DOJ Opinion No. 059, s. 1980

DOJ OPINION NO. 059 , s. 1980 April 28, 1980 The Chairman Export Processing Zone Authority 4th Floor Legaspi Towers III, Roxas Blvd., Manila Sir : This refers to your request for opinion on "the proper interpretation" of section 4 of Presidential Decree No. 1449 amending section 18(f) of Presidential Decree No. 66 (the Charter of the Export Processing Zone Authority [EPZA]) which reads: "SEC. 4. Section eighteen of the same Decree is hereby amended by adding three new paragraphs after paragraph (f) thereof and amending paragraph (f) to read as follows: (f) Exemption from Local Taxes and License . Notwithstanding the provisions of law to the contrary, zone registered enterprises shall, to the extent of their construction, operation, or production inside the Zone be exempt from the payment of any and all local government imports, fees, licenses or taxes except real estate taxes which shall be collected by the Municipality responsible for the collection thereof under the provisions of the Real Property Tax Code: Provided, That machineries owned by zone registered enterprises which are actually installed and operated in the Zone for manufacturing, processing or for industrial purposes shall not be subject to the payment of real estate taxes for the first three (3) years of operation of such machineries: Provided, further , That fifty percent of the proceeds of the real estate taxes collected from all real properties located in the Zone and such other areas owned or administered by the Authority shall be remitted to the Authority by the Municipality responsible for the collection of such taxes under the provisions of the Real Property Tax Code. All real estate taxes accruing to the Authority shall be expended for such community facilities, utilities and/or services as the Board may determine. . . .". (Emphasis supplied). It appears that the provincial government of Bataan is of the view that the tax exemption granted in the first proviso of the above-quoted provision does not apply to machineries which had been installed and operated prior to June 11, 1978, the date when PD 1449 took effect, on the ground that "the clear intention of the amendment is to exempt only those machineries [which will have been] actually installed or operated after the effectivity of P.D. No. 1449, because the said amendment speaks of the first three (3) years of operation". LexLib On the other hand, Mattel Philippines Inc., thru its counsel, contends that under subject provision it is "liable for real estate taxes on [its] . . . machineries for the period prior to June 11, 1978 . . . but exempt from said taxes from June 11, 1978 up to the expiration of the three-year exemption period". As we see it, the legal problem is this: Considering that subject amendatory provision does not expressly provide for the date when the exemption therein provided shall start to be effective and simply refers to "machineries owned by zone registered enterprises which are actually installed and operated in the zone for manufacturing, processing or for industrial purposes," should the exemption from "the payment of real estate taxes for the first three (3) years of operation of such machineries", be applied to machinery installed before June 11, 1978? If so, how should such interpretation be applied? Subject to the extended discussion hereunder, we are of the opinion that in determining whether the exemption may be enjoyed, it is immaterial whether the machineries were installed before or after June 11, 1978, the three-year period to be counted from the date when subject machineries started operating, and the machineries to enjoy the exemption for so much of said three-year period which will have been unexpired after June 11, 1978. The subject matter of the amendatory provision introduced into P.D. No. 66 by P.D. No. 1449 is the grant of tax exemption to owners of machineries described therein under the terms prescribed therein. Following the settled rule of statutory construction that statutes operate prospectively unless otherwise provided, the tax exemption granted by P.D. No. 1449 should be made effective only with still respect to real estate taxes pertaining to that portion of the first-three-years period of operation which still has to run after June 11, 1978, when said decree became effective. Under Section 56 of P.D. No. 464 (The Real Property Tax Code), the real estate tax which includes the tax on machinery for any year, "shall attach and become due and payable on the first day of January". To illustrate the application of our above-stated interpretation, we shall resort to practical examples, to wit: 1. If the machinery was installed after P.D. No. 1449 took effect on June 11, 1978, such machinery would clearly enjoy exemption from the real estate tax for three years from the date of its installation. 2. If the machineries had already been installed and had been operating on June 11, 1978, the tax exemption shall be enjoyed for the remaining balance of the 3-year period after tax year 1978. For instance, if the machinery in question was installed or operated in January 1977, the taxes due thereon will have accrued in January of the same year, pursuant to section 56 of PD NO. 464, supra . Therefore, the machinery would be subject to the real property tax for that year (1977) because under PD No. 66 prior to its amendment by P.D. No. 1449 on June 11, 1978 all machineries of zone registered enterprises installed and operated in the zone were subject to the real estate tax. However, for tax years 1978 and 1979 the second and third years of the operation of the machinery, the realty tax for which would have accrued in January 1978 and January 1979, respectively, pursuant to section 56 of P.D. No. 464, supra the exemption would be enjoyed, but only for the tax period/s after June 11, 1978. Please be guided accordingly. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice