LBT on tollway operators/concessionaires

The Department of Finance (DOF) has issued the following clarifications on the authority of local government units (LGUs) to impose business tax on tollway operators/concessionaires (TOCs) pursuant to the provisions of Section 143(e) of RA 7160 (otherwise known as the Local Government Code of 1991).

Imposition of LBT

For local business tax (LBT) purposes, tollway operators/concessionaires (TOCs) shall be classified as falling under the category of contractors. They shall be subject to LBT on the amount they realize from the operation of tollways systems, which shall be considered their taxable gross receipts.

In calculating a TOC’s LBT liability to any LGU traversed by the toll expressway system, the following rules shall apply:

a. All receipts collected by the tollbooths in a toll barrier/plaza shall be recorded in said toll barrier/plaza and the tax due thereon shall be payable to the city or municipality where the tollbooth or toll barrier/plaza is located.

b. In case an LGU hosts more than one toll barrier/plaza, the combined gross sales or receipts collected at the toll barriers/plazas shall also be recorded in said LGU and all LBT dues shall be collected 100% by the same LGU.

c. In case an LGU hosts the head/principal office of the TOC, any LBT due shall be based only upon the gross sales/receipts collected at the toll barriers/plazas, if any, located within the territorial

jurisdiction of the same LGU. No sales allocation shall be applicable and the LGU hosting such head/principal office shall have no share in the LBT due to other LGUs traversed by the toll expressway system. However, gross receipts realized by the head/principal office of the TOC independent from the operation of the tollways system, if any, shall be recorded in, and the tax due thereon shall be paid to, the LGU hosting the same.

d. Cities and municipalities traversed by the tollways system where the TOC does not maintain any tollbooth or toll barrier/plaza shall not be entitled to the collection of the LBT. Conversely, an LGU that does not host a tollbooth or toll barrier/plaza within its territorial jurisdiction is not authorized to impose and  collect LBT even if it hosts the head/principal office of the TOC.

e. All receipts from an electronic toll collection system (ETC), such as “EC Tag” or any other modes of electronic collection, shall be recorded in the toll barrier/plaza were the e-Card or e-Pass is used and the charges therefrom shall be recorded in said toll barrier/plaza and the tax due thereon shall be payable to the city or municipality where the said tollbooth or toll barrier/plaza is located.

f. No LBT shall be imposed on a newly-installed tollbooth or toll barrier/plaza during the initial period of operation thereof, except regulatory fees and services charges.

However, on the ensuing quarter/year and thereafter, the same shall be assessed for LBT based on the gross sales/receipts realized during the preceding quarter/calendar, as the case may be.

Collection of mayor’s permit and other regulatory fees

LGUs are authorized to collect the mayor’s permit fee and other regulatory fees and charges from the head/principal office and/or tollbooth or toll barrier/ plaza operating within their respective jurisdictions. However, TOCs shall not be required to pay mayor’s permit and other regulatory fees in localities where they do not directly operate a head/principal office and/or tollbooth or toll barrier/plaza.

The mayor’s permit and other regulatory fees shall not be based on capital investment, gross sales of the business, actual kilometer traversed in each LGU, or volumes of vehicles that use the tollways system.

(Local Finance Circular No. 1-2013, January 18, 2013)

Tax Brief – March 2013

Punongbayan and Araullo