (4) years for non-pioneer firms b. PROPORTIONATE - for a period of three (3) years from COMMERCIAL OPERATION, registered expanding firms shall be entitled to exemption from income tax levied by the National Government proportionate to their expansion under such terms and conditions as the Board may determine. (E.O. 226, Title III, Article 39) 8\. **Excise** taxes on articles enumerated under the NIRC, as amended, and taxes, fees or charges on petroleum products; ***Note**: LGUs may impose tax on a petroleum business. A tax on business is distinct from a tax on the article itself (Phil. Petroleum Corp. v. Municipality of Pililia Rizal, G.R. No. 90776, June 3, 1991)* 9\. **Percentage** or value added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services **Exception**: When otherwise provided by the Code; #### LGC authorized imposition: a\. ***MANUFACTURER*** -- Gross sales P6,500,000 or more -- Percentage Tax -- 37.5% of 1% based on the preceding year's sales. b\. ***WHOLESALERS, DISTRIBUTORS, DEALERS*** - Sale receipts for the preceding calendar year P2,000,000 or more - Percentage Tax -- 50% of 1% on the gross sales or receipts. c\. ***CONTRACTORS*** - Gross receipts P2,000,000 or more - Percentage tax -- 50% of 1% on their gross receipts ### **Note**: If the gross sales or receipts do not exceed the above prescribed amount, LGU is preempted from imposing any percentage tax. 10\. Taxes on the **Gross** receipts of: a\. Transportation contractors; b\. Persons engaged in the transportation of passengers or freight for hire; and c\. Common carriers by air, land or water. **Exception**: When otherwise provided by the Code; ### Note: ### The transport of GOODS OR CARGOES by transportation contractor, persons who transport for hire and common carriers is subject to 10% VAT (Sec. 108(A), NIRC) ### The transport of PASSENGERS by transportation contractor, persons who transport for hire and common carriers is subject to 3% percentage tax on their gross quarterly receipts. (Sec. 117, NIRC) 11\. Taxes on premiums paid by way of **Reinsurance** or retrocession; ### **Retrocession**: a transaction whereby one insurance entity (the \"retrocessionaire\") agrees to indemnify another insurance entity (the \"reinsurer\") against all or part of the loss that the latter sustains under a policy or policies of reinsurance that it has issued 12\. Taxes, fees or charges for the a\. **Registration** of motor vehicles; and b\. Issuance of all kinds of licenses or permits for the driving thereof **Exception**: Tricycles 13\. Taxes, fees or other charges on Philippine products actually exported **Exception**: When otherwise provided by the Code; (i.e. Sec. 143(c), LGC- municipalities may impose taxes on exporters) 14\. Taxes, fees or charges on a\. **Countryside** and barangay business enterprises and b\. Cooperatives duly registered under R.A. 6810 (Magna Carta for Countryside and Barangay Business Enterprises) and (Cooperatives Philippines); R.A. 6938 (Cooperatives Code of the Philippines) 15\. Taxes, fees or charges of any kind on the **National** Government, its agencies and instrumentalities, and local government unit. ### **Note**: These apply to all LGUs and are actually taxes or impositions which LGC excludes from the taxing power of local governments. TAXING POWER OF LGU - PROVINCES =============================== +-------------+-------------+-------------+-------------+-------------+ | ARTICLE | TRANSACTION | BASE | RATE | EXECEPTION | +=============+=============+=============+=============+=============+ | TRANSFER OF | Sale, | Fair market | Not more | Transfer | | PROPERTY | donation, | value or | than 50% of | under the | | (135) | barter, or | considerati | 1% | Comprehensi | | | any other | on | | ve | | | mode of | received, | | Agrarian | | | transferrin | whichever | | Reform | | | g | is higher | | Program | | | ownership | | | | | | of title of | ### **Note: | | | | | real | ** Fair mar | | | | | property | ket value i | | | | | | s based on, | | | | | ### **Note: | whichever | | | | | ** payment | is higher: | | | | | is within 6 | | | | | | 0 days of e | a. ### Ass | | | | | xecution by | essed Value | | | | | the seller | from Provi | | | | | , donor, tr | ncial asses | | | | | ansferor, e | sor's offic | | | | | xecutor, or | e; and | | | | | administra | | | | | | tor | b. ### Zon | | | | | | al Value fr | | | | | | om BIR | | | +-------------+-------------+-------------+-------------+-------------+ | BUSINESS OF | Printing | 1. Gross | Not more | Printing of | | PRINTING | and | annual | than 50% of | DepEd, | | AND | publication | receipt | 1% | CHED, and | | PUBLICATION | of books, | s | | TESDA | | (136) | cards, | for the | | prescribed | | | posters, | precedi | | text or | | | etc. | ng | | references | | | | year | | | +-------------+-------------+-------------+-------------+-------------+ | | | 2. Capital | 1/20 of 1% | | | | | investm | | | | | | ent | | | | | | -- in | | | | | | case of | | | | | | newly | | | | | | started | | | | | | busines | | | | | | s | | | +-------------+-------------+-------------+-------------+-------------+ | FRANCHISE | Enjoyment | 1. Gross | Not more | | | TAX (137) | of a | annual | than 50% of | | | | franchise | receipt | 1% | | | | | s | | | | | ### **Note: | for the | | | | | ** franchis | precedi | | | | | e is a righ | ng | | | | | t or privil | year | | | | | ege **grant | | | | | | ed** to pri | | | | | | vate indivi | | | | | | duals or co | | | | | | rporations, | | | | | | influenced | | | | | | by public | | | | | | interest, a | | | | | | nd subject | | | | | | to terms an | | | | | | d condition | | | | | | s imposed b | | | | | | y the gover | | | | | | nment or it | | | | | | s subdivisi | | | | | | ons for pub | | | | | | lic welfare | | | | | | , security, | | | | | | and safety | | | | | | (131(18)). | | | | +-------------+-------------+-------------+-------------+-------------+ | | | 2. Capital | 1/20 of 1% | | | | | investm | | | | | | ent | | | | | | -- in | | | | | | case of | | | | | | newly | | | | | | started | | | | | | busines | | | | | | s | | | +-------------+-------------+-------------+-------------+-------------+ | SAN, | Extraction | Fair market | Not more | | | GRAVEL, AND | of ordinary | value in | than 10% | | | OTHER | stones, | the | | | | QUARRY | gravel, | locality | **Permit to | | | RESOURCES | sand, | per cubic | extract** | | | EXTRACTED | earth, and | meter of | shall be | | | FROM PUBLIC | other | the subject | issued | | | LAND (138) | quarry | | **exclusive | | | | resources^1 | **Proceed | ly** | | | | ^ | Allocation: | by the | | | | as defined | ** | provincial | | | | under NIRC | | governor, | | | | from public | 30% - | pursuant to | | | | lands and | Province | the | | | | waters. | | ordinance | | | | | 30% - | of | | | | ### ^1^**No | Component | Sangguniaan | | | | te:** refer | city/munici | g | | | | to common | pality | Panlalawiga | | | | stones or m | | n | | | | ineral subs | 40% - | | | | | tances, as | Barangay | | | | | declared by | | | | | | the Direct | | | | | | or of the B | | | | | | ureau of Mi | | | | | | nes and Geo | | | | | | sciences, p | | | | | | rovided the | | | | | | y do not co | | | | | | ntain metal | | | | | | s or other | | | | | | valuable mi | | | | | | nerals in e | | | | | | conomically | | | | | | viable qua | | | | | | ntities. | | | | +-------------+-------------+-------------+-------------+-------------+ | PROFESSIONA | Exercise or | Reasonable | Not to | Professiona | | L | practice of | classificat | exceed Php | l | | TAX (139) | profession | ion | 300 | EXCLUSIVELY | | | requiring | by | | employed in | | | government | Sanggunian | ### **Note: | the | | | examination | | ** payable | government | | | | | annually on | | | | ### **Note: | | or before | | | | ** employer | | **January** | | | | of person | | **31** or | | | | subject to | | before prac | | | | professiona | | tice to the | | | | l tax shall | | **province | | | | require pa | | ** where hi | | | | yment [befo | | s professio | | | | re payment | | n or princi | | | | and annuall | | pal office | | | | y thereafte | | is located | | | | r.]{.underl | | | | | | ine} once p | | | | | | aid, shall | | | | | | be entitled | | | | | | to practic | | | | | | es **in any | | | | | | part of th | | | | | | e Philippin | | | | | | es** withou | | | | | | t being sub | | | | | | jected to o | | | | | | ther tax of | | | | | | such profe | | | | | | ssion. | | | | +-------------+-------------+-------------+-------------+-------------+ | AMUSEMENT | Ownership, | Gross | Not more | Operas, | | TAX (140) | lease, or | receipts | than 30% | concerts, | | | operation | from | | dramas, | | | of | admission | ### **Note: | recitals, | | | theaters, | fees | ** 10% amen | painting | | | cinemas, | | ded by RA 9 | and art | | | concert | **Distribut | 640 (ask to | exhibitions | | | halls, | ion | atty.) | , | | | circuses, | of | | flower | | | boxing | Proceeds:** | | shows, | | | stadium and | | | musical | | | other | ### [Equall | | programs, | | | places of | y shared]{. | | literary | | | amusement | underline} | | and | | | | by the prov | | oratorical | | | | ince and mu | | presentatio | | | | nicipality | | n | | | | | | **except | | | | | | pop, rock, | | | | | | or similar | | | | | | concerts** | +-------------+-------------+-------------+-------------+-------------+ | Annual | used by | Every | Not | **Exempt | | Fixed Tax | **MPWDR** | Delivery | exceeding | from tax on | | For Every | in the | Truck, Van, | PHP 500 | peddlers** | | Delivery | delivery or | or Vehicle | | imposed by | | Truck or | distributio | | | municipalit | | Van of | n | | | ies | | Manufacture | of | | | | | rs | distilled | | | | | or | spirits, | | | | | | fermented | | | | | Producers, | liquors, | | | | | Wholesalers | | | | | | of, | soft | | | | | Dealers, or | drinks, | | | | | Retailers | cigars and | | | | | in, Certain | cigarettes, | | | | | Products | and other | | | | | (141) | products as | | | | | | may be | | | | | | determined | | | | | | by the | | | | | | Sangguniang | | | | | | | | | | | | Panlalawiga | | | | | | n, | | | | | | to sales | | | | | | outlets, | | | | | | consumers, | | | | | | whether | | | | | | directly or | | | | | | indirectly | | | | +-------------+-------------+-------------+-------------+-------------+ TAXING POWER OF LGU - MUNICIPALITIES ==================================== SECTION 142. Scope of Taxing Powers. \_ Except as otherwise provided in this Code, municipalities may levy taxes, fees, and charges not otherwise levied by provinces. +-----------------------------------+-----------------------------------+ | Taxable Entities | Tax Base and Rate | +===================================+===================================+ | Tax on Business | | +-----------------------------------+-----------------------------------+ | manufacturers, assemblers, |  | | repackers, processors, brewers, | | | distillers, rectifiers, | | | | | | and compounders of liquors, | | | distilled spirits, and wines or | | | manufacturers of any article | | | | | | of commerce of whatever kind of | | | nature (143(a)) | | | | | | ### (MANUFACTURERS) | | +-----------------------------------+-----------------------------------+ | wholesalers, distributors, or | | | dealers in any article of | | | commerce of whatever kind or | | | | | | nature (143(b)) | | | | | | ### (SELLERS) | | | | | | ### Wholesaler- a sale where the | | | purchaser buys commodities for re | | | sale to others, not the end user, | | | regardless of transaction quanti | | | ty. | | | | | | ### Dealer - is a merchant who bu | | | ys and sells merchandise, standin | | | g between the producer and consum | | | er, relying on market skill and f | | | oresight for profit rather than l | | | abor on the goods. | | | | | | ### Retail - a sale where the pur | | | chaser buys the commodity for his | | | own consumption, irrespective of | | | the quantity of the commodity so | | | ld | | +-----------------------------------+-----------------------------------+ | exporters, and on manufacturers, | at a rate not exceeding one | | millers, producers, wholesalers, | | | distributors, dealers | half (1/2) of the rates | | | prescribed under subsections (a), | | or retailers of essential | (b) and (d) of this Section | | commodities (143(c)) | | | | ### (4) Rice and corn; | | ### (EXPORTERS AND MANUFACTURERS, | | | AND SELLERS OR ESSENTIAL GOODS) | ### (5) Wheat or cassava flour, m | | | eat, dairy products, locally manu | | | factured, processed or | | | | | | ### pre served food, sugar, salt | | | and other agricultural, marine, a | | | nd fresh water products, | | | | | | ### whether in their original sta | | | te or not; | | | | | | ### (6) Cooking oil and cooking g | | | as; | | | | | | ### (7) Laundry soap, detergents, | | | and medicine; | | | | | | ### (8) Agricultural implements, | | | equipment and post harvest facili | | | ties, fertilizers, pesticides, | | | | | | ### insecticides, herbicides and | | | other farm inputs; | | | | | | ### (9) Poultry feeds and other a | | | nimal feeds; | | | | | | ### (10) School supplies; and | | | | | | ### (11) Cement | +-----------------------------------+-----------------------------------+ | Retailers (143(d)) |  | | | | | | **Exeptions:** gross sales or | | | reciepts under 50,000 or 30,000 | | | in cities and municipalites, | | | respectively | | | | | | ### **Note:** The barangay has th | | | e exlusive power to tax retailers | | | on the exemptions | +-----------------------------------+-----------------------------------+ | Contractors and other independent | | | contractors (143(e)) | | | | | | ### Contractor is any person or e | | | ntity not subject to professional | | | tax under Section 139, primarily | | | engaged in selling services for | | | a fee, whether or not it involves | | | using physical or mental faculti | | | es (132(d)). | | +-----------------------------------+-----------------------------------+ | Banks and other financial | not exceeding fifty percent (50% | | institutions (143(f)) | of one | | | | | | percent (1) on the gross receipts | | | of the preceding calendar year | | | | | | ### **Derived** from interest, co | | | mmissions and discounts from lend | | | ing activities, income from finan | | | cial leasing, dividends, rentals | | | on property and profit from ex ch | | | ange or sale of property, insuran | | | ce premium. | +-----------------------------------+-----------------------------------+ | Peddlers engaged in the sale of | not | | any merchandise or article or | | | commerce (143(g)) | exceeding Fifty pesos (P50.00) | | | per peddler annually | | ### Pedler - is a person who trav | | | els from place to place selling g | | | oods or offering them for sale, e | | | ither for themselves or on commis | | | sion. Whether they are a wholesal | | | e or retail peddler is determined | | | by the definitions provided in t | | | his Title. | | +-----------------------------------+-----------------------------------+ | On any business not otherwise | The Sanggunian concerned may | | specified above (143(h)) | prescribe a schedule of graduated | | | tax rates but in no case to | | | exceed the rate prescribed | | | herein. | | | | | | ### **Provided**, That on any bus | | | iness subject to the excise, valu | | | e-added or percentage tax under t | | | he National Internal Revenue Code | | | , as amended, the rate of tax sha | | | ll not exceed two percent (2%) of | | | gross sales or receipts of the p | | | receding calendar year. | +-----------------------------------+-----------------------------------+ Rates of Tax in Metropolitan Manila (144) ----------------------------------------- The municipalities within the Metropolitan Manila Area may levy taxes at rates which **shall not exceed by fifty percent (50%) the maximum rates** prescribed in the preceding Section. Retirement of Business (145) ---------------------------- When a business ends, it must submit a sworn statement of its gross sales or receipts for the year. Any tax difference between what was paid and the amount due must be settled before the business is officially retired. Payment of Business Taxes (146) ------------------------------- The taxes imposed under Section 143 shall be payable **for every separate or distinct establishment** or place where business subject to the tax is conducted and one line of business does not become exempt by being conducted with some other business for which such tax has been paid. The tax on a business must be paid by the person conducting the same. ### Taxes must be paid for each distinct business location, and having multiple businesses does not exempt any from tax. The business owner is responsible for the tax. a. ***Same rate of tax-*** In cases where a person conducts or operates two (2) or more of the businesses, the tax shall be computed on the combined total gross sales or receipts of the said two (2) or more related businesses. b. ***Different rate of tax -*** the gross sales or receipts of each business shall be separately reported for the purpose of computing the tax due from each business. Municipal Fees and Charges -------------------------- 1\. The municipality may impose and collect such reasonable fees and charges on business and occupation except professional taxes reserved for provinces (Sec. 147, LGC). 2\. Fees for Sealing and Licensing of Weights and Measures (Sec. 148, LGC). 3\. Fishery Rentals, Fees and Charges (Sec. 149, LGC) SITUS OF TAX in municipality ============================ For tax collection under Section 143, businesses like manufacturers, wholesalers, banks, etc., with branches or sales outlets [shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is located.] ### Businesses must pay taxes to the municipality where a sale occurs. If they have no local branch, taxes are paid to the municipality of their main office 1\. ***With branch or sales office or warehouse*** -- where such branch or sales outlet is located. 2\. ***Where there is no branch, sales office, or warehouse*** - The sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality. ***Branch office*** -- a fixed place in a locality which conducts operations of the business as an extension of the principal office. ***Principal office*** -- head or main office of the business appearing in pertinent documents submitted to the SEC and specifically mentioned in the Articles of Incorporation. #### 3. Where there is a factory, project office, plant, or plantation in pursuit of business Thirty percent (30%) of all sales recorded in the principal office taxable by the city or municipality where the principal office is located; Seventy percent (70%) of all sales recorded in the principal office -- taxable by the city or municipality where the factory, project office, plant, or plantation is located; This 70% shall be divided as follows [if the plantation and factory is located separately]: a\. 60% - city or municipality where the factory is located; b\. 40% city or municipality where the plantation is located. TAXING POWER OF LGU -- cities ============================= ***Scope***: Except as otherwise provided in the LGC, the city may levy the taxes, fees, and charges which the province OR municipality may impose. (Sec. 151, LGC) 1\. The taxes, fees, and charges levied and collected **by highly urbanized and independent component cities** shall accrue to them and distributed in accordance with the provisions of the Code. 2\. The rate of taxes that the city may levy may exceed the maximum rates allowed for the province municipality by **not more than 50%.** **Exception**: The rates of professional and amusement taxes. (Sec. 151, LGC) ### **Note**: Under the LGC, there are three types of cities, Component Cities, Independent Component Cities and Highly Urbanized Cities. ICCs and HUCs **are independent of the province** (Secs. 451-452, LGC). This means that taxes, fees and charges levied and collected by ICCs and **HUCs accrue solely to them**. (Sec. 151, LGC) +-----------------------------------+-----------------------------------+ | Source of Taxes (152) | Tax Rate and Base; Fees and | | | Charges | +===================================+===================================+ | BARANGAY TAXES | with gross sales or receipts of | | | the preceding calendar year of | | on stores or retailers with fixed | P50,000 or less, in the case of | | business establishments. | cities and P30,000 or less, in | | | the case of municipalities, at a | | | rate not exceeding **one percent | | | (1%) on such gross sales or | | | receipts.** | +-----------------------------------+-----------------------------------+ | Service Fees or Charges | reasonable fees or charges for | | | services rendered in connection | | | with the regulation or the use of | | | Barangay-owned properties or | | | service facilities such as palay, | | | copra, or tobacco dryers. | +-----------------------------------+-----------------------------------+ | Barangay Clearance | Sangguniang Barangay may impose a | | | reasonable fee | | | | | | ### **Note**: No city or municipa | | | lity may issue any license or per | | | mit for any business or activity | | | unless a clearance is first obtai | | | ned from the Barangay where such | | | business or activity is located o | | | r conducted. | | | | | | ### The application for clearance | | | shall be acted upon | | | | | | ### within seven (7) working days | | | from the filing thereof. In the | | | event that the clearance is not i | | | ssued within the said period, the | | | city or municipality may issue t | | | he said license or permit. | +-----------------------------------+-----------------------------------+ | OTHER FEES AND CHARGES | The Barangay may levy reasonable | | | fees and charges | | a\. Commercial breeding of | | | fighting cocks, cockfights and | | | cockpits | | | | | | b\. Places of recreation which | | | charge admission fees | | | | | | c\. Billboards, signboards, neon | | | signs and outdoor | | | advertisements | | +-----------------------------------+-----------------------------------+