Republic of the Philippines
House of Representatives
Quezon City

SEVENTEENTH CONGRESS

First Regular Session

House BillNo. Ss 4672

Introduced by Representative Jose Enrique S. Garcia Il!

EXPLANATORY NOTE

One key aspect in the devolution process set into motion by the Local
Government Code (RA 7160), is the transfer to the local government units
(Igus) of the responsibility for the delivery of basic services which include
health, agriculture, environment and natural resources, social services and
public works funded by local funds.

To enable the igus to perform such assigned role to become partners
in national progress and development, they have been given the power to levy
taxes, fees and charges, thereby creating their own sources of revenue.

In particular, municipalities and cities have been given the power to
impose, among others, tax on business establishments which operate within
their respective territorial jurisdictions. Aiming to resolve disputes anticipated
to arise from the operation of business establishments that spans two or more.
municipalities and cities, the Code set down in Section 150 thereof the rules
‘on the proper situs of the tax.

However, questions on the equity of the allocation of the tax are being
raised since a great majority of businesses have their principal offices in
highly urbanized centers such as Metro Manila. Factories and production
plants are usually located in municipalities and cities in the countryside which
thus bear the brunt of the concomitant air, noise and environmental pollution.

Itis, therefore, the aim of this bill to achieve a more equitable allocation
of the tax by giving primary consideration to the place most affected by the
operation, production or manufacturing activity of the business irrespective of
where the sale is generated.

The current 70-30 sharing that the Code prescribes will be abolished
as this bill proposes to increase to 100% the share of the Igu where the
factory, plant or plantation is located.


The bill also incorporates and adopts some of the guidelines laid down
by the Department of Finance on specific businesses such as banks,
insurance companies, and construction contractors.

In view of the foregoing, immediate passage of this bill is earnestly
sought.

lan

REP. JOSE ENRIQUE S. GARCIA III
Second District, Bataan


Republic of the Philippines
House of Representatives
Quezon City

SEVENTEENTH CONGRESS

First Regular Session

4672

House Bill No.

AN ACT TO RATIONALIZE THE COLLECTION OF THE TAX ON

BUSINESS UNDER SECTION 143 OF THE LOCAL GOVERNMENT CODE,

AND AMENDING FOR THE PURPOSE SECTION 150 THEREOF

Be it enacted by the Senate and House of Representatives of the Philippines

in Congress assembled:

SECTION 1. Section 150, Article II, Chapter II, Title |, Book Il of

Republic Act No. 7160, otherwise known as the Local Government Code, is
hereby amended, to read as follows: m

“Section 150. Situs of the Tax. -

(a) For purposes of collection of the taxes under Section 143 of this
Code, manufacturers, assemblers, repackers, brewers, distillers,
rectifiers and compounders of liquor, distilled spirits and wines, millers,
producers, exporters, wholesalers, distributors, dealers, [contractors,
banks and other financial institutions] and other businesses,
maintaining or operating branch, [or] sales outlet, FACTORY, PLANT
AND PLANTATION elsewhere shall record the sale in the PRINCIPAL
OFFICE [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, FACTORY, PLANT OR PLANTATION
is located. In cases where there is no such branch, [or] sales outlet,
FACTORY, PLANT OR PLANTATION ELSEWHERE, [in the city or
municipality where the sale or transaction is made,] 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 WHERE THE PRINCIPAL
OFFICE IS LOCATED.

[(b) The following sales allocation shall apply to manufacturers,
assemblers, contractors, producers, and exporters with factories,
project offices, plants, and plantations in the pursuit of their business:


(1) Thirty percent (30%) of all sales recorded in the principal
office shall be taxable by the city or municipality where the
principal office is located.

(2) Seventy percent (70%) of all sales recorded in the principal
Office shall be taxable by the city or municipality where the
factory, project office, plant, or plantation is located.]

[(c) In case of a plantation located at a place other than the place
where the factory is located, said seventy percent (70%) mentioned in
subparagraph (b) of subsection (2) above shall be divided as follows:

(1) Sixty percent (60%) to the city or municipality where the
factory is located; and

(2) Forty percent (40%) to the city or municipality where the
plantation is located.]

([d]B) In cases where a manufacturer, assembler, producer, exporter
or contractor has two (2) or more BRANCHES, SALES OUTLETS,
factories, project offices, plants, or plantations located in different
localities, [the seventy percent (70%) sales allocation mentioned in
subparagraph (b) of subsection (2) above] THE SALE shall be
prorated among the localities where the BRANCHES, SALES
OUTLETS, factories, project offices, plants, and plantations are located
in proportion to their respective volumes of SALE OR production during
the period for which the tax is due.

({e]C) The foregoing sales allocation shall be applied irrespective of
whether or not sales are made in the locality where the factory, project
office, plant, or plantation is located.

(D) IN CASE OF BANKS AND BANKING INSTITUTIONS, ALL
TRANSACTIONS FILED WITH OR NEGOTIATED IN THE BRANCH
SHALL BE RECORDED IN SAID BRANCH AND THE GROSS
RECEIPTS DERIVED FROM SAID TRANSACTIONS SHALL BE
TAXABLE BY THE CITY OR MUNICIPALITY WHERE THE BRANCH
IS LOCATED.

THIS RULE SHALL BE APPLIED TO: (1) TRANSACTIONS
NEGOTIATED WITH AND APPROVED BY THE BRANCH
MANAGER UNDER HIS OWN AUTHORITY; (2) TRANSACTIONS
FILED AND NEGOTIATED IN THE BRANCH BUT BEING BEYOND
THE APPROVING AUTHORITY OF THE BRANCH MANAGER, ARE
FORWARDED TO THE HEAD OFFICE FOR APPROVAL; AND, (3)
TRANSACTIONS WHERE THE STATED ADDRESS IN THE LOAN
APPLICATION OF THE BORROWER IS THE CITY OF
MUNICIPALITY WHERE THE BANK HAS A BRANCH, IN WHICH


CASE THE HEAD OFFICE UPON APPROVAL OF THE LOAN
SHALL CREDIT THE TRANSACTION TO THE BRANCH.

(E) IN CASE OF INSURANCE COMPANIES, ALL THE GROSS
RECEIPTS DERIVED FROM INSURANCE CONTRACTS/POLICIES
SOLICITED BY A BRANCH SHALL BE TAXABLE BY THE CITY OF
MUNICIPALITY WHERE SUCH BRANCH IS LOCATED.

(F) IN CASE OF CONSTRUCTION CONTRACTORS, ALL GROSS
RECEIPTS REALIZED FROM PROJECTS OR CONTRACTS
UNDERTAKEN BY A BRANCH OFFICE SHALL BE RECORDED IN
THE SAID BRANCH OFFICE AND THE TAX THEREON SHALL BE
PAYABLE TO THE CITY OR MUNICIPALITY WHERE THE BRANCH
IS LOCATED.

IN CASES WHERE THERE IS NO BRANCH OFFICE, THE GROSS
RECEIPTS SHALL BE RECORDED IN THE HEAD OFFICE AND
THE SAME SHALL BE TAXABLE BY THE CITY OR MUNICIPALITY
WHERE THE PROJECT IS LOCATED.

IN CASES WHERE THE PROJECT COVERS TWO (2) OR MORE
LOCALITIES, THE GROSS RECEIPTS SHALL BE PRO-RATED
AMONG THE LOCALITIES IN PROPORTION TO THE COST OF THE
WORK ACCOMPLISHED.”

SECTION 2. The Secretaries of the Department of Finance, the
Department of Budget and Management, and the Department of Interior and
Local Governments, in consultation with the Presidents of the League of
Municipalities, League of Cities and League of Provinces, shall promulgate
the necessary rules and regulations to implement the provisions of this Act.

SECTION 3. All laws, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof, which are inconsistent with
the provisions of this Act are hereby repealed or modified accordingly.

SECTION 4. If any part or provisions of this Act shall be held to be
unconstitutional or invalid, the other parts or provisions hereof which are not
affected thereby shall continue to be in full force and effect.

SECTION 5. This Act shall take effect fifteen (15) days from its
publication in the Official Gazette or in two (2) newspapers of national
circulation

Approved.