Bureau of Local Government Finance Opinion

September 6, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 4th Indorsement Respectfully returned, thru the Municipal Treasurer, to the Municipal Assessor, Taguig, Metro Manila, his within preceding Indorsement dated June 30, 2000, requesting clarification as regards the period or time of the commencement of real property tax exemption of the Asset Privatization Trust (APT), as an addendum to the attached 2nd Indorsement dated June 26, 2000 of this Bureau. TcAECH Under the subject 3rd Indorsement, that Office raised the contention that the exemption period of APT begins only upon the transfer of the torrens title to the transferee (the Government of the Republic of the Philippines) and not on the date the Deed of Transfer was executed in line with Proclamation No. 50, as amended. It appears that the properties of the Philippine Polysterine Paper Corporation (PPPC) were transferred to the National Government through APT as Trustee who immediately took possession of the same on February 27, 1987, pursuant to Proclamation No. 50 dated December 8, 1986 of the then President of the Philippines, Corazon C. Aquino. The real property taxes thereon for the years 1982 to 1987 have been paid to the Municipal Treasurer's Office of Taguig under Official Receipt No. 3551026 dated June 28, 2000. ITDSAE In the letter dated July 5, 2000, APT advanced the contention that the exemption from payment of real property taxes should cover the period from the time the National Government took title to and possession over the subject properties of the PPPC, which date was on February 27, 1987, on the basis of its "use" allegedly pursuant to Section 198(b) of R.A. No. 7160, otherwise known as The Local Government Code of 1991, which states: "h) Real property shall be classified for assessment purposes on the basis of its actual use." Section 12, paragraph (3) of Proclamation No. 50, empowers APT to, among others, "take title to and possession of and to take such steps as may be necessary to conserve assets transferred to it by the Committee, including, without limitation, to oversee the management and operation of corporations or other businesses constituting such assets, and to file suits and institute proceedings on behalf of and in the name of National Government for the recovery and protection of such assets;" (Emphasis ours) It is evident that by virtue of Proclamation No. 50, the National Government, thru APT, took possession, use of, and control over, the subject properties (in this case, the properties of PPPC) and all the other attributes of ownership, short of the naked title. ADSTCI A review of the Deed of Transfer executed by the DBP in favor of the Government of the Republic of the Philippines (Government), stipulated, among others, that: "1.01 For and in consideration of the Government's assumption of certain liability of the Bank, the Bank hereby assigns, transfers and conveys unto and in favor of the Government all its rights, titles and interests in and to certain assets of Banks (Bank's Assets), as listed and more particularly described in Annex "A" hereto, consisting of eight (8) pages." (emphasis supplied.) Section 23 of Proclamation No. 50, as amended, provides further: "Sec. 23. Mechanics of Transfer of Assets . As soon as practicable, but not later than six months from the date of the issuance of this Proclamation, the President, acting through the Committee on Privatization, shall identify such assets of government institution as appropriate for privatization and divestment in an appropriate instrument describing such assets or identifying the loan or other transactions giving rise to the receivables, obligations and other property constituting assets to be transferred. CDISAc "The Committee shall, from the list of asset deemed appropriate for divestment, identify assets to be transferred to the Trust or to be referred to the government institutions in an appropriate instrument, which upon execution by the Committee shall constitute as the operative act of transfer or referral of the assets described therein, and the Trust or the government institution may thereupon proceed with the divestment in accordance with the provisions of this Proclamation and guidelines issued by the Committee. (Emphasis supplied) Administrative Order No. 14, paragraph (2) provides that: "(a) The identification of and transfer to the National Government of certain assets of the Development Bank of the Philippines and the Philippine National Bank consisting of loans equity investments accrued interest receivables, acquired assets and other assets included in the list consisting of 17 pages hereto attached and made an integral part hereof as Annex "A". (Emphasis supplied) It is evident from the foregoing that the execution of the Deed of Transfer operates to transfer all rights, titles and interest over PPPC assets from the DBP in favor of the Government which authorizes the Committee on Privatization to identify asset to be transferred to the government or to the Trust (APT) or to the government institutions in an appropriate instrument which constitute as the operative act of transfer. As such the operative act of transfer is to the Government not to APT. Simply put, the Government is deemed owner of the subject property which is under the administration of APT for the purpose of taking possession, disposition, liquidation and/or privatization. HaTDAE Such being the case, the ruling under the 2nd Indorsement dated January 21, 1993 will not apply. In the stipulation of facts, the property involved is owned by the Government. Hence, it belongs to the Republic of the Philippines and falls squarely within the exempt provisions of law. Considering that PPPC has paid the delinquent real property taxes from 1982 to 1987, as earlier stated, and the subject property is owned by the Government, the exemption of said properties should commence on January 1, 1988, or the year after APT held or possessed the same on February 27, 1987, in line with Art. 3(b)2(h) of the Manual on Real Property Tax Administration in the Philippines. SaIACT We trust that this will clarify matters. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge