Bureau of Local Government Finance Opinion

October 21, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon . Carmelo F. Lazatin City Mayor Angeles City S i r : This refers to your letter dated August 22, 2002, in effect requesting opinion as to whether it would be possible or legal for the Angeles City government to grant real property tax exemptions on newly constructed buildings as an incentive to encourage investments particularly on real estates. In this connection, attention is invited to the 2nd Indorsement dated May 7, 2002, of this Bureau, copy enclosed, treating on a similar subject matter, which ruled in part, as follows: "It is worthwhile to note hereon that the authority to grant tax exemption privileges is thru an Ordinance provided under Title One Book II, Section 192, of R.A. No. 7160, otherwise known as the Local Government Code of 1991. This provision, however, pertains solely to Local Government Taxation and not Real Property Taxation which is found under Title Two of the same Book Two of the Code. The exemption from real property tax is specifically provided under Section 234 thereof, which is quoted hereunder: "SEC. 234. Exemptions from Real Property Tax . The following are exempted from payment of the real property tax: "(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; "(b) All charitable institutions, churches, parsonages or convents appurtenant thereto including mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements which are actually, directly and exclusively used for religious, charitable or educational purposes; "(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; "(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and "(e) Machinery and equipment exclusively used for pollution control and environmental protection. "Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporation are hereby withdrawn upon the effectivity of this Code." "It is also informed that the said Section 192 of the Local Government Code of 1991 was further explained under Article 282 of its Implementing Rules and Regulations (IRR) which reads as follows: 'ART. 282. Authority to Grant Tax Exemption Privileges. . . . . (Local sanggunians granting tax exemptions, tax incentives and tax reliefs may be guided by the following: '(1) The exemption or relief may be granted in cases of natural calamities, civil disturbances, general failure of crops or adverse economic conditions such as substantial decrease in the prices of agricultural or agri-based products,' "The aforecited provision of Section 192 of the Code, as implemented under Article 282 of the Implementing Rules and Regulations of the same Code, requires that the tax exemption or tax relief may be granted only in cases of natural calamities, civil disturbances, general failure of crops or adverse economic conditions such as substantial decrease in the prices of agricultural or agri-based products. More importantly, such grant of incentive should not be given to selected taxpayers only. "xxx xxx xxx. "In view thereof, it is therefore clear that the real property tax exemption extended to the particular subject land . . ., is not in accordance with the provisions of the said Code . . .." Similarly, therefore, and considering that the abovementioned real properties (newly constructed buildings), are not among those specifically mentioned under the abovequoted Section 234 of the said Code, this Bureau believes that granting exemption hereof will not be in accordance with the said provisions of law. In view hereof, attention is also invited to Section 276 of the same Code, which is quoted hereunder: "SEC. 276. Condonation or Reduction of Real Property Tax and Interest . In case of a general failure of crops or substantial decrease in the price of agricultural or agri-based products, or calamity in any province, city or municipality, the sanggunian concerned by, ordinance passed prior to the first (1st) day of January of any year and upon recommendation of the Local Disaster Coordinating Council , may condone or reduce, wholly or partially, the taxes and interest thereon for the succeeding year or years in the city or municipality affected by the calamity. (Emphasis supplied) Evidently, condonation or reduction of real property taxes and the interests due thereon, can be availed of upon the enactment of an Ordinance by the local sanggunians, together with the recommendation of the Local Disaster Coordinating Council of the locality when any of the following causes exist, to wit: 1. General failure of crops; 2. Substantial decrease in the price of agricultural or agri-based products; and 3. Calamitous event. In view hereof, and much as we would like to be of help to the City's undertaking, we regret that your abovementioned request cannot be favorably acted upon for lack of legal basis. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director