Bureau of Local Government Finance Opinion

October 6, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned, thru the Assistant Regional Director for Local Government Finance, Region VII, 3rd Floor, Cebu Kang-Ha Foundation Bldg., Corner Lapu-Lapu and Juan Luna Streets, Cebu City, to the Provincial Assessor of Cebu, the within preceding Indorsement dated June 17, 1997 relative to the request of Atty. Bienvenido B. Juban, Jr., in behalf of his Client, the Cebu Sutherland Construction and Development Corporation located at CRM Bldg., Molave Cor. Escario St., that city, for the cancellation of Tax Declaration Nos. 20225, 20214 and 20213, all declared in the name of the said corporation and thereafter, be exempt from the payment of real property taxes. It appears that the abovementioned request was prompted by the notices of assessments, all dated June 4, 1996 sent by that Office despite the Build Lease Agreement executed by and between the municipality of Bogo and the said corporation. A perusal of the said agreement revealed that the said municipality entered into a contract with the said corporation (through bidding) to construct a building at the New Public Market based on a Build, Operate and Transfer scheme with a condition that the corporation shall pay the municipality of Bogo a yearly rental for the land in the amount of P75,000.00 whose area is equivalent to the floor area of the said building. It is also stated that the corporation shall determine and collect the store rentals and operate/maintain the said building for the duration of the said agreement which is 18 years from its effectivity, after which period, the building shall entirely be turned over to the municipality. From the provisions of the abovementioned Agreement, it is clear that the said corporation shall be deemed the owner of the said building for the duration of the Agreement; and although the ownership of the land remains with the municipality, the company should be considered as the "beneficial user" thereof. Therefore, said corporation is subject to the payment of real property taxes pursuant to Section 234 (a) of the Local Government Code of 1991 (R.A. No. 7160), which is quoted hereunder: "SEC. 234. Exemptions from Real Property Tax . The following are exempted from the payment of the real property tax: "a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person ; (Emphasis supplied) "xxx xxx xxx." Accordingly, this Bureau holds the view that Cebu Sutherland Construction and Development Corporation is liable to the payment of real property taxes on the subject properties (land and building) for the eighteen-year duration of the Agreement. The abovementioned request for the cancellation of Tax Declaration Nos. 20225, 20214 and 20213, should, therefore, be denied for lack of legal basis. SEIacA Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director