Bureau of Local Government Finance Opinion

July 4, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned, thru the Regional Director for Local Government Finance, Department of Finance, Region II, 17 Provincial Road, Caritan Sur, Tuguegarao City, to the Provincial Assessor, Ilagan, Isabela, the within preceding Indorsement dated February 4, 2002 relative to the 1st Indorsement dated December 21, 2001 of that Office, requesting clarification concerning the taxability of the real properties owned by the Philippine Rice Research Institute (PRRI) and the Bureau of Plant Industry (BPI) formerly Cagayan Valley Experimental Station (CVES) which are both located at Malasin, San Mateo, same province. The subject request was prompted by the letter dated December 18, 2001 of the Officer-in-Charge, Provincial Treasurer's Office, addressed to the Provincial Assessor, both of the same province, inquiring on the taxability of the real properties owned by PRRI and BPI. The said Provincial Assessor, in his 1st Indorsement dated December 18, 2001 submitted that the Municipal Assessor of San Mateo, same province, declared the real properties of PRRI as taxable in view of the provision of Section 234 of R.A. No. 7160, otherwise known as the Local Government Code of 1991. However, that Office, believes that the owner government agencies, are operating not as government corporate agencies, but rather as line agencies and therefore, exempt from the payment of real property tax. Please be informed that under Title IV Section 19 of Executive Order No. 292, otherwise known as the Administrative Code of 1987, the Bureau of Plant Industry is one of the Bureaus under the Department of Agriculture, the mandate of which is provided under Section 2 of the said Code which is quoted as follows: "xxx xxx xxx "Section 2. The department is the government agency responsible for the promotion of agricultural development by providing the policy frame work, public investment, and support services needed for domestic and export-oriented business enterprises." "xxx xxx xxx. It can be gleaned from the aforecited provision that BPI is a government agency attached to the Department of Agriculture, performing governmental function such as the promotion of agricultural development, public investment and other support services for either domestic or foreign business enterprises. In this connection, attention is invited to Section 234(a) of R.A. No. 7160, otherwise known as the Local Government Code of 1991 which reads as follows: "Section 234. Exemption 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 subdivision except when the beneficial use thereof has been granted, for consideration or otherwise, to taxable person;" "xxx xxx xxx. Evidently, the abovequoted provision of said Code mandates that real properties of government agencies or any of its political subdivisions are exempt from the payment of real property taxes except when the beneficial use thereof is granted to a taxable person. As regards PRRI, it is informed that the said Institute is a government-owned or controlled corporation (GOCC) attached to the Department of Agriculture, with a budgetary support of P100,000,000.00, as reflected in the attached xerox copy of the General Appropriation Act (GAA) for CY 2002. Being a GOCC, the applicable provision of law on the matter is the last paragraph of Section 234 of the same Code, which provides as follows: "Section 234. Exemption from Real Property Tax . The following are exempted from the payment of real property taxes. "xxx xxx xxx; "Except as provided herein, any exemption from payment of real property tax previously granted to , or presently enjoyed by , all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code ." (Emphasis supplied) Clearly, the above provision of said Code (RA 7160) explicitly provides that the exemptions previously granted to government-owned or controlled corporations have been withdrawn upon the effectivity of the Code. Viewed in the light of the foregoing, this Bureau believes that the real properties owned by the Bureau of Plant Industry (BPI) are exempt from the payment of real property tax while those of the Philippine Rice Research Institute (PRRI) should be declared as taxable beginning 1992 (Effectivity of R.A. No. 7160). Be guided accordingly. (SGD.) JUANITA D. AMATONG Undersecretary and Officer-in-Charge, BLGF