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The Philippine Economic Zone Authority is exempt from payment of real property taxes.
These are consolidated... the City of Lapu-Lapu (the City)... appealed the Regional Trial Court
's decision finding the PEZA exempt from payment of real property taxes.
the Province of Bataan (the Province)... assails the Court of Appeals' decision... granting the
PEZA's petition for certiorari. The Court of Appeals... ruled that the Regional Trial Court,...
gravely abused its discretion in finding the PEZA liable for real property taxes to the Province of
President Ferdinand E. Marcos issued Presidential Decree No. 66 in 1972... the Export
Processing Zone Authority (EPZA) was created to operate, administer, and manage the export
processing zones established in the Port of Mariveles, Bataan... and such other export processing
zones that may be created by... virtue of the decree.
EPZA was declared exempt from all taxes that... may be due to the Republic of the Philippines,
its provinces, cities, municipalities, and other government agencies and instrumentalities.
Specifically, Section 21 of Presidential Decree No. 66 declared the EPZA exempt from payment
of real... property taxes
From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to be
paid to the National Government, its provinces, cities, municipalities and other government
agencies and instrumentalities... the PEZA was created by virtue of Republic Act No. 7916 or
"the Special Economic Zone Act of 1995"
The PEZA was granted the power... to register, regulate, and supervise the enterprises located in
the economic zones.
By virtue of the law, the export processing zone in Mariveles, Bataan became the Bataan
Economic Zone... and the Mactan Export Processing
Zone the Mactan Economic Zone.
s for the EPZA, the law required it to "evolve into the PEZA
President Fidel V. Ramos issued Executive Order No. 282, directing the PEZA to assume and
exercise all of the EPZA's powers, functions, and responsibilities "as provided in Presidential
Decree No. 66
Facts of G.R. No. 184203
City of Lapu-Lapu, through the Office of the Treasurer, demanded from the PEZA... real
property taxes for the period from 1992 to 1998 on the PEZA's properties located in the Mactan
It cited Sections 193 and 234 of the Local Government Code of 1991 that withdrew the real
property tax exemptions previously granted to or presently enjoyed by all persons.
PEZA filed a petition for declaratory relief... praying that the trial court declare it exempt from
payment of real property taxes.
According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the
Special Economic Zone Act of 1995.
The PEZA, therefore, is not liable for real property taxes on the land it owns.
Characterizing the PEZA as an agency of the National Government, the trial court ruled that the
City had no authority to tax the PEZA
The City then appealed
Facts of G.R. No. 187583
Facts of G.R. No. 184203... whether... the PEZA is exempt from payment of real property taxes.
The PEZA is exempt from payment... of real property taxes
Under Section 133(o), local government units have no power to levy taxes of any kind on the
national government, its agencies and instrumentalities and local government units:... the PEZA
is an instrumentality of the national government. It is not integrated within the department
framework but is an agency attached to the Department of Trade and Industry.
Attachment, which enjoys "a larger measure of independence"
As an instrumentality of the national government, the PEZA is vested with special functions or
jurisdiction by law. Congress created the PEZA to operate, administer, manage and develop
special economic zones in the Philippines.
Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some corporate powers,... the PEZA is not a government-
owned or controlled corporation taxable for real property taxes.
To be considered a government-owned or controlled corporation, the entity must have been
organized as a stock or non-stock corporation.
Government instrumentalities, on the other hand, are also created by law but partake of sovereign
functions. When a government entity performs sovereign functions, it need not meet the test of
economic viability
The law created the PEZA's charter. Under the Special Economic Zone Act of 1995, the PEZA
was established primarily to perform the governmental function of operating, administering,
managing, and developing special economic zones to attract investments and provide
opportunities... for preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with some corporate
powers. However, it was not organized as a... stock... or non-stock... corporation. Nothing in the
PEZA's charter provides that the
PEZA's capital is divided into shares.[272] The PEZA also has no members who shall share in
the PEZA's profits.
The PEZA does not compete with other economic zone authorities in the country. The
government may even subsidize the PEZA's operations. Under Section 47 of the Special
Economic Zone Act of 1995, "any sum necessary to augment [the PEZA's] capital outlay shall
be... included in the General Appropriations Act to be treated as an equity of the national
The PEZA, therefore, need not be economically viable. It is not a government-owned or
controlled corporation liable for real property taxes.
The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA
The PEZA's predecessor, the EPZA, was declared non-profit in character with all its revenues
devoted for its development, improvement, and maintenance. Consistent with this non-profit
character, the EPZA was explicitly declared exempt from real property taxes under its... charter.
Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its charter.
The PEZA assumed the real property exemption of the EPZA under
Presidential Decree No. 66.
Real property taxes are annual taxes levied on real property such as lands, buildings, machinery,
and other improvements not otherwise specifically exempted under the Local Government Code.
Real property taxes are ad valorem, with the... amount charged based on a fixed proportion of the
value of the property.
Under the law, provinces, cities, and municipalities within the Metropolitan Manila Area have
the power to levy real property taxes within their respective... territories.
The person liable for real property taxes is the "taxable person who had actual or beneficial use
and possession [of the real property for the taxable period,] whether or not [the person owned the
property for the period he or she is being taxed]."