Philippine Fisheries Development Authority vs. Central Board of Assessment Appeals

A government instrumentality that is not organized as a stock or non‑stock corporation is exempt from local real property taxation under Section 133(o) of the Local Government Code; a port constructed by the State and devoted to public use is property of public dominion owned by the Republic and therefore exempt from real property tax under Section 234(a) of the same Code, except to the extent that its beneficial use has been granted to taxable persons through leases.

The Lucena Fishing Port Complex, situated on reclaimed land in Barangay Dalahican, Lucena City, was one of the fishery infrastructure projects under the Nationwide Fish Port Package. It was financed through loans from Japan’s Overseas Economic Cooperation Fund. PFDA was created by Presidential Decree No. 977, as amended by Executive Order No. 772, and tasked with managing, operating, and developing fishing port complexes. It took over management of the Lucena port in February 1992. In 1999 and 2000, the City Government of Lucena demanded payment of real property taxes on the complex, leading to the present dispute over PFDA’s liability.

• The Lucena Fishing Port Complex:

  • The LFPC was constructed on a reclaimed area of approximately 8.7 hectares in Barangay Dalahican, Lucena City, at a total cost of PHP 296,764,618.77, financed through loans from Japan’s Overseas Economic Cooperation Fund under agreements dated 9 November 1978 and 31 May 1978.
  • It forms part of the Nationwide Fish Port Package, a national government infrastructure project, and is intended to provide post‑harvest infrastructure support to the fishing industry.

• Role and Status of PFDA:

  • PFDA was created by Presidential Decree No. 977, as amended by Executive Order No. 772, and was tasked to manage, operate, and develop fishing port complexes.
  • Pursuant to its mandate, PFDA took over the management and operation of the LFPC in February 1992.
  • In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 169836, the Supreme Court definitively ruled that PFDA is not a government‑owned or controlled corporation but a government instrumentality.

• Demand for Real Property Tax:

  • On 26 October 1999, the City Government of Lucena addressed a letter to PFDA demanding payment of realty taxes on the LFPC for the period 1993 to 1999 in the amount of PHP 39,397,880.00; the letter was received by PFDA on 24 November 1999.
  • On 17 October 2000, another demand letter was sent for the same property, covering 1993 to 2000, in the amount of PHP 45,660,080.00.

• Proceedings Before the Assessment Boards:

  • PFDA’s appeal to the Local Board of Assessment Appeals of Lucena City was dismissed for lack of merit, and the LBAA denied reconsideration on 10 December 2001.
  • On appeal to the CBAA, the board held that PFDA owned the LFPC by virtue of Section 11 of P.D. No. 977 and was not exempt from real property tax, as its charter only exempted it from income tax. The CBAA dismissed the appeal on 5 October 2005.

• Government Instrumentality Status: Petitioner maintained that it is not a government‑owned or controlled corporation but an instrumentality of the national government, as already settled by the Supreme Court in the 2007 PFDA cases; thus, under Section 133(o) of the Local Government Code, local government units cannot impose taxes on it.
• Property of Public Dominion: Petitioner argued that the Lucena Fishing Port Complex is a property of public dominion intended for public use, specifically a port constructed by the State, and consequently exempt from real property tax under Section 234(a) of the Local Government Code.

• PFDA as a Taxable GOCC: Respondents contended that PFDA is a government‑owned or controlled corporation, and that Section 193 of the Local Government Code withdrew all tax exemptions previously granted to GOCCs; therefore, PFDA is subject to real property tax under Section 232 of the Code.
• Absence of Exemption: Respondents argued that PFDA failed to prove any exemption under Section 234 of the Local Government Code, and that PFDA’s charter did not confer exemption from real property tax.

• Status of PFDA: Whether PFDA is a government‑owned or controlled corporation subject to real property tax, or a government instrumentality exempt under Section 133(o) of the Local Government Code.
• Exemption of the Port Complex: Whether the Lucena Fishing Port Complex, as property of public dominion, is exempt from real property tax under Section 234(a) of the Local Government Code.

• Status of PFDA: PFDA was not a government‑owned or controlled corporation. It had a capital stock but not divided into shares, no stockholders or voting shares, and no members; it is a government instrumentality exercising both governmental and corporate powers, as definitively classified in Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 169836, and reaffirmed in G.R. No. 150301. As an instrumentality of the national government, it falls squarely within the prohibition in Section 133(o) of the Local Government Code, which bars local government units from imposing taxes, fees, or charges on the National Government, its agencies, and instrumentalities. Consequently, PFDA is not liable for the real property tax assessed by the City of Lucena.

• Exemption of the Port Complex: The Lucena Fishing Port Complex, constructed by the State as a major infrastructure project for public use, is property of public dominion under Article 420 of the Civil Code. It is a "port" intended for public use and therefore owned by the Republic of the Philippines. Accordingly, it is exempt from real property tax pursuant to Section 234(a) of the Local Government Code. However, any portion of the complex that PFDA leased to private persons or entities is subject to real property tax because the beneficial use has been granted to a taxable person.

• Government Instrumentality Distinguished from GOCC — A government agency vested with corporate powers but not organized as a stock or non‑stock corporation remains a government instrumentality, not a government‑owned or controlled corporation. PFDA had a capital stock but no shares, stockholders, or members, and thus fell under this definition. This status determines exemption from local taxation.

• Local Government Tax Prohibition on National Instrumentalities — Section 133(o) of the Local Government Code limits the taxing power of local government units by prohibiting taxes on the National Government, its agencies, and instrumentalities. PFDA, as a government instrumentality, was insulated from the real property tax assessed by Lucena City.

• Public Dominion Property Exemption — Real property owned by the Republic and intended for public use, such as ports, roads, and canals, is property of public dominion under Article 420 of the Civil Code and exempt from real property tax under Section 234(a) of the Local Government Code. The exemption is lost only when beneficial use is granted to a taxable person.

• Leased Portions of Exempt Property — Where a government instrumentality leases portions of exempt public dominion property to private entities, those portions become subject to real property tax, as the beneficial use is transferred to a taxable person. The remaining property, however, retains its exemption.

• “The Authority is actually a national government instrumentality which is defined as an agency of the national government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.” — This passage defines the concept of a government instrumentality and was central to classifying PFDA.

• “local government units have no power to tax instrumentalities of the national government like the PFDA.” — Summarizes the application of Section 133(o) to the case.

• “The Lucena Fishing Port Complex, which is one of the major infrastructure projects undertaken by the National Government under the Nationwide Fishing Ports Package, is devoted for public use and falls within the term ‘ports.’” — Justifies the classification of the port as property of public dominion.

• Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 169836, 31 July 2007 — Controlling precedent. The Supreme Court first ruled that PFDA is an instrumentality, not a GOCC, and exempt from real property tax, except as to portions leased to private entities.

• Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 150301, 2 October 2007 — Reaffirmed the instrumentality status and tax exemption for the Navotas Fishing Port Complex, solidifying the doctrine.

• Manila International Airport Authority v. City of Pasay, G.R. No. 163072, 2 April 2009 — Cited for the principle that the taxing power of local government units is subject to the limitations in Section 133, including the prohibition on taxing instrumentalities.

• Manila International Airport Authority v. Court of Appeals, G.R. No. 155650, 20 July 2006 — Cited for the rule that property of public dominion is owned by the Republic and exempt from real estate tax.

• Section 133(o), Local Government Code (R.A. No. 7160) — Prohibits local government units from imposing taxes, fees, or charges on the National Government, its agencies, and instrumentalities. Applied to hold that the City of Lucena could not tax PFDA.

• Section 234(a), Local Government Code — Exempts real property owned by the Republic from real property tax, except when beneficial use is granted to a taxable person. The Lucena Fishing Port Complex, as property of the Republic, was exempt, but leased portions were not.

• Article 420, Civil Code — Identifies property of public dominion, including ports constructed by the State and intended for public use. The LFPC fell within this category, confirming state ownership and exemption.

• Presidential Decree No. 977, as amended by Executive Order No. 772 — PFDA’s charter; while expressly granting exemption only from income tax, the Court’s ruling concerning PFDA’s status as an instrumentality brought it within the protective umbrella of Section 133(o) of the Local Government Code.

Antonio Eduardo B. Nachura, Diosdado M. Peralta, Roberto A. Abad, Jose C. Mendoza — all concurred.