A inherited a two-storey building in Makati from his father, a real estate broker in the ‘60s. A group of Tibetan monks approached A and offered to lease the building in order to use it as a venue for their Buddhist rituals and ceremonies. A accepted the rental of P1 million for the whole year.
The following year, the City Assessor issued an assessment against A for non-payment of real property taxes.
Is the assessor justified in assessing A’s deficiency real property taxes? Explain. (3%)
Suggested answer only. Not an official answer and not legal advice.
No, the City Assessor is not justified in assessing A's deficiency real property taxes. Under Sec. 28(3), Art. VI of the Constitution and Sec. 234(b), LGC, property actually, directly, and exclusively used for religious purposes is exempt
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Quick check
Under the 1987 Constitution and the Local Government Code, what determines real property tax exemption for religious property?
Real property tax exemption is determined strictly by the actual, direct, and exclusive use of the property, not its ownership.
Does leasing a private building to a religious group for rental income forfeit the property's real property tax exemption?
Exemption depends on actual religious use, so receiving rental income does not defeat the real property tax exemption.
Which constitutional provision grants real property tax exemption to properties actually, directly, and exclusively used for religious purposes?
Article VI, Section 28(3) of the 1987 Constitution provides tax exemption for real property exclusively used for religious purposes.
How is the rental income received by a property owner from leasing real property to a religious group treated for tax purposes?
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In City of Baguio v. Busuego, what test governs the entitlement of real property to tax exemption under local tax law?
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Learn more about these topics
1. Religious Use Exemption
Under Article VI, Section 28(3) of the Constitution and Section 234(b) of the Local Government Code, real property actually, directly, and exclusively used for religious purposes is exempt from real property tax. This tax exemption is grounded in public policy promoting religious worship and spiritual activities.
2. Actual Use Doctrine
Real property tax exemption is governed strictly by the actual use of the property, rather than its ownership. Even if the property is owned by a private individual or leased for profit, tax exemption attaches as long as the tenant actually, directly, and exclusively uses the premises for religious rituals.
3. Rental Income Impact
The receipt of rental income by a property owner does not forfeit the real property tax exemption enjoyed by the leased premises. While the rental income received by the lessor may be subject to income tax, the real property itself remains exempt from real property tax due to its exclusive religious use.