BLGF Local Assessment Opinion No. 002-06

January 19, 2006 BLGF LOCAL ASSESSMENT OPINION NO. 002-06 The Municipal Assessor Peablanca, Cagayan M a d a m : This refers to the request of that Office for opinion on whether radio relay station towers owned by Globe Telecom, Inc. (GLOBE, for brevity) are exempt from the payment of real property tax. It is represented that GLOBE claims exemption from real property tax pursuant to its franchise (R.A. No. 7229). In this connection, attention is invited to the letter dated October 26, 2005, copy enclosed, of this Bureau, resolving the issue citing the recent Supreme Court Decision in the case of RCPI vs. Provincial Assessor of South Cotabato (G.R. No. 144486) dated April 13, 2005, as follows: "It may be recalled that the Central Board of Assessment Appeals (CBAA) ruled that RCPI was liable for the real property tax on the assessed properties such as radio station building, machinery shed, radio relay station tower and accessories (100 ft. high) and two (2) generating sets. "The Court of Appeals explained that RCPI's exemption covers only the radio equipment, machinery, and spare parts essential to its business. Apparently, the machinery referred to are various types of radio equipment, such as UHF communication equipment, power distribution unit board, and battery charger. However, the tower upon which these different types of radio equipment are mounted or attached, is subject to real property tax. "xxx xxx xxx. "Applying the RCPI decision to the herein case, it is believed that the machinery referred to are machinery and radio equipment mounted as accessories to its relay tower but not the relay station tower itself. The above exemption is specifically provided under Section 11 of R.A. No. 7229, which in turn was entirely reenacted and adopted under Section 3 of R.A. No. 4540 (GLOBE's legislative franchise) . . .: "xxx xxx xxx. "Relatedly and with regard to the impact of other laws such as R.A. No. 7925 (Equality of Treatment Clause), attention is invited to the following discussion under the subject RCPI case: 'xxx xxx xxx. 'RCPI cannot also invoke the equality of treatment clause under Section 23 of Republic Act No. 7925. The franchises of Smart, Islacom, Teletech, Bell, Major Telecoms, Island Country, and Islatel, all expressly declare that the franchise shall pay the real estate tax, using words similar to section 14 of R.A. 2036, as amended. The provisions of these subsequent telecommunication franchises imposing the real estate tax on franchises only confirm that RCPI is subject to the real estate tax. Otherwise, RCPI will stick out like a sore thumb, being the only telecommunications company exempt from the real estate tax, in mockery of the spirit of equality of treatment that RCPI is invoking, not to mention the violation of the constitutional rule on uniformity of taxation .' (Emphasis supplied) "Inasmuch as GLOBE's legislative franchise categorically states its liability to pay the real property tax, GLOBE shall be liable to real property tax effective on the date the franchise of GLOBE took effect. Provided that if the subject property of GLOBE was declared for the first time, the subject property shall be assessed for the period during which it would have been liable but in no case exceeding ten (10) years prior to the date of initial assessment pursuant to Section 222 of the Local Government Code of 1991. "The tax exemption must be expressed in the statute in clear language that leaves no doubt on the intention of the legislative to grant such exemption. Even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority [( Commissioner of Internal Revenue vs. Court of Appeals, 298 SCRA 83 (1998)]. "In the light of all the foregoing, GLOBE is therefore liable to pay real property tax on its radio station building, machinery shed, and radio relay station tower, while radio equipment, accessories and spare parts needed in the business are exempt therefrom ." (Emphasis supplied) In view hereof, and considering the above-cited SC Decision, this Bureau believes that the exemption from real property tax of telecommunication companies, like GLOBE, is limited only to its radio equipment, accessories and spare parts needed in connection with the business. However, its radio station building, machinery shed, and radio relay station towers are considered taxable real properties. The Bureau will be issuing the appropriate Memorandum Circular on the matter for dissemination to all Assessors and others concerned. We trust that we have enlightened you on the matter. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director