Introduction

Cemeteries and memorial parks serve essential social and cultural functions in the Philippines, providing spaces for burial, cremation, and remembrance. However, as business entities or properties, they are subject to a range of taxation under Philippine law. This encompasses national taxes administered by the Bureau of Internal Revenue (BIR) and local taxes imposed by local government units (LGUs). The tax treatment varies depending on whether the cemetery or memorial park is operated for profit, as a non-profit entity, or under special regimes. This article comprehensively examines the applicable taxes, exemptions, compliance requirements, and related legal considerations within the Philippine context. It draws from key statutes such as the National Internal Revenue Code (NIRC) of 1997, as amended, the Local Government Code (LGC) of 1991, and relevant jurisprudence to provide a thorough guide for operators, investors, and legal practitioners.

Legal Framework Governing Taxation of Cemeteries and Memorial Parks

The taxation of cemeteries and memorial parks is primarily governed by the NIRC (Republic Act No. 8424, as amended by Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, and subsequent amendments). Under the NIRC, these entities are treated as real estate developments or service providers, subject to income, value-added, excise, and documentary stamp taxes where applicable.

The LGC (Republic Act No. 7160) empowers LGUs to impose local business taxes, real property taxes, and fees on cemeteries and memorial parks operating within their jurisdictions. Additionally, special laws like Republic Act No. 7916 (Philippine Economic Zone Authority Act) may offer incentives if the park qualifies as an ecozone or tourism enterprise.

Cemeteries are classified under the Philippine Standard Industrial Classification (PSIC) as part of Division 96 (Other Personal Service Activities), including funeral and related activities. Memorial parks, often involving land development, fall under real estate activities. Non-profit cemeteries, such as those operated by religious organizations or local governments, may qualify for exemptions under Section 30 of the NIRC or Article 133 of the LGC.

The Supreme Court has interpreted these laws in cases emphasizing that taxation must be uniform and equitable, with exemptions strictly construed against the taxpayer (e.g., Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 124043, 1998).

Income Taxation

Corporate Income Tax (CIT)

For-profit cemeteries and memorial parks organized as corporations are subject to CIT on their taxable income. Under the CREATE Act, the standard CIT rate is 25% for domestic corporations and resident foreign corporations, reduced to 20% for those with net taxable income not exceeding PHP 5 million and total assets not exceeding PHP 100 million. Income from sales of burial lots, interment services, cremation, and maintenance fees constitutes gross income.

Installment sales of lots are taxed under Section 49 of the NIRC, allowing deferred recognition if payments in the year of sale do not exceed 25% of the selling price. Perpetual care funds, set aside for maintenance, are generally not taxable if properly segregated and used exclusively for that purpose, as per BIR rulings.

Minimum Corporate Income Tax (MCIT)

Corporations in their first three years or those with zero or negative taxable income are subject to 1% MCIT on gross income (reduced from 2% pre-CREATE), ensuring a minimum tax payment.

Income Tax for Partnerships and Individuals

If operated as partnerships or sole proprietorships, income is taxed at the individual level using graduated rates from 0% to 35% under Section 24 of the NIRC, with deductions for business expenses like land development costs, salaries, and utilities.

Exemptions for Non-Profit Entities

Non-stock, non-profit cemeteries operated exclusively for religious, charitable, or educational purposes are exempt from income tax under Section 30(E) of the NIRC, provided no part of the net income inures to private individuals. This exemption requires BIR certification as a tax-exempt entity. Government-owned cemeteries, such as those managed by LGUs, are also exempt under Section 27(C) of the NIRC.

Value-Added Tax (VAT)

Sales of goods and services by cemeteries and memorial parks are generally subject to 12% VAT under Section 106 and 108 of the NIRC. This includes:

Sale of burial plots or niches.
Interment, cremation, and embalming services.
Lease of memorial spaces or facilities.

The VAT threshold is PHP 3 million in gross annual sales; below this, entities may opt for 3% percentage tax instead. Zero-rated VAT applies to exports of services, though rare in this sector. Input VAT on purchases (e.g., construction materials) can be credited against output VAT.

Exemptions include sales to senior citizens or persons with disabilities under Republic Act No. 9994 and Republic Act No. 10754, and non-profit cemeteries if their activities qualify as exempt transactions under Section 109.

Real Property Tax (RPT)

Under the LGC, cemeteries and memorial parks are subject to RPT on land, buildings, and improvements, assessed at fair market value by the local assessor. The tax rate varies by LGU but caps at 2% for cities and 1% for provinces/municipalities. Idle lands may incur an additional 5% special levy.

Exemptions apply to properties owned by the government, charitable institutions, churches, and non-profit cemeteries used exclusively for burial purposes (Section 234 of the LGC). However, if portions are used commercially (e.g., flower shops), those areas are taxable. The Supreme Court in Lung Center of the Philippines v. Quezon City (G.R. No. 144104, 2004) clarified that exemptions are limited to areas actually, directly, and exclusively used for exempt purposes.

Local Business Taxes and Fees

LGUs impose business taxes on gross receipts, typically 1-3% depending on the ordinance, classified as "other services" or "real estate dealers." Additional fees include mayor's permits, sanitary permits, and environmental fees for operations involving waste management.

Under Section 143 of the LGC, taxes on real estate developers apply to memorial parks developing land for sale. Non-profit entities may be exempt if operations are not commercial.

Other National Taxes

Documentary Stamp Tax (DST)

DST applies to deeds of sale for burial lots (PHP 15 per PHP 1,000 of consideration under Section 196 of the NIRC) and lease agreements for memorial spaces (Section 194).

Excise Tax

No specific excise tax applies to cemeteries, but if alcohol or tobacco is sold on premises (e.g., in wakes), standard excise rates under Sections 141-150 apply.

Estate and Donor's Tax

While not directly on the cemetery, transfers of burial rights may trigger donor's tax (6% under Section 98) if gifted, or inclusion in estate tax (6% under Section 84) upon death.

Withholding Taxes

Operators must withhold taxes on payments to suppliers (1-15% creditable withholding tax) and employees (withholding tax on compensation).

Tax Incentives and Special Regimes

Cemeteries in economic zones registered with the Philippine Economic Zone Authority (PEZA) may enjoy income tax holidays (4-7 years) followed by 5% gross income tax in lieu of all national and local taxes. Eco-friendly memorial parks may qualify for incentives under Republic Act No. 10771 (Green Jobs Act) or as tourism enterprises under Republic Act No. 9593.

Compliance and Penalties

Operators must register with the BIR for TIN, books of accounts, and invoicing. Annual income tax returns (BIR Form 1702), quarterly VAT returns (Form 2550Q), and local tax declarations are required. Non-compliance incurs penalties under Section 248-276 of the NIRC, including 25% surcharge, interest, and potential criminal liability for tax evasion.

Audits by the BIR may focus on perpetual care funds and expense deductions. LGUs conduct assessments for RPT, with appeals to the Local Board of Assessment Appeals.

Judicial Precedents and Case Studies

Exemption Scope: In Abra Valley College v. Aquino (G.R. No. L-39086, 1988), the Court ruled that commercial use of exempt property revokes exemptions, applicable to cemeteries with ancillary businesses.
VAT on Services: BIR Ruling No. 123-2019 clarified that cremation services are VATable unless performed by exempt entities.
RPT Disputes: City of Lapu-Lapu v. PEZA (G.R. No. 184203, 2010) affirmed incentives overriding local taxes for zoned entities.
Hypothetical based on trends: A for-profit memorial park challenged RPT on undeveloped land, but courts upheld the idle land levy, emphasizing public policy.

Practical Considerations and Advice

For Operators:

Secure tax-exempt status early if non-profit, with proper documentation.
Segregate funds and maintain records to support deductions and exemptions.
Engage tax consultants for compliance with amendments like CREATE.

For Investors:

Evaluate tax incentives in site selection, favoring ecozones.
Structure as corporations for limited liability and tax planning.

For LGUs and Regulators:

Ensure ordinances align with national laws to avoid ultra vires challenges.

Tax planning should consider evolving laws, such as potential digital services tax implications for online booking systems.

Conclusion

The taxation of cemeteries and memorial parks in the Philippines balances revenue generation with social considerations, imposing a mix of national and local taxes while offering exemptions for non-profit and incentivized operations. Understanding the NIRC, LGC, and related rulings is crucial for compliance and optimization. As societal needs evolve— with increasing demand for sustainable burial options—tax policies may adapt, underscoring the need for ongoing legal vigilance among stakeholders.