THE Court of Tax Appeals (CTA) has ruled that gross income of cargo forwarders is exempt from business tax imposed by provincial, city and municipal governments.
The court’s Special First Division issued the resolution reversing the decision of the Paranaque City Regional Trial Court requiring Kuene + Nagel Inc. to pay the city P37.6 million in local business tax out of its gross earnings realized in 2001 to 2005.
In a 16-page decision, the court said Section 5 of the Local Government Code (LGC) exempts transport operators of both passengers and cargoes from paying local business tax on their gross earnings.
It said subjecting them to local tax was tantamount to double taxation as their gross receipts were already covered by the three percent common carriers tax under the Internal Revenue Code.
The court also stated that it was also erroneous for the treasurer’s office to include reimbursement payment by the clients of Kuene to its gross income.
It said the Bureau of Internal Revenue defined reimbursement as advance payment made by the forwarder to third parties who participate in the delivery.
It said it was not income but return to capital.
The court added that local governments are empowered to create their own sources of revenues under the Constitution, but must be fair and within the law and regulations. (Jun Ramirez)