MERCANTILE AND TAXATION LAWS > III. TRANSPORTATION

In the Philippine context, the transportation sector is heavily regulated by a variety of laws that intersect with both mercantile and taxation concerns. Below is a comprehensive outline of Philippine laws and regulations governing transportation and associated taxation. This includes a look into the governing statutes, regulations, liabilities, and tax implications for the transportation industry in the Philippines.

I. LEGAL FRAMEWORK FOR TRANSPORTATION IN THE PHILIPPINES

The transportation sector in the Philippines is regulated by several key laws and government agencies. Major statutes include the Civil Code of the Philippines, the Revised Penal Code, the Public Service Act, and the Maritime Industry Authority (MARINA) regulations for maritime concerns. For air transport, the Civil Aviation Authority Act of 2008 (Republic Act No. 9497) plays a central role, while land transportation is governed by the Land Transportation and Traffic Code (Republic Act No. 4136) and regulations issued by the Land Transportation Office (LTO) and Land Transportation Franchising and Regulatory Board (LTFRB).

Key Regulatory Agencies:

Land Transportation Office (LTO) – Registration, licensing, and regulation of motor vehicles.
Land Transportation Franchising and Regulatory Board (LTFRB) – Issues franchises to public utility vehicles.
Maritime Industry Authority (MARINA) – Regulates maritime industry standards and operations.
Civil Aviation Authority of the Philippines (CAAP) – Oversees the regulation of air transport, including safety and licensing.
Bureau of Customs (BOC) – Oversees import duties on vehicles and goods for transportation.
Department of Transportation (DOTr) – General oversight of the transportation sector.

II. CONTRACTS AND LIABILITIES IN TRANSPORTATION

The transportation industry is governed by mercantile law principles and certain rules of civil law regarding contracts. The contract of carriage is fundamental, as it creates the relationship between the carrier (the transportation provider) and the passenger or shipper.

1. Contract of Carriage

Defined under Article 1732 of the Civil Code, it includes all carriers, whether by land, water, or air, who offer services to the public.
The carrier’s obligation is to deliver passengers and goods safely, efficiently, and within a reasonable time.

2. Common Carrier Liability

Common carriers are mandated under Article 1756 of the Civil Code to be liable for any damage or loss to goods transported, except in cases where damage is due to force majeure, inherent defect in the goods, or the act of the shipper.
Liability for delay, under Article 1764, includes damages for mental anguish or inconvenience, especially when there is gross negligence.

3. Passenger Rights and Safety

Carriers must exercise extraordinary diligence in ensuring the safety of passengers. This extends to all forms of transportation, from public buses to airplanes.
The Public Service Act grants passengers the right to file complaints for poor service, and Republic Act No. 7394 (Consumer Act of the Philippines) provides further protections.

4. Maritime and Aviation-Specific Liabilities

MARINA regulates standards for passenger safety, requiring mandatory insurance coverage for passengers on registered vessels.
The Montreal Convention governs airline liability in cases of international flights for injury, delay, or damage to baggage, which the Philippines has ratified.

III. TAXATION OF TRANSPORTATION SERVICES

In the Philippines, various taxes apply to transportation services, depending on the nature of the service and the tax category it falls under. These include value-added tax (VAT), income tax, excise tax, motor vehicle tax, and specific taxes on fuel.

1. Value-Added Tax (VAT)

Under the National Internal Revenue Code (NIRC), transportation services provided by international carriers are generally exempt from VAT. However, domestic carriers are subject to VAT at 12%.
The Bureau of Internal Revenue (BIR) issues rules for VAT compliance specific to the transportation sector, including exemptions for certain types of services (e.g., passenger transport via jeepneys and tricycles).

2. Common Carrier’s Tax

This tax applies to domestic carriers, which includes land-based transportation (buses, taxis, jeepneys), and is imposed on the gross receipts from their operations.
Air and sea carriers are typically subject to VAT in lieu of a common carrier’s tax, following amendments to the NIRC.

3. Excise Tax on Fuel

Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, imposes excise taxes on fuel, which indirectly affects transportation operators. Increased costs due to excise taxes may be passed down to consumers through increased fares.

4. Income Tax for Transport Operators

Transportation businesses, whether corporate or sole proprietors, are subject to income tax under the general provisions of the NIRC.
Carriers can claim operating expenses (such as maintenance and fuel) as deductions, provided these expenses are necessary and substantiated by official receipts.

IV. PUBLIC UTILITY VEHICLE FRANCHISES AND TAX INCENTIVES

Public utility vehicles (PUVs) in the Philippines, including buses, taxis, and jeepneys, require franchises from the LTFRB to operate legally. Certain tax incentives apply to PUVs under government programs aimed at modernizing transportation, such as the Public Utility Vehicle Modernization Program (PUVMP).

Franchise Requirements and Fees
- Franchise holders must comply with LTFRB regulations, including fees for franchise applications and renewals. Additionally, franchisees are expected to meet safety, emission, and operational standards.
Tax Incentives for Modernization
- Under the TRAIN Law, operators who participate in the PUVMP receive tax incentives, including VAT exemptions for the purchase of environmentally friendly vehicles (e.g., electric or hybrid).

V. IMPORTATION OF TRANSPORT VEHICLES AND RELATED TAXES

Importation of vehicles into the Philippines is subject to customs duties, VAT, and excise taxes. The Bureau of Customs (BOC) oversees these duties, while the BIR enforces the excise tax.

Customs Duties and VAT
- Imported vehicles attract customs duties based on the vehicle type, origin, and applicable trade agreements.
- In addition, a 12% VAT is levied on the total landed cost, which includes the customs duty.
Excise Tax on Motor Vehicles
- Motor vehicles are subject to excise tax under Section 149 of the NIRC. Rates vary depending on the net selling price, and higher rates apply to luxury vehicles.

VI. CURRENT ISSUES AND DEVELOPMENTS IN TRANSPORTATION LAW

Recent developments in Philippine transportation law focus on modernizing infrastructure, reducing emissions, and enhancing passenger safety. Some initiatives include:

Enhanced Regulations on PUVs – Stricter requirements on emissions, safety, and the franchising process, in alignment with the Clean Air Act and environmental standards.
Incentives for Eco-Friendly Vehicles – Tax exemptions for electric and hybrid vehicles as part of the Philippine government’s Electric Vehicle Industry Development Act (Republic Act No. 11697), aiming to reduce carbon emissions in the transport sector.
Data Privacy and Passenger Protection – With the increasing use of ride-sharing and app-based transport, regulatory efforts focus on protecting passenger data and ensuring transparency in fare computation.

VII. SUMMARY

The transportation laws in the Philippines are aimed at ensuring safe, efficient, and fair operation across all modes of transport while promoting economic growth through regulatory compliance and fiscal policies. Carriers must balance compliance with these regulations with operational profitability. As the government implements modernization programs, tax incentives are becoming a crucial tool for encouraging industry adherence to higher safety and environmental standards.

Ensuring full compliance with both the mercantile and taxation requirements is essential for legal, safe, and efficient transport operations in the Philippines.