Review of BLGF 1st Indorsement and Letter Re: Real Property Tax Exemption of Bank Vault and Air-Conditioning System of BPI Family Bank

November 14, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION MEMORANDUM FOR : Undersecretary Juanita D. Amatong FROM : Assistant Secretary Emmanuel P. Bonoan SUBJECT : Review of BLGF 1st Indorsement and Letter Re: Real Property Tax Exemption of Bank Vault and Air-Conditioning System of BPI Family Bank This refers to your request for comments on the proposed 1st Indorsement dated August 15, 2002 addressed to the City Assessor, Valenzuela City, and the letter of even date addressed to the Branch Manager, BPI Family Bank, Malinta Branch, both concerning the request of BPI Family Bank, Malinta Branch, for exemption from the payment of real property tax (RPT) on the latter's bank vault and air-conditioning system. We have reviewed the Indorsement and the letter, and we find nothing legally objectionable with the conclusion that, while the air-conditioning system is not subject to RPT, the bank vault is subject to RPT. For your consideration. (SGD.) EMMANUEL P. BONOAN Assistant Secretary November 18, 2002 Ms. Petrita Y. Bonilla Committee Affairs Support Service "B" 3rd Flr. Left Wing, Senate Building, Financial Center, Roxas Boulevard, Pasay City M a d a m : This refers to your follow-up letter dated July 22, 2002, concerning a fishpond located in the municipality of Cantillan, Surigao del Sur, with an area of 13.7 hectares, in effect requesting clarification on whether the fishpond is considered as a real property and the local government is allowed to demand payment of real property tax from the lessee. In this connection, attention is invited to the 2nd Indorsement dated September 18, 2002 of the Provincial Assessor of Surigao del Sur, the pertinent portions of which read as follows: "Section 199. Definitions . When used in this Title:" "(d) "Agricultural Land" is land devoted principally to the planting of trees, raising of crops, livestock and poultry, dairying, salt making, inland fishing and similar acquacultural activities , and other agricultural activities, and is not classified as mineral, timber, residential, commercial or industrial land." (Emphasis supplied) "xxx xxx xxx" "Section 4.02 Classification of Agricultural Lands . " "The productivity classification of other crop lands not mentioned on the above classification, such as tree-farm, sugar, fishponds, vegetable, banana, etc. shall be determined by the assessor on the basis of the annual yield per hectare. Data on production of agricultural lands may be secured from the offices of the Provincial or City Agriculturist and the Provincial Officer of the Bureau of Plant Industry." HSTaEC "Each crop land should use the applicable unit of measure such as cubic meter for tree farms, picul for sugar, kilos for fishponds , etc." (Emphasis supplied) "As to the second clarificatory query, as to whether the government is allowed to demand payment of real property tax from the lessee. The stand of this office is on the affirmative, quoting the provision of Assessment Regulations No. 3-76 dated February 9, 1976 of the then Cesar Virata, Secretary of the Department of Finance, quoted in part as follows:" "xxx xxx xxx" "Sec. 1. Timber and forest lands belonging to the Republic of the Philippines or any of its political subdivisions, the beneficial use of which has been granted to taxable person shall be subject to the real property tax ." (Emphasis supplied) "Added provision on its taxability is Section 234 (a) of R.A. No. 7160, quoted as follows:" "Section 234. Exemption from Real Property Tax . The following are exempted from 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) "It is the honest observation and belief of this office that payment of yearly lease rental to the national government is a national imposition, while real property tax is a local imposition which is authorized under Section 232 of R.A. No. 7160, quoted as follows:" aHTcDA "Section 232. Power to Levy Real Property Tax . A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereinafter specifically exempted." In view of the abovementioned, this Bureau agrees with the opinion of the Provincial Assessor of Surigao del Sur, that the said fishpond is taxable and that the local government is entitled to demand payment of real property tax from the lessee based on the Beneficial Use Theory. We hope this clarifies matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director