Knowing local taxation
Having the knowledge and the expertise to not only understand the nature of local business taxation but also grasp the parameters of such power will help ordinary local businesses, professionals, and alike to know their lawful obligations in order to promote transparency and effective collection in the locality
Published in Daily Tribune on December 16, 2021
by: Juan Romulo R. Taleon
As the end of the year draws near, it is only normal to look into what the new year holds for all of us. The advent of the new year signifies new beginnings, some would think about their new year’s resolutions, and most would hope for a lucky year ahead. To new beginnings, a new chapter, and a new life. Included in this is the time when the renewal period starts for local businesses. In fact, every business registered in a certain locality needs to renew its business permit annually to continue doing business. In this regard, the Department of Finance through the Bureau of Local Government Finance issued Memorandum Circulars 01-2020, entitled “Updated Reminders in the Assessment of the Local Business Tax (LBT), Registration and Renewal of Business Permits and Licenses and the Imposition of Local Taxes, Fees and Charges”.
This Memorandum Circular (MC) reminds all local treasurers and assistant treasurers of their duties in the Assessment of Local Business Tax (LBT), Registration and Renewal of Business Permits and Licenses, and the Imposition of Local Taxes, Fees, and Charges.
One such reminder states that new businesses shall not be liable for Local Business Taxes and shall only be subject to the payment of Business Permit and other regulatory fees and charges except for businesses on printing and publication and those enjoying a franchise which gives the provinces and cities the power to impose a tax based on capital investment, as prescribed by the Local Government Code and implemented through a duly enacted tax ordinance of the Local Government Code concerned.
Secondly, in assessing local business tax for renewal of business permits, a sworn declaration of gross sales or receipts by the taxpayer or its Income Tax Returns (ITR) can be used in the absence of the audited Financial Statement of the entity involved. It also enumerates transactions that are excluded from the gross sales or receipts for the computation of Local Business Tax. Additionally, it talks about the use of the Presumptive Income Level Assessment Approach (PILAA) which can only be used if the taxpayer is unable to provide proof of its gross sales or receipts.
The aforementioned MC also enumerates activities exempt from the requirement of a Mayor’s/Business Permit and those that are exempt from Local Taxes. Additionally, Local Government Units are prohibited from requiring business registrants from securing insurance from LGU-accredited insurance companies for having no legal basis and being in violation of the Insurance Code.
The MC also talks about penalties for delayed payment of business permit fees which shall only be imposed after the lapse of the prescribed period that is either after the 20th day of January or the extended period as indicated in the revenue ordinance of the local government concerned. It also provides for the imposition and collection of local taxes, fees, and charges on professionals whereby local governments are mandated to follow the local finance circular 001-2019.
Also mentioned is the payment of Community Tax which discusses the amount of payment that can be levied, the place of payment, the time of payment, and the penalties for late payment. Lastly, the MC explains the Situs of Local Business Tax on Banks and other Banking institutions giving a clear distinction between the gross receipts derived from all transactions filed with or negotiated in the branch office and the gross receipts from transactions made by the head office.
Lastly, the said circular emphasizes the Supreme Court Decision in Batangas City v. Philippine Shell Petroleum Corporation that “ordinances passed by virtue of the implied power found in the general welfare clause must be reasonable, consonant with the general powers and purposes of the corporation, and not inconsistent with the laws or policy of the State”. Hence, local treasurers are enjoined to make the necessary and immediate representations with their Local Chief Executives and Sanggunian for local ordinances and revenue measures that are inconsistent with the abovementioned ruling.
Having the knowledge and the expertise to not only understand the nature of local business taxation but also grasp the parameters of such power will help ordinary local businesses, professionals, and alike to know their lawful obligations in order to promote transparency and effective collection in the locality.
