Bureau of Local Government Finance Opinion

February 11, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned, thru the Provincial Assessor, Iba Zambales, to the Municipal Assessor, said municipality, his within letter dated October 12, 2001 requesting clarification concerning the classification to be applied on the assessment of buildings particularly apartments and boarding houses. It appears that the abovementioned letter was prompted by the provision of Section 38 of Assessment Regulations No. 1-92 wherein the said apartments and boarding houses are not among those mentioned therein for purposes of proper classification. It is worthwhile to note herein that an apartment house is defined as a building arranged in several suites of connecting rooms, each suite designed for independent housekeeping, but with certain mechanical conveniences, such as heat, light, or elevator services, in common to all families occupying the building (Black Law Dictionary width Pronunciation, Fifth Edition). On the other hand, a boarding house is a house furnishing meals and sometimes lodging for pay (The Grosset Webster Dictionary). In this connection, attention is invited to Section 198 (b) and (c) of R. A. No. 7160 otherwise known as the Local Government Code of 1991 which reads as follows: "Section 198. Fundamental Principles . The appraisal, assessment, levy and collection of real property tax shall be guided by the following fundamental principles: "xxx xxx xxx "(b) Real property shall be classified for assessment purposes on the basis of its actual use;" "(c) Real property shall be assessed on the basis of a uniform classification within each local government unit;" The abovecited fundamental principles in real property tax assessment were further amplified under Section 217 of the same Code, which reads as follows: "Sec. 217. Actual Use of Real Property as Basis for Assessment . Real Property should be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it and whoever uses it." Actual use is also defined under Section 199(b) of the same code as "the purpose for which the property is principally or predominantly utilized by the person in possession thereof." Moreover, be reminded that when PD 464, (otherwise known as the Real Property Tax Code, as amended), was still in force and in effect, that is, before the promulgation of R. A. No. 7160, the Department of Finance, in clarifying the principle of "Actual Use" as basis for assessment of real property, has issued Department Order No. 3-74 dated January 31, 1974, copy attached. The pertinent portion thereof reads, to wit: "xxx xxx xxx "3. A building actually used for residential purposes by persons other than the owner on rental basis shall be classified and assessed as residential based on its current level of assessment . . .; "xxx xxx xxx." Further, in G.R. No. L-29770 City of Bugaboo vs. Fernando S. Busnego , the Supreme Court clarified that: "Where use is the test, the ownership is immaterial." (Emphasis supplied) In view of the foregoing, and considering that residential apartments and boarding houses are used by the occupants/inhabitants as residence, this Bureau maintains that the classification of the subject buildings should be residential. Be guided accordingly. (SGD.) JUANITA D. AMATONG Undersecretary and Officer-in-Charge, BLGF