Exemption of the University of the Philippines from Payment of Registration Fees Assessed by the LRA/Registry of Deeds

DOJ OPINION NO. 025 , s. 2013 February 28, 2013 Hon. Alfredo E. Pascual President University of the Philippines Diliman, Quezon City Dear President Pascual : This has reference to your letter requesting for our opinion on the exemption of the University of the Philippines (UP) from payment of registration fees assessed by the Land Registration Authority (LRA)/Registry of Deeds. You state that you have been exerting efforts to have various untitled properties titled in the name of UP; that one such property is located in Laguna for which the Registry of Deeds assessed a total of PhP5,372,242.35 in registration fees; that the bulk of the fees are made up of the actual registration fee, assurance fund fees, and legal research fund fees, each amounting to Php3,431,226, Php1,905,600, and PhP34,312.26 respectively; and that all of such fees fall under Section 111, Chapter XI of Presidential Decree No. (P.D.) 1529, otherwise known as the Property Registration Decree. It is your position that as the national university, UP is part of the national government and is thus exempt from registration fees; that pursuant to Section 2 of Executive Order No. 292 (EO 292), otherwise known as the Administrative Code of 1987, chartered institutions that are not integrated within the department framework vested with special functions or jurisdiction by law, and are endowed with some if not all corporate powers, administering special funds and enjoying operation autonomy are considered Instrumentalities of the National Government; that State Universities, such as the University of the Philippines, fall under such definition; that in the case Republic of the Philippines vs. City of Paraaque (G.R. 191109, July 18, 2012), the Supreme Court of the national government as defined in the Administrative Code; and that under Section 56 of P.D. No. 1529, the National Government is exempt from payment of registration fees. aESICD You further argue that even if UP is not exempt as an instrumentality of the Government, the imposition of the abovementioned fees is not a fee, but is a tax for which the UP must be exempt; that the imposition of such registration fees is not a police power measure for regulation purposes but a tax measure for raising revenues; that UP wished to point out that part of the registration fees assessed under Section 111 Chapter XI of P.D. No. 1529 are used for the maintenance and other operating expenses of the Land Registration Commission (now the Land Registration Authority) as provided for under the last paragraph (Special Accounts) of Section 111 of P.D. No. 1529 and in Section 94. Custody and Investment of Fund of P.D. No. 1529; that such fees go beyond the regulatory functions of "fees" and already serve the purpose for which taxes are imposed, that is, to raise revenue; that accordingly, you seek exemption from such fees based on Section 25 (a) of Republic Act No. 9500, otherwise known as the University of the Philippines Charter of 2008, which provides that " All revenues and assets of the University of the Philippines used for educational purposes or in support thereof shall be exempt from all taxes and duties "; that such provision draws strength from Article XIV, Section 4 (3) of the 1987 Constitution which states: " All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purpose shall be exempt from tax. " Finally, you said that even if the said fees serve a regulatory function, the Supreme Court has held that fees may be properly regarded as taxes even though they also serve as an instrument of regulation as in the case of Philippine Airlines vs. Edu (G.R. No. L-41383, August 15, 1988, 164 SCRA 320, 328); that the various properties being registered will be used for the benefit of the students, and as such, should not be taxed in accordance with the provisions of the UP Charter and the Constitution, which mandate that all revenue and assets of the University used for educational purposes should not be taxed; that the Constitution mandates that the State shall give priority to education and that it shall protect and promote the right of all citizens to quality education at all levels, and shall take appropriate steps to make such education accessible to all; and that it is for these reasons that UP seeks exemption from payment of property registration fees, including payment of the fees for the assurance and legal research funds for the property above mentioned as well as all other properties to be registered. Subject to the discussions herein provided, it is our view that, in the absence of a law, rule, regulation or an agreement that will specifically exempt UP from the payment of registration fees and fees for the assurance and legal research funds, UP is not exempt from the payment of such fees. SEHTAC UP, being the national university and a chartered institution, is part of the national government, as it falls within the definition of Instrumentalities of the National Government under Section 2 of E.O. No. 292, to wit: "Section 2. General Terms Defined. ... (4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality ,or government-owned or controlled corporation, or a local government or a distinct unit therein. (10) Instrumentality refers to any agency of the National Government ,not integrated within the department framework vested within special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. (12) Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges and the monetary authority of the State. (Emphasis supplied) Likewise, the Supreme Court in the case of UP v. Dizon 1 held that: "The Court stressed that the UP is a government instrumentality performing the State's constitutional mandate of promoting quality and accessible education and that all the funds going into its possession, including interest from its bank deposits constitute a "special trust fund," the disbursement of which should always be aligned with the UP's mission and purpose, and should always be subject to auditing by the COA." (Emphasis supplied) However, even if UP is a government instrumentality, it is still subject to the payment of the appropriate fees, which includes those under Section 111 of P.D. No. 1529, since the said P.D. does not provide for an exemption from the payment of the said fees for the national government. Reliance by UP on Section 56 of P.D. No. 1529 that the national government is exempt from payment of registration fees is misplaced. Section 56 of P.D. No. 1529 reads: EITcaH "SEC. 56. Primary Entry Book; fees ; certified copies. Each Register of Deeds shall keep a primary entry book in which, upon payment of the entry fee ,he shall enter, in the order of their reception, all instruments, including copies of writs and processes filed with him relating to registered land. He shall, as a preliminary process in registration, note in such book the date, hour and minute of reception of all instruments, in the order in which they were received. They shall be regarded as registered from the time so noted, and the memorandum of each instrument, when made on the certificate of title to which it refers, shall bear the same date; Provided, that the national government as well as the provincial and city governments shall be exempt from the payment of such fees in advance in order to be entitled to entry and registration ." (Emphasis supplied) A careful reading of the aforequoted relevant provisions of Section 56 would show that it talks about the payment entry fee as a preliminary process in registration. It does not talk about registration fees nor exemption from payment of the entry fee or registration fees. In fact, the national government is still required to pay the entry fee. The only exemption is for the payment of such fees in advance in order for the government to be entitled to entry and registration in the primary entry book because as a general rule, the Register of Deeds is not authorized to register an instrument for purposes of a primary entry without payment in advance of the entry fee. Moreover, we are not persuaded with the argument that the registration fee is actually a form of tax and such being the case, UP is not obliged to pay the registration fee because pursuant to its Charter, all of its revenues and assets used for educational purposes or in support thereof shall be exempt from all taxes. A tax refers to a financial obligation imposed by a state on persons, whether natural or juridical, within its jurisdiction, for property owned, income earned, business or profession engaged in, or any such activity analogous in character for raising the necessary revenues to take care of the responsibilities of government. An often-quoted definition is that of Cooley: "Taxes are the enforced proportional contributions from persons and property levied by the state by virtue of its sovereignty for the support of government and for all public needs." 2 Fees is a reward or compensation allowed by law to an officer for specific services performed by him in the discharge of his official duties; a sum certain given for a particular service; the sum prescribed by law as charge for services rendered by public offices. 3 TEacSA The registration fees under P.D. No. 1529 is more in the nature of fees and not a form of tax since its principal object is not to raise revenues but to cover the administrative cost of registration under the Torrens system. Based on the afore-cited case of Philippine Airlines v. Edu :"If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Umali, Id. ) such is the case of motor vehicle registration fees." In the present instance, the registration fee under P.D. No. 1529 is not of equivalent standing with the motor vehicle registration fees. Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. G.R. No. 171182, August 23, 2012. 2. Republic v. Philippine Rabbit Bus Lines, Inc. , 32 SCRA 215. 3. P. 370, Philippine Law Dictionary, 3rd ed. Citing Manila Electric Co. v. Auditor General , 73 Phil. 133.