Bureau of Local Government Finance Opinion

April 16, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The Officer-In-Charge Office of the Postmaster General Philippine Postal Corporation 3rd Floor Philpost Main Bldg. Liwasang Bonifacio Manila S i r : At the outset, we would like to manifest hereon that the unintentional delay in answering your herein query was due to the representations made by the representative of that corporation that, in addition to the basic letter, an opinion to be rendered by the Legal Service of PHILPOST will be furnished this Bureau, which opinion, dated October 6, 2000, was received only last December 29, 2000. This refers to your letter requesting clarification on whether or not the Philippine Postal Corporation (PPC) is exempt from the payment of real property taxes on its real properties pursuant to R.A. No. 7160, otherwise known as the Local Government Code of 1991. The subject request stemmed from the enactment of R.A. No. 7354, creating the Philippine Postal Corporation, defining its powers, functions and responsibilities, providing for regulation of the industry and for other purposes connected therewith. Paragraph 3, Section 14, of R.A. No. 7354 provides as follows: "Section 14. Exemption from Taxes, Customs and Tariff Duties . "xxx xxx xxx. " The Corporation is also exempt from the payment of capital gains tax, local government imposts and fees after December 31, 1997 : Provided, That it may offset the full value of capital investments not otherwise funded by the National Government against any income tax due for the same period." (Emphasis ours) The Legal Opinion embodied under the attached October 6, 2000 letter of the Legal Service of that corporation disclosed that: "Real Property Taxes are levied on the res .. The tax incidence and liability is attached on the real property itself. Generally, as a rule of thumb, who ever owns the taxable property will shoulder the taxes levied. ITAaCc "But for clarity, we shall make an assumption that PPC is effectively occupying the property even if the title is not yet vested on its name. The following are the consequences, viz : "a) If the real property is owned before by a private entity, then that entity will be liable for payment of property tax except when there is contractual obligation on the part of PPC that it would shoulder payment (of) such tax instead. "b) If the real property is owned before by the Republic of the Philippines or any of its political subdivisions then the payment of property tax is exempt, except when the beneficial use thereof has been granted for consideration or otherwise to a taxable person, including PPC at that time." Records show that prior to its becoming a government-owned and controlled corporation (GOCC) in 1992, PPC is a regular government agency performing governmental functions under the name of the Bureau of Posts, which was created under Act No. 462 and subsequently renamed as the Postal Services Office, created under Executive Order No. 125 dated April 30, 1987, as amended by Executive Order No. 125-A dated October 1, 1987. Undoubtedly, the then Postal Services Office, enjoys real property tax exemption, pursuant to Section 40(a) of the Real Property Tax Code, P. D. 464, as amended, the law then prevailing prior to the promulgation and effectivity of R.A. No. 7160. Section 40(a) of P.D. 464 provides as follows: "SEC. 40. Exemption from Real Property Tax . The exemption shall be as follows: "(a) Real Property owned by the Republic of the Philippines or any of its political subdivision and any government-owned corporation so exempt by its charter; Provided, however, that this exemption shall not apply to real property, of the above-named entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. "xxx xxx xxx." In June 1992, six months after the Local Government Code of 1991 (R.A. No. 7160) took effect, R.A. No. 7354, otherwise known as the "Postal Service Act of 1992", was enacted into law, having as one of its objectives the "economical and speedy transfer of mail and other postal matters, from sender to addressee, with full recognition of their privacy or confidentiality." The Postal Services Office was therefore abolished, and all contracts, records, and documents relating to the operation of the Postal Services Office (PSO) and its postal field offices were transferred to the Philippine Postal Corporation (PPC) pursuant to Section 29 of R.A. No. 7354. HTDAac Its transformation into a GOCC commencing June 1992, PPC has then ceased to be a regular government agency which used to enjoy real property tax exemption pursuant to the abovecited Section 40(a) of the Real Property Tax Code, as amended. Neither can it continue to enjoy real property tax exemption, pursuant to the provisions of the Local Government Code, particularly Sections 234 and 534(f) thereof, which provisions are quoted hereunder: "Section 234. Exemptions from Real Property Tax . The following are exempted from payment of real property tax: "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) "Section 534. Repealing Clause . . . . "xxx xxx xxx. "(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly." Consequently, therefore, PPC shall be liable to pay real property taxes beginning January 1, 1993 pursuant to the withdrawal of exemption provisions of R.A. No. 7160, and Article III(B)(2) of the Manual on Real Property Tax Administration which reads as follows: "(2) Day as of which exemption determined "If property is not exempt on the tax day, it is liable to taxation for the (fiscal) year although it afterwards becomes exempt. For instance, it has been decided that where land has become liable for taxes, it remains so for that year although subsequently acquired for purposes rendering it exempt." However, the liability of PPC to pay real property taxes on its real properties should cease commencing January 1, 1998 only, pursuant to the aforecited pertinent provision of Section 14 of R.A. No. 7354. With regard to the query embodied under your letter dated October 3, 2000, addressed to the APMG for Finance of that corporation, as to whether or not PPC is indeed supposed to pay real property taxes for the period June 3, 1992 to December 31, 1997, (that is, when the title of the PSO properties have not yet been transferred in the name of PPC), Section 29 of R.A. 7354 categorically provides that all real and personal properties, which upon the effectivity of this Act, are vested in, or earned by, the Postal Services Office, are transferred to the Corporation without need of conveyance, transfer or assignment. Stated otherwise, real properties of PSO, shall automatically become properties of PPC even if the titles to these properties have not as yet been transferred in the name of PPC. Concisely, therefore, the subject real properties of the defunct Postal Services Office, which were transferred to PPC under R.A. No. 7354, should be declared/assessed as follows: 1. Taxable effective January 1, 1993 until December 31, 1997; and 2. Exempt effective January 1, 1998 and thereafter. HcaDTE We hope that we have adequately answered your herein query. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director