Leasehold Rights Certificates: A Thinly Disguised Property Tax

Comment from a reader on SBMA's plan for the issuance of "Certificates of Ownership of Leasehold Rights"

SBMA's new requirement that leaseholders obtain "Certificates of Ownership of Leasehold Rights" is a transparent attempt on the part of SBMA to impose a periodically payable property tax on leaseholders.

Buried deep in the "Implementing Rules and Regulations Registry of Certificate of Ownership of Leasehold Rights (Registry Office)" is the following section (in Part III, Rule 2 of those Rules):

Section 7. Validity – All certificates of ownership of leasehold rights shall be valid for a period stated on the face thereon and shall be renewable (i) upon approval of the Board; (ii) payment of the prescribed fees; and (iii) submission of the required supporting documents.

This means that leaseholders who go through the hassle and expense of obtaining a Certificate of Ownership of Leasehold rights for their property could, and undoubtedly would, find that their Certificates are valid for less than the remaining term of their lease, requiring them to pay more "fees" to renew their Certificates upon their Certificates' expiration. (Not to be confused with amendment of Certificates of Ownership of Leasehold Rights upon extension of the underlying lease term, which is addressed by a separate section in those Rules--Section 13 of Rule III, Part III of the Rules).

Presumably, a failure to renew would subject the leaseholder to the fines provided for failure to obtain a Certificate.

SBMA is quite sneaky in how they are proceeding--having everyone sign up under the impression that this is a one time payment, and then issuing certificates that will require periodic renewal. Leaseholders will be given the choice of paying up at renewal time, or having the penalty for failure to obtain a certificate added to their bill at the SBMA Accounting Office.

SBMA can then withhold approval of assignment of leases until the bill (including fine) is cleared.

Fortunately, their scheme is clearly illegal under Philippine Law.

Such an arbitrary limitation of the period of the validity of the Certificates to less than the remaining term of the leasehold would transform the "fees" assessed in connection with the renewal of the Certificate from a fee to tax, which would violate Section 12 of Republic Act No. 7227, as amended, which provides:
"The provisions of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the National Government, one percent (1%) of the gross income earned by all business enterprises within the Subic Special Economic Zone to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.

Even were such renewal fees legally defensible as "fees", instead of "taxes", such renewal fees, like fees assessed in connection with the original issuance of the Certificates, would vary the terms of the leases leaseholders have with SBMA, and as such violate Section 10, Article III, of the 1987 Philippine Constitution, which provides:"No law impairing the obligation of contracts shall be imposed".

Someone needs to bring suit against SBMA.

[The Subic Bulletin] We agree with your assessment and if it will take a legal case then so be it. We think most people are waiting to hear a plan of action from the Subic Chamber of Commerce who is seeking legal advice on this matter.

We think most leaseholders in the Freeport would be happy put in a contribution for a case because this is the protection of rights against bullying from an out-of-control government body. If SBMA is successful in doing this what would be next?