LEGAL OPINION RE TAXABILITY OF SSS MACHINERIES [DELAYED POSTING]

Republic of the Philippines
Province of South Cotabato
City of Koronadal
OFFICE OF THE CITY LEGAL OFFICER


LEGAL OPINION NO.___________

DATE : 30 May 2011

TO : ENGR. ARTHUR R. BUZARANG, MPA
OIC-City Assessor

RE : Taxability of Social Security System’s (SSS) Machineries

______
Sir:
This refers to your query on whether or not the machineries owned by the Social Security System (SSS) are subject to real property tax (RPT), a query which arises from the claim of the SSS for exemption therefrom under Section 16 of Republic Act 8282, to wit:
x x x
“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 be 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.”
x x x
The undersigned is of the opinion that the said machineries are indeed NON-TAXABLE SUBJECT TO QUALIFICATIONS SET BY LAW.
The Honorable Supreme Court, in the case of SOCIAL SECURITY SYSTEM vs. CITY OF BACOLOD and MIGUEL REYNALDO as City Treasurer of Bacolod City [G.R. No. L-35726, 21 July 1982], had the occasion to rule that Republic Act No. 1161, otherwise known as Social Security Act of 1954, has removed all doubts as to the exemption of the SSS from taxation by explicitly providing for such exemption. Said law contained the same provision quoted above. While it may be argued that the Local Government Code of 1991 has withdrawn certain tax privileges, it is important to underscore that the Supreme Court construed that SSS falls squarely within the definition of the terms "Government of the Republic of the Philippines" and "Republic of the Philippines" whose real property are exempt from the payment of real property tax. More so, Republic Act 8282 was enacted subsequent to the effectivity of the Local Government Code of 1991.
However, such exemption is subject the qualification provided under Section 234 of RA 7160, to wit:
x x x
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; [emphasis added]
x x x

The above view finds support from the 7 November 2003 Bureau of Local Government Finance Opinion issued by Executive Director Ma. Presentation R. Montesa, which reads, to wit:
x x x
“This Bureau, therefore, agrees with the opinion rendered by Atty. Monteiro that SSS maintains its real property tax-exempt status even after the effectivity of R.A. No. 7160. However, on the issue of the subject real properties of SSS, the beneficial use of which are being let to private persons, for consideration or otherwise, this Bureau believes otherwise.
Granting arguendo, that there was no distinction made under the SSS Law with regard to its assets, particularly real properties, this Bureau believes that nowhere in its mandate, that in furtherance of its main purpose, the real properties owned by SSS shall be let to private or taxable persons and still be exempt from all kinds of taxes, fees or charges. This would violate the principle of "inclusio unius est exclusio alterius" (what is not included is deemed excluded). It is therefore more logical to conclude that what was exempted under the said special law (SSS charter) are those real properties which are actually, directly and exclusively used for the operation in the achievement of its existence. R.A. No. 7160, a general law, however, specifically provides for the limitations of the said exemption granted to SSS' real properties from real property tax when the beneficial use thereof has been granted for consideration or otherwise to a taxable person, and those acquired or foreclosed properties and assets not yet titled in the name of SSS.
Moreover, Supreme Court (SC) Decision (No. L-35726), entitled: "SOCIAL SECURITY SYSTEM vs. CITY OF BACOLOD and MIGUEL REYNALDO as CITY TREASURER OF BACOLOD CITY" cited by Atty. Monteiro, the Court held, thus:
". . . . 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." (Emphasis supplied)
In another SC Decision (G.R. No. 120082), in the case of "MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON. FERDINAND J. MARCOS, et al.," the term "Government of the Republic of the Philippines" is considered synonymous with the term "Republic of the Philippines."
In view hereof, this Bureau is of the opinion that the SSS does not fall under the category of government-owned or controlled corporations. Hence, we further believe that its real property tax exemption provided for under its charter remains covered by the exemption proviso of Section 234(a) of the said Code (R.A. No. 7160) which provides below:
"SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:
"(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;"
x x x


In an answer to the request of MR. MARIANO S. TOLENTINO, Asst. Vice-President of Social Security System (SSS), Executive Director Montesa, on 1 June 2009, reiterated the earlier stance, thus:

x x x
“This refers to your letter dated November 18, 2008, which, in effect, is a follow- up of your letter dated May 16, 2007 addressed to the City Assessor of Makati City, and forwarded to this Bureau regarding your request for exemption from the payment of real property tax on the condominium units located thereat which are owned by the Social Security System (SSS), but are held-in-trust by Philam Tower Realty Corporation (PTRC).

It may be recalled that your request was anchored on R.A. No. 8282, otherwise known as the Social Security Act of 1987 particularly Section 16 thereof.

This Bureau, under its letter dated May 16, 2008, in reply to the said letter, required that office to submit a contract and/or agreement that was executed by and between the SSS and PTRC, in order to determine fully the tax exemption privileges of SSS with regard to its real properties.

Apparently, the Memorandum of Agreement (MOA) submitted reveals that the three (3) condominium units owned by SSS are intended primarily and exclusively for lease to private individuals. The said MOA further provides that PTRC is a corporation organized and existing under the laws of the Philippines. More importantly, PTRC is acting in behalf of and/or in trust for SSS properties which are specifically intended for lease.

Consequently, this Bureau concurs with the views expressed by the City Assessor of Makati City, in his undated letter, copy attached, addressed to Mr. Baltazar C. Cajilig, Officer-In-Charge, Asset Management Department, that office.

In view hereof, attention is invited on this Bureau’s ruling issued under its 1st Indorsement, copy enclosed, dated June 17, 1997, which reads in part, as follows:

“The tax exemption privileges therefore of the SSS shall continue unless expressly and specifically revoked, provided, however, that: 1) the beneficial use of the subject properties has not been let for consideration or otherwise to a taxable person pursuant to Section 234 (a) of the Code; and 2) the acquired or foreclosed properties and assets not yet titled in the name of SSS shall be declared as taxable.”

Section 234 (a) of the Code provides:

SECTION 234. Exemptions from Real Property Tax.-The following are exempted from payment of the real property tax:

“(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;”(Underscoring ours)

Moreover, attention is invited on this Bureau’s ruling dated November 7, 2003, copy enclosed, which provides in part, to wit:

“In view of the foregoing, this Bureau maintains its stand embodied under our above-mentioned 1st Indorsement dated November 17, 1997. The subject real properties of SSS. . . .being occupied/tenanted for dwelling purposes by private persons or individuals for consideration or otherwise, should be included in the “Taxable” roll of real properties.”

In the light of all the foregoing, this Bureau reiterates its ruling rendered under the above-mentioned 1st Indorsement dated June 17, 1997. Thus, SSS shall continue to enjoy its exemption from the payment of real property tax except, however, when the beneficial use of the subject properties has been granted, for consideration or otherwise, to a taxable person pursuant to the above-mentioned provision of the Local Government Code.
x x x

RESPECTFULLY SUBMITTED:



EUFEMIO A. SIMTIM, JR.
City Legal Officer