Republic of the Philippines

DEPARTMENT OF FINANCE
BUREAU OF LOCAL GOVERNMENT FINANCE
86 Floor EDPC Building, BSP complex, Roxas Boulevard, 1004 Manila
www.blgf.gov.ph I blgf@blgf.gov.ph ; +63 2 8527 2780 I 9527 27gO

MEMORANDUM CTRCULAR NO. 0 0 3 . 2 0 22

1 0 JAN 2022

TO All BLGF Central and Regional Directors; All Provincial, City

and Municipal Treasurers; and Others Concerned

SUBJECT DOJ Opinion on Section 15 (c) of RA No. 9513

This Memorandum Circular is issued to inform all concerned of the herein attached
Department of Justice (DOJ) Opinion No. 27, s.2021 , dated 06 August 2021, issued by
Secretary Menardo l. Guevarra, regarding the proper interpretation and application of Section
15 (c) of Republic Act (RA) No. 9513, orthe Renewable Energy (RE) Act of 2008, on the levy
and collection of realty and other taxes, in relation to RA No. 7160, or the Local Government
Code (LGC) of 1991 .

The pertinent portions of the said DOJ Opinion are quoted as follows:
"Both in name (the law, after all, calls it an "annual tax") and in substance, the
additional lew imoosed under Section 235 of the LGC is a tax. and as such, is
included in the term 'realtv and other ' referred to rn Section 15(d of the
RE Act.
This can easily be gleaned from the unequivocal language of Section 235 of the LGC
which covers the SEF, pariicularly from its title ('Additional Levy on Real Property for
fhe Special Education Fund") and its body ("an annual tax of one tl%l rs rmposed on
fhe assessed value of real property"). Clearly, the levyis imposed on real property and
uses fhe assessed value thereof as the basis for the tax.
Moreover, relevant headings and sub-headings of the LGC indicate that the SEF is a
realty tax. Sec 235 falls under Title ll ("Real Property Taxation") and Chapter 5
("Special Levies on Real Property") of the LGC.
Nevertheless, even assuming hypothetically that the additional levy which accrues to
fhe SEF cannot be considered as a realty tax, it may nevertheless be considered as
a specie of "other taxes", and thus remains within the ambit of the phrase "realty and
other faxes" rn Sec 15(c) of the RE Act.
xxx xxx xxx
Thus, the above-described additional SEF tax on real prooertv under Section 235
of the LGC is clearlv included in the term "realtv and other taxes" contemplated
in Sectio n 15(c) of the RE Act. The same is alreadv covered bv the one and a half
percent fl.5%ol maximum special realtv tax rate in the subiect provision of the
RE Act.
xxx xxx xxx
Based on all the foregoing,j
1 5G) of the RE Act, fhe spec ial realtv imoosed on RE developers for real
properties actuallv and exclusivelv used for RE facilities should not exceed
1.5%o. which rate includes both the basic RPT and the additional levv for the
SEF.,' (emphasis supplied)

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 All BLGF Central and Regiona! Directors are hereby instructed to immediately and
widely disseminate this Circular to all concerned loca! officials within their respective
jurisdictions.

For information and reference.

ffi7/r/b)
NINO RAYMOND B. ALVINA
000660 Executive Director

DOJ Opinion on Section 15 (c) of RA No.9513

Page 2 of 2
 OPINION NO
Republika ng Pilipinas
KAGAWARAN NG KATARUNGAN
Department of Justice
Manila
AUG 0 6 2021

Mr. NINO RAYMOND B. ALVINA

Executive Director
Bureau of Local Government Finance
8®' Floor EDPC Building, Bangko Sentral ng Pilipinas Complex
Roxas Boulevard, 1004 Manila

Dear Executive Director ALVINA;

We write in response to the letter from the Bureau of Local Government

Finance (BLGF) of the Department of Finance regarding the proper interpretation
and application of Section 15(c) of Republic Act (RA) No. 9513, the Renewable
Energy Act of 2008 (RE Act), in relation to the levy of an annual tax which shall
accrue exclusively to the Special Education Fund (SEF) under RA No. 7160, the
Local Government Code of 1991 (LGC).

Section 15(c) of the RE Act provides a special tax rate on real property and
other taxes of a registered renewable energy(RE)developer and is worded in the
following manner:

SEC. 15. Incentives for Renewable Energy Projects and

Activities. - RE developers of renewable energy facilities,
including hybrid systems, in proportion to and to the extent of the
RE component, for both power and non-power applications, as
duly certified by the DOE, in consultation with the BOI, shall be
entitled to the following incentives:

(c) Special Realty Tax Rates on Equipment and Machinery. -

Any law to the contrary notwithstanding, realty and other
taxes on civil works, equipment, machinery, and other
improvements of a Registered RE Developer actually and
exclusively used for RE facilities shall not exceed one
and a half percent (1.5%) of their original cost less
accumulated normal depreciation or net book value: Provided,
That in case of an integrated resource development and
generation facility as provided under Republic Act No. 9136,
the real property tax shall only be imposed on the power plant.

XXX (emphasis supplied)

 OPINION NO 20.2/.
The BLGF's question revolves around how Section 15(c) of the RE Act
should be interpreted in relation to Sections 233 and 235 of the LGC. Section 233
mandates the collection of basic Real Property Tax(RPT) in the following rates:

Section 233. Rates of Levy. - A province or city or a municipality

within the Metropolitan Manila Area shall fix a uniform rate of
basic real property tax applicable to their respective localities as
follows:

(a) In the case of a province, at the rate not exceeding one

percent(1%) of the assessed value of real property; and

(b) In the case of a city or a municipality within the

Metropolitan Manila Area, at the rate not exceeding two
percent(2%)of the assessed value of real property.

Section 235, on the other hand, authorizes the collection of a levy besides
the basic RPT, in the rate and manner given, the proceeds of which are to be
placed in the SEF established in the LGC:

Section 235. Additional Levy on Real Property for the Special

Education Fund. - A province or city, or a municipality within the
Metropolitan Manila Area, may levy and collect an annual tax of
one percent (1%) on the assessed value of real property which
shall be in addition to the basic real property tax. The proceeds
thereof shall exclusively accrue to the Special Education Fund
(SEF).

Issue

The BLGF thus poses the question of whether the special realty tax rate
under the RE Act is inclusive of the additional tax which accrues to the SEF as
provided under Section 235 of the LGC.

Contrasting views are presented by the BLGF. One view states that a
registered RE developer is entitled to a special realty tax rate not exceeding 1.5%
inclusive of both the basic RPT and the additional levy for the SEF under Section
235, LGC.

The other view considers the basic RPT and the levy accruing to the SEF
as separate and distinct impositions. Thus, the special rate provided for under the
RE Act should only be applied to the basic RPT, and the additional levy should
remain.

We take note that Section 15(c) of the RE Act is couched in unequivocal

language when it provides that an RE developer is entitled to a special tax rate on
realty and other taxes, so long as the civil works, equipment, machinery, and other
improvements are actually and exclusively used for RE facilities.
 OPINION NO iL..,S, 20.i/..
Thus, the issue could be resolved by answering the simple question
of whether the additional levy on real property, the amount of which accrues
exclusively to the SEF, is covered by the phrase "realty and other taxes."
Otherwise stated, is the additional levy of one percent(1%)of the assessed
value of the real property a tax? If yes, then it should be deemed included
under Section 15(c) of the RE Act.

Discussion

The lew accniina to the SEF is a tax and

is included in the term "realty and other taxes"

Both in name (the law, after ail, calls It an "annual tax") and in substance,
the additional levy imposed under Section 235 of the LGC is a tax, and as such,
is included in the term "realty and other taxes" referred to in Section 15(c) of
the RE Act.

This can easily be gleaned from the unequivocal language of Section 235
of the LGC which covers the SEF, particularly from its title {"Additional Levy on
Real Property for the Special Education Fund") and its body ("an annual tax of one
[1%]is imposed on the assessed value of real property"). Clearly, the levy is
imposed on real property and uses the assessed value thereof as the basis for the
tax.

Moreover, relevant headings and sub-headings of the LGC indicate that the
SEF is a realty tax. Sec 235 falls under Title II ("Real Property Taxation") and
Chapter 5("Special Levies on Real Property") of the LGC.

Nevertheless, even assuming hypothetically that the additional levy which

accrues to the SEF cannot be considered as a realty tax, it may nevertheless t)e
considered as a specie of "other taxes', and thus remains within the ambit of the
phrase "realty and other taxes" in Sec 15(c) of the RE Act.

The additional lew for the SEF is

for a aovemmental purpose

The SEF is for support of the government and for a public need. The purpose of
the SEF is found elsewhere in the LGC. Section 272 of the law provides;

Application of Proceeds of the Additional One Percent SEF Tax.

- The proceeds from the additional one percent(1%)tax on real
property accruing to the Special Education Fund (SEF) shall be
automatically released to the local school boards: Provided, That,
in case of provinces, the proceeds shall be divided equally
between the provincial and municipal school boards: Provided,
however. That the proceeds shall be allocated for the
operation and maintenance of public schools, construction
and repair of school buildings, facilities and equipment.
 OPINION NO. |S| 20.'^-
educational research, purchase of books and periodicals,
and sports development as determined and approved by the
Local School Board,(emphasis supplied)

It is clear from the above citation that the SEF will be used for the support
of government (operating through the local school boards) in carrying out the
decidedly public purpose that may be summarized as the improvement of the
public school system.

Thus, the above-described additional SEF tax on real property under

Section 235 of the LGC is clearly included in the term "realty and other taxes"
contemplated in Section 15(c) of the RE Act. The same is already covered
by the one and a half percent (1.5%) maximum special realty tax rate in the
subject provision of the RE Act.

Intent of Congress

This view reflects the clear intent of the Congress to lump both the basic
RPT and the additional tax pertaining to the SEF into a special tax rate under the
RE Act, which can be gleaned from the relevant portion of the deliberations of the
Bicameral Conference Committee, to wit;

XXX

REP. JAVIER. I think the rate under the Local Government Code
is 1 percent 'no plus the additional assessment of 1 percent for SEF so
it's total. 2. So total. 2 percent.

MR. PEREZ. This is two and a half.

REP. JAVIER. That's right. It's more that 2 percent/

MR. PEREZ. Mr. Chairman, if I may. You know, the real estate
tax - I'm sorry, but currently, the practice is 1 percent. So. actually, bv
making it 2.5. well, actually, it's becoming a disincentive, eh.

REP. VILLAFUERTE. Maybe, Mr. Chairman. Compromise is

1.5%.

THE CHAIRMAN (SEN. ANGARA). One and a half, o sige.

Okay na 'yon, okay na' yon. We have to - we may be favoring
companies but we may be disadvantaging the LCDs. Masama rin naman
yon.
 OPINION NO. 'Si
REP. JAVIER. O'paano'yan?

THE CHAIRMAN (SEN. ANGARA). One and a half. We will

accept the 1.5. So. we reduce it bv .5. Okav.

REP. MAGSAYSAY. Mr. Chairman, I just like to ask in the

present set up of the mga - who are engaged in this business, are they
paying special realty tax already on equipment and machine and how
much?

REP. VILLAFUERTE. Yes, ves. A/am mo ana mawawala

divan special education fund^(Emphasis and underscoring supplied).

It is apparent from the above deliberations that the Congress was aware
that the special realty tax rate of one and a half percent (1.5%) intended to
incentivize RE developers would affect the tax collections of the LGU and funding
for the improvement of the public school system.

CBAA and CTA rulings

On top of all these are decisions of the Court of Tax Appeals(CTA)and the
Central Board of Assessment Appeals (CBAA) where both bodies consistently
adopted the interpretation that the basic RPT and the additional tax which accrues
to the SEP, in the aggregate, should not exceed the one and a half percent(1.5%)
maximum realty tax rate provided under Section 15(c) of the RE Act.

On 26 February 2020, the CTA En Banc, in Calajate v. North Luzon

Renewable Energy Corp.} held:

The Court finds no error in the conclusion arrived at by the CBAA

in the assailed Decision that, indeed, the SEF was considered bv the
members of the Bicameral Committee and, more importantly, intended
to be included in the applicabilitv of Section 15 (c) as one of the taxes
that will be subject to the capped preferential rate. The CBAA
observed. "The SEF was mentioned twice during the Bicam
Conference and none of the members of the body commented that it
was not included therein. Hence, it is apparent that the intent of the
law makers, is to give as much incentive as possible to RE Developers.
This intent is very explicated [from]the transcript of their deliljerations.'

^ Bicameral Conference Committee on the Disagreeing Provisions of Senate Bio! No. 2406 and
House Bill No. 4193 (Renewable Energy act of 2008), October 7, 2008, pp. 48, 145, 148,151
(Senate Version).
2 CTA EB Case No. 1812, February 26, 2020
 OPINION NO. 20.^.
The foregoing discussion lends to no other conclusion[]than that
the SEF was intended to be part and parcel of the phrase "other taxes'
subject to the capped preferential specialty realty tax rate.
(Underscoring supplied).

The CTA's Decision in the Calajate case was not appealed to the Supreme
Court^ and thus became final and executory^.

This Department respects the conclusions of judicial bodies such as the

CTA, a highly specialized body specifically created for the purpose of reviewing
decisions in tax cases. In Commissioner of Internal Revenue v. GJM Philippines
Manufacturing, Inc.,^ the Supreme Court explained:

Oft-repeated is the rule that the Court will not lightly set aside
the conclusions reached by the CTA which, by the very nature of its
function of being dedicated exclusively to the resolution of tax
problems, has accordingly developed an expertise on the subject,
unless there has been an abuse or improvident exercise of authority.
This Court recognizes that the CTA's findings can only be disturbed on
appeal if they are not supported by substantial evidence, or there is a
showing of gross error or abuse on the part of the Tax Court. In the
absence of any clear and convincing proof to the contrary, the Court
must presume that the CTA rendered a decision which is valid in every
respect. It has been the Court's long-standing policy and practice
to respect the conclusions of quasi-judicial agencies such as the
CTA, a highly specialized body specifically created for the
purpose of reviewing tax cases,(emphasis supplied)

Similarly, in the CBAA cases entitled "Hedcor Sibulan, Inc. v The Local
Board ofAssessment Appeals of the Province ofDavao Del Sur"^ and 'Green Core
Geothermal, Inc. v. The Local Board of Assessment Appeals of the Province of
Negros Orientar,^ the CBAA ruled that both the RPT and the additional tax which
accrues to the SEF should not exceed one and a half percent (1.5%) pursuant
Section 15(c) of the RE Act.

These pronouncements of the CBAA should also be given weight, pursuant

to the guiding principle enunciated in Benguet Corporation v. Central Board of
Assessment Appeals, et al.,^ where the Supreme Court held:

^ Records Verification dated 20 July 2020,'No motion for reconsideration nor appeal has t)een
filed with the Supreme Court (http;//cta.judiciary.gov.ph/histQry2)
^ Promulgation of Resolution dated 16 March 2021,'WHEREFORE, petitioner Provincial
Treasurer's "Urgent Motion to Furnish Original Copies of the En Banc Decision and Notice of
Decision to the Provincial Govemment of llocos Norte"is DENIED, while respondent's "Motion for
Entry of Judgement'is GRANTED. Let the Decision rendered by this Court on February 26, 2020
be entered in the Book of Judgments. SO ORDERED.'(http://cta.judiciary.gov.ph/history2)

5 G.R. No. 202695, February 29, 2016.

® CBAA Case No. M^-2018, October 16, 2019.
^ CBAA Case No. V-37, November 25, 2019.
8 G.R. No. 106041, January 29, 1993.

6
 OPINION NO. 20JJ..
It has been the long-standing policy of this Court to respect
the conclusions of quasi-judicial agencies like the CBAA, which,
because of the nature of its functions and its frequent exercise
thereof, has developed expertise in the resolution of assessment
problems. The only exception to this rule Is where it is clearly shown
that the administrative body has committed grave abuse of discretion
calling for the intervention of this Court in the exercise of its own powers
of review. There is no such showing in the case at bar. (emphasis
supplied)

Conclusion

Based on all the foregoing, it is the opinion of this Department that under
Section 15(c)of the RE Act, the special realty taxes imposed on RE developers for
real properties actually and exclusively used for RE facilities should not exceed
1.5%, which rate includes both the basic RPT and the additional levy for the SEP.

Please be guided accordingly.

Very truly yours,

MENARDO I. GUEVARRA
Secretary
Department of Justice
CM: 0202108028