Bureau of Local Government Finance Opinion

August 12, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned to the Municipal Treasurer, Valenzuela, Metro Manila. This refers to her letter dated April 1, 1997 requesting opinion on whether that Office had complied with the application of the 20% and 10% discounts on advanced and prompt payments of real property taxes stated in Section 37 of Ordinance No. 93-78 of that municipality. It is noted that under Section 37 of the Tax Ordinance No. 93-78 of that municipality, a taxpayer shall be entitled to a discount of twenty percent (20%) of the amount of the tax due and payable if the basic real property tax and the additional tax accruing to the Special Education Fund (SEF) are paid in advance for the whole year on any year during the period from the first day of January to the thirty first (31st) day of March and a discount of ten percent (10%) of the amount of the tax due and payable if the same taxes are paid on time in accordance with the prescribed schedule of payments as provided for in Section 50 of the Ordinance. In this connection, attention is invited to the provisions of Article 342 of the Implementing Rules and Regulations (IRR), implementing Section 251 of the Local Government Code of 1991 (RA 7160), and Sections 246 and 250 of the same Code, quoted hereunder: "ART. 342. Tax Discount for Advanced and Prompt Payment . If the basic real property tax and the additional tax accruing to SEF are paid on time or in advance in accordance with the prescribed schedule of payment as provided in Article 341, the sanggunian concerned may grant a discount not exceeding twenty percent (20%) of the annual tax due. For purposes of this Rule, prompt payments may be given a discount of ten percent (10%) while advanced payments may be entitled to the maximum discount of twenty percent (20%)." "SEC. 246. Date of Accrual of Tax . The real property tax for any year shall accrue on the first day of January and from that date it shall constitute a lien on the property which shall be superior to any other lien, mortgage, or encumbrance of any kind whatsoever, and shall be extinguished only upon the payment of the delinquent tax." ITESAc "SEC. 250. Payment of Real Property Taxes in Installments . The owner of the real property or the person having legal interest therein may pay the basic real property tax and the additional tax for Special Education Fund (SEF) due thereon without interest in four (4) equal installments; the first installment to be due and payable on or before the Thirty-first (31st) of March; the second installment, on or before the Thirtieth (30th) of June; the third installment, on or before the Thirtieth (30th) of September; and the last installment on or before the Thirty first (31st) of December, except the special levy the payment of which shall be governed by ordinance of the sanggunian concerned. "The date for the payment of any other tax imposed under this Title without interest shall be prescribed by the sanggunian concerned. "Payments of real property taxes shall first be applied to prior years delinquencies, interests, and penalties, if any, and only after said delinquencies are settled may tax payments be credited for the current period." On the basis of the abovequoted provisions of the IRR and the Code, it is apparent that the real property tax accrues on the first day of January. However, the said tax may also be paid without interest (penalty) in four (4) equal installments, each installment becoming due and payable on or before the end of the quarter. Therefore, any installment that is paid within the quarter may be considered as a prompt payment and shall be entitled to a ten percent (10%) discount. On the other hand, an installment paid in advance or before the beginning of the quarter to which it pertains may be entitled to the 20% discount. Hence, for real property taxes paid in full on or before the end of the first quarter, which is March 31st, one fourth (1/4) of the whole amount shall be considered as prompt payment and entitled to a 10% discount, while three fourths (3/4) thereof becomes an advanced payment for the remaining three quarters and, therefore, entitled to the 20% discount. Furthermore, in granting discounts, the basic real property tax and the SEF tax should be treated separately and independent of each other. With respect to the provisions of subject Tax Ordinance 93-78, it is believed that on the basis of experience, it is very seldom that property owners pay one year in advance their tax obligations. Hence, only a few will be able to avail of a 20% discount in that municipality. That Office, therefore, is hereby advised to inform the Municipal Mayor and the Sangguniang Bayan hereof in order that said Ordinance may be amended accordingly. It is hoped that this will help clarify matters. (SGD.) LORINDA M. CARLOS Executive Director