In the Philippines, the authority of local government units (LGUs) to create their own sources of revenue and to levy taxes, fees, and charges is enshrined in Article X, Section 5 of the 1987 Constitution and operationalized by Republic Act No. 7160, otherwise known as the Local Government Code (LGC) of 1991.
For restaurant owners in Quezon City (QC), understanding the computation of Local Business Tax (LBT) is critical for compliance and financial planning. Quezon City governs these impositions primarily through the Quezon City Revenue Code of 1993, as amended (notably by Socialized Housing Tax ordinances and various updated tax schedules like Ordinance No. SP-2095, S-2011).
I. The Basis of the Tax
The Local Business Tax for restaurants is an excise tax on the privilege of engaging in business. Unlike Income Tax, which is based on net profit and paid to the Bureau of Internal Revenue (BIR), the LBT is based on the gross sales or receipts of the preceding calendar year.
Legal Definition: "Gross Sales or Receipts" include the total amount of money or its equivalent representing the contract price, compensation, or service fee, including the amount charged or materials supplied with the objects or services, and deposits or advance payments actually or constructively received.
II. The Computation Formula
The computation of the annual LBT for a restaurant in Quezon City follows a graduated schedule or a fixed percentage, depending on the bracket of the restaurant's gross receipts.
1. The Graduated Tax Schedule
Quezon City classifies restaurants under "Retailers" or "Contractors/Service Establishments" depending on the specific nature of the permit, but most food service establishments fall under the category of Contractors (Section 18 of the QC Revenue Code) for tax purposes.
The general formula is:
2. Illustrative Rates (General Framework)
While rates are subject to periodic legislative updates by the Quezon City Council, the structure generally follows these lines for establishments with gross receipts exceeding P2,000,000.00:
- For the first P2,000,000.00: A fixed amount (e.g., approximately P16,500.00 to P25,000.00 depending on the specific sub-category).
- For the excess over P2,000,000.00: A percentage rate (commonly 75% of 1% or 0.75% of the excess).
3. New Businesses
For a newly started restaurant, the tax is not based on the previous year's receipts (as there are none). Instead, the tax is usually a fixed initial fee or a percentage of the initial capital investment (often 1/20 of 1% of the capital investment).
III. Additional Levies and Regulatory Fees
A restaurant's "Business Tax" statement from the QC Business Permits and Licensing Department (BPLD) will often include more than just the LBT. To compute the total liability, one must account for:
- Mayors Permit Fee: Based on the area of the establishment or the number of employees.
- Sanitary Inspection Fee: Mandatory for food establishments to ensure compliance with the Health Code.
- Garbage Fee: Scaled based on the square footage of the dining and kitchen area.
- Fire Inspection Fee: Usually 10% of all other fees paid to the LGU.
- Socialized Housing Tax (SHT): Under Ordinance No. SP-2095, QC imposes an additional 0.5% tax on the assessed value of real property in excess of P100,000.00, which can impact restaurants that own their land/building.
IV. Deadlines and Penalties
Strict adherence to the tax calendar is necessary to avoid hefty surcharges.
| Term | Deadline |
|---|---|
| Annual Payment | On or before January 20 |
| Quarterly Installments | Jan 20, April 20, July 20, Oct 20 |
Penalties for Late Payment:
- Surcharge: A 25% surcharge on the unpaid amount.
- Interest: 2% per month of delay, including the surcharge, until the amount is fully paid (not to exceed 36 months or 72%).
V. Mandatory Requirements for Assessment
To compute the tax, the QC Treasurer’s Office requires the following documents during the annual renewal:
- Sworn Statement of Gross Sales/Receipts for the preceding year.
- Financial Statements (Audited FS for corporations; Simplified FS for sole proprietorships).
- VAT Returns (2550M/Q) or Percentage Tax Returns (2551M) filed with the BIR.
- Previous Year's Business Permit and Tax Bill.
VI. Summary of Steps for Restaurant Owners
- Consolidate Receipts: Total all sales from January 1 to December 31 of the previous year.
- Apply the QC Schedule: Use the current year's graduated tax table provided by the City Treasurer.
- Include Ancillary Fees: Add the regulatory fees (Sanitary, Garbage, Fire).
- Deduct Credits: Apply any tax credits or advance payments if applicable.
- Payment: Pay in full by January 20 to avail of potential "Early Bird" discounts (often 10% if authorized by executive order).