47.

BLGF Opinion dated February 17, 2010

FACTS:
An indorsement was returned to the Regional Director for Local Government Finance, CARAGA
Region, Baladad Compound, J.C. Aquino Avenue, Libertad, Butuan City relative to City Ordinance
No. 2009-06, dated 29 October 2009 of the City of Cabadbaran entitled An Ordinance
Establishing the Local Investment Incentive Code of the City of Cabadbaran. Section 17 (A) of
such ordinance provides fiscal incentives to registered enterprises.
ISSUE:
Whether or not the said ordinance is in conformity with Article 282 of the IRR implementing
Section 192 of the Local Government Code of 1991.
HELD:
No.
The proposed grant of tax incentives for a period of three (3) years is not in conformity with Article
282 of the Implementing Rules and Regulations (IRR) implementing Section 192 of the Local
Government Code (LGC) of 1991, quoted hereunder, therefore not enforceable:
Article 282. Authority to Grant Tax Exemption Privileges. (a) While local
sanggunian may grant tax exemption, incentive, or tax relief, such grant shall not apply
to regulatory fees which are levied under the police power of the LGUs. Such tax
exemption shall be conferred through the issuance of a tax exemption certificate, which
shall be non-transferrable.
(2) On the grant of tax incentives:
(i) The tax incentive shall be granted only to new investments in the
locality and the ordinance shall prescribe the terms and conditions that must
be complied with for such grant or tax incentive;
(ii) The grant of the tax incentive shall be for a definite period not
exceeding one (1) calendar year;
(iii) The grant of the tax incentive shall be by ordinance passed prior to
the first (1st) day of January of any year; and
(iv) Any tax incentive granted to a type or kind of business shall apply
to all businesses similarly situated.
Thus, the Sanggunian Panlungsod should amend said ordinance by reducing the period of
exemption to not more than one (1) year from the actual date the business started operations.
It may be mentioned at this point that the grant of incentive shall not apply to regulatory fees which
are levied under the police power of the city.
Moreover, Section 234, Title Two of the said Code, provides as follows:

Section 234. Exemptions 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) All charitable institutions, churches, parsonages or convents
appurtenant thereto including mosques, nonprofit or religious cemeteries
and all lands, buildings, and improvements which are 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 under RA 6938; and
(e) Machinery and equipment exclusively 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.
Apparently, the Code already enumerated categorically the real properties that should be granted
exemption from real property taxes. Thus, the basic principle of what is not included is deemed
excluded should apply. LGUs do not have the authority to grant exemption from real property
taxes, those which are not expressly exempted by the governing law, otherwise they will be
exercising the power of amending laws or Acts enacted by Congress.
In view thereof, the Bureau holds that the grant of real property tax exemption under the aforesaid
Sec. 17(A) of the Local Incentive Code of the City of Cabadbaran is without legal basis. However,
the said comments made are not a declaration of the nullity or illegality of the Local Investment
Incentive Code for reason that such function falls exclusively within the jurisdiction of the DOJ.
Hence, unless said ordinance is declared by competent authority as illegal or unconstitutional, the
City Treasurer of Cabadbaran has no alternative but to implement the provisions thereunder.