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
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
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.