Liability of PCGG to Pay Real Property Tax, Business Tax, and Mayor's Permit for the "Payanig Property" in Pasig City

DOJ OPINION NO. 003 , s. 2010 February 1, 2010 Mr. Ricardo M. Abcede Commissioner-in-Charge Asset Management Department Presidential Commission on Good Government IRC Building, No. 82 EDSA, Mandaluyong City Sir : This has reference to your request for this Department's legal opinion regarding the claim of the City of Pasig that the two (2) parcels of land, otherwise known as the "Payanig Property", registered in the name of Mid-Pasig Development Corporation ("Mid-Pasig", for brevity), two of the properties surrendered to the National Government by Mr. Jose Y. Campos, are subject to real property tax, business tax and mayor's permit. We take it that the query stemmed from the letter of then Pasig City Mayor Vicente Eusebio requiring the PCGG to pay business taxes, mayor's permit, and real property taxes for the "Payanig Property" to the City of Pasig. It also appears that similar demands for payment of real estate taxes were previously made by then Pasig City Mayor Soledad C. Eusebio during her term of office. You state that Mid-Pasig had already stated its position on the matter and, in fact, in its letter to the City of Pasig, Mid-Pasig advised the latter that, among other things, the Payanig Property is exempt from taxes, such as the real estate tax, upon its surrender to the National Government based on DOJ Opinion No. 108 dated October 16, 1987 and BIR Ruling No. 030-02 dated August 7, 2002, respectively. HSAcaE You also state that Pasig City's claim that Payanig Property is not exempt from real property tax is anchored on the provisions of Section 234 of Republic Act (R.A.) No. 7160 or the Local Government Code of 1991, claiming that although Payanig Property was surrendered to the National Government, the property or a portion thereof was leased out by Mid-Pasig to various private individuals and entities. You revealed, however, that as pointed out by Mid-Pasig, the lease of the Payanig Property or a portion thereof has been resorted to for the sole purpose of "maintaining the assets and properties of the entities under the IRC Group of Companies which includes Mid-Pasig and to pay the salaries of the IRC Groups' skeletal force and the expenses of suits in court involving said property and entities, pending its privatization which may be realized only after final judgment of the case involving titles to or ownership over the said property before the Sandiganbayan." Hence, this query. At the outset, we would like to stress that Section 234 of the Local Government Code is clear that "real property owned by the Republic of the Philippines or any of its political subdivisions are exempted from real property tax, except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." (emphasis supplied) In the case of Manila International Airport Authority (MIAA) vs. City of Pasay, et al., 1 the Supreme Court ruled and we quote: "Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real property tax. In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like private parties are subject to real property tax by the City of Pasay. (emphasis ours) ICASEH Likewise, as we stated in DOJ Opinion No. 108, s. 1987, and we quote: "Accordingly, Section 40 of Presidential Decree No. 464, as amended, exempts from real property tax real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter unless the beneficial use of which has been granted to a taxable person. . . . (emphasis ours) For all the foregoing, we reiterate the view that the transfer in favor of the Government of the subject properties may be effected without the payment of taxes being required to be paid by the Registers of Deed . . ." Evidently, while DOJ Opn. No. 108, s. 1987 is still applicable, said opinion covers exemption from payment of capital gains, transfer tax, real property tax and other fees in connection with the transfer of real properties voluntarily surrendered to the government. Upon the other hand, your query refers to exemption from payment n real property tax in connection with the beneficial use of the properties, such as when it n were leased to private parties. Please note that in the above-mentioned DOJ Opinion, we mentioned that when the beneficial use of the property has been granted to a taxable person, the same is no longer exempt from real property tax. As to the business tax and Mayor's Permit fees, some of the Contracts of Lease provide that the Lessees shall be solely responsible for any permits, fees, and licenses of whatever nature which may be required by any government agency, local or national, for its operation and the Lessor shall not be liable for the non-issuance of any such permits, fees and licenses except as may be provided. Clearly, it is the Lessees that should bear these expenses for it is their business which benefits therefrom. Please be guided accordingly. Very truly yours, (SGD.) AGNES VST DEVANADERA Secretary Footnotes 1. G.R. No. 163072, April 2009. n Note from the Publisher: Copied verbatim from the official document. n Note from the Publisher: Copied verbatim from the official document.