Ecozone firms not exempt from real estate tax, says PEZA

Trece Martirez City – Firms located at export processing zones which have availed of income tax holidays are still liable for the payment of real property tax, according to the Philippine Economic Zone Authority (PEZA).

Procolo Olaivar, PEZA manager for legal services group, clarified this to ease the brewing controversy over the Cavite provincial government’s move to collect real estate taxes on machinery, equipment and fences owned by Intel Philippine Technology Inc., a unit of the world’s biggest maker of microprocessor chips.

Intel’s plant is located at the Gateway Business Park in Javalera, General Trias town.

The provincial government has declared Intel as having owed the government more than P136 million in real property taxes on its buildings, machinery, and fences that have accrued from 1998 to 2002, including the penalties and other charges.

It threatened to sell, in a public auction, Intel’s properties if the firm continued to refuse to pay such real estate property taxes.

Despite persistent notices, Intel has ignored to pay the alleged real estate taxes, claiming the company, as a PEZA-registered export enterprise, is exempted from payment of local taxes as provided for by existing municipal and provincial ordinances.

Olaivar said that Intel opted to avail of income tax holiday incentive provided under the provisions of Executive Order 226 or the Omnibus Investments Code of 1987. The firm was registered in Oct. 1995.

Under the Code, enterprises registered with PEZA which are availing of incentive, are exempt from the payment of local taxes, licenses, fees, and imposts, except real property tax.

But Intel is banking on the provisions of an ordinance passed by the municipal government of General Trias, which exempts business enterprises located at the Gateway Business Park from payment of local taxes for a period of four years from start of their commercial operations.

PEZA, on the other hand, said that the provisions of the Local Government Code must prevail.

The LGC enumerated those who are exempt from the payment of real property tax. They are real property owned by the Republic of the Philippines; charitable institutions, churches; and machinery and equipment actually, directly and exclusively used by water districts and government-owned corporations which are engaged in the supply and distribution of water and or generation of power; all real properties owned by duly registered cooperatives; and machinery and equipment used for pollution control and environmental protection.

Thus in the case of Intel, it is not one among those exempted, Olaivar said, adding that the power of the municipal government to tax must always yield to a legislative act which is superior having been passed upon by the state itself.