Bureau of Local Government Finance Opinion

May 7, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the ICO-Regional Director for Local Government Finance, Department of Finance, Region III, Benigno Aquino Memorial Hall, Provincial Capitol Compound, Pampanga, her within preceding 1st Indorsement dated September 13, 2001, relative to the letter dated September 11, 2001 of the City Assessor of Angeles City, requesting opinion concerning the provision contained in the Memorandum of Agreement entered into by and between the City Government, Angeles City, and Mr. Deogracias Sanchez and Ms. Nazareth Viray, on June 18, 2000, over a parcel of land covered by TCT No. 50434, for socialized housing site. In her 1st Indorsement dated September 13, 2001, the ICO-Regional Director, Region III rendered the following opinions, to wit: "This office opined that the aforementioned Memorandum of Agreement can not serve as the legal basis for granting exemptions from payment of the real property tax as well as the condonation of any arrears on the said tax. It should be based on the approved Tax Ordinance/Code of Angeles City, wherein the provisions of the following sections of R.A. 7160, otherwise known as the Local Government Code, quoted hereunder were adopted." "xxx xxx xxx. "In view of the foregoing, this office further opined that the aforementioned real property is not covered by Sec. 234 and 276 of the Local Government Code. It should therefore be taxable and the arrears on the real property tax, if there is any, should be paid by the co-owners, respectively." It appears that the abovementioned request was prompted by the stipulation under Article II, 2.6 of the said Memorandum of Agreement which states: "The City shall: "2.6 Grant real property tax exemption for the above described property of co-owners including any arrears thereof". 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. Exemption 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) Charitable institutions, churches personages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings and improvements 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 for under R.A. No. 6938 and; "(e) Machinery and equipment 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 corporations 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. . . (b) 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. As regards the incentive on the non-payment of arrears as mentioned in Article II, 2.6 of the said Memorandum of Agreement, attention is invited to Section 276 of the same Code of 1991, which provides as follows: "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 (1) 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." Clearly, the abovequoted provision of the Code provides that the sanggunian concerned may only condone or reduce the real property tax including interest thereon, wholly or partially for the succeeding year or years in the city or municipality, upon recommendation of the Local Disaster Coordinating Committee. Such incentive, however, may also be promulgated only when there is a general failure of crops or substantial decrease in the agricultural or agri-based products, or when a calamity in any province, city, or municipality occurred. In this regard, that Office, thru the City Assessor concerned, is hereby advised to make the necessary representations with the Sanggunian Panlungsod thereat, regarding the legal implications of granting tax incentives, exemptions and reliefs on grounds not supported by any provision in the Local Government Code. In view thereof, it is therefore clear that the real property tax exemption extended to the particular subject land co-owned by Mr. Deogracias Sanchez and Ms. Nazareth Viray, under the said Memorandum of Agreement, is not in accordance with the provisions of the said Code which view is, in effect, similar to that expressed by the abovementioned ICO-Regional Director of this Bureau. cDCaTS Be guided accordingly. (SGD.) JUANITA D. AMATONG Undersecretary and Officer-in-Charge, BLGF