Bureau of Local Government Finance Opinion

September 8, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the Municipal Treasurer of San Antonio, Quezon, the within letter dated September 3, 2003 of Mr. Eduardo B. Ledesma, President, Roxas Agricultural Development Corporation (RADC for brevity), Pasay Road, Makati City, requesting confirmation of his opinion that lands covered by the Comprehensive Agrarian Reform Program (CARP) are deemed exempt from payment of interests or penalties. Representation is being made that RADC with properties located at Bulihan, San Antonio, Quezon, consisting of Three Hundred (300) hectares planted with coconuts and allegedly were distributed to its tenants in year 1991, under the Comprehensive Agrarian Reform Program (CARP) of the government (R.A. No. 6657), had been allegedly assessed by the Municipal Treasurer of San Antonio, Quezon with interests and penalties on top of the delinquent Basic Tax and Special Education Fund (SEF) Tax. Please be informed in this regard that Local Finance Circular No. 2-94, dated March 7, 1994 was issued by the Bureau of Local Government Finance (BLGF), to provide guidelines to local Treasurers on the issuance of Statement of Tax Delinquencies for lands covered by the Comprehensive Agrarian Reform Program (CARP). Pertinent portion of Local Finance Circular No. 2-94 is quoted hereunder: "Section 66. Exemption from Taxes and Fees of Land Transfers . Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof: Provided, That all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled ." (Emphasis supplied) "Clearly, only delinquencies in real property taxes are deductible from the compensation due the landowners; the penalties or interests excluded. All lands, therefore, which are covered by the Comprehensive Agrarian Reform Program (CARP) of the government that became delinquent upon the promulgation of the CARL on June 10, 1988, are in effect exempt from, or not subject to penalties or interests accruing thereto. However, such penalties or interests which have accrued prior to the effectivity of the CARL shall remain to be collected and/or deducted from the compensation due the landowners concerned." Evidently, only delinquencies in real property tax are deductible from the compensation due the landowners, covered by the Comprehensive Agrarian Reform Program (CARP) of the government, excluding penalties of interests. Simply stated, all lands covered by the CARP that became delinquent upon the promulgation of CARL on June 10, 1988, are not subject to penalties or interests accruing thereto. Interests or penalties, however, which have accrued prior to the promulgation of CARL in 1988, shall remain to be collected and/or deducted from the compensation due the landowners concerned. DTaAHS Be guided accordingly. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director