City of Lapu-Lapu v.

Philippine Economic Zone Authority (PEZA)

G.R. Nos. 184203, 187583
November 26, 2014
Justice Leonen

Facts
The case herein is consolidated petitions of the City of Lapu-Lapu and the
Province of Bataan separately filed against the Philippine Economic Zone Authority
(PEZA). It appears that President Ferdinand E. Marcos issued a Presidential Decree,
declaring as government policy the establishment of export processing zones in
strategic locations in the Philippines. To carry out this policy, the Export
Processing Zone Authority (EPZA) was created to manage the export processing
zones established in the Port of Bataan. Said decree also provided that EPZA, as a
non-profit organization, be exempt from payment of real property taxes.
Thereafter, President Marcos issued Proclamation No. 1811, establishing the
Mactan Export Processing Zone, wherein certain parcels of land of the public
domain located in the City of Lapu-Lapu were reserved to serve as site of the
Mactan Export Processing Zone. Later on, a law was enacted creating PEZA to
operate and manage economic zones in the country. By virtue of the law, the
export processing zone in Bataan became the Bataan Economic Zone and the
Mactan Export Processing Zone the Mactan Economic Zone. Thereafter, the City of
Lapu-Lapu and the Province of Bataan demanded payment from PEZA for real
property taxes on the PEZA’s properties located in the Mactan Economic Zone and
the Bataan Economic Zone, respectively. In the defense of PEZA, it argued that it is
an agency and instrumentality of the National Government. It is therefore exempt
from payment of real property taxes under Section 234(a) of the Local Government
Code.
Issue
Whether the City of Lapu-Lapu and the Province of Bataan can collect real
property taxes from the PEZA.

Ruling
No. In this case, the properties sought to be taxed are located in publicly owned
economic zones. These economic zones are property of public dominion. The City
seeks to tax properties located within the Mactan Economic Zone, the site of
which was reserved by President Marcos under Proclamation No. 1811. Reserved
lands are inalienable and outside the commerce of man, and remain property of
the Republic until withdrawn from public use either by law or presidential
proclamation. Since no law or presidential proclamation has been issued
withdrawing the site of the Mactan Economic Zone from public use, the property
remains reserved land. As for the Bataan Economic Zone, the law consistently
characterized the property as a port. Thus, Article 420 of the Civil Code classifies
a port as property of public dominion. The Freeport Area of Bataan, where the
government allows tax and duty-free importation of goods, is considered property
of public dominion. As such, the Freeport Area of Bataan is owned by the state and
cannot be taxed under Section 234(a) of the Local Government Code. It bears
emphasis that properties of public dominion, even if titled in the name of an
instrumentality as in this case, remain owned by the Republic of the Philippines. If
property registered in the name of an instrumentality is conveyed to another
person, the property is considered conveyed on behalf of the Republic of the
Philippines. All told, the PEZA is an instrumentality of the national government.
Furthermore, the lands owned by the PEZA are real properties owned by the
Republic of the Philippines. The City of Lapu-Lapu and the Province of Bataan
therefore cannot collect real property taxes from the PEZA.

Notes
Real Properties of PEZA vis-a-vis Tax Exemption
1. Real properties under the PEZA’s title are owned by the Republic of the
Philippines.
a. Under Section 234(a) of the Local Government Code, real properties
owned by the Republic of the Philippines are exempt1 from real
property taxes.
2. Thus, the Philippine Economic Zone Authority is exempt from payment of
real property taxes.

Reserved Lands
1. Reserved lands are lands of the public domain set aside for settlement or
public use, and for specific public purposes by virtue of a presidential
proclamation.

Port
1. A port of entry, where imported goods are unloaded then introduced in the
market for public consumption, is considered property for public use. Thus,
Article 420 of the Civil Code classifies a port as property of public dominion.
The Freeport Area of Bataan, where the government allows tax and
duty-free importation of goods, is considered property of public dominion.

1
Hence, it is important to determine the classification of a property in relation to the person to whom it
belongs.
The Freeport Area of Bataan is owned by the state and cannot be taxed
under Section 234(a) of the Local Government Code.