Tax Articles

Issues on Extended Deadlines in Payment of Local Taxes Clarified

By: Atty. Fulvio D. Dawilan

Interpretation of statutes defers to the principle that an enactment must not be read in truncated parts. Instead, every part must be considered together with the other parts and kept subservient to the general intent of the whole. This is how the Department Circular 002-2020 (“DC 002-2020”) of the Department of Finance extending the deadlines for the payment of local taxes should be viewed in order that the spirit behind its issuance will be realized.

Following the implementation of the community quarantine throughout the country, a number of local government units (“LGUs”) enacted ordinances granting tax reliefs to their constituents via the extension of the deadlines for the payment of local taxes in their respective jurisdictions. Some were more restrictive in the duration of the extension and to the covered types of local taxes, and some were more lenient by granting extensions to all types of local taxes and longer compliance period. But others preferred to keep silent and passed on to their constituents the discretion to weigh on their options.  As a result, the deadlines vary per locality depending on the presence or absence of extensions and the durations and coverage of the extensions provided in the respective ordinances.

On April 23, 2020, DC 002-2020 was issued by the Department of Finance to provide uniform implementation of the authority given to the President to move the statutory deadlines and timelines for the filing and submission of any document and the payment of taxes, fees and charges required by law. In so far as local taxes are concerned, the deadline for their payments was moved to June 25. But the circular is not free from causing confusions. There are some issues related to the implementation of the extended deadlines, raising questions not only on the part of the taxpayers but also on the part of the implementors.  

Guided by the answers made by friends from the Bureau of Local Government Finance on frequently asked questions on these issues, let me briefly address a few of these concerns.

With the differences in the coverage and duration of the extensions provided in local tax ordinances and DC 002-2020, which should prevail? There is no doubt that local tax matters are within the domain of the LGUs. This includes the fixing of the deadlines for the payments and to suspend such deadlines when necessary. In fact, no less than the Local Government Code allows the sanggunian concerned to, for justifiable reason or cause, extend the time for the payment of taxes, fees and charges without surcharges and penalties, but only for a period not exceeding 6 months. The COVID-19 pandemic and the implementation of community quarantines are no doubt justifiable reasons for LGUs to cause the deferment of the payment of taxes without penalties.

It is also clear, however, that the Bayanihan to Heal as One Act (Republic Act 11469) from which DC 002-2020 draws its breath, provides that in case the exercise of the powers provided in the law conflicts with other statutes, orders, rules and regulations, the provisions of RA 11469 shall prevail. On this premise, the extensions made pursuant to said law shall prevail over any other law and other issuances. Thus, if extension of deadlines made pursuant to local tax ordinances is inconsistent with the extension provided in DC 002-2020, the latter shall prevail and should be respected by the local government unit. It is only when there is a subsequent extension made through a local tax ordinance beyond June 25 will such extension be followed.

Does the extension cover those falling due within March 25 to June 25 only? What the circular clearly provides is that the deadlines for the payment of all local taxes, fees and charges imposed by the LGUs as of March 25, 2020 shall be extended up to June 25, 2020. This suggests that the deadlines covered by the extension are those falling in March 25 and earlier periods. A deadline, however, that has already lapsed or a tax due that has become delinquent may no longer be extended. Despite that, there is waiver of the interests, surcharges and penalties from March 25 to June 25. The LGU is also prohibited from pursuing administrative or judicial action for the enforcement of taxes. In effect, there is suspension of the payment for taxes that had already become due, but without the condonation of the interests, surcharges and interests that had already accrued.

For the taxes falling due from March 25 to June 25, the circular does not clearly provide for extension of payment deadlines. But similar to delinquent taxes, the interests, surcharges and penalties on taxes falling due within such period are waived. Impliedly, payment of taxes due on such period is extended to June 25. 

Does the extended deadline in DC 002-2020 cover real property taxes? Many of the extensions made by LGUs prior to the effectivity of DC 002-2020 fixed earlier deadlines than June 25. This is understandable for those enacted prior to the issuance of DC 002-2020. Surprisingly, some ordinances made after the circular still provided for an earlier deadline, especially for real property taxes. It may be because these concerned LGUs are not aware of DC 002-2020 or they believe that real property taxes are not covered by the extension on payment of local taxes. Whatever is the reason, Local Government Taxation and Real Property Taxation, although separated by different titles, are both found in Book II of the Local Government Code, which deals with Local Taxation and Fiscal Matters. No doubt, real property tax is also a local tax. Thus, any deadline for real property tax payment falling within March 25 to June 25 should be considered extended to June 25 without the imposition of penalties, even if there is an earlier extended deadline provided in an ordinance.

Is the extension affected by the classification of community quarantine (i.e., ECQ, MECQ, GCQ, MGCQ, etc.)?  The extension provided by DC 002-2020 to June 25 applies throughout the Philippines regardless of the classification of the community quarantine imposed in the area. Unlike the extension for the national internal revenue taxes where the definition of the quarantine matters in some cases, this is not so for local taxes. The extension is very specific, that is, March 25 to June 25 or the effectivity of RA 11469. The prevailing community quarantine in the area should not affect the moving of the deadlines to June 25.

To summarize, the payment of local taxes falling due within the period March 25 to June 25 is extended to June 25, regardless of the extent of the community quarantine imposed in the locality and notwithstanding the duration of extensions provided in local tax ordinances. Also, the imposition of penalties, interests and surcharges during the same period is waived not only for the taxes falling due within the period but also for taxes that had already become due. LGUs are bound to yield to this circular despite differences with their respective ordinances.