Olongapo Telecom & Information Technology

Wednesday, August 25, 2004

Piltel is exempted from franchise tax

THE Court of Appeals has upheld a lower court’s decision exempting Pilipino Telephone Corp. (Piltel) from paying local franchise taxes.

The decision would cover telecom companies similarly situated. It is considered precedent because it determined the telecommunication franchises, which contain the specific exemption clause and were passed after the effectivity of the Local Government Code, that are exempted from paying local franchise tax.

The court summarily dismissed the appeal filed by the Makati City government seeking a reversal of the judgment of the Makati Regional Trial Court-Branch 148 on December 10, 2002, which directed Makati City to stop assessing and collecting local franchise taxes from Piltel.

Piltel had filed a protest against the aggregate assessment of its local franchise tax of P45 million with the Makati City government.

The company cited its exemption by virtue of its franchise, Republic Act 7293, which exempted it from paying local franchise tax, which is mentioned in Section 6 of Piltel’s legislative franchise.

The City of Makati denied Piltel’s protest. Piltel then filed a petition for review with the RTC of Makati, which upheld Piltel’s exemption from paying franchise taxes to the city government. The decision prompted Makati City to appeal the case to the appellate court, which Piltel’s franchise, which was passed by Congress on March 27, 1992, and took effect after the passage of the Local Government Code on January 1, 1992, thus restoring the tax exemption clauses of franchises which came after the passage of the code