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 While it may be argued that the Local Government Code of 1991 has withdrawn certain tax privileges, it is important to underscore that the Supreme Court construed that SSS falls squarely within the definition of the terms "Government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

LEGAL OPINION RE PHILHEALTH PREMIUM CONTRIBUTION

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


LEGAL OPINION NO. __________
DATE : 15 January 2013

TO : JULIETA R. GASTALA, MPA
City Budget Officer
This City

RE : PHILHEALTH PREMIUM CONTRIBUTION


Madam:
The issue being presented in your query is: Which should be followed as regards the premium contributions to be remitted by the LGU to PhilHealth, the PhilHealth Circular No. 011- S-2012 (as superseded by PhilHealth Circular No. 057, s-2012) or the DBM Circular Letter No. 2012-12, dated 29 June 2012?

This issue boils down into the question as to who has the authority to fix the Philhealth premium contribution. Pertinent provisions of Republic Act No. 7875, as amended by Republic Act No. 9241, state:

xxx xxx xxx

“Section 14. Creation and Nature of the Corporation. – There is hereby created a Philippine Health Insurance Corporation, which shall have the status of a tax-exempt government corporation attached to the Department of Health for policy coordination and guidance.”

xxx xxx xxx

“Section 16. Powers and Functions. – The Corporation shall have the following powers and functions:

a) to administer the National Health Insurance Program;

b) to formulate and promulgate policies for the sound administration of the Program;

c) to set standards, rules, and regulations necessary to ensure quality of care, appropriate utilization of services, fund viability, member satisfaction, and overall accomplishment of Program objectives;

d) to formulate and implement guidelines on contributions and benefits, cost containment and quality assurance; and health care provider arrangements, payment methods; and referral systems;”

xxx xxx xxx

"SEC. 4. Definition of Terms.-For the purpose of this Act, the following terms shall be defined as follows:

xxx xxx xxx

d) Contribution - The amount paid by or in behalf of a member to the Program for coverage, based on salaries or wages in the case of formal sector employees, and on household earnings and assets, in the case of self-employed, or on other criteria as may be defined by the Corporation in accordance with the guiding principles set forth in Article 1 of this Act.

xxx xxx xxx


ARTICLE VII
FINANCING

“Section 28. Contributions. – All members of the Program shall contribute to the Fund, in accordance with a reasonable, equitable and progressive contribution schedule to be determined by the Corporation on the basis of applicable actuarial studies and in accordance with the following guidelines:

a) Formal sector employees and current medicare members and their employers shall continue paying the same monthly contributions as provided for by law until such time that the Corporation shall have determined the contribution schedule mentioned herein: provided, that their monthly contribution shall not exceed three percent (3%) of their respective monthly salaries.

b) Contributions from self-employed members shall be based primarily on household earnings and assets; their total contributions for one year shall not, however, exceed three percent (3%) of their estimated actual net income for the preceding year.

c) Contributions made in behalf of indigent members shall not exceed the minimum contributions set for employed members.

xxx xxx xxx


It cannot be denied that based on the foregoing provisions of the law, the PhilHealth Corporation has the authority to fix the premium contribution that must be remitted by the employers, including the LGU. The Department of Budget and Management (DBM), without any statutory fiat, cannot arrogate unto itself such authority.

The following are the general functions of the DBM:

1. Formulates the overall resource application strategy to match the government’s macro-economic policy;

2. Prepares the medium-term expenditure plan, indicating the programming, prioritization, and financing of capital investment and current operating expenditure requirements of medium-term sectoral development plans;

3. Undertakes the formulation of the annual national budget in a way that ensures the appropriate prioritization and allocation of funds to support the annual program of government;

4. Develops and administers a national accounting system essential to fiscal management and control;

5. Conducts a continuing study of the bureaucracy and assesses as well as makes policy recommendation on its role, size, composition, structure and functions to establish a government bureaucracy imbued with a spirit of public service;

6. Establishes the rules and procedures for the management of government organization resources i.e., physical, manpower and other resources, formulates standards of organizational program performance; and undertakes or provides services in work simplification or streamlining of systems and procedures to improve efficiency and effectiveness in government operations;

7. Conceptualizes and administers the government’s compensation and position classification plan; and

8. Monitors and assesses the physical as well as the financial operations of local government units and government-owned and/or – controlled corporations.

While DBM is mandated under Executive Order No. 25, dated April 25, 1936, and subsequent issuances to promote the sound, efficient and effective management and utilization of government resources (i.e., technological, manpower, physical and financial) as instrument in the achievement of national socioeconomic and political development goals, this cannot be construed as to include the power or authority to alter or modify the acts of the PhilHealth Corporation. There is nothing in the law that empowers the DBM to review the decisions of the Corporation. Neither is there any provision of law which requires the prior approval by DBM before any increase in premium can be implemented by PhilHealth. It is worthy to note that even the DBM Circular letters make reference to the PhilHealth Circulars.

One cannot simply brush aside the possible repercussions to the Philhealth members and to the employer LGU should their benefits be withheld in the future due to under-remittance.

Based on the foregoing, the undersigned is of the opinion that the PhiliHealth Circular should prevail.

I hope this opinion could be of help to the LGU’s endeavors.



Yours truly,




ATTY. EUFEMIO A. SIMTIM, JR.
City Legal Officer
cc:
CMO

LEGAL OPINION RE CONFLICTING CLAIMS IN THE KORONADAL CITY PUBLIC MARKET [STALL NO. 13]

Republic of the Philippines
Province of South Cotabato
City of Koronadal
OFFICE OF THE CITY LEGAL OFFICER
Tel No. (083) 228-1742

LEGAL OPINION NO. ________

DATE : 15 November 2013


TO : CYRUS JOSE J. URBANO, CPA, MBA
City Administrator

RE : As Stated
________________________________________________________

Kanami Koronadal!

This is with reference to your letter dated 12 November 2013 requesting for a legal opinion apropos the letter of Atty. Raul O. Tolentino asking for the cancellation/revocation of the lease contract which was entered into by John Abella with the City Government of Koronadal.

It appears that on 14 January 2013, a Contract of Lease was entered into between the City Government of Koronadal, as the lessor and John Abella, as the lessee, covering Stall No. 13, Supermarket Building 1, Ground Floor of the City Public Market of this City. The lease has duration of two (2) years renewable upon its expiration unless revoked in accordance with the Local Revenue Code of Koronadal City. However, it appears from the record of the Licensing Office that Agencia Niña, Inc. under the business name, Golden Drug Store had been actually occupying the leased subject property.

Based on the foregoing facts, it can be gleaned that John Abella subleased the said property to the Agencia Niña, Inc., /Golden Drug Store.

However, note must be taken that the aforementioned contract specifically prohibits the subleasing of the above-mentioned property to any third person which provides:

x x x

“6. That it shall be inviolable [sic] violation of this contract to sublease, mortgage, sell, transfer or in any manner allow people to conduct business in the said stall/room other than the lessee himself/herself”

x x x

Also, the Civil Code of the Philippines particularly Article 1649 expressly provides, inter alia, that:

x x x

Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary."

x x x

Applying the above provisions to the case under consideration, it follows that the subleasing could not have been valid there being no proof that the City Government of Koronadal, the lessor, gave its express consent to the substitution of Agencia Niña, Inc.,/Golden Drug Store in lieu of John Abella as lessee. In view of such violation of the provision of the lease contract or for failure to comply with the terms/ conditions thereof, the lessor has a right to revoke/cancel/terminate the contract of lease with the lessee John Abella and to take physical possession of the subject property.

Section 5, B.04. Administrative Provisions.- of the City Market Ordinance provides that:

x x x

“Dummies, sublease of stalls/rooms- In any case the person registered to be the holder or lessee of a stall room/room in the public market, is found to be not the same person who is actually occupying said stall/room, the lease of such stall/room shall be cancelled, if upon investigation such stall holder shall be found to have subleased his stall/room to another person or to have connived with such person so that the latter may for any reason, be able to occupy the said stall.”

x x x

Nonetheless, it does not follow that the actual occupant Agencia Niña, Inc., /Golden Drug Store be permitted or be placed as lessee.

Anent thereto, the undersigned, consequently, recommend that the subject property be DECLARED VACANT AND REOPENED FOR APPLICATION FOR LEASE.

Please be guided accordingly.



In public service,




ATTY. EUFEMIO A. SIMTIM, JR., REA, REB
City Legal Officer




JACQUELINE MAE ESTORNINOS-SAQUILABON, LLB
Legal Assistant II


c.c
BPLS
CMO
City Market Committee