N OTES ON L OCAL G OVERNMENT T AXATION

JOSALEE S. DEINLA | 2002-26115

POWER TO CREATE SOURCE OF REVENUE - Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges subject to
the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local government units.

FUNDAMENTAL PRINCIPLES - The following fundamental principles shall govern the exercise
of the taxing and other revenue-raising powers of local government units:
1. Taxation shall be uniform in each local government unit;
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as far as practicable on the taxpayer's ability to pay;
b. be levied and collected only for public purposes;
c. not be adjust, excessive, oppressive, or confiscatory;
d. not be contrary to law, public policy, national economic policy, or in restraint
of trade;
3. The collection of local taxes, fees, charges and other impositions shall in no case be
let to any private person;
4. The revenue collected pursuant to the provisions of this Code shall inure solely to the
benefit of, and be subject to disposition by, the local government unit levying the tax,
fee, charge or other imposition unless otherwise specifically provided herein; and,
5. Each local government unit shall, as far as practicable, evolve a progressive system
of taxation.

LOCAL TAXING AUTHORITY - The power to impose a tax, fee, or charge or to generate
revenue shall be exercised by the Sanggunian of the local government unit concerned
through an appropriate ordinance.

COMMON LIMITATIONS ON THE TAXING POWERS OF LOCAL GOVERNMENT UNITS - Unless
otherwise provided, the exercise of the taxing powers of provinces, cities, municipalities, and
Barangays shall not extend to the levy of the following:
1. Income tax, except when levied on banks and other financial institutions;
2. Documentary stamp tax;
3. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided herein;
4. Customs duties, registration fees vessels and wharfage on wharves, tonnage dues,
and all other kinds of customs fees, charges and dues except wharfage on wharves
constructed and maintained by the local government unit concerned;
5. Taxes, fee and charges and other impositions upon goods carried into or out of, or
passing through, the territorial jurisdictions of local government units in the guise of
charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in
any form whatsoever upon such goods or merchandise;
6. Taxes, fees, or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen;
7. Taxes on business enterprises certified to by the Board of Investments as pioneer or
non-pioneer for a period of six (6) and (4) four years, respectively from the date of
registration;
8. Excise taxes on articles enumerated under the National Internal Revenue Code, as
amended, and taxes, fees or charges on petroleum products;
9. Percentage or value added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;

1

creeks. 12. lakes. 6810 and Republic Act Numbered Sixty- nine hundred thirty-eight (R. and local government units TAXING AND OTHER REVENUE RAISING POWERS OF PROVINCES TAX OBJECT RATE TRANSFER OF REAL Not more than 50% of 1% of the PROPERTY OWNERSHIP total consideration or of the fair market value in case the monetary consideration involved in the transfer is not substantial. 10. the tax shall not exceed preceding calendar year based on one-twentieth (1/20) of one percent the incoming receipt. rivers.A. 14. the tax shall not exceed preceding calendar year 1/20 of 1% of the capital investment. of any kind on the National Government. 6938) otherwise known as the "Cooperatives Code of the Philippines" respectively. Taxes. the tax shall be based on the gross receipts for the preceding calendar year. sand. except as otherwise provided herein. except as provided in this Code. GRAVEL AND OTHER Not more than 10% of fair market The permit to extract sand. land or water. Taxes on premium paid by way or reinsurance or retrocession. Taxes. FRANCHISE Rate exceeding 50% of 1% of the In the case of a newly started gross annual receipts for the business. issued exclusively by the provincial earth. 13. In within its territorial jurisdiction. gravel QUARRY RESOURCES value in the locality per cubic meter and other quarry resources shall be of ordinary stones. 11. streams. SAND. pursuant to the ordinance extracted from public lands or from of the Sangguniang Panlalawigan. No. the tax shall be based on the gross receipts for the preceding calendar year. and other public The proceeds of the tax on sand. Taxes. In the succeeding calendar year. as provided herein. or charges. the succeeding calendar year. Taxes on the gross receipts of transaction contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air. except tricycles. or any fraction thereof. fees. and other quarry resources governor. No. its agencies and instrumentalities. or any fraction thereof. regardless of when the business started to operate. Taxes. on Countryside and Barangay Business Enterprises and cooperatives duly registered under R. fees or charges on Philippine products actually exported. and 15. The receipts from the printing and/or publishing of books or other reading materials prescribed by the Department of Education as school texts or reference shall be exempt from this tax. (1%) of the capital investment. fees or charges for the registration of motor vehicle and for the issuance of all kinds of licenses or permits for the driving thereof. waters within its territorial gravel and other quarry resources jurisdiction shall be distributed as follows: 2 . whichever is higher BUSINESS OF PRINTING AND Not exceeding 50% of 1% of the In the case of a newly started PUBLICATION gross annual receipts for the business. or realized. the beds of seas. fees or charges. regardless of when the business started to operate.A. gravel.

as the case may be. painting and art 3 . Province .00 where he practices his profession or where he maintains his principal office in case he practices his profession in several places. lessees. Such person who has paid the corresponding professional tax shall be entitled to practice his profession in any part of the Philippines without being subjected to any other national or local tax.30%.40%. reports. license. or operators and the distributors of the cinematographic films. surveys and maps. the number of the official receipt issued to him. 2. AMUSEMENT Not more than thirty percent 30% of In the case of theaters of cinemas. or free for the practice of such profession. Barangay where the sand. Any person subject to the professional tax shall write in deeds. The professional tax shall be payable annually on or before the thirty first (31st) day of January must. gravel. plans and designs. or operators and paid to the provincial treasurer before the gross receipts are divided between said proprietors. pay the full tax before engaging therein. A line of profession does not become exempt even if conducted with some other profession for which the tax has been paid. recitals. and other quarry resources are extracted . The holding of operas. PROFESSION Such amount and reasonable Every person legally authorized to classification as the Sangguniang practice his profession shall pay the Panlalawigan may determine but professional tax to the province shall in no case exceed P300. concerts. receipts. 1. the gross receipts from admission the tax shall first be deducted and fees withheld by their proprietors. however. lessees. and other quarry resources are extracted - 30%. dramas. Professionals exclusively employed in the government shall be exempt from the payment of this tax. books of account. Component City or Municipality where the sand. gravel. prescriptions. Any individual or corporation employing a person subject to professional tax shall require payment by that person of professinal tax before employment and annually thereafter. and 3.

00 ARTICLE OF COMMERCE OF 302. REPACKERS.000.00 or more but less than 100.00 1. manner.Except as otherwise provided.000.00 AND COMPOUNDERS OF 165. The Sangguniang Panlalawigan may prescribe the time. DISTILLED SPIRITS. interests and penalties. terms and conditions for the payment of tax. from the tax on peddlers prescribed FERMENTED LIQUORS.00 825. except pop. flower shows. The proceeds from the amusement tax shall be shared equally by the province and the municipality where such amusement places are located.00 75.00 LIQUORS.000. in the amount of DISTILLERS.000.00 or more but less than 20. and retailers WITHIN THE PROVINCE OF referred to here shall be exempt DISTILLED SPIRITS.00 WHATEVER KIND OF NATURE 20.750.00 50.00 or more but less than 75. DRINKS.000. DELIVERY OR DISTRIBUTION wholesalers.00 or more but less than 50.00 2. rock. musical programs.000.00 4 . fees.00 The manufacturers. and charges not otherwise levied by provinces. literary and oratorical presentations.000.000.00 or more but less than 150. RECTIFIERS. In case of fraud or failure to pay the tax.200.320.000.00 660. the Sangguniang Panlalawigan may impose such surcharges.000. P 10.00 or more but less than 200. Less than 10.000. AND OTHER PRODUCTS AS MAY BE DETERMINED BY THE SANGGUNIANG PANLALAWIGAN TAXING AND OTHER REVENUE RAISING POWERS OF MUNICIPALITIES SCOPE OF TAXING POWERS . SOFT elsewhere in the Code. BREWERS. producers.00 or more but less than 40.000. dealers.000.00 or more but less than 15.000.00 1.00 MANUFACTURERS OF ANY 15.000. VEHICLE USED IN THE Amount not exceeding P500.650. municipalities may levy taxes.00 150. CIGARS AND CIGARETTES.000.000. Amount of tax per preceding amount of calendar ASSEMBLERS.000.00 40.000. year annum PROCESSORS.00 AND WINES OR 220.00 or more but less than 30. or similar concerts shall be exempt from the payment of this tax.00 2.00 30. exhibitions.00 440.00 100. TAX OBJECT/SUBJECT SCHEDULE OF RATES BUSINESS: With gross sales or receipts for the MANUFACTURERS.

00 or more but less than 20.00 750.000.000.00 8.00 or more but less than 50.000.00 or more but less than 6.00 10.100.00 8.00 121.00 187.000.00 or more but less than 2.00 275.000.000.00 23.00 30.375.00 16.00 3.00 or more but less than 10.00 4.000.000.000.00 5.000.000.000.000.00 660.00 or more but less than 30.00 or more but less than 6.00 24.00 5.000.000.00 3.000.000.000.000.000.00 1.00 or more but less than 75.000.00 100.00 or more but less than 4.000.500.000.00 330.00 5 .000.00 or more but less than 3.00 40.00 1320.00 990.000.000.00 6.00 ACCORDANCE 18.000.000.000.000.000.000.000.00 or more but less than 15.00 P 1. 200.00 220.000.000.000.00 13.00 or more but less than 150.00 15.00 165.000.000.000.000.00 or more but less than 300.000.00 300.000.500.000.00 or more but less than 7.00 2.000.00 or more but less than 4.00 10.000.000.00 5.00 4.00 or more but less than 1.00 440.000.00 100.000.00 or more but less than 100.000.00 or more but less than 500.00 or more at a rate not exceeding 37 1/2% of 1% WHOLESALERS.00 or more but less than 8.000.000.00 72.00 143.00 33.00 or more but less than 5.000.00 50. OR DEALERS Amount of tax per preceding amount of calendar IN ANY ARTICLE OF year annum COMMERCE OF WHATEVER in the amount of KIND OR NATURE IN Less than P1.500.00 or more but less than 5.800.000.00 19.500.000.850.00 20.000.00 500.00 2.00 3.000.00 or more but less than 40.000.000.00 or more but less than 3.000.000.00 50.00 7.000.750.000.00 6. With gross sales or receipts for the DISTRIBUTORS.000.00 75.000.00 or more but less than 2.00 or more but less than750.

00 or more but less than 2. 1870. 6.000. WHEAT OR CASSAVA FLOUR.000. PESTICIDES.000. HERBICIDES AND OTHER FARM INPUTS. the first.00 or more but less than 1.000.00 6600. PROCESSED OR PRESERVED FOOD. WHETHER IN THEIR ORIGINAL STATE OR NOT. EQUIPMENT AND POST HARVEST FACILITIES. POULTRY FEEDS AND OTHER ANIMAL FEEDS. MARINE. AND FRESH WATER PRODUCTS. MEAT. 2. AND 8. WHOLESALERS. LAUNDRY SOAP.000. DEALERS OR RETAILERS OF ESSENTIAL COMMODITIES: 1.000. INSECTICIDES.00 500. 5.000.000. 4.000.00 2.00 1.00 2420. DETERGENTS. AND MEDICINE.000.000.000.00 8800.000.00 or more but less than 200. LOCALLY MANUFACTURED. SALT AND OTHER AGRICULTURAL. 7.00 or more but less than 300.00 or more but less than 500. AND ON Rate not exceeding 1/2 of the rates prescribed under MANUFACTURERS.00 50.00 200. RICE AND CORN. MILLERS.00 4400.000.00 300.00 or more but less than 750. DAIRY PRODUCTS. to business tax in this tabulation DISTRIBUTORS. SUGAR.000.000.00 or more at a rate not exceeding 50% of 1% EXPORTERS.00 10000.00 3300. SCHOOL SUPPLIES. COOKING OIL AND COOKING GAS.00 150. CEMENT RETAILERS With gross sales or receipts for the Barangays shall have Rate of Tax the exclusive power preceding calendar year of: to levy taxes on 6 .000. second and fourth type of business subject PRODUCERS. AGRICULTURAL IMPLEMENTS. FERTILIZERS. 3.

00 or more but less than 250.000. commissions and discounts from lending activities.000.00 10250.00 30.00 400.00 9250.50 15.00 or more but less than 500.00 50.000.000. dividends.00 385.00 2.00 or more but less than 750.000.000. rentals on property and profit from ex change or sale of property.00 40.00 500.00 11500.00 or more but less than 15.00 20.00 150.00 or more but less than 30.000.000.000.000.00 200.000.000.000.000.000.00 or more but less than 2.50 P 5.00 or more but less than 200.000.00 750.000.00 1% or less in the case of municipalities.00 or more but less than 300.00 550.00 or more but less than 40.00 8250.00 880.000.000.00 165.000.00 1980.000. Per Annum gross sales or P 400.00 1.000. income from financial leasing.00 75.00 6160.00 per peddler annually ANY OTHER BUSINESS On any business WHICH THE SANGGUNIAN subject to the excise.000.00 or more but less than 10.00 or less receipts of the 2% preceding calendar More than P 400.000. CONTRACTORS AND With gross sales or receipts for the INDEPENDENT Amount of tax per preceding amount of calendar CONTRACTORS year annum in the amount of Less than P 5.00 or more but less than 100.000.00 or more but less than 400.000.00 27.00 year of P50.000.00 or more at a rate not exceeding 50% of 1% BANKS AND OTHER Rate not exceeding 50% of 1% on the gross receipts FINANCIAL INSTITUTIONS of the preceding calendar year derived from interest.000. 7 .00 2640.00 61.00 104.00 or more but less than 1.000. insurance premium PEDDLERS Rate not exceeding P50.000.000.00 or more but less than 20.00 or more but less than 150.000.000.000.000.000.00 275.00 or more but less than 75.000.00 1320.00 250.000.00 300.000.00 or more but less than 50.00 100.60 10.000.000.00 4620.000.00 3630.000.

CONCERNED MAY DEEM value-added or PROPER TO TAX percentage tax under the NIRC. The Sanggunian concerned shall. the rate of tax shall not exceed 2% of gross sales or receipts of the preceding calendar year. inspection and licensing SEALING AND LICENSING OF The Sangguniang WEIGHTS AND MEASURES bayan shall prescribe the necessary regulations for the use of weights and measures. FEES AND CHARGES BUSINESS AND OCCUPATION In an amount commensurate with the cost of regulation. The Sanggunian concerned may prescribe a schedule of graduated tax rates but in no case to exceed the rates here prescribed. oyster. Grant fishery privileges to erect fish corrals. penalize fraudulent practices and unlawful possession or use of instruments of weights and measures and prescribe the criminal penalty. upon payment of a compromise penalty of not less than P200.00 FISHERY PRIVILEGES The Sangguniang Bayan may: 1. subject to such guidelines as shall be prescribed by the Department of Science and Technology. by appropriate ordinance. The Sanggunian concerned may authorize the municipal treasurer to settle an offense not involving the commission of fraud before a case therefore is filed in court. 8 .

3.000. Grant the privilege to gather.00 for every The following are THE PHILIPPINES 18 P1.00 Diplomatic and ON A WAGE OR SALARY consular BASIS FOR AT LEAST 30 representatives. COMMUNITY TAX: 1. traps or other fishing gears to marginal fishermen free of any rental. Issue for the operation of fishing vessels of three tons or less for which purpose the Sangguniang bayan shall promulgate rules and regulations regarding the issuances of such licenses to qualified applicants under existing laws. and CONSECUTIVE WORKING 2) Transient visitors DAYS DURING ANY when their stay in CALENDAR YEAR. within a definite zone of the municipal waters. EVERY INHABITANT OF P5.00 and an annual additional tax of P1. exercise of profession or from property community tax: 1) REGULARLY EMPLOYED which in no case shall exceed P5. 2.00 of income regardless of whether from exempt from the YEARS OF AGE OR OVER business. fee.000. prawn fry or kawag-kawag or fry of other species and fish from the municipal waters by nets. OR the Philippines does 9 . mussels or other aquatic beds or bangus fry areas. The Sangguniang bayan may require a public bidding pursuant to an ordinance for the grant of such privileges. charge or any other imposition whatsoever. take or catch bangus fry. Duly registered organizations and cooperatives of marginal fishermen shall have the preferential right to such fishery privileges.

000. producers.For purposes of collection of the taxes. SALES ALLOCATION –  In case of manufacturers. RATES OF TAX WITHIN THE METROPOLITAN MANILA AREA – The municipalities within the Metropolitan Manila Area may levy taxes at rates which shall not exceed by 50% the maximum rates prescribed for municipalities.40% to the city or municipality where the plantation is located.00 A community tax OR ORGANIZED. distillers… maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction.000. The tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is located. assemblers. assemblers. manufacturers.00 worth of real property in the the place where the LAW TO FILE AN INCOME Philippines owned by it during the preceding year principal office of the TAX RETURN based on the valuation used for the payment of the juridical entity is real property tax. brewers. derived b by it from its business in the Philippines person or ENGAGED IN OR DOING during the preceding year . and . SITUS OF THE TAX . 10 .P2.00. RETIREMENT OF BUSINESS . the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality. 2. If the tax paid during the year. the individual. and plantations: . and exporters with factories. OR WHO OWNS REAL PROPERTY The community tax WITH AN AGGREGATE shall be paid in the ASSESSED VALUE OF place of residence of P1.A business subject to tax shall submit a sworn statement of its gross sales or receipts for the current year upon its termination.  In case of a plantation located at a place other than the place where the factory is located.30% of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located -70% of all sales recorded in the principal office shall be taxable by the city or municipality where the factory. repackers.00) OR MORE.P2. or in OR WHO IS REQUIRED BY For every P5. the difference shall be paid before the business is concerned officially retired. said 70% of all sales taxable shall be divided as follows: .60% to the city or municipality where the factory is located.00 of gross receipts or earnings issued to every RESIDENT FOREIGN.000. CORPORATIONS NO the city or municipality where the real property is MATTER HOW CREATED situated . project office. A community tax certificate may also be issued to any person or corporation not subject to the community tax upon payment of P1. plants. OCCUPATION. certificate shall be WHETHER DOMESTIC OR For every P5.00. corporation upon BUSINESS IN THE payment of the PHILIPPINES community tax. contractors. WHO IS ENGAGED IN not exceed three BUSINESS OR months. plant. project offices. In cases where there is no such branch or sales outlet in the city or municipality where the sale or transaction is made. found in the assessment rolls of located. or plantation is located.

in the case of municipalities.00 or less. at a rate not exceeding 1% on such gross sales or receipts. BARANGAY CLEARANCE Reasonable amount No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the Barangay where such business or activity is located or conducted. The application for clearance shall be acted upon within seven working days from the filing In the event that the clearance is not issued within the said period. which shall exclusively accrue to them: TAX RATE/AMOUNT SUBJECT/FEES/CHARGES STORES OR RETAILERS WITH With gross sales or receipts of the FIXED BUSINESS preceding calendar year of ESTABLISHMENTS P50. OTHER FEES AND Reasonable amount CHARGES: 1. or plantations located in different localities. plants. In case where a manufacturer. TAXING AND OTHER REVENUE-RAISING POWERS OF BARANGAYS SCOPE OF TAXING POWERS – The Barangays may levy the following taxes. fees. plants. exporter or contractor has two (2) or more factories. the seventy percent (70%) mentioned in subparagraph (b) of subsection (2) above shall be prorated among the localities where the factories. fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the Code. the city.  The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than 50% except the rates of professional and amusement taxes.000. and charges which the province or municipality may impose provided that the taxes. producer. assembler.000. fees. neon 11 . signboards.00 or less. SCOPE OF TAXING POWER OF CITIES  Except as otherwise provided. Places of recreation which charge admission fees 3.  Cities may also levy community taxes in the same manner as municipalities. may levy the taxes. cockfighting an cockpits 2. Commercial breeding of fighting cocks. and charges. Billboards. and plantations are located in proportion to their respective volume or production during the period for which the tax is due. project offices. the city or municipality may issue the said license or permit. in the case of cities and P30. project offices.

 PUBLIC UTILITY CHARGES . that no such toll fees or charges shall be collected from officers and enlisted men of the AFP and members of the PNP on mission. pier or wharf. and outdoor advertisements COMMON REVENUE-RAISING POWERS  SERVICE FEES AND CHARGES – Local government units may impose and collect such reasonable fees and charges for services rendered. The said facility shall then be free and open for public use. post office personnel delivering mail. and disabled citizens who are 65 years or older. bridge. the Sanggunian concerned may discontinue the collection of the tolls. 12 .The Sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road. waterway.  When public safety and welfare so requires. signs. ferry or telecommunication system funded and constructed by the local government unit concerned provided. physically-handicapped.

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