Test of Exemption from Real Property Taxes

EXEMPTION FROM REAL PROPERTY TAXES IN SECTION 234 OF THE LOCAL GOVERNMENT CODE

1.   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. 
NOTE: This exemption shall not apply to real properties the beneficial use of which has been granted, for consideration or otherwise, to a taxable person (Testate Estate of C.T. Lim v. City of Manila, G.R. No. 90639, February 21, 1990). 


2.   Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, non-profit or religious cemeteries, and all lands, buildings, and improvements actually, directly and exclusively used for religious, charitable, or educational purposes. 
NOTE: The tax exemption herein rests on the premise that they are actually, directly and exclusively used by said entities or institutions for their stated purposes and not necessarily because they are owned by religious, charitable or educational institutions. 


3.   All machineries and equipment that are actually, directly and exclusively used by local Water utilities and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power. 


4.   All real property owned by duly registered Cooperatives as provided for under RA 6938. 


5.   Machinery and equipment used for Pollution control and environmental protection (Sec. 234, LGC). 


BENEFICIAL USE

Even as the real property is owned by the Republic of the Philippines, or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to taxable person for consideration or otherwise. (MIAA vs. Marcos, G.R. No. 120082)

This exemption shall not apply to real properties the beneficial use of which has been granted, for consideration or otherwise, to a taxable person (Testate Estate of C.T. Lim v. City of Manila, G.R. No. 90639, February 21, 1990). 


Even granting that the national government indeed owns the carriage ways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity. Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly construed against the claimant. LRTA has not shown its eligibility for exemption; hence, it’s subject to tax. (LRTA vs CBAA, 342 SCRA 692)