REPUBLIC OF THE PHILIPPINES BUREAU OF LOCAL GOVERNMENT FINANCE, DEPARTMENT OFFINANCE. Sth Floor BDPC Building, Bango Sentral ng Pilipinas Complex Roxas Boulevard, Manila 1004 * Telefax Nos, 527-2780 /527-2790 ‘E-mal:blefablefgov-ph 1° Indorsement January 30, 2012 Respectilly retumed to the OIC-City Treasurer, Cabanatwan City her herein letter dated May 31, 2011, requesting for opinion to further enlighten her regarding the correct interpretation of the provisions of Section 276, R.A. No. 7160, otherwise known as the Local Government Code of 1991, in relation to Resolution No. 202-2007, and Ordinance No. 2007-036, both of the Sangguniang Panlungsod of Cabanatuan City. Ordinance No. 2007-036, conditionally condoned all the interests and penalties on the delinquent real property taxes due from CHAS Realty Development Corporation (CRDC for brevity) and likewise granted compromise agreement by extending the period of ‘payment of the real property taxes in arrears, ie., CYs 2000-2007 and current, i.e., CYs 2008-2018. The OIC-City Treasurer deferred the implementation of subject Ordinance No. 2007-036, citing certain alleged deficiencies on the validity thereof. It is also her contention that the condonation of interests and penalties on the real property taxes due from CRDC runs counter to the intensified revenue generation program of Cabanatuan City. In this connection, the attention of the OIC-City Treasurer is hereby invited to this Bureau's earlier clarification concerning Section 276 of the Local Government Code of 1991, which was embodied in the hereto attached letter dated January 5, 2009, to the City Mayor of Naga City, Cebu, as follows: “The Local Government Cade of 1991, authorized the condovation or reduction ‘of real property taxes and interests x x through the local sangeunian xx x x, viz: “SEC. 276. Condonation or Reduction of Real Property Tax and Interest, ~ In case of a general failure of crops or substantial crease in the price of agricultural or agribased products, or calamity, in any provinee, city, or municipality, the sanggunian concerned, by ordinance passed prior to the first (1°) day of January of any year and ‘upon recommendation of tae 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 “Section 276 allows the condonation or reduction of real property tax and interes, wholly or partially, inthe event of: 1) general failure of crops; 2) substantial decrease in the price of ogvieultural or agri-based products; of 3) calamity, for the Succeeding year or years after the occurence of any ofthe events mentioned, through an ordinance passed before the 1 day of January of any year, on recommendation of the Local Disaster Coordinating Council It must be noted thatthe presence of an economic crisis is not one ofthe conditions by which condoration or reduction of teal property tax or ierest may be granted by the sanggunian“The condonation or reduction contemplated under Section 276, is prospective in application, meaning, only real property taxes or interests due the succeeding year or ‘years, ater any of the abovementioned incidents happened which adversely affected the ‘xpayer's ability to pay, may be condoned or reduced, and not unpaid real property taxes or interests of the past year or years, Further, as such applicability or nature of the condonation or reduction is prospective, what are covered therefore are real property taxes and interest, not penalties or surcharges.” “Incentive or relief as reason for condonation or reduction of real property tax: and interest may not be approprisie for the reason that tax incentives or reliefs as authorized under Section 192 (duthority to Grant Tax Exemption Privileges) of the Local Government Code of 1991, are deemed applicable for local taxes such as business taxes covered in Title One, Book I of the same Co “Seotion 276 of the same Code, may be the basis for such condanation or reduction of taxes and interests provided the requirements or conditions set forth therein are satisfied to ensure that such condonation or reduction would be an effective means of generating additional revenues without undermining confidence in tax collection and enforcement, and not to discourage diligent taxpayers.” Meanwhile, for the proper guidance of the OIC-City Treasurer of Cabanatuan in connection with the compromise agreement between Cabanatuan City and CRDC as embodied under Section 2 of subject Ordinance No. 2007-036, providing for an installment payment scheme for real property taxes in arrears and current from 2008 until 2018, the following requisites and measures may be considered: 1 A duly enacted ordinance, granting authority upon the provincial or city treasurer or municipal treasurer of Metropolitan Manila to enter into a compromise agreement and prescribing the terms and conditions thereof; The ageregate delinquent real property tax is so much and too burdensome to the property owner-taxpayer and there exists serious doubt that the owner- taxpayer could ever pay the full amount of tax liability at one time within the remainder of the statutory period for callection; ‘The term of payment must not be beyond the remainder of the statutory period for collection, or beyond the period of redemption, as the case may be The compromise agreement does not defest the tax collection efforts of the local taxing authority or does not serve to discourage diligent taxpayers; The amount of tax liability is not reduced; and ‘The compromise agreement is most advantageous to the local taxing authority vis-d-vis the tax collection costs and the circumstances, and must be in conformity with the provisions of the Local Government Code on real property taxes.It is hoped that with the foregoing clarifications, the OIC-City Treasurer will gain clearer understanding regarding condonation of real property tax and resorting to compromise agreement for the collection of delinquent real property tax. At this juncture, it must be noted that subject ordinance has been enacted by the Sangguniang Panlungsod and in the absence of a subsequent declaration of its invalidity or an order effecting suspension of its implementation, the same remains valid and enforceable, Be guided accordingly. SALVADOR ‘CASTILLO {1C-Executive Director