A. The Manila International Airport Authority (MIAA), Bases Conversion Development Authority (BCDA), Philippine Ports Authority (PPA), Mactan International Airport Authority (MCIAA), University of the Philippines (UP), Bangko Sentral Ng Pilipinas (BSP) and all other so called GOCCs which are not organized as stock or non-stock corporations, are not considered as GOCCs but as government instrumentalities or "government corporate entities". According to the said Supreme Court Decision, they are not subject to the payment of any taxes, fees or charges of any kind imposed by provinces, cities, municipalities, and barangays pursuant to Section 133(o) of the Local Government Code. The Government Service and Insurance System (GSIS), the Social Security Services System (SSS), The National Kidney Foundation of the Philippines , the Lung Center of the Philippines (LCP), the Philippine Heart Center (PHC), the Philippine Economic Zone Authority (PEZA), to name a few, are likewise to be considered as government instrumentalities or "government corporate entities."
B. The real properties of government instrumentalities or government corporate entities are classified either as properties of public dominion or of private ownership. The former consists of properties which are intended for "public use" and/or for "some public service" and are
inalienable and outside the commerce of man. These properties are not subject to levy, encumbrance or disposition through public or private sale, and are generally exempted from the payment of real estate taxes. These real properties are titled either in the name of the Republic of the Philippine itself or in the name of the agencies or instrumentalities of the National Government.
C. Exception to the exemption is when the beneficial use of the real property/ies have been granted, for consideration or otherwise, to a taxable person. Thus, the Supreme Court held that lands and buildings which MIAA leases of private entities are not exempt from real estate taxes. Similarly, the Court also held that portions of the lands leased to private entities by the Lung Center of the Philippines, as well as those parts of the hospital leased to private individuals are not exempt from such taxes (Citing Lung Center of the Philippines vs. Quezon City, G.R. No. 144104, June 29, 2004).
D. The other real properties of government instrumentalities which are not intended for public use or some public service are classified as private properties which are subject to the payment of real estate taxes.
E. GOCCs, whose capital stock is divided into shares of stock, whether or not incorporated under a special charter or under the Corporation Code as stock corporations, are subject to real estate taxes on the real properties owned by them. Thus, according to the Supreme Court, the Land Bank of the Philippines, Development Bank of the Philippines, Philippine Crop Insurance Corporation, and the Philippine International Trading Corporation, among others, are all subject to the payment of real estate taxes on the real properties owned by them.
F. Water Districts are specifically exempted from real estate taxes. With this development, we therefore advise all concerned as follows :
1. MIAA and other "government instrumentalities" defined/mentioned in the Decision may temporarily suspend payments while the above case awaits finality. At present, the City of Paranaque moved for a reconsideration. However, with the 10-3 voting ratio in the Supreme Court when the aforesaid decision was rendered, 10 Justices in favor of the exemption of government corporate entities, and 3 Justices dissenting, the possibility of the said decision being overturned is very slim. We shall advise you of the results of Paranaque City's Motion for Reconsideration as soon as the Supreme court issues its ruling thereon.
2. However, nothing should prevent the GOCCs from providing financial and other assistance to the LGU in pursuit of its corporate social responsibility for the benefit of local communities.
3. The Inventory of Real Properties requested from all Government-Owned or -Controlled Corporations (GOCCs) shall no longer be required. However, all government instrumentalities and GOCCs are strongly urged to accomplish and maintain for their own record and file, the Pro-forma matrix for the Inventory which we prescribed under Memorandum No. 46 dated July 6, 2006. For the government instrumentalities, the important items or factors to be indicated in the Inventory to be filed are: the name of the registered owner, its location, mode of acquisition, and actual use. The inventory will be helpful in the formulation of the necessary legal theory or strategy to protect GOCCs or government corporate entities from unwarranted local tax impositions.
4. Lastly, we would like to request on or before Friday, September 29, 2006, for a feedback from all government instrumentalities and GOCCs regarding any other real property not covered under any of the principles that were enunciated by the Supreme Court in the aforesaid.
For your information and guidance.
ATTY. AGNES VST DEVANADERA
Government Corporate Counsel
