Billing Statements for Local Business Taxes are Not Tax Assessments
By: Euney Marie J. Mata-Perez on November 30,2023
There is a big difference between protesting an assessment and claiming for refund of erroneously paid local business taxes (LBT). The remedies for each action are sets out in separate sections of the Local Government Code of 1991 (LGC).
Under Section 195 of the Local Government Code, a taxpayer has sixty (60) days from receipt of a “notice of assessment” within which to file a written protest with the local treasurer contesting the assessment. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. The taxpayer shall then have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.
On the other hand, a claim for refund for the recovery of erroneously or illegally collected tax can be filed within two years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit.
In the recent case of Holcim Philippines, Inc. V. The City of Taguig and Atty. J. Voltaire Enriquez, in his capacity as the City Treasurer of The City of Taguig (CTA Case No. AC-268, November 15, 2023 ), the Court of Tax Appeals (CTA) held that “billing statements”, which are issued by the City Treasurer of Taguig, “assessing” the taxpayer for LBT in the course of renewing its business permits, are not tax assessments for purpose of Section195 of the LGC. Thus, the taxpayer timely filed its claim for refund pursuant to Section 196 of the same code.
In this case, since the City Treasurer failed to act on its letter request for refund, the taxpayer filed a Petition for Refund before the Regional Trial Court (RTC). The RTC denied the refund, holding that the billing statements are assessments under the LGC and that the taxpayer should have filed its claim in court within the reglementary period in Section 195 of the LGC.
The taxpayer appealed the decision of the RTC, maintaining that the billing statements are not the assessments contemplated in Section 195 of the LGC and that Section 196 of the LGC applies to the case.
Citing the case of International Container Terminal Services, Inc. v. The City of Manila, et al. (G.R. No. 185622, October 17, 2018), the CTA held thatLBT billing letters paid as a prerequisite for the renewal of business permit cannot be considered as the “notice of assessment” required under Section 195 of the LGC since they do not contain any amount of deficiency, surcharges, interests, and penalties due from the taxpayer. Accordingly, Section 196 of the Tax Code governs and the taxpayer has two years from date payment to file a judicial claim for refund.
The CTA found enlightening the ruling in the case of National Power Corporation v. The Province of Pampanga and Pia Magdalena D. Quibal (G.R. No. 230648, October 6, 2021) which states thatthe mandate of providing the taxpayer with notice of the facts and laws used as bases for the assessment is not to be mechanically applied. The purpose of this requirement is to adequately inform the taxpayer of the basis of the assessment to enable him to prepare for an intelligent or “effective” protest or appeal of the assessment or decision.
The ruling in this case is similar in Lafarge Holdings (Philippines), Inc. v. City of Taguig (CTA A.C. No. 227, July 24, 2020), wherein the CTA, through its Third Division, stressed that the assessment under Section 195 of the LGC must be premised on a finding by the local treasurer that correct taxes, fees, or charges have not been paid after an examination, “and that the local treasurer issue a statement containing the amount of deficiency, surcharges, interests, and penalties due from the taxpayer.”
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Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer and has been ranked as one of the top 100 lawyers of the Philippines by Asia Business Law Journal and is the incoming Chair of the Tax Committee of the Management Association of the Philippines. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.