Bureau of Local Government Finance Opinion

November 18, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The Regional Director for Local Government Finance Department of Finance-Region IV People's Mansion Compound Batangas City M a d a m : This refers to your letter dated September 11, 2002, requesting clarification, for purposes of uniformity, on the taxability of air-conditioning system, both the window and cabinet types, installed at commercial establishments such as banks, theatres, etc. located in the different municipalities in the province of Batangas. Representation is being made that the Provincial Assessor of said province assessed air conditioning system as taxable, since allegedly they are considered as real properties once the units are attached to the building or land, including those that are used in residential buildings. That office, however, believes that these air-conditioning units, whether they are window type, cabinet type, split type or centralized type are not considered real property subject to real property tax for as long as they are not actually, directly and exclusively used to meet the needs of a particular industry, business or activity. DcHaET In this regard, attention is invited to the 2nd Indorsement dated January 30, 2001, as reiterated under the 2nd Indorsement dated April 25, 2001, both of this Bureau (both copies enclosed), treating on a similar subject matter, the pertinent portion of which provides as follows: "Other equipment/machines, however, which are not essentially being used directly and exclusively in the banking business like air-conditioning units (window and packaged type), small generating sets and other mechanical devices of the same nature which are considered as falling under the category of machinery of general purpose use should not be considered real properties in line with the clarification under Article 290(o) of the IRR of R.A. No. 7160." In view thereof, this Bureau agrees with the opinion of that Office that air-conditioning units, which are classified as machinery of general purpose use, are not considered real property as contemplated under Sec. 199(o) of the Local Government Code of 1991 (R.A. No. 7160) as clarified under Article 290(o) of its IRR. We trust that this clarifies matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director