Proper Implementation and Period of Collection of Socialized Housing Tax

June 6, 2017 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Rosette F. Laquian Acting City Treasurer San Juan City SUBJECT : Proper Implementation and Period of Collection of Socialized Housing Tax Dear Ms. Laquian : This refers to your request for opinion on the correct interpretation of the formula in computing the socialized housing tax (SHT) and the period for its implementation, pursuant to Republic Act (RA) No. 7279, otherwise known as the Urban Development and Housing Act (UDHA) of 1992. Representations are made that San Juan City has been collecting the SHT through the implementation of its City Ordinance stating that an additional one-half of one percent (1/2 of 1%) SHT shall be levied on the assessed value of landowners/developers in the City, in excess of One Hundred Fifty Thousand Pesos (Php150,000.00), which is in addition to the basic real property tax (RPT). It is further represented that the said City Ordinance makes no mention of the period of implementation of such tax; hence, the query on whether or not there are provisions or mandates as regards the difference in the imposition of SHT between San Juan City and Quezon City. In treating the matter, attention is invited to Local Finance Circular (LFC) No. 1-97, dated April 16, 1997, issued by Secretary of Finance, setting the guidelines for the implementation of Sections 7, 20 and 43 of RA No. 7279, otherwise known as the UDHA of 1992, and to supplement LFC No. 3-92 dated September 11, 1992, to wit: Section 6. Responsible Agencies and Guidelines in the Implementation of Section 43 . 6.1 All LGUs with identified urban area based on the National Urban Development and Housing Frameworks per Section 6 of the Act, shall inform the DILG, HUDCC and this Department of their intended action relative to Section 43 of said Act, which shall include such details as: (a) the commencement and termination of its implementation and imposition of the Socialized Housing Tax (SHT); (b) the projected generated income; (c) and the prospective projects to be funded by the tax. (emphasis supplied) However, the imposition of the additional one-half percent (0.5%) on the assessed value of all lands in urban areas in excess of fifty thousand pesos (P50,000.00) shall require the enactment of an ordinance by the sanggunian of the LGU concerned. 1. A province or city, or municipality within the Metropolitan Manila Area involved may impose an annual Social Housing Tax of one-half percent (0.5%) on the assessed value of all lands in urban areas in excess of fifty thousand pesos (P50,000.00) in addition to the basic and Special Education Fund (SEF) taxes which the said local government units (LGUs) are authorized to impose under Sections 232 and 235 of the Local Government Code of 1991 (R.A. 7160) . (emphasis supplied) All provinces and cities, and the municipalities within the Metropolitan Manila Area imposing the Social Housing Tax (SHT), shall have to enact their respective tax ordinances for this purpose . (emphasis supplied) 2. The proceeds of the SHT actually and directly collected by the city or municipal treasurers shall accrue to their respective General Funds, under a Special Account to be established for the purpose. However, proceeds of the SHT collected by the municipal treasurers, outside Metropolitan Manila Area shall be apportioned between the province and municipality concerned as determined and approved by the Sangguniang Panlalawigan on the basis of their respective urban development and housing programs. 3. The SHT shall accrue on the first day of January of the year following the commencement date of the program implementation and may be paid without interest in four (4) equal quarterly installments ; the first installment to be due and payable on or before the Thirty-first (31st) of March; the second installment, on or before the Thirtieth (30th) of June; and the third installment, on or before the Thirtieth (30th) of September; and the last installment on or before the Thirty-first (31st) of December, in line with the provisions of Section 250 of the Local Government Code of 1991. (emphasis supplied) The tax ordinance imposing the SHT may provide tax discounts for advanced and prompt payments in accordance with the provisions of Section 251 of R.A. No. 7160 and Article 342 of the Implementing Rules and Regulations (IRR) of the said Code. (emphasis supplied) However, failure to pay the SHT upon the expiration of the periods above prescribed, shall subject the taxpayer to the payment of interest (penalty) at the rate of two percent (2%) on the unpaid amount per month, or fraction thereof, until the delinquent tax shall have been fully paid: Provided, however, that in no case shall the total interest on the unpaid SHT or portion thereof exceed seventy-two percent (72%) . (emphasis supplied) 6.2 The LGU shall utilize the Social Housing Tax (SHT) for any one or a combination of the following projects or undertakings: 1. Land purchase/Land banking 2. Improvement of current social housing facilities 3. Land development 4. Construction of core houses, sanitary cores, medium-rise buildings and other similar structures 5. Financing of joint-venture agreements of LGU/NHA with the private sector 6.3 The Assessor's office of the Identified LGU shall: a. immediately undertake an inventory of lands within its jurisdiction which shall be subject to the levy of the Social Housing Tax (SHT) by the local sanggunian concerned; b. inform the affected registered owners of the effectivity of the SHT; a list of the lands and registered owners shall also be posted in three (3) conspicuous places in the city/municipality; c. furnish the Treasurer's office and the local sanggunian concerned of the list of lands affected; 6.4 The Treasurer's office shall: a. collect the Social Housing Tax on top of the Real Property Tax, SEF Tax and other special assessments; b. report to the DOF, thru the Bureau of Local Government Finance, and the Mayor's office the monthly collections on Social Housing Tax (SHT). An annual report should likewise be submitted to the HUDCC on the total revenues raised during the year manner in which the same was disbursed. 6.5 For this purpose, the HUDCC through its regional offices, and the NHA are hereby enjoined to: a make recommendations to identified LGUs feasible social housing projects within their jurisdiction to be funded by the SHT; b. enter into joint-venture agreements with the LGU concerned for the development of projects to be funded by the SHT; Recently, the Supreme Court En Banc ruled in Jose Ferrer, Jr. v. City Mayor Herbert Bautista, et al. , G.R. No. 210551, dated June 30, 2015, on the imposition of SHT and shed light on the proper imposition and implementation thereof, to wit: "Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is consistent with the UDHA. While the law authorizes LGUs to collect SHT on properties with an assessed value of more than P50,000.00, the questioned ordinance only covers properties with an assessed value exceeding P100,000.00. As well, the ordinance provides for a tax credit equivalent to the total amount of the special assessment paid by the property owner beginning in the sixth (6th) year of the effectivity of the ordinance. Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or oppressive since the tax being imposed therein is below what the UDHA actually allows. As pointed out by respondents, while the law authorizes LGUs to collect SHT on lands with an assessed value of more than P50,000.00, the questioned ordinance only covers lands with an assessed value exceeding P100,000.00. Even better, on certain conditions, the ordinance grants a tax credit equivalent to the total amount of the special assessment paid beginning in the sixth (6th) year of its effectivity. Far from being obnoxious, the provisions of the subject ordinance are fair and just ." (emphasis supplied) In view of the foregoing, it is clear that local government units (LGUs) can exercise their autonomy in deciding and implementing the SHT, as long as it is within the boundary and provisions of RA No. 7279. Increasing the threshold above what is indicated in the UDHA, i.e. , imposing SHT to properties with more than Php150,000 assessed values only, is a demonstration that the LGU may opt to exempt more real property taxpayers from the SHT imposition, especially those with properties with lower assessed values. Stated otherwise, the LGU may decide to shift the SHT to taxpayers with properties with higher assessed values taking into account the ability-to-pay principle in taxation. In the case of San Juan City, the SHT levied to landowners/developers with properties of more than Php150,000 assessed value is basically exempting those within the bracket of Php50,000 to Php149,999. Consistent with the aforementioned jurisprudence, the City Government appear to have decided that only those lands with more than Php150,000 assessed value shall be within the ambit of the SHT. On the issue of correctness of the computation, a circumspect perusal of the subject Ordinance of San Juan City shows that the formula used by the said city, which is an additional one-half of one percent (1/2 of 1%) SHT on the assessed value in excess of One Hundred Fifty Thousand Pesos (Php150,000.00), reveals that the same is consistent with the law and the guidelines issued by the Department of Finance. As regards the mandate on the period of implementation of SHT, this Bureau is of the view that there is no required length or period for the imposition of the SHT since neither Republic Act No. 7279 nor the DOF LFC No. 1-97 provide for the length or period that SHT shall be collected and/or implemented. The discretion to decide on this matter belongs to the concerned LGU. However, this Bureau must emphasize Sec. 6.1 of DOF LFC No. 1-97 wherein the LGU shall inform the DOF of the intended action on SHT, relative to the commencement and termination of its implementation and imposition, the projected generated income, and the prospective projects to be funded by the tax. For this, it is hereby recommended that the Ordinance should properly reflect the specific date as to when should the implementation and collection of SHT commence and be terminated, in order for the Treasurer to project the income to be generated. This Opinion is rendered based on the facts presented by the ICO City Treasurer of San Juan. If, upon proper investigation, the result will prove the contrary, this Opinion will be null and void. We hope we have provided clarity on the matter. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director ATTACHMENT Republic of the Philippines City of San Juan, Metro Manila Office of the City Treasurer March 29, 2017 MR. NIO RAYMOND B. ALVINA Executive Director, Bureau of Local Government Finance 8/F EDPC Building, BSP Complex, Roxas Boulevard, Manila Thru: MS. LUZ R. LAPID Chief, Local Assessment Operation Division Dear Mr. Alvina: Good day. We would like to seek an opinion and advice from you regarding our implementation of Socialized Housing Tax under our City Ordinance No. 91-2013 Article I as authorized by Republic Act (RA) 7929, otherwise known as the "Urban Development and Housing Act of 1992." In this matter, we respectfully inquire some clarifications on the following points: The correct interpretation of the formula stated in the said Ordinance and Republic Act . Our current computation of Socialized Housing Tax is Assessed Value (in excess of One hundred fifty thousand pesos) times one-half of one percent: Assessed Value (>P150,000.00) x .005 = Socialized Housing Tax The basis of the computation is on the premise of Section 2I.02 of the said Ordinance which reads as "There is hereby levied an additional one-half of one percent (1/2 of 1%) socialized housing tax on the assessed value of land owners/developers in this city in excess of One Hundred Fifty Thousand Pesos (P150,000.00), which is in addition to the basic real property tax." We also considered the prevailing computation of Quezon City Treasury. With this, we humbly inquire whether our interpretation for the said formula is correct. Provisions/Mandates for the period of implementation and collection of Socialized Housing Tax . In our City Ordinance, there is no provision on how long the implementation of SHT should be. Compared to Quezon City's, they are collecting only within a period of Five (5) Years and will give a tax credit on the collected SHT upon cessation. Are there any provisions regarding this difference in the impositions of SHT between the two LGUs? Attached in this letter is a copy of Article I of San Juan City Ordinance No. 91-2013 and other documents related to our implementation of SHT. We sincerely hope to receive opinion that will help us properly administer the Socialized Housing Taxation and to fully utilize it for the betterment of our service to the people. Thank you. Yours very truly, (SGD.) LETICIA R. ALCOBER ICO-City Treasurer Tax Order of Payment for Socialized Housing Date: March 21, 2017 Declared Owner: ARTURO JOCSON MUNARRIZ, ET AL. _____________________________________ PIN # Assessed Value 019-05-170-0000 P210,720.00 Total Assessed Value P210,720.00 Assessed Value Subject to SHT P210,720.00 ========= Rate Tax Due 1/2 of 1% Socialized Housing Tax (SHT) on the assessed value of land owners/developers in this city in excess of One Hundred Fifty Thousand Pesos (P150,000.00) P1,053.60 2% Interest on unpaid amount not exceeding 36 months (or 72%) P_________ Others _________ TOTAL P1,053.60 ======== Prepared by: ROSE MARILYN C. LAZARO Admin Aide III Certified Correct: MARVIN C. MADAYAG Chief, Land Tax Division ARTICLE I Socialized Housing Tax SECTION 2I.0 1. Definitions . When used in this Article, the term: a) Socialize Housing refers to housing programs and projects covering houses and lots or homelots duly undertaken by the Government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long-term financing, liberalized terms on interest payments, and such other benefits in accordance with the provisions of R.A. 7279 otherwise known as the Urban Development and Housing Act of 1992. b) Urban Areas refer to all cities regardless of their population density and to cities with a population density of at least five hundred (500) per square kilometer. SECTION 2I.02. Imposition of Tax. There is hereby levied an additional one-half of one percent (1/2 of 1%) socialized housing tax on the assessed value of land owners/developers in this city in excess of One Hundred Fifty Thousand Pesos (P150,000.00), which is in addition to the basic real property tax. SECTION 2I.03. Exemptions . Pursuant to the provisions of R.A. 7279, the following are exempted from the Socialized Housing Tax: a) Those included in the coverage of R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law; b) Those actually used for national defense and security of the state; c) Those used, reserved or otherwise set aside for government offices, facilities and other installations, whether owned by the National government, its agencies and instrumentalities, including government-owned or controlled corporations, or by the local government units. Provided, however, that the lands herein mentioned, or portion thereof, which have been used for the past ten (10) years from the effectivity of R.A. 7279 shall be covered by this Act; d) Those used or set aside for parks, reserves for flora and fauna, forests and watersheds and other areas necessary to maintain ecological balance on environmental protection, as determined and certified to by the proper government agency; and e) Those actually and primarily used by religious, charitable or educational purposes, cultural and historical sites, hospitals and health centers, and cemeteries or memorial parks. SECTION 2I.04. Collection and Accrual of Proceeds . The fixed tax on socialized housing shall be collected at the same time and in the same manner as that of the basic real property tax. The proceeds of the additional socialized housing tax shall accrue to the Urban Development and Housing Program of this city. SECTION 2I.05. Administrative Provision. The City Assessor shall keep an updated record of landowners/developers within his jurisdiction with assessed values in excess of One Hundred Fifty Thousand Pesos (P150,000.00). For purposes of collection, the City Treasurer shall notify, on the basis of such record, the owner of the property or person having legal interest therein of the imposition of the additional tax. SECTION 2I.06. Interest on Unpaid Socialized Housing Tax. Failure to pay the socialized housing tax on time, and upon the expiration of the periods as provided for in Sec. 2B.04 shall subject the payment of interest at the rate of two percent (2%) per month on the unpaid amount or a fraction thereof, until the delinquent shall have been fully paid. In no case shall the total interest on the unpaid tax or portion thereof exceed thirty-six (36) months.