Bureau of Local Government Finance Opinion

June 15, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Frederick Reyes Tax Officer Eastwest Banking Corporation 6795 Ayala Avenue Corner Herrera St., Salcedo Village Makati City Sir : This has reference to your letter dated October 10, 2011, seeking clarification as to what machinery of the Eastwest Banking Corporation should be declared for real property tax purposes. Said request was made in view of your contention that the said bank does not receive from the different municipalities where the bank's branches are located, a uniform assessment for machinery. CcAHEI In this connection, attention is invited to the opinion rendered by this Bureau on a similar subject matter, as contained under its 2nd Indorsement dated April 2, 2008; and letters dated May 13, 2010 and July 6, 2010, which read in part, as follows: 2nd Indorsement dated April 2, 2008 : "xxx xxx xxx. "In view of the foregoing, this Bureau believes that the subject bank vaults are subject to real property tax and should be assessed as improvement under Section 199 (m) of the Code and Article 209 (m) of its Implementing Rules and Regulations (IRR), while ATM machines should be considered as machinery subject, likewise, to the payment of real property tax under Section 199(o) of the same Code. The generator sets, however, are considered as falling under the category of 'Machinery for General Purpose Use' and do not fall within the definition of 'Machinery' subject to real property tax under Article 290 (o) of the PR of R.A. 7160. " Letter dated May 13, 2010 : "xxx xxx xxx. "Please be informed in this regard that the BLGF, ruled on several occasions that air-conditioning units (window, cabinet, split, package and centralized types) are considered 'machinery of general purpose use' and therefore exempt from payment of real property tax . Attached is the letter dated July 31, 2006 of this Bureau concerning the air-conditioning units being used by Allied Bank. The penultimate portion of which states: "xxx xxx xxx. "Centralized Air-conditioning System have the same function as window-type air-conditioning units and yet the latter are never considered as real property for purposes of the real property tax because window-type air-conditioning system could not be. "xxx xxx xxx. ". . . considering that the said machinery (centralized air-conditioning system) is not essential to the needs of banking operations, this Bureau reiterates its previous ruling that air-conditioning units are considered as falling under the category of machinery of general purpose use and do not fall within the definition of "Machinery" subject to real property tax as provided under Section 199 (O) of the Local Government Code of 1991. AEHTIC "With respect to Bank Vaults, safety deposit boxes, surveillance cameras and other security devices used by the Bank, this Bureau under its 1st Indorsement dated November 21, 2002 addressed to the City Assessor of Valenzuela City, copy enclosed, clarified that the 'Bank Vault of BPI Family Bank is considered an improvement for reason that it enhances the utility of the bank for the purpose of storage and safekeeping of cash/check deposits, safety deposit boxes and other valuables for its clientele', and therefore, subject to real property tax . Being an improvement, however, the market value of these security devices should have been included/added to the market value of the building where these devices are installed to come up with the total value, and the assessment level to be applied as provided under Section 218 (b) (3) of the Code. The BLGF is hereby reiterating the above ruling with respect to the same properties of the BPI and BPI Family Savings Bank, Inc." (Underlining Supplied) Letter dated July 6, 2010 : "In view of the foregoing, this Bureau believes that the subject generator sets, computers (CPU, keyboard, printer, DeskJet, monitors, scanner/HP Flatbed, PC Server, modem, etc.), office devices (bill counter, check writer, passbook printer, etc.) Facsimile machines, exhaust and orbit/ceiling fans, landline phones, water dispensers, and refrigerators are considered as falling under the category of 'Machinery of General Purpose Use' and do not fall within the definition of 'Machinery' subject to real property tax in line with the clarification under Article 290 (O) of the Implementing Rules and Regulations (IRR) of R.A. No. 7160." (Underscoring Ours) Similarly situated, real properties of the Eastwest Banking Corporation shall be classified and assessed for real property tax purposes, as follows: General Purpose Machinery Machinery Improvements (Not Subject to RPT) (Subject to RPT) (Subject to RPT) - Computers - ATM - Safe Deposit Boxes - Black Light - CCTV - Electric/Manual Typewriter - Vault Door - Generator - Time Delay Mechanism - Uninterrupted Power Supply equipment (UPS) - Fax, Telephones - Electric Fan - Pantry (e.g., Equipment (Refrigerator, Toaster) - Air-conditioning System - Bill Counter Enclosed is Local Finance Circular No. 01-2002, for your guidance. We trust that this clarifies the matter. HTASIa Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director