BIR warns LGUs that their fundraising activities are not tax-exempt

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THE BUREAU of Internal Revenue (BIR) warned local government units (LGUs) conducting commercial activities to pay the corresponding taxes.

“There are many local government units that undertake proprietary activities to create additional sources of revenue. Revenues derived by LGUs from such activities are taxable because these are not undertaken by LGUs in the performance of their governmental functions,” Eduardo L. Pagulayan, Jr., OIC-Regional Director, of the Cebu City Revenue Region said in a statement yesterday.

This was after a BIR Ruling dated March 13, 2018, that held the Municipality of Oslob liable for income tax, value-added tax (VAT), expanded withholding tax, deficiency withholding tax on VAT and other percentage taxes, withholding tax on compensation, and registration fees for its Butanding Watching Activities for the taxable year 2012.

Under the tax code, LGUs with a propriety function shall pay such rate of tax upon their taxable income as are imposed upon corporations engaged in similar activities. — Elijah Joseph C. Tubayan