Bureau of Local Government Finance Opinion

April 5, 2005 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred, thru the Provincial Assessor of Sarangani, to the Municipal Assessor of Maasim, same province, the herein letter dated January 26, 2005 of Mr. Arthur T. Oclarit, Group Head, Administration and Services, Gensan Shipyard and Machine Works, Inc. (GENSAN SHIPYARD, for brevity) (RD Group of Companies),requesting confirmation of his opinion, that floating dock and pontoon barge are not considered real properties subject to real property tax and therefore should be dropped from the roll of taxable real property and entered instead in the exempt roll of real property. Mr. Oclarit submitted the following arguments: 1. Floating docks and pontoon barges are boats or vessels floating on the water, not fixed, transportable and considered personal property under Article 416 of the New Civil Code; The same is true with the pontoon barge; 2. The floating docks/pontoon barges are registered with the Maritime Industry Authority (MARINA),(a national government agency having jurisdiction over vessels),as "vessel" as shown in the Certificate of Vessel Registry and Certificate of Inspection; 3. The dock can be moved from one place to another to support the needs of RD Groups' fishing fleet at sea. The temporary anchorage at GENSAN Shipyard is not fixed and is not exclusive, as the shipyard can operate separately even with the absence of a floating dock. cd2uptax05 The above request was made in view of the Statement of Realty Tax Delinquency dated August 2004 sent by the Municipal Treasurer of Maasim, same province, in effect, requiring them to pay real property tax on the Floating Dock declared under ARP No. 01-016-00357; and the Pontoon Barge under ARP No. 01-016-00358. A careful reading of the attached letter from the Maritime Industry Authority, DOTC reveals that floating docks are classified/categorized as "vessel" falling under Class I. "Miscellaneous Ships" under Chapter I, Regulation I/4, Page 5 of Philippine Merchant Marine Rules and Regulations, and are registered with the Maritime Industry Authority (MARINA),a national government agency having jurisdiction over vessels. Article 290 (o) of the Implementing Rules and Regulations (IRR) of R.A. No. 7160, otherwise known as the Local Government Code of 1991, defined machinery as follows: "ART. 290. Definition of Terms . When used in this Rule, the term: "xxx xxx xxx "(o) Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus, which may or may not be attached, permanently or temporarily to the real property. "Physical facilities for production, installations and appurtenant service facilities, those which are mobile, self powered, or self propelled and those not permanently attached to the real property shall be classified as real property provided that; (1) They are actually, directly, and exclusively used to meet the needs of the particular industry, business, or activity; and (2) By their very nature and purpose are designed for, or necessary to manufacturing, mining, logging, commercial, and industrial, or agricultural purposes. ICASEH "Machinery which are of general purpose use including but not limited to office equipment, typewriters, telephone equipment, breakable or easily damaged containers (glass or cartons),micro computers, fax, telex machines, cash dispensers, furniture and fixtures, freezers, refrigerators, display cases or racks, fruit juice or beverage automatic dispensing machines which are not directly and exclusively used to meet the needs of a particular industry, business or activity shall not be considered within the definition of machinery under this Rule." Pontoon is defined in the Webster Dictionary as a floating platform supporting a temporary bridge, very similar to a barge which is defined as a boat or vessel floating in and on the water. In our 1st Indorsement dated May 20, 1996, the DOF had the occasion to render an opinion that Gas Turbine Barges owned by the National Power Corporation (NPC) are not machineries that can be considered real property subject to the payment of real property tax. Pertinent portion of that opinion is quoted hereunder: "...the subject turbine barges, for practical reasons, could not be considered as real property, in the same manner that other mobile machineries/equipment such as trucks, buses, ships, airplanes, and the like, which requires registrations with the proper agency of the government, could not be considered as real property." Similarly therefore, the power barge owned by NPC is registered as a vessel per Certificate of Inspection issued by the Philippine Coast Guard; while the floating dock and pontoon barge owned by GENSAN Shipyard are registered with the Maritime Industry Authority (MARINA) per attached Certificate of Vessel Registry. Viewed in this light, the machineries (floating dock and pontoon barge) owned by GENSAN Shipyard, which as mentioned earlier are registered with the MARINA are not subject to the payment of real property tax. Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director