Bureau of Local Government Finance Opinion

August 21, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned to the Officer-In-Charge, City Assessor's Office, City of Manila, her within 2nd Indorsement dated March 20, 2000, relative to the letter dated February 14, 2000 of Mr. Manny Palad, representing Mervin Realty Corporation (MRC), requesting investigation and recomputation of the 1999 and 2000 real property tax payments on its newly constructed building and other improvements, and consequently questioning the real property tax rates applied on the subject properties. It appears that the subject property was assessed by that Office in March 1995 as commercial with an assessed value of P11,963,810 effective 1996 under TD No. B-079-02304. In May of the same year, however, the same property was reclassified from commercial to residential/commercial based on its actual use under TD No. B-079-02313 with an assessed value of P6,350,480 for residential and P939,480 for commercial. During the 1997 General Revision of Real Property Assessments in the City of Manila, the subject property (commercial portion) was again revised under TD No. C-096-00042 and, therefore TD No. C-096-00514 was issued revising the whole portion of the property as residential/commercial cancelling TD No C-096-00042. AEcIaH The In-Charge of Office, City Treasurer's Office, that city, informed in her letter dated March 2, 2000, that "for the portion classified as commercial, the rate of levy was also 1% or 50% of 2% being imposed on the newly constructed building and other improvements. Considering that the rates applied to both properties are the same, the person who computed the RPT bill simply added the assessed values of both residential and commercial properties to get the 1% basic tax and 1% additional tax (SEF)." Mr. Palad, however, claims that in applying Section 69 of Ordinance No. 7794, otherwise known as the Revenue Code of the City of Manila, the rates to be applied in computing the realty tax due on their property which is classified as residential/commercial should be .75% for residential (1/2 of 1.5%) and 1.0% for commercial (1/2 of 2.0%). Section 69 of Ordinance No. 7794 provides as follows: "Section 69. Imposition of the Basic Real Property Tax . . . . "Class of Property Rates of Levy Residential 1.5% Commercial 2.0% Industrial 2.0% Special 2.0% "Provided, however, that in the case of a residential real property actually and exclusively used as residence by the owner himself the rate of the basic real property tax shall be reduced to one percent (1%) of the assessed value; provided, further, that newly constructed buildings and other improvements including machineries shall be taxed at one-half of the rate prescribed in this section for a period of five (5) years from the date of completion or acquisition; . . ." In their Report dated July 13, 2000, the representatives of this Bureau who conducted the ocular inspection, submitted the following findings/observations: "1. Per ocular inspection conducted, the subject property was found to be a five (5) storey building being actually used as follows: "Ground Floor (1) PAG-IBIG Office; (2) Dormitory; (3) Canteen; (4) Driveway; and (5) Parking Area charging P20.00 for both tenants and guests. HDIATS "2nd Floor PAG-IBIG Office occupies the entire floor. "3rd Floor Rooms 307, 308, 309, 310, 311, 312, 314 and 316, are all condominium units; and the remaining portion is being occupied by the Claims and Marketing Division of PAG-IBIG. "4th Floor Room 402 is a Dental Clinic of a certain Dr. Hilda dela Rosa, and the remaining rooms are all condominium units with one (1) fully-furnished unit. "5th Floor The entire floor houses fourteen (14) condominium units including three (3) fully-furnished units. "Rooftop serves as the residence of the owner. "2. Interview made with Mr. Mateo Mataverde, In-Charge of the said building reveals that Mervin charges the following rates, viz: Fully-furnished P10,000.00/mo. Not furnished P7,000.00/mo. Dormitory P2,880.00/mo. "3. The subject real property . . . was assessed by the City Assessor's Office of Manila as follows: T.D. No. Market Value Assessed Value Effectivity B-019-02304 (New) P14,954,760.00 P11,960,810.00 1996 B-079-02313 P7,938,100.00 P6,350,480.00 1996 B-079-02313 P1,174,560.00 P939,480.00 1996 "4. The larger portion of the same (ground floor, 2nd and 3rd floors) is being utilized as commercial and the remaining portion as residential; and "5. The subject building is included in the Group of Commercial Buildings listed under Section 38 of Local Assessment Regulations No. (LAR) 1-92 of the Department of Finance." EADSIa Section 15(b) of Local Assessment Regulations No. 1-92 dated October 6, 1992 of the Department of Finance, provide as follows: "Section 15. Rules for assessment of Buildings and other improvements " "xxx xxx xxx "b. A building used both of residential and commercial or industrial purposes shall be classified and valued in accordance with the schedule of base unit construction cost and shall be assessed on the basis of the predominant use of the building," (Emphasis supplied) Clearly, three (3) or more storey buildings, which are used both for residential, commercial and/or industrial purposes shall be valued and assessed on the basis of its predominant use. In cases, however, where the building is equally used for residential, commercial or industrial, the predominant use of the surrounding properties shall govern its classification. Accordingly, the subject five (5) storey building declared in the name of Mervin Realty Corporation, should be classified and assessed entirely as commercial. AaHcIT Relatedly, being a newly declared commercial building during the 1995 revision of real property assessments, the applicable rate to be applied on the entire property should be 1.0% for the basic real property tax as provided under Section 69 of Ordinance No. 7794 of that city; and another 1% for the Special Education Fund (SEF). The Officer-in-Charge, City Assessor's Office, is hereby instructed to rectify all assessment records of the subject property in accordance hereof. Likewise, the City Treasurer should be advised of the corrections for his immediate appropriate action. Report of action taken hereon within ten (10) days from receipt hereof is requested. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge