Today, may be most of the business establishments have renewed their business permits for the year 2011 with their respective local government units (LGUs) in the country.
In the first week of January 2011, me and my associates in the office had been busy preparing the requirements for the renewal of business permits of businesses with different LGUs.
The LGUs are granted the power to tax, including the right to impose local business taxes (LBT) on all business operating within its jurisdiction with reference to the law, Republic Act No. 7160 which is known as the Local Government Code of 1991 (LGC).
LBT is imposed on the amount of gross sales or receipts of a business establishment for the preceding calendar year using the rates of taxes provided under Section 143 of the LGC, or a specific ordinance issued by the LGU, for each type of business.
Business establishments are required by LGUs to submit Declaration/ Certification of Gross Sales/Receipts for the preceding calendar year for basis in computation of LBT and the latest Income Tax Returns and Financial Statements for purposes of verifying the accuracy of the declarations that have been made for the previous year.
In my worse actual experience for almost two years in securing renewal of business permits is that one of the LGUs is not following the Section 143 of the LGC.  Upon presentation of the accomplished tax assessment form providing the 2009 gross sales which is higher compared to 2010 gross sales in securing business permit for year 2011, I was dismayed when their government employee decided to make an assessment of the same amount as declared in 2009 gross sales with their invalid reason that the 2010 gross sales/receipts should be higher even though I have provided their requirements which was resulted to over-assessment and  over-payment of business taxes.
Through research, I have learned that the method used by this LGUs is known as the Presumptive Income Level Assessment Approach (PILLA) that it is commonly practiced in most LGUs throughout the country as a tool for the efficient and effective collection of taxes.

Again, the LGUs in the country should based  the local business taxes stated in Section 143 of the LGC and should not based on presumptive income.

Local taxation must always be uniform, fair and just despite of the local autonomy granted by the Constitution.


Tonight, upon reading an article written by a Tax Manager of an Audit Firm in the Country stated that NON-STOCK, NON-PROFIT (NSNP) CORPORATIONS OR ORGANIZATIONS not really exempt from the payment of all taxes.
The writer stated that the grant of tax exemption  provided under the Constitution (Section 4(3), Article XIV of the Constitution) and the Tax Code may well be among the reasons why a many trustees and officers of Non-stock, Non-profit organizations are under the mistaken notion that their tax exemption is absolute.
In support, the writer stated  about the case of (Lladoc vs. Commissioner of Internal Revenue, 14 SCRA 292)  decided by the Supreme Court, it was held that the tax exemption of charitable and religious institutions under the Constitution refers only to real property exemption and not to other types of taxes.
The exemption privileges do not cover all types of income and activities. Income from properties, as well as from activities conducted for profit by NSNP corporations is subject to income tax. Section 30 of the Tax Code explicitly provides that “the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under this Code”. Because of this, income earned by a non-stock non-profit institution from the sale or lease of its real property is subject to tax. Interest income from bank deposits and yield from deposit substitutes are likewise subject to the final withholding taxes.
Likewise, income earned by the educational institutions from investments in shares of stock which is not deemed related to its purposes as an educational institution and is subject to income tax. Income earned from the sale or lease of real property or from fund raising activities although to be used exclusively in furtherance of the objectives and purposes of the organization are likewise, in general, taxable.
Both NSNP organizations and educational institutions are neither exempt from the liability to withhold taxes on their employees and other income payments that are subject to withholding tax under the regulations.
The author also recommends that when in doubt, a ruling may be secured from the BIR on whether certain income or receipts can be exempt or should be taxable. Exemptions from the general rules on taxability may also be obtained, in certain cases.