The Cebu City Treasurer's Office has granted the operator of Cebu City's new 400-room Radisson Blu Hotel Cebu a temporary permit valid for only 60 days after it declared a capital investment of only P5 million.
Cebu City Treasurer Ofelia Oliva said the permit issued to Hotel Specialist (Cebu) Inc. is valid only up to Nov. 23, 2010 and will be renewed after it submits documents proving it does not own the property and is just the operator of the newly opened Radisson Blu Hotel situated beside Shoe Mart City-Cebu at the north reclamation area.
She required Hotel Specialist to submit its lease contract with SM Investments Inc. (SMIC), the management contract with Radisson, receipts and purchase orders that would indicate that their capital investment is only P5 million.
Oliva found the amount “too small,†considering the hotel's size, with 400 rooms, several ballrooms and five-star amenities and services.
“The declared capital investment is too small. They are claiming that the owner of the property is SM Investment so we asked them to submit a copy of the lease contract. We also required copies of the purchase orders and receipts so we can peg the right amount of business taxes so for now, their permit is temporary†she said.
Since the declared capital investment is P5 million, the applicant paid only P26,097.50 in business tax, which represents 1/20 of one percent of the capital investment and other fees.
Oliva also compared the hotel to other five-star hotels in the city, which declared a capital investment of at least P210 million.
But SM City Cebu Manager Sherry Tuvilla explained that while Hotel Specialist operates the hotel, the land, building, machinery, equipment, furniture and fixtures of Radisson Blu are owned by SMIC, which also owns Hotel Specialist.
This is why Hotel Specialist did not declare these as their own capital investment in their application for a business permit, she said.
The investment for major purchases for the hotel's operation will be reflected in the business permit of SMIC, which will have a declared capital investment of P404 million.
Tuvilla, who spoke for SMIC and Hotel Specialist, said they are still applying for the permit and will pay some P202,000 in business tax for it.
“SMIC and Hotel Specialist are two separate entities. Hotel Specialist operates the hotel but everything is owned by SM Investments. Hotel Specialist enjoys a credit line with our suppliers that's why we don't have to put in so much capital,†she said.
Hotel Specialist's P5-million capital investment covers the salaries of Radisson's personnel and its minor purchases, she explained.
The Cebu City Tax Code defines capital investment as “the capital which a person puts in any undertaking, or which he contributes to the common stock of a partnership, corporation, or any juridical entity or association.â€
SM Prime Holdings Inc., another company under SMIC, is the owner of a 30-hectare lot worth P2.7 billion in Cebu City's South Road Properties. It plans to build the biggest mall in the Visayas and Mindanao area, as well as a convention center on their lot.
Tuvilla said SMIC has applied for a business permit, but the CTO put it on hold until they can submit the documents required of Hotel Specialist.
She assured that SMIC and Hotel Specialist are working on the requirements. They do not intend to mislead the city with their declarations, and they are not avoiding paying the right amount of taxes, she said.
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