CEBU CITY -- Filinvest Land Inc. (FLI) is asking the Cebu City Government for an exemption from paying P7 million in local transfer taxes for its purchase of two parcels of land in the South Road Properties (SRP).

Tristan Las Marias, FLI's vice president in the Visayas and Mindanao, said the City Government will be acting in bad faith if it will demand payment for transfer tax prior to the release of their tax clearance.

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"We do not agree to issue an undertaking to pay the local transfer taxes. We paid the P342 million second payment last March with the clear understanding that the exemption of the local transfer taxes was already a non-issue, as such was granted during our first payment last March 2009," said Las Marias in his letter to City Treasurer Ofelia Oliva.

In March last year, FLI turned over to the City Government P348 million as down payment for the land at SRP that they will develop.

As the need to pay the transfer tax was only brought up after the second payment from FLI, Las Marias requested City Hall to release its tax certificates in good faith and defer the discussion until before the third payment, due in March next year.

Oliva, in a phone interview with Sun.Star Cebu Sunday, said the joint venture agreement specifies that FLI is obligated to pay the transfer taxes on their purchase of SRP land.

"No such tax was collected in the first payment because there was a certification from (Renee) Empaces dated March 18, 2009, saying the Cebu City Government is exempt from the payment of transfer tax," said Oliva.

"Unya di man ang city magbayad sa transfer tax. Nagkasayop-sayop ba. (But it's not the City that has to pay the transfer tax. Mistakes were made.) It was misinterpreted," said Oliva. Empaces is a former city treasurer.

In her letter to Las Marias, Oliva said: "(The CTO) noted that there was erroneous issuance of certification. Section 5 of the Deed of Absolute Sale executed between the two parties provides that the local transfer taxes shall be for the account of Filinvest but the city commits to grant an exemption to Filinvest for the payment of transfer taxes as may be allowed by law. However, the transaction by Filinvest with Cebu City is not one of the exceptions provided by law."

Oliva said the City Government will be collecting at least P7 million from FLI for the first and second sale.

"Maingnan ta ana'g I am not doing my job if I will not collect the tax from them," she said.

Oliva, meanwhile, said FLI may be exempted from paying the P7 million in transfer taxes if the Sangguniang Panlungsod [City Council] decides to grant an exemption.

Councilor Jose Daluz III, who chairs the council's committee on budget and finance, filed a resolution during its regular session last week seeking an exemption for FLI.

Daluz's resolution was referred to the committee on budget and finance through its vice chairman, Councilor Noel Wenceslao, and to the committee on laws chaired by Councilor Edgardo Labella.

If FLI will be granted the P7-million tax exemptions, Oliva said it will not be too much.

"The city's benefit will be much bigger. That exemption will be compensated by their investment in the SRP," she said.

FLI is the first developer to buy lots at the SRP, which the City Government developed using funds borrowed from the Japanese Government. (PDF of Sun.Star Cebu)