Bureau of Local Government Finance Opinion

February 24, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Lorna M. Salansang-Dee Counsel for PCU and UMC Philippine Christian University Taft Avenue corner Pedro Gil St. Manila Madam : This refers to your letter dated September 13, 1999 requesting opinion on the payment of transfer tax in the case of reconveyance made by and in favor of tax exempt institutions. Representations are made that the Philippine Christian University (PCU), an educational institution, executed a Deed of Reconveyance in favor of the United Methodist Church (UMC), a religious organization, of the properties originally owned by the said church it is further represented that the subject transfer does not involve any monetary consideration. It is contended that the properties reconveyed by PCU in favor of UMC is not taxable, citing Section 28 (c), Article VI of the 1987 Constitution which states that "Charitable institutions churches and parsonages or convents appurtenant thereto, mosques, non-profitable cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious charitable or educational purposes shall be exempt from taxation." Hence, by implication, it follows that transfer of such, properties between tax-exempt institutions is not subject to transfer tax under RA 7160. Section 135 of the Local Government Code of 1991 (LGC) provides as follows: EIDATc "Section 135. Tax on Transfer of Real Property Ownership. (a) The province may impose a tax on the sale, donation, barter or on any other mode of transferring ownership or title of reel property at the rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved in the acquisition of the property or of the fair market value in case the monetary consideration involved in the transfer is not substantial, whichever is higher. . . . ." The aforequoted Section 135 of the LGC, however, should be read in relation with Section 151 of the said Code, quoted hereunder, with respect to cities: "Section 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them mid distributed in accordance with the provisions of this Code. "The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes." Thus, whatever tax a province may impose, a city may likewise impose. Under said Section 135 of the Code, it is clear that the tax base should only be either the total consideration involved in the acquisition of the property, or its fair market value. In view thereof and considering the representations made that the subject Deed of Reconveyance, is a mere return of real properties to the original owner and does not involve any monetary consideration, it is the view of this Bureau that the said reconveyance of properties by PCU to UMC, both tax exempt institutions, is not subject to the payment of transfer tax pursuant to Section 135 of the Code. CSTDIE Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a1999-0912.pdf> last visited on October 2, 2013.