CEBU City Hall will drop its demand for Filinvest Land Inc. (FLI) to pay P7 million in transfer taxes for South Road Properties (SRP) lots that it bought, after the city attorney ruled the developer is not liable for any such payment.

City Attorney Joseph Bernaldez said there is no need to review a city councilor’s proposal to exempt FLI from the payment of transfer tax, because the law does not require them to pay in the first place.

However, in the Cebu City Government-FLI joint venture contract for the sale and development of SRP lots, one of the provisions states that the transfer tax is on the account of FLI.

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“That provision in the contract is a mistake. It’s contrary to the law that states that the payment of transfer tax should be shouldered by the seller of the property. In this case, it’s the City Government and not FLI that should shoulder it,” Bernaldez said.

He prepared a legal opinion on the matter and submitted it to City Treasurer Ofelia Oliva and Councilor Jose Daluz III, who proposed a resolution seeking the exemption of FLI from the payment of transfer tax.

Daluz said he withdrew his resolution, after learning that in this case, it is the City Government that is liable to pay the transfer tax as owner and seller of SRP lots.

In a phone interview yesterday, Oliva said she has prepared a letter for FLI informing them that she is withdrawing the demand for payment.

She also authorized FLI to proceed with the processing of the transfer of the ownership of the property at the Register of Deeds and the City Assessor’s Office.

The P7 million the City Treasurer’s Office collected from FLI represents local transfer taxes for its purchase of two parcels of land in the SRP.

“Since the city attorney already said that collecting from FLI is contrary to the law, then I will have to drop any move to collect the transfer tax. That provision in the contract will also be declared null and void,” Oliva told Sun.Star Cebu.

Although the City will drop that proviso from the contract and consider it null and void, Bernaldez said there is no need to amend the entire contract, and that the contract as a whole should remain valid.

In his legal opinion, Bernaldez cited Section 135 of the Local Government Code, which states that a local government unit “may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real property at the rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved in the acquisition of the property or of the fair market value...”

“It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein imposed within sixty (60) days from the date of the execution of the deed or from the date of the decedent’s death,” reads Section 135 b of the Local Government Code.