August 29, 2013

BUREAU OF LOCAL GOVERNMENT FINANCE OPINION

Dr. Lilia B. de Lima
Director General
Philippine Economic Zone Authority
Roxas Boulevard corner San Luis Street
Pasay City
Attention: Atty. Procolo M. Olaivar
Manager
Legal Services Group
Madam :
We would like to request clarification on whether or not income of
PEZA-registered enterprise declared as regular rate and taxed by the Bureau of
Internal Revenue (BIR) under the regular rate (30%) is exempt from the local business
taxes.
We would also like to be clarified as to the nature of this "regular rate" of
income and its sources, whether these were earned within or outside the Ecozone
conclave.
The request is being made in view of the final demand made by the City of
Calamba for the settlement of the purported deficiency in the payment of business tax
from 2006-2012 in the aggregate amount of SIXTEEN MILLION SIX HUNDRED
EIGHT THOUSAND TWO HUNDRED SEVENTY PESOS and 58/100
(PhP16,608,270.58) of Yazaki-Torres Manufacturing, Inc. (YTMI).
YTMI claimed that in the inquiry made by it from PEZA, said agency
confirmed the exemption of the company from the payment of the business taxes
being assessed by said City, the pertinent portion of which is quoted as follows:
cHaICD

"As regards local government permits, fees, taxes, etc., YTMI continues
to be exempt. This is because the enterprise does not shed its PEZA-registered
status just because it has realized income from non-PEZA registered, albeit
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related, activities. For as long as YTMI conducts its business inside the ecozone,
it remains exempt from LGU permits/taxes."

This Bureau under a letter dated March 18, 2013, addressed to Ms. Eufemia H.
Biscocho, Special Assistant to the Division Head, YTMI, expressed the view "that
income of YTMI classified as "regular rate" shall be subject to the local business tax
imposed under a duly-enacted tax ordinance of the City of Calamba. This Bureau
therefore, finds the assessment made by the ICO-City Treasurer in full accord of the
law.''
The above request is necessary in order that appropriate action can be taken by
this Bureau on requests pertaining to the exemption from local taxes of
PEZA-registered enterprises.

Very truly yours,

(SGD.) SALVADOR M. DEL CASTILLO

OIC-Executive Director

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Philippine Taxation Encyclopedia 2015