Imposition of local taxes, fees, and charges by local government units on transitioning registered business enterprises

Guidelines on imposition of local taxes, fees, and charges by local government units on transitioning registered business enterprises

Imposition of local taxes, fees, and charges by local government units

Article Posted date 07 September 2023

The Fiscal Incentives Review Board (FIRB) issued Advisory No. 014-2023 dated 31 August 2023, circularizing the Department of Finance (DOF) Department Order (DO) No. 033-2023, which provides the guidelines on the imposition of local taxes, fees, and charges by local government units (LGUs) on transitioning registered business enterprises (RBEs) or those granted incentives prior to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Under Section 311 of the National Internal Revenue Code of 1997, as amended (Tax Code), transitioning RBEs may continue to avail of their respective incentives until the end of the transitory period.

Key points

  • The rules on local taxes applicable to transitioning RBEs:

1.

Those availing of income tax holiday (ITH) only and classified as either pioneer or non-pioneer (under Executive Order No. 226 and/or specified in the registration agreement)

Exempt from local business tax (LBT) for the remaining period of the ITH

 

All other transitioning RBEs: Subject to local taxes

2.

Those currently availing of ITH that are also entitled to 5% tax on gross income earned (GIE) after the ITH

Exempt from LBT (during the remaining period of ITH) and exempt from all local taxes* (while availing the 5% tax on GIE), subject to the 10-year limitation for both incentives

3.

Those availing of 5% tax on GIE

Exempt from local taxes* for 10 years from the effectivity of CREATE

*except real property taxes imposed on land owned by developers

  • Exemption on local fees and charges shall continue for 10 years for transitioning RBEs that are granted such exemption under their registration agreements with the concerned Investment Promotion Agency (IPA), or by their respective LGUs. The LGUs may collect such fees and charges if RBEs are liable thereto prior to the effectivity of CREATE.

Read a September 2023 report prepared by the KPMG member firm in the Philippines

 

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