Bureau of Local Government Finance Opinion

July 25, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Ricardo L. Castro City Treasurer Marikina City Sir : This has reference to your letter dated July 18, 2012, seeking assistance from the Bureau through the issuance of necessary guideline on the grant of tax credit and the proper and effective implementation thereof. The request was brought about when the Bureau rendered an opinion regarding the propriety of the act made by the former assessor of that city wherein the relocation houses of beneficiaries were inappropriately assessed as taxable. In the said opinion, that office was instructed to transfer the subject properties from taxable roll to exempt roll of real properties effective the date when the erroneous assessments were made. As a result of which that office is anticipating the influx of taxpayers affected to file their claims for tax refund or tax credit, thus this query: "In granting the claims, can we possibly apply the tax credit to their other obligations payable to the city government such as unpaid garbage fees if the taxpayer has no other tax obligation to the city except the aforementioned garbage fee. " Black's Law Dictionary, defined tax credit as follows: "An amount subtracted from an individual's or entity's tax liability to arrive at the total tax liability. A tax credit reduces the taxpayer's liability . . ., compared to a deduction which reduces taxable income upon which the tax liability is calculated. A credit differs from deduction to the extent that the former is subtracted from the tax while the latter is subtracted from income before the tax is computed." Further, reference should be made to Section 253 of the Local Government Code of 1991, which states that: ISaTCD "SEC. 253. Repayment of Excessive Collections. When an assessment of basic real property tax, or any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment. The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60) days from receipt thereof. In case the claim for tax refund or credit is denied, the taxpayer may avail of the remedies as provided in Chapter 3, Title II, Book II of this Code." (Underscoring ours) In relation with the aforesaid provision, reference should likewise be made to Section 252 of the Local Government Code of 1991 (R.A. No. 7160) as well as Article 286 of its Implementing Rules and Regulations (IRR), pertinent portion of which reads: "SEC. 252. Payment under Protest. (a) . . . (c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax liability. xxx xxx xxx" "Article 286. Claim for refund or tax credit. . . . The tax credit granted a taxpayer shall not be refundable in cash but shall only be applied to future tax obligations of the same taxpayer for the same business. ADaSET xxx xxx xxx" From the provisions aforequoted, it could be inferred that the tax refund or tax credit mentioned under Section 253 of the LGC are meant to be applied only on the taxpayer's future tax liability or obligation. Premises considered the possibility of applying the said tax credit to the other obligations of the taxpayers, such as their unpaid garbage fees in the absence of other tax obligation to the city is not possible as it contravenes the intent and spirit of the law. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director