I. The core idea: an OPC is “one person,” but it is still a corporation

A One Person Corporation (OPC) is a corporation with a single stockholder created under the Revised Corporation Code of the Philippines (RCC). It has a separate juridical personality from its stockholder, and—unless a special rule applies—an OPC is treated like other corporations for local taxation and local business permitting.

For local business taxes, what matters most is (a) the nature of the business activity, and (b) where the business is conducted, not the fact that the corporation has only one stockholder.

II. What “Local Business Tax” means in Philippine practice

A. Local business tax (LBT) vs. other local exactions

In everyday use, “business tax” usually refers to the tax on the privilege of doing business imposed by a city or municipality under the Local Government Code of 1991 (LGC) and the local revenue ordinance.

It is distinct from (and often collected alongside) other items typically shown in the Mayor’s permit assessment:

Regulatory fees (Mayor’s permit fee, sanitary inspection, garbage fee, signage, etc.)
Barangay clearance-related fees and barangay charges
Fire Safety Inspection Certificate (FSIC) fees/charges processed with the BFP (national agency, but often part of the permitting workflow)
Real property tax (if the OPC owns taxable real property)
Community tax (cedula) (usually for individuals; corporations may also be subject under specific rules)
Professional tax (for individuals practicing professions, not corporations per se)
Franchise tax (for certain franchise holders, depending on the franchise and LGC rules)
Amusement tax (if operating places of amusement, depending on LGU authority and classification)

Practical point: When people ask “What’s the business tax rate in my city?” they’re often mixing taxes (revenue-raising) and fees (regulatory/cost recovery). The legal basis, computation, and remedies differ.

III. Who imposes local business tax, and where an OPC pays

A. City/municipality business tax

The city or municipality where the OPC maintains and operates its business may impose the business tax by ordinance, subject to LGC ceilings and limitations.

B. Barangay “business tax” (small retailers)

A barangay has a narrower power to impose a tax on small retailers/stores below statutory gross-sales thresholds and to collect certain fees and charges. If the OPC’s activity falls within those barangay thresholds and it is a retailer/store covered by the barangay taxing power, barangay tax may apply in addition to city/municipal requirements—though many barangays focus on clearances/fees rather than running a full tax assessment system.

IV. The legal framework in one page

Constitutional basis: local autonomy and local taxing power subject to congressional limits.
Local Government Code (LGC):
- grants LGUs taxing powers,
- provides maximum rates,
- sets situs rules,
- requires procedures (ordinance enactment, publication, assessments, protests, prescription), and
- provides penalties and remedies (surcharges, interest, distraint/levy).
Local revenue ordinance: your LGU’s enacted ordinance sets the actual rate (must be within LGC limits).
Special laws / incentives: can reduce or replace local tax liability (e.g., BMBE, economic zone/investment regimes, cooperative rules, franchise provisions), depending on eligibility and the exact statutory scheme.

V. The LGC ceilings: what “rates” exist in law

A. Why “rate” is often not a single percentage

For many business classes, the LGC authorizes graduated schedules (fixed amounts by gross-sales bracket) and/or percentage caps. So a taxpayer may see:

a fixed amount for a bracket (e.g., based on gross receipts), or
a base amount + marginal percentage on amounts above a threshold, or
a straight percentage cap (common for services/contractors/“other businesses”).

B. City rates are generally higher than municipal rates

As a rule, cities may impose taxes at higher maximum rates than municipalities—commonly described as up to 50% more than the maximum rates allowed to municipalities (subject to LGC structure and exceptions). In practice, this is why business taxes are often noticeably higher in highly urbanized/independent component cities than in municipalities.

C. Common LGC business tax classifications (how an OPC is slotted)

Your OPC will typically fall under one (or more) of these broad categories used in ordinances:

Manufacturers, assemblers, processors, etc.
Wholesalers, distributors, dealers, exporters/importers
Retailers
Contractors and other independent contractors / service providers (a catch-all used by many LGUs for service revenue)
Banks and other financial institutions (special rules)
Peddlers (special rules)
Businesses “not otherwise specified” (often a fallback category with its own cap)

D. Important percentage caps to know (because they drive many ordinances)

Even when the LGC uses schedules for some categories, these caps are widely encountered and often reproduced in local ordinances:

Contractors / independent contractors (service-type receipts): commonly capped at 0.5% of gross receipts in municipalities (cities may be higher within the LGC framework).
“Other businesses not otherwise specified” (fallback category): commonly capped at 2% of gross sales/receipts in municipalities (cities may be higher within the LGC framework).
Barangay tax on small retailers/stores (below statutory thresholds): capped at 1% of gross sales/receipts for covered small retailers/stores.

Why this matters for OPCs: Many OPCs are single-owner service providers (consulting, digital services, contractors, clinics structured as enterprises, small agencies). LGUs frequently classify these under contractors/independent contractors or other businesses, so those caps are often the practical ceiling.

VI. The tax base: “gross sales” and “gross receipts,” and the first-year rule

A. The general base: prior-year gross sales/receipts

Local business tax is typically computed on the gross sales or gross receipts of the preceding calendar year. This is why LGUs ask for:

audited or unaudited financial statements,
income tax return excerpts,
VAT returns, and/or
sworn declarations.

B. New businesses: capital investment is often used

For newly started businesses, the initial tax is commonly assessed based on capital investment (or capitalization) because there is no preceding-year gross to use. Local ordinances often require an adjustment the following year once actual gross receipts are known.

C. What counts as “gross” in common disputes

“Gross receipts/sales” disputes arise because:

some receipts are pass-through (e.g., VAT collected for remittance),
some receipts are reimbursements,
some are inter-company transfers, or
the OPC has multiple revenue streams.

Philippine practice is heavily ordinance-driven, and jurisprudence has treated some items (like pass-through taxes) differently depending on facts and statutory/ordinance wording. The safest compliance posture is to align declared gross with what is reported to national agencies and to document exclusions clearly when legally supportable.

VII. Situs of taxation: where the OPC is taxed when it has branches, plants, or multiple locations

A. The basic situs rule

An LGU may tax the business carried on within its territorial jurisdiction. If the OPC has:

a principal office in one LGU, and
branches/sales offices/warehouses in others,

business tax liability may be allocated or separately imposed depending on the nature of operations and where sales/receipts are realized.

B. Allocation rules (high impact for corporations with multiple sites)

For some operations (especially manufacturing with plants/factories/plantations), the LGC provides allocation rules that split tax proceeds between:

the LGU of the principal office, and
the LGU where the plant/factory/plantation is located.

This prevents all business tax from being captured solely by the principal office LGU when substantial business activity occurs elsewhere.

C. Multiple lines of business

If the OPC engages in two or more lines of business, many ordinances treat each line as separately taxable, potentially at different rates/schedules.

VIII. Compliance mechanics: timelines, declarations, payment modes, and permitting

A. Annual payment; quarterly option

Business taxes are generally due and payable at the start of the calendar year. The LGC framework allows payment annually or in quarterly installments, typically due within the first 20 days of each quarter (depending on ordinance mechanics). Paying quarterly can avoid the cash-flow spike many micro and small OPCs experience.

B. Sworn declaration and supporting documents

Common requirements include:

sworn statement of gross sales/receipts for the preceding year,
SEC registration documents for the OPC,
proof of occupancy (lease/title),
location sketch, barangay clearance,
BIR registration, invoices/receipts authority,
financial statements/ITR, and
other regulatory clearances depending on industry.

C. Mayor’s permit linkage

Many LGUs integrate the business tax assessment into the Mayor’s permit renewal process. Non-payment can block issuance/renewal, and persistent delinquency can lead to enforcement measures, including closure proceedings under local regulatory authority.

IX. Penalties for late payment and non-compliance

While exact application is ordinance-specific, the LGC framework commonly authorizes:

Surcharge on delinquent taxes (often up to 25% of the amount due)
Interest (often 2% per month on the unpaid amount, frequently capped by a maximum accrual period in the LGC framework)
Administrative enforcement such as distraint of personal property, levy on real property, and judicial action for collection
Regulatory consequences such as suspension/non-issuance of permits and potential closure for operating without the required permit/licenses

X. Exemptions, reductions, and special regimes that may affect an OPC

An OPC is not automatically exempt because it is “one person.” Exemptions typically come from special laws or specific classifications, for example:

A. BMBE (Barangay Micro Business Enterprise) registration

Under the BMBE Act, qualified micro enterprises (including corporations meeting the asset-size and registration requirements) may receive exemption from certain local taxes/fees as provided by law and implementing rules, subject to LGU implementation mechanics. This can be significant for micro OPCs in trading and services.

B. Economic zone / investment incentive regimes

Enterprises registered under certain incentive regimes may have “in lieu of all taxes” structures or negotiated local tax treatments depending on the governing statute and the enterprise’s registration status and phase (e.g., ITH vs. special rate regime). Local business tax exposure can be reduced or replaced by a statutory special tax—subject to the exact law and the enterprise’s certification.

C. Cooperatives and other special entities

Cooperatives have distinct statutory treatment. An OPC is not a cooperative, but if the business is considering restructuring, the local tax consequences differ materially across entity types.

D. Common limitations on local taxing power

The LGC contains limitations on what LGUs may tax and how, including protection for certain activities/entities and restrictions against certain forms of taxation (e.g., income tax by LGUs). These limitations can become relevant when an ordinance tries to tax a transaction or entity outside LGU authority.

XI. Professional practice vs. business tax: a recurring issue for “solo” operators

Many one-person ventures are professional in substance (law, medicine, accountancy, engineering, architecture, etc.). The LGC also provides for professional tax imposed on individuals engaging in the practice of a profession requiring government examination.

Key practical/legal tension:

LGUs sometimes attempt to treat professional income as “business” and impose business tax on top of professional tax.
Philippine practice and jurisprudence have frequently scrutinized these overlaps, especially when the taxpayer is clearly within the professional-tax framework.

For OPCs, the analysis turns on:

whether the activity is the practice of a regulated profession,
whether corporate practice is permitted by law/regulation for that profession, and
how the ordinance classifies and taxes the activity.

XII. Remedies: protesting an assessment and challenging an ordinance

Local tax disputes usually fall into two tracks:

A. Protesting a tax assessment (amount/assessment issues)

The LGC provides procedures and deadlines to protest an assessment (typically starting with a written protest to the local treasurer within a specified period from receipt of assessment, followed by judicial recourse in the proper court if denied or not acted upon within statutory timeframes).

B. Challenging the validity of an ordinance (authority/procedure issues)

Challenges to an ordinance’s validity often require:

showing non-compliance with LGC substantive limits (exceeding ceilings, improper subject), and/or
procedural defects (lack of required hearings/publication), and
observing statutory periods for administrative review and judicial action.

Deadlines are strict in local tax litigation; missing them can be fatal.

XIII. Practical rate reality: why two OPCs doing the same work pay different LBT

Even for identical businesses:

LGU A may set rates close to the statutory ceiling,
LGU B may adopt lower rates, discounts, or different classification buckets, and
enforcement and interpretation (especially on “gross receipts” inclusions) can vary.

So the legally correct “rate” answer is always two-layered:

LGC ceiling (national cap), and
Local ordinance rate (actual rate applied).

XIV. A structured way to determine an OPC’s local business tax exposure

Step 1: Identify the taxing LGU(s)

principal office location
branches/sales offices/warehouses
plants/factories/plantations (if any)
situs/allocation rules

Step 2: Classify the business activity under the ordinance

manufacturing/wholesale/retail
contractor/service provider
financial institution category
“not otherwise specified” fallback
multiple lines of business (possible multiple taxes)

Step 3: Determine the tax base

prior-year gross sales/receipts (typical)
capitalization for first year (typical for new businesses)

Step 4: Apply the rate schedule or percentage

verify whether the ordinance uses:
- fixed amounts per bracket,
- base + marginal percentage, or
- straight percentage (often for services/other)

Step 5: Add other local charges (not business tax, but payable for permitting)

regulatory fees, inspection fees, garbage fees, signage, etc.

Step 6: Check exemptions/special status

BMBE registration
incentives and special laws
statutory limitations

XV. Conclusion

For a One Person Corporation, local business tax liability is determined primarily by (1) the business activity classification, (2) the LGU where business is conducted (including situs/allocation rules), and (3) the applicable local ordinance, all bounded by LGC rate ceilings and limitations. In practice, most OPCs fall under service/contractor or “other businesses” categories, where the most commonly encountered statutory caps are expressed as percentage limits on gross receipts, while manufacturing/wholesale/retail activities often trigger graduated schedules embedded in the LGC framework and mirrored (with local variations) in revenue ordinances.