Tax Exemption on BFP-Collected Fees Under RA 9514 (Philippine Fire Code of 2008)

Executive summary

Fees, charges, fines, and penalties that the Bureau of Fire Protection (BFP) collects under Republic Act No. 9514 (the Fire Code of the Philippines of 2008) are regulatory exactions imposed under the State’s police power to prevent and suppress fires. They are not taxes, and—once collected—they do not themselves become subject to national or local taxes (e.g., VAT, local business tax, income tax). The collections accrue to a Fire Code Fund earmarked for fire prevention and BFP operations, under a statutory sharing/allocation formula. Businesses may treat what they pay to the BFP as ordinary and necessary regulatory fees (typically booked under “Taxes & Licenses/Permits”)—not as VAT-able purchases and not subject to withholding.

Below is a comprehensive practitioner-oriented guide.

A. Legal bases and framework

RA 9514 (Fire Code of 2008).
- Establishes the BFP’s authority to impose and collect Fire Code fees, charges, fines, and penalties tied to plan review, permitting, inspection, and enforcement.
- Creates a Fire Code Fund where these collections accrue and limits their earmarked use to fire prevention, enforcement, facilities, equipment, training, and related BFP programs.
- Provides implementing details through the IRR (Implementing Rules and Regulations) on specific fee types, schedules, and collection mechanics.
Nature of Fire Code exactions (police power vs. taxation).
- Fire Code impositions are regulatory fees (meant to defray the cost of regulation and enforcement) rather than revenue-raising taxes. This distinction is crucial for tax treatment.
Local Government Code (LGC) coordination.
- LGUs cannot tax the National Government, its agencies and instrumentalities. The BFP, as a bureau of the DILG, is such an instrumentality. LGUs therefore cannot impose local taxes, fees, or charges on the BFP’s collections nor add duplicate “fire” charges that replicate Fire Code fees.
- RA 9514 preempts LGUs from creating parallel “fire safety” fees for the same regulatory services already covered by the Fire Code.
National tax law coordination (NIRC/VAT).
- VAT applies to the sale of goods or services in the course of trade or business. Government regulatory collections (fees/fines/penalties) are not sales of services; they are sovereign acts. BFP official receipts should not carry VAT.
- The National Government and its agencies are not subject to income tax on their governmental functions. Collections under the Fire Code are not taxable income to the BFP.

B. What the BFP collects under RA 9514 (non-exhaustive, by function)

Plan review / design stage: Fire Safety Evaluation Clearance (FSEC) for building plans and fire protection system designs.
Pre-occupation / occupancy stage: Fire Safety Inspection Certificate (FSIC) for occupancy permits and for business permit issuance/renewal.
Hazardous materials & special hazards: Clearances and fees for storage/handling/use of flammable liquids/gases and other hazardous/combustible materials.
System installations & tests: Fees tied to installation, testing, and commissioning of fire alarms, sprinklers, standpipes, hydrants, foam systems, kitchen hoods, etc.
Enforcement: Fines, penalties, and surcharges for violations, abatement orders, and non-compliance.
Special services: Fees (where authorized) for standby firefighting teams, witnessed tests, fire drill evaluation, certification copies, and similar services.

These are all Fire Code-based collections; they are not VAT-able and not subject to local business taxes.

C. The Fire Code Fund (where the money goes)

Earmarking. All Fire Code collections accrue to a special fund dedicated to BFP purposes (e.g., modernization, equipment, facilities, operations, training, prevention campaigns).
Sharing/Allocation. The statute and IRR provide a fixed sharing formula—a defined portion goes to the BFP and a portion accrues to the LGU where collected as an incentive/support for local fire safety programs. (Practitioners commonly refer to an LGU share and a larger BFP share; check the latest internal circulars/IRR tables for the exact percentage distribution applicable to your period.)
Budgetary treatment. Because these are earmarked regulatory receipts, they are not treated as tax revenues of the LGU and are not subject to local tax overlays.

D. Tax treatment: what is (and isn’t) imposed on BFP fees

Value-Added Tax (VAT).
- Not applicable. BFP is not selling services in commerce; it is exercising police power. No output VAT; payors should not be charged VAT on top of Fire Code fees.
- Corollary: Payors cannot claim input VAT from these payments (there is none).
Income tax / percentage taxes (to BFP).
- Not applicable. Collections are governmental regulatory receipts, not taxable income or gross receipts from business.
Local taxes & charges (to BFP or on the collections).
- Not applicable. LGUs cannot tax the National Government or impose charges on BFP’s exercise of its regulatory function or on the collections themselves.
- LGUs also cannot duplicate Fire Code fees by creating similar “fire” fees for the same regulatory steps—this is preempted by RA 9514.
Documentary Stamp Tax (DST).
- Fire safety certificates and clearances are regulatory instruments. They are not among the DST-taxable instruments associated with commercial/financial transactions (e.g., debt instruments, insurance policies, leases, mortgages). As such, DST does not apply to the mere issuance of an FSEC/FSIC or analogous Fire Code permits. (If a separate, DST-taxable commercial instrument is executed between private parties, that’s different and unrelated to BFP permits.)
Withholding taxes (EWT/CWT).
- No withholding is required when paying Fire Code fees to the BFP; these are payments to the government for regulatory compliance, not income payments to a taxable supplier. Do not issue BIR Form 2307 to the BFP for such payments.
Customs duties & taxes on BFP acquisitions.
- The Fire Code Fund supports acquisition of firefighting equipment and related items for BFP. Statutory and IRR provisions recognize facilitated or preferential tax/duty treatment for such government procurements to enable modernization objectives. (Always match the procurement and customs rules in force at the time of import/purchase to confirm any specific exemptions or zero-rating applicable to a given transaction.)

E. Treatment for businesses and organizations (accounting & compliance)

Expense recognition. Payments to the BFP for FSEC/FSIC, hazardous materials clearances, etc. are deductible business expenses as regulatory fees (commonly classified under “Taxes and Licenses” or “Permits”) if they are ordinary, necessary, and directly connected with operations.
No input tax. Do not book input VAT; BFP receipts are non-VAT official receipts.
No withholding. Pay the assessed fees in full; do not withhold.
Documentation. Keep the BFP Order of Payment, Official Receipt, and the issued Clearance/Certificate. These support the deduction and your business/occupancy licensing.

Special sectors & edge cases

PEZA/BOI-registered enterprises and ecozone locators. Incentives typically cover taxes and duties, often on local taxes; they do not exempt enterprises from Fire Code compliance or BFP regulatory fees. FSIC/FSEC still apply.
Government projects/offices. Fire Code compliance applies to public buildings too. Where national-to-national budget transfers are needed, agencies usually settle fees through government disbursement channels rather than commercial invoicing—still no VAT and no withholding on the BFP side.
Condominiums, malls, complex developments. Responsibility to secure FSEC/FSIC may be split (e.g., shell vs. fit-out). Coordinate early to avoid duplicate submissions and to align who pays which Fire Code fees.

F. LGU coordination and common pitfalls

Duplicate or “mirror” LGU fees.
- If an LGU attempts to collect a separate “fire clearance fee” for the same regulatory step already covered by RA 9514, that overlaps and is generally ultra vires (beyond their authority). Politely cite RA 9514 and request alignment with the BFP.
VAT mistakenly added by a cashier.
- Ask for correction; BFP receipts should not reflect VAT for Fire Code fees. The BFP’s official receipt should indicate the Fire Code fee only.
“2307 please?”
- Not applicable. Payments to BFP are not subject to expanded/creditable withholding; no 2307 should be issued.
Timing & validity.
- FSIC for business permits typically aligns with the annual LGU business permitting cycle; FSIC for occupancy is associated with the building’s occupancy authorization and usually remains valid until there is a use change, alteration, or as otherwise required by regulations. Always check your local BFP guidance for renewal triggers.

G. Enforcement & consequences of non-payment/non-compliance

The BFP may deny or withhold certificates, recommend non-issuance of occupancy/business permits, assess fines/penalties, and—where warranted—order abatement/closure or file cases for Fire Code violations.
Payment of the proper Fire Code fees is integral to compliance; paying a substitute LGU fee will not cure the lack of BFP clearance.

H. Practical checklist (for CFOs, compliance officers, and project managers)

Before design/permit filing: Budget for FSEC and other plan-stage fees.
Before occupancy/business opening/renewal: Budget for FSIC.
If handling hazardous materials: Secure the appropriate Fire Code clearance and account for recurring inspections.
Accounting treatment:
- Book as Taxes & Licenses/Permits (deductible).
- No VAT in / no VAT out; no withholding.
Documentation: Keep Order of Payment, OR, and FSIC/FSEC on file.
Watch for duplication: Decline any duplicate LGU “fire”-labeled fees that mirror RA 9514 exactions.
Government vendors: If you supply BFP, different rules apply (e.g., government 5% final VAT withholding on their payments to you). That is unrelated to your payments to BFP.

I. Frequently asked questions

1) Are Fire Code fees “taxes”? No. They are regulatory fees under police power—not revenue-raising taxes.

2) Are BFP receipts VAT-able or subject to percentage taxes? No. No VAT is added, and businesses cannot claim input VAT from them.

3) Do I issue a BIR Form 2307 to BFP? No. Payments to BFP are not subject to withholding.

4) Can my city still charge its own “fire inspection fee”? Not for the same regulatory service already covered by the Fire Code. RA 9514 preempts duplicate LGU charges in that space.

5) Are my payments deductible? Yes, typically as ordinary and necessary regulatory fees (often booked under Taxes & Licenses/Permits), assuming they relate to your trade, business, or profession.

6) Do ecozone or investment incentive registrations exempt me from BFP fees? No. Incentives generally do not waive Fire Code compliance or fees.

J. Final notes and good practices

Treat BFP fees as a compliance cost, not a taxable/commercial purchase.
Maintain a clean paper trail—Order of Payment → Official Receipt → Certificate.
Coordinate early with BFP and the LGU to sequence Fire Code clearances alongside building and business permitting.
For unusual fact patterns (e.g., multi-tower phased occupancy, complex hazardous processes, or mixed-use campuses), get pre-filing guidance from your local BFP office to avoid rework.

This article provides general information on the tax treatment of BFP-collected fees under RA 9514 and related principles. It is not legal advice. For project-specific or dispute scenarios, consult counsel or your BFP/LGU desk officer and review the latest IRR circulars in force for your locality and period.