MANILA INTERNATIONAL AIRPORT AUTHORITY v.

COURT OF
APPEALS, et al. GR No. 155650, 20 July 2006, Carpio, J. (En
Banc)
Section 243(a) of the Local Government Code (LGC)
exempts from real estate tax any real property owned by
the Republic of the Philippines. This exemption should be
read in relation with Sec. 133(o) of the LGC, which
provides that the exercise of the taxing powers of local
governments shall not extend to the levy of taxes, fees or
charges of any kind on the National Government, its
agencies and instrumentalities. The rule is that a tax is
never presumed and there must be clear language in the
law imposing the tax. This rule applies with greater force
when local governments seek to tax national government
instrumentalities. Moreover, a tax exemption is construed
liberally in favor of national government instrumentalities.
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. Also, when the
law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the
National Government machinery.
The Manila International Airport Authority (MIAA) operates
the Ninoy Aquino International Airport (NAIA) Complex in
Paranaque City under Executive Order No. 903 (MIAA
Charter), as amended. As such operator, it administers the
land, improvements and equipment within the NAIA
Complex. In March 1997, the Office of the Government
Corporate Counsel (OGCC) issued Opinion No. 061 to the
effect that the Local Government Code of 1991 (LGC)
withdrew the exemption from real estate tax granted to
MIAA under Section 21 of its Charter. Thus, MIAA paid
some of the real estate tax already due. In June 2001, it
received Final Notices of Real Estate Tax Delinquency from
the City of Paranaque for the taxable years 1992 to 2001.
The City Treasurer subsequently issued notices of levy and
warrants of levy on the airport lands and buildings.

At the instance of MIAA, the OGCC issued Opinion No. 147

clarifying Opinion No. 061, pointing out that Sec. 206 of
the LGC requires persons exempt from real estate tax to
show proof of exemption. According to the OGCC, Sec. 21
of the MIAA Charter is the proof that MIAA is exempt from
real estate tax. MIAA, thus, filed a petition with the Court
of Appeals seeking to restrain the City of Paranaque from
imposing real estate tax on, levying against, and
auctioning for public sale the airport lands and buildings,
but this was dismissed for having been filed out of time.
Hence, MIAA filed this petition for review, pointing out that
it is exempt from real estate tax under Sec. 21 of its
charter and Sec. 234 of the LGC. It invokes the principle
that the government cannot tax itself as a justification for
exemption, since the airport lands and buildings, being
devoted to public use and public service, are owned by the
Republic of the Philippines. On the other hand, the City of
Paranaque invokes Sec. 193 of the LGC, which expressly
withdrew the tax exemption privileges of governmentowned and controlled corporations (GOCC) upon the
effectivity of the LGC. It asserts that an international
airport is not among the exceptions mentioned in the said
law.
Meanwhile, the City of Paranaque posted and published
notices announcing the public auction sale of the airport
lands and buildings. In the afternoon before the scheduled
public auction, MIAA applied with the Court for the
issuance of a TRO to restrain the auction sale. The Court
issued a TRO on the day of the auction sale, however, the
same was received only by the City of Paranaque three
hours after the sale.
ISSUE:
Whether or not the airport lands and buildings of MIAA are
exempt from real estate tax under existing laws
RECENT JURISPRUDENCE TAXATION LAW
HELD:

The airport lands and buildings of MIAA are exempt from

real estate tax imposed by local governments. Sec. 243(a)
of the LGC exempts from real estate tax any real property
owned by the Republic of the Philippines. This exemption
should be read in relation with Sec. 133(o) of the LGC,
which provides that the exercise of the taxing powers of
local governments shall not extend to the levy of taxes,
fees or charges of any kind on the National Government,
its agencies and instrumentalities. These provisions
recognize the basic principle that local governments
cannot tax the national government, which historically
merely delegated to local governments the power to tax.
The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. This rule
applies with greater force when local governments seek to
tax national government instrumentalities. Moreover, a
tax exemption is construed liberally in favor of national
government instrumentalities.
MIAA is not a GOCC, but an instrumentality of the
government.
Sec. 2(13) of the Introductory Provisions of the
Administrative Code of 1987 defines a GOCC as follows:
(13) Government-owned or controlled corporation refers to
any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51)
percent of its capital stock: x x x (Emphasis supplied)
MIAA is not organized as a stock or non-stock corporation.
It is not a stock corporation because it has no capital stock
divided into shares. It has capital but it is not divided into
shares of stock. It has no stockholders or voting shares.
MIAA is also not a non-stock corporation because it has no
members. Even assuming that the Government is
considered as the sole member of MIAA, this will not make
MIAA a non-stock corporation. Being a public utility, MIAA
is not organized for any of the purposes provided for under

the Corporation Code for which a non-stock corporation

may be organized. Also, it is mandated by its charter to
remit 20% of its annual gross operating income to the
National
Treasury.
Non-stock
corporations
cannot
distribute any part of their income to their members.
MIAA is a government instrumentality vested with
corporate powers to perform efficiently its governmental
functions. Sec. 2(10) of the Introductory Provisions of the
Administrative Code defines a government instrumentality
as follows:
(10) Instrumentality refers to any 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. x x x (Emphasis
supplied)
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. Also, when the
law makes a government instrumentality operationally
The Petition is GRANTED.
RECENT JURISPRUDENCE TAXATION LAW
autonomous, the instrumentality remains part of the
National Government machinery. Being a government
instrumentality, MIAA falls under Sec. 133(o) of the LGC.
As such, it is not a taxable person.
The airport lands and buildings are owned by the Republic
of the Philippines, hence, exempt from tax.
Properties of public dominion mentioned in Article 420 of
the Civil Code, like roads, canals, rivers, torrents, ports
and bridges constructed by the State, are owned by the

State. The term ports includes seaports and airports.

The MIAA airport lands and buildings constitute a port
constructed by the State. Also, the said properties are
devoted to public use because they are used by the public
for international and domestic travel and transportation.
The fact that MIAA collects terminal fees and other
charges from the public does not remove the character of
the airport lands and buildings as properties for public use.
Such fees are often termed users tax, which means taxing
those among the public who actually use a public facility
instead of taxing all the public including those who never
use the particular public facility. A users tax is more
equitable.
MIAA is merely holding title to the airport lands and
buildings in trust for the Republic. In fact, MIAA cannot
dispose of the properties without the Presidents approval.
The transfer of these properties from the Bureau of Air
Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to
MIAA. The purpose was merely to reorganize a division in
the Bureau of Air Transportation into a separate and
autonomous body. The Republic remains the beneficial
owner of the properties. MIAA itself is owned solely by the
Republic. At any time, the President can transfer back to
the Republic title to the airport lands and buildings without
the Republic paying MIAA any consideration.
As long as the airport lands and buildings are reserved for
public use, their ownership remains with the State. Unless
the President issues a proclamation withdrawing these
properties from public use, they remain properties of
public dominion. As such, they are inalienable, hence, they
are not subject to levy on execution or foreclosure sale,
and they are exempt from real estate tax.
However, portions of the airport lands and buildings that
MIAA leases to private entities are not exempt from real
estate tax. In such a case, MIAA has granted the beneficial
use of such portions for a consideration to a taxable
person.