SSS Exemption from Assessment and Payment of Real Property Tax Accruing on the Common Areas of a Condominium

DOJ OPINION NO. 099 , s. 2012 November 7, 2012 Atty. Voltaire P. Agas Vice President/Chief Legal Counsel Legal Services Division Social Security System East Avenue, Diliman, Quezon City Dear Atty. Agas : This refers to your request for opinion as to whether the SSS is exempt from an assessment and payment of real property tax accruing on the common areas in CyberOne Tower (CyberOne), Eastwood, Quezon City, where SSS-owned condominium units are located. In your letter, you state that the assessment of real property tax is in proportion to SSS' respective interest in the condominium corporation, and made pursuant to Part II, Sections 4 (A) and 6 of the Master Deed and Restrictions of CyberOne, to wit: "Section 4. Association Dues. "A. Regular Assessment The Condominium Corporation shall periodically collect association dues from all owners of the units, in such amount as is sufficient to cover the cost of maintenance, repair, insurance and security of, as well as, real property taxes accruing on the Unlimited Common Areas and Limited Common Areas, and all other reasonable expenses incurred solely for the benefit of said areas, subject to the provision on Sharing of Expenses in Part II, Section 3B. paragraphs 1 to 4. "Section 6. Taxes and Assessments. "All unit owners shall share in the payment of real property taxes and assessments accruing on the Unlimited and Limited Common Areas, in proportion to their respective interest in the Project. All payments for taxes on the Unlimited and Limited Common Areas shall be assessed against the unit owners either as a regular assessment or special assessment in accordance with Part II, Section 4(B)." aDSTIC You further state that the SSS has been made to pay the real property taxes for the common areas, notwithstanding SSS exemption from all kinds of taxes under Section 16 of Republic Act (RA) No. 1161, as amended by RA No. 8282; hence, this request for legal opinion. The tax-exempt status of the SSS is provided under Section 16 of RA No. 1161, as amended, to wit: "SEC. 16. Exemption from Tax, Legal Process and Lien. All laws to the contrary notwithstanding, the SSS and all its assets and properties, all contributions collected and all accruals thereto and income or investment earnings therefrom as well as all supplies, equipment, papers or documents shall be exempt from any tax, assessment, fee, charge, or customs or import duty; and all benefit payments made by the SSS shall likewise be exempt from all kinds of taxes, fees or charges, and shall not liable to attachments, garnishments, levy or seizure by or under any legal or equitable process whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the member to the SSS. No tax measure of whatever nature enacted shall apply to the SSS, unless it expressly revokes the declared policy of the State in Section 2 hereof granting tax-exemption to the SSS. Any tax assessment imposed against the SSS shall be null and void. (Emphasis supplied) Accordingly, under Section 16 of RA No. 1161, as amended, the SSS and all its assets and properties are exempt from all taxes, assessments, fees, charges, or customs or import duties. The nature of the exemption is elaborated in Social Security System v. City of Bacolod, et al. ( G.R. No. L-3576, July 21 , 1982), 1 whereby it was held that the SSS' exemption from real property tax is all encompassing. It does not make any distinction, whether said properties are held by SSS in a sovereign, governmental or political capacity or possessed in a private, proprietary or patrimonial character. We also note that the exemption covers all tax measures of whatever nature, whether local or national. For national tax measures, they shall not apply to the SSS unless there is an express revocation of the declared State policy of granting tax exemption to the SSS. The issue in the case at hand is whether the undivided interest of SSS in the common areas, for which it is assessed real property tax in proportion to its interest, can be considered SSS asset or property that is exempt from tax pursuant to Section 16 of RA No. 1611, as amended. Under Part I, Section 7 of the Master Deed, a condominium corporation shall be organized for the purpose of holding title to the common areas and of managing the project, and that all unit owners shall automatically become members of the condominium corporation to the exclusion of others. AIcECS On the other hand, it is provided in Part I, Section 6 of the Master Deed, that the unit owner shall acquire an undivided interest in, and the non-exclusive right to utilize, the unlimited common areas and the right to the exclusive use or benefit, alone or with other unit owners similarly situated, of the limited common areas assigned to them, subject to reasonable rules and regulations as may be promulgated from time to time by the condominium corporation. Based on these provisions of the Master Deed, it can be inferred that while the condominium corporation holds the legal title to the common areas, it is the members of the corporation who are the beneficial owners of the common areas. The term "beneficial owner" is defined as one who does not have title to property but has rights in the property which are the normal incident of owning the property. (Black's Law Dictionary, Sixth edition) In the case at hand, the condominium corporation, while having legal title over the property, merely holds the same for the benefit of the unit owners. That beneficial ownership lies with the unit owners or members of the condominium corporation is buttressed, not only by Part I, Sections 6 and 7 of the Master Deed but also by Part II, Section 11 (A) thereof which states that in case of expropriation, all the unit owners affected shall appoint the Board of Directors and such persons as the Board may designate to represent all of them in connection thereto, and that any award shall be paid to the corporation for distribution to the affected unit owners in proportion to their respective equity interest in the project or in the limited common areas as the case may be. If both legal title and beneficial ownership were lodged in the condominium corporation, then there would have been no need for the affected unit owners to appoint the Board to represent them in the expropriation, and the proceeds, if any, would have been retained by the condominium corporation instead of it being distributed to the affected unit owners. Thus, for the purpose of real property taxation, the undivided interest of SSS in the common areas constitutes a form of property or asset of the SSS that is exempt from real property tax, it being within the coverage of the tax exemption under Section 16 of RA No. 1161, as amended. The SSS is, therefore, exempt, not only from the real property tax accruing from its own units within CyberOne, but also from the real property tax accruing from its undivided interest in the common areas of the condominium, which amount is in proportion to its interest in the project. Please be guided accordingly. ESIcaC Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. The Court stated as follows: " It bears emphasis that the said section does not contain any qualification whatsoever in providing for the exemption from real estate taxes of "lands and buildings owned by the Commonwealth or Republic of the Philippines." Hence, when the legislature exempted lands and buildings owned by the government from payment of said taxes, what it intended was a broad and comprehensive application of such mandate, regardless of whether such property is devoted to governmental or proprietary purpose. xxx xxx xxx "The distinction laid down in "NACOCO vs. Bacaal" between government agencies exercising constituent functions, on the one hand, and those performing ministrant functions, on the other, has therefore no relevance to the issue before Us. What is decisive is that the properties possessed by the SSS, albeit devoted to private or proprietary purpose, are in fact owned by the government of the Philippines. As such they are exempt from realty taxes. It is axiomatic that when public property is involved, exemption is the rule and taxation, the exception. "In connection with the issue at hand, it would not be amiss to state that Presidential Decree No. 24, which amended the Social Security Act of 1954, has already removed all doubts as to the exemption of the SSS from taxation." . . . (Emphasis supplied)