Friday, August 3, 2012

PRA properties exempted from tax


Businessworld - ALL RECLAIMED properties of the Philippine Reclamation Authority (PRA) are exempted from real estate taxes, the Supreme Court (SC) has declared, saying the agency is a non-commercial, government-owned entity that is non-taxable.

In a decision dated July 18, the high court’s Third Division granted the PRA’s petition to overturn the January 2010 ruling of the Parañaque City Regional Trial Court (RTC) Branch 195, which favored the city government’s claim for real property taxes on the agency’s reclaimed properties in Parañaque City.

The case stemmed from the city treasurer’s issuance in 2003 of warrants of levy on the PRA’s properties in Central Business Park and Barangay San Dionisio for years 2001-2002.

The agency asked the RTC for a stay order against the city government, but was denied, allowing the latter to sell the properties in a public auction in April 2003.

In its January 2010 decision, the RTC further denied the PRA’s August 2009 motion to nullify the real property tax assessments issued against it, the public auction, and the certificates of sale issued to the winning bidders during the auction.

It said that PRA was not exempt from real estate taxes since it was a government-owned and -controlled corporation (GOCC), which is taxable according Republic Act 7160 or the Local Government Code.

The SC, however, sided with the PRA’s argument that it is not a GOCC but an incorporated instrumentality of the national government, which is property tax-exempt based on the same law.

The high tribunal cited the Introductory Provisions of the Administrative Code of 1987, which defines a GOCC as an “agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government…”

On the other hand, it defines a government instrumentality as an “agency of the national government, not integrated within the department framework, vested with 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.”

With such definitions, the SC pointed out that PRA is not a GOCC because “it cannot be considered a stock corporation because although it has a capital stock divided into no par value shares as provided in [its charter], it is not authorized to distribute dividends, surplus allotments or profits to stakeholders.”

The PRA cannot also be a non-stock corporation “because it does not have members,” the court added.

The SC further cited the 1987 Constitution, which provides that Congress may create GOCCs “in the interest of the common good and subject to the test of economic viability.”

“PRA may have passed the first condition of common good but failed the second one -- economic viability,” the SC stated, explaining that the agency’s creation “was not for economic or commercial activities” but for the administration and reclamation of government lands to hasten their development.

Thus, the high court declared as void “all real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Parañaque on the subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and the Certificates of Sale subsequently issued by the Parañaque City Treasurer.” 


For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

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