Computation of the Market Value of Machineries Owned by Steel Corporation of the Philippines

December 3, 1999 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION MEMORANDUM FOR : Secretary Edgardo B. Espiritu THRU : Undersecretary Lily K. Gruba SUBJECT : Computation of the Market Value of Machineries Owned by Steel Corporation of the Philippines Attached is the proposed action on the request of the Steel Corporation of the Philippines (SCP), thru its counsel, the Laya Mananghaya and Co., for confirmation of its contention that, for purposes of determining the real property taxes due on its imported machinery and equipment, the actual cost of the machinery denominated in foreign currency, should be determined based on the average exchange rate prevailing at the time the machinery was actually acquired and not at the time the same was installed. The instant request pertains to the provision of Section 224 of R.A. No. 7160 which indicates that "(T)he fair market value of a brand-new machinery shall be the acquisition cost," and if the machinery is imported, "(T)he cost in foreign currency shall be converted to peso cost on the basis of foreign currency exchange rates as fixed by the Central Bank. We find merit in the contention of SCP which is anchored on the Decision of the Court of Tax Appeals in Case No. 2880, dated April 5, 1982, the pertinent portion of which was cited under the attached proposed action. Moreover, SCP, in citing Section 198(e) of the Code (R.A. No. 7160), submits that it would be inequitable, unjust and unfair for SCP to bear the burden of higher real property taxes resulting from a regional currency crisis and not from a real appreciation of the value of realty per se . cEaCAH For your signature/approval. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director