Bureau of Local Government Finance Opinion

January 11, 2005 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned, thru the ICO-Regional Director for Local Government Finance, Department of Finance, Region XI, Helen K. Lee Bldg., corner Juan Luna and Juan dela Cruz Streets, Davao City, to the City Assessor of Davao City. This pertains to the request of the said City Assessor for opinion on whether the mining claims of the New Davao Union Cement Corporation (NDUCC) located in Davao City are taxable separate from the land, either as industrial or agricultural. The request was made in view of the attached composite map of the mining claims of the said corporation prepared by the Bureau of Mines-Department of Environment and Natural Resources (DENR), Regional Office No. XI, as presented by the Commission on Audit (COA), said city. A perusal of the said composite map reveals that the two (2) parcels of land are apparently covered by Mineral Production Sharing Agreements (MPSA) i.e., (a) MPSA-080-97-XI with an area of 657.32 has; and (b) MPSA-82-97-XI with an area of 148.44 has. cDCaTS In this regard, please be informed that an opinion dated August 15, 2003, copy enclosed, of this Bureau, treating on a similar subject matter, provides as follows: "Under the 1st Indorsement dated April 13, 1998, the Department of Finance has ruled in the case of Celestial Nickel Mining Exploration Corp., the Following: 'In view of the foregoing, it is clear that Celestial being merely a Contractor, which primary obligation to undertake and execute mining operations (for the exploration development and commercial utilization of certain nickel ore deposits existing within the contract area (land) 'in behalf of the Government' is deemed not liable to real property taxes on its area of operations as stipulated in the abovementioned MPSA considering that the said corporation could not be considered as beneficial user of the subject land.' (Emphasis supplied) "There is a similarity between the above opinion of the DOF and the herein case. Both companies are covered by MPSA as contractor for the commercial utilization of certain mineral deposits for and in behalf of the government, with the agreement that the total value of production and sale of minerals derived from the mining operations should be divided between the Government and the contractor. "Being a mere contractor therefore, Rapu-Rapu Minerals, Inc./Ungay Malobago Mines, Inc. is not deemed liable to real property tax on the subject contract areas for undertaking mining operations "for and in behalf of the government" as stipulated under MPSA 122-98-V and MPSA 163-2000-V, but is liable instead to the government share as provided under Sections 290 and 292 of the Local Government Code of 1991." Similarly, therefore, and considering that the subject mining claims (NDUCC) are likewise covered by MPSA, the stipulation in the said Agreement is necessary in determining the taxability of the said Corporation. In view hereof, the Office of the said City Assessor is hereby advised to make representations with the said Corporation in order to determine as to whether their mining claim is similar to the abovecited case earlier resolved by this Bureau. It would be best if additional information will be furnished this Bureau so that the appropriate opinion can be rendered. EHSADc Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director