UP vs. City Treasurer of Quezon City, GR No.
214044, 19 Jun 2019
FACTS: On 27 October 2006, the University of the Philippines (UP) and Ayala Land, Inc. (ALI) entered into a contract
of lease with the former leasing part of its land to the latter. The contract provides that ALI owns the improvements on
the leased land. As to real property taxes, UP shall pay the real estate taxes on the land while ALI will pay the real
estate taxes on the improvements on the leased premises.
On 29 April 2008, Republic Act No. 9500, or the UP Charter of 2008, was signed into law. The R.A. provides that “all
revenues and assets of the University of the Philippines used for educational purposes or in support thereof shall be
exempt from all taxes and duties.”
On 22 August 2012, the City Assessor informed UP in a letter of the City Assessor's service of a Notice of Assessment
to ALI citing Sections 205 and 234 of the Local Government Code as its bases.
On 23 August 2012, the City Assessor issued a Notice of Assessment to ALI. The notice stated that the land subject
of the lease agreement with UP was reclassified and assessed for taxation purposes with an assessed value of
P499,500,000.00 effective 2009.
On 5 December 2012, the City Treasurer issued a Statement of Delinquency to UP North Property Holdings, Inc. for
the period 2009 to 2011 and the first three quarters of 2012 in the total amount of P78,970,950.00. The total amount
included the tax due and penalty.
On 1 August 2013, the Executive Director of Bureau of Local Government Finance, Department of Finance (BLGF-
DOF) sent a letter to Quezon City Mayor Herbert M. Bautista, holding ALI as the legally accountable party for the
unpaid real property taxes due covering the "government-owned UP property."
On 24 September 2013, the City Treasurer issued a Statement of Delinquency27 to UP North Property Holdings, Inc.
The City Treasurer demanded payment of real property tax on the subject land in the amount of P102,747,150.00 for
the years 2009 to 2012 and the first three quarters of 2013.
On 27 May 2014, the City Treasurer issued a Notice of Delinquency to UP for the years 2009 to 2013 and the first
quarter of 2014 in the total amount of P106,992,900.00. The total amount included the tax due and penalty. This was
the first time that the City Treasurer demanded payment from UP of real property tax on the subject land. The City
Treasurer sent the Notice of Delinquency to UP without any prior issuance of a Notice of Assessment.
On 13 June 2014, then UP President Alfredo E. Pascual wrote the City Treasurer to address the Statement of
Delinquency, pointing out UP’s tax exemptions.
On 11 July 2014, the City Treasurer issued a Final Notice of Delinquency to UP for the years 2009 to 2013 and the
first three quarters of 2014 in the total amount of P117,182,700.00. The total amount also included the tax due and
penalty.
ISSUE: Whether UP is liable for real estate taxes on the property leased to ALI.
HELD: No, UP is not liable for real estate taxes.
While a combined reading of Sections 205 and 234 of the Local Government Code provides for removal of the
exemption to government instrumentalities when beneficial use of a real property owned by a government
instrumentality is granted to a taxable person, R.A. 9500 gave a specific tax exemption to UP which covers the land
subject of the present case. The enactment and passage of Republic Act No. 9500 in 2008 superseded Sections 205(d)
and 234(a) of the Local Government Code. R.A. 9500 allows UP to lease and develop its land subject to certain
conditions, i.e., for an educational purpose, or at the very least, in support of an educational purpose. There is no longer
any need to determine the tax status of the possessor or of the beneficial user to further ascertain whether UP's revenue
or asset is exempt from tax.
Considering that the subject land and the revenue derived from the lease thereof are used by UP for educational
purposes and in support of its educational purposes, UP should not be assessed, and should not be made liable for
real property tax on the land subject of this case. Under R.A. 9500, this tax exemption, however, applies only to "assets
of the University of the Philippines," referring to assets owned by UP. Under the Contract of Lease between UP and
ALI, all improvement on the leased land "shall be owned by and shall be for the account of the LESSEE [ALI]" during
the term of the lease. The improvements are not "assets" owned by UP; and thus, UP's tax exemption under Republic
Act No. 9500 does not extend to these improvements during the term of the lease.
