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RTDG - ausl real property tax reviewer


Q: What are real property taxes?
These are direct taxes imposed on the privilege to use real
property such as land, building, machinery and other
improvements unless specifically exempted.
Q: What are considered real properties?
Article 415 of the Civil Code, the following are immovable
Q: Define machinery.
Machinery embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus which
may or may not be attached, permanently or temporarily, to
the real property. It includes the physical facilities for
production, the installations and appurtenant service
facilities, those which are mobile, self-powered or selfpropelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used
to meet the needs of the particular industry, business or
activity and which by their very nature and purpose are
designed for, or necessary to its manufacturing, mining,
logging, commercial, industrial or agricultural purposes.
(Sec. 199 (o), LGC)
Q: What types of machinery are subject and not
subject to RPT?
(1) Machinery that is permanently attached to land and
buildings is subject to the real property tax, even
though this is actually, directly, and exclusively used
for religious, charitable or educational purposes.
(2) Machinery that is not permanently attached to real
estate is:
(i) subject to RPT if it is an essential and
principal element of an industry, work or activity
without which such industry, work or activity,
cannot function;
(ii) not subject to RPT if it is not an essential and
principal element of an industry, work or activity.
(3) Machinery of non-stock, non-profit educational
institutions used actually, directly, and exclusively for
educational purposes is not subject to real property tax.
Q: Define improvement.
Improvement is a valuable addition to the property or an
amelioration in its condition amounting to more than a
repair or replacement of parts. (Sec. 199 (m), LGC)
Q: What are the requisites for taxability of an
(1) It must enhance the value of the property
(2) It must be separately assessable
(3) It can be treated independently from the main property
Q: Are equipment/machineries in cement or wooden
platform and which were never used as industrial
equipments to produce finished products for sale nor
to repair machineries offered to the general public for
business or commercial purposes considered as realty
subject to RPT?

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NO. In Mindanao Bus Co. v. City Assessor & Treasurer

[Sept. 29, 1962], the Supreme Court held that for
equipment to be real property, they must be essential and
principal elements. In addition, the machinery should be
essential to carry on business in a building or piece of land
and this is not the case here since it was proven that the
equipment was not essential because it it used only for
repairs which could actually be done elsewhere.
Q: Are the gas station equipment and machinery
(tanks, pumps, etc) permanently affixed by Caltex to its
gas station and pavement, albeit on leased land,
considered real property subject to RPT even if lessor
does not become the owner of the said assets?
YES. Because they are essential to the business of
taxpayer. In Caltex v. CBAA [May 31, 1982], the Supreme
Court ruled that the said equipment and machinery, as
appurtenances to the gas station building or shed owned
by Caltex and which fixtures are necessary to the operation
of the gas station for without them the gas station would be
useless and which have been attached or affixed
permanently to the gas station site are taxable
improvements and machinery.
Q: MERALCO installed two oil storage tanks on a lot in
Batangas which it leased from Caltex. They are used
for storing fuel oil for MERALCOs power plants. Are
the oil storage tanks real property for purposes of
YES. In Meralco v. CBAA [May 31, 1982], the Supreme
Court held that while the two storage tanks are not
embedded in the land, they are to be considered
improvements on the land enhancing its utility and
rendering it useful to the oil industry. The two tanks have
been installed with some degree of permanence as
receptacles for the considerable quantities oil needed by
MERALCO for its operations.
Q: Enumerate the fundamental principles that shall
guide real property taxation.
(1) Real property shall be appraised at its current and fair
market value.
(2) Real property shall be classified for assessment
purposes on the basis of its actual use.
(3) Real property shall be assessed on the basis of a
uniform classification within each LGU.
(4) The appraisal, assessment, levy and collection of real
property tax shall not be let to any private person.
(5) The appraisal and assessment of real property shall
be equitable. (Sec. 198, LGC)
Q: Do all types of LGUs have the power to impose real
property taxes?
NO. Only provinces and cities as well as municipalities
within Metro Manila may impose RPTs. (Sec. 232, LGC)
Municipalities outside Metro Manila and barangays cannot
impose RPT.

RTDG - ausl real property tax reviewer

Q: What are the rates of levy for purposes of RPT?

A province or city or municipality within Metro Manila shall
fix a uniform rate of basic property tax applicable to their
respective localities:
(1) Province, at the rate not exceeding 1% of the
assessed value
(2) City or Municipality within Metro Manila, at the rate not
exceeding 2% of the assessed value (Sec. 233, LGC)
Q: What are the special levies under the LGC?
(1) Additional Levy for the Special Education Fund
(SEF) - 1% on the assessed value of real property in
addition to the basic RPT. (Sec. 235, LGC)
(2) Special Levy on Idle Lands - idle lands shall be
taxed at a rate not exceeding 5% of the assessed
value in addition to the basic RPT. (Sec. 236, LGC)
(3) Special Levy by LGUs for lands benefited by
public works (special assessment) - the special levy
shall not exceed 60% of the actual cost of such project
and improvements, including the costs of acquiring
land and other real property. (Sec. 240, LGC)
Q: When may idle lands be exempted from tax?
(1) force majeure
(2) civil disturbance
(3) natural calamity
(4) any cause which physically or legally prevents the
owner of the property or person having legal interest
therein from improving, utilising, or cultivating the
same (Sec. 238, LGC)
Q: What are the conditions for the validity of a tax
ordinance imposing special levy for public works?
(1) the ordinance shall describe the nature, extent and
location of the project, state the estimated cost, and
specify the metes and bounds by monuments and
lines (Sec. 241, LGC)
(2) it must state the number of annual installments, not
less than 5 yrs nor more than 10 yrs (Sec. 241, LGC)
(3) notice to the owners and public hearing (Sec. 242,
Q: What are the properties exempt from RPT?
(a) Real property owned by the Republic or any of its
political subdivisions (except when beneficial use has
been granted to a taxable person)
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings or
improvements actually, directly, and exclusively used
for religious, charitable or educational purposes
(c) All machineries and equipment actually, directly and
exclusively used by local water districts and GOCCs
engaged in supply and distribution of water and/or
generation and transmission of electric power
(d) All real property owned by duly registered cooperatives
(e) Machinery and equipment used for pollution control and
environmental protection (includes infrastructure). (Sec.
234, LGC)

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Sec. 234(a), LGC

Q: Is the Metro Manila International Airport Authority
(MIAA) a GOCC which will now be considered liable for
RPT under the LGC?
NO. In Metro Manila International Airport Authority v.
CA [July 20, 2006], the Supreme Court, in resolving the
issue on whether the lands and buildings owned by the
MIAA were subject to real property tax, ruled in the
negative. The Supreme Court opined that since MIAA is not
a GOCC but instead as government instrumentality vested
with corporate powers or a government corporate entity. As
such, it is exempt from RPT.
However, in Mactan Cebu International Airport Authority
v. Marcos [Sept. 11, 1996], the Supreme Court ruled that
MCIAA is a GOCC and since the last paragraph of Section
234 of the LGC unequivocally withdrew the exemptions
from payment of RPT granted to natural or juridical
including GOCCs, MCIAA is now liable for RPT.
Q: Is the Philippine Fisheries Development Authority
(PFDA) a GOCC and, hence, now liable for RPT?
NO. In Philippine Fisheries Development Authority v.
CA [July 31, 2007], the Supreme Court ruled that the
PFDA is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of
RPT. However, said exemption does not apply to the
portions of the properties which the PFDA leased to private
Q: Is the GSIS liable for RPT?
NO. As held in GSIS v. City Treasurer of the City of
Manila [December 23, 2009], GSIS is an instrumentality of
the government and, as such, is not a taxable juridical
person for purposes of RPT.
Q: Is the Light Rail Transit Authority (LRTA) a GOCC,
and, as such, liable for RPT?
YES. Although not expressly stating that LRTA is a GOCC,
the Supreme Court in Light Rail Transit Authority v.
CBAA [Oct. 12, 2000], stated that the LRTA is clothed with
corporate status and corporate powers in the furtherance of
its proprietary objectives. It operates much like any private
corporation engaged in the mass transport industry. AS
such, it is liable for RPT.
Sec. 234(b), LGC
Q: The Philippine Lung Center leased portions of its
real property out for commercial purposes. Are these
exempt from RPT?
NO. In Lung Center of the Philippines v. Quezon City
[433 SCRA 119], the Supreme Court held that the hospital
was not exempt from real property tax on the portions of its
property not actually, directly, and exclusively used for
charitable purposes. Thus, those leased out for commercial
purposes are subject to RPT. Those used by the hospital
even if used for paying patients remain exempt from RPT.
Q: ABC Association is a non-stock, non-profit
organization owned by XYZ Hospital in Cebu City. XYZ
likewise owns the XYZ Medical Arts Center. The City

RTDG - ausl real property tax reviewer

Assessor assessed the XYZ Medical Arts Center

Building with the assessment level of 35% for
commercial buildings (instead of the 10% special
assessment imposed on XYZ hospital and its
buildings). Was the medical arts center built to house
its doctors a separate commercial building?
NO. The Supreme Court in City Assessor of Cebu City v.
Association of Benevola De Cebu Inc. [June 8, 2007],
classified the medical arts center building as special for
the following reasons: (1) the medical arts center was an
integral part of the hospital; (2) the medical arts center
facility was incidental to and reasonably necessary for the
operations of the hospital; and (3) charging rentals for the
offices used by its accredited physicians was a practical
necessity and could not be equated to a commercial
Sec. 234(c), LGC
Q: What are the requisites to claim exemption from
RPT for machineries and equipment used by LWDs and
(1) the machineries and equipment are actually, directly,
and exclusively used by the LWDs and GOCCs
(2) the LWDs and GOCCs claiming exemption must be
engaged in the supply and distribution of water and/or
generation and transmission of electric power
Q: FELS entered into a lease contract with NAPOCOR
over two engine power barges at Balayan Bay
Batangas. The lease contract stipulated that
NAPOCOR shall be responsible for all taxes (including
RPT on the barges), fees and charges that FELS and
its employees and construction permit and
environmental fees. FELS was assessed for RPT and
LBAA upheld the assessment stating that while the
barges may be classified as personal property, they
are considered real property for RPT purposes
because they are installed at a specific location with a
character if permanency. Are the power barges subject
to RPT?
YES. The Supreme Court in FELS Energy v. Province of
Batangas [Feb. 16, 2007], held that the power barges are
subject to RPT on the following reasons: (1) Article 415(9)
of the CC provides that docks and structures which,
though floating, are intended by their nature and object to
remain at a fixed place on a river, lake or coast. Barges fall
under this provision. (2) FELS cannot claim exemption
given that the requirement is that to be exempt the
machineries and equipment must be actually, directly and
exclusively used by GOCCs engaged in the generation of
power. Since the agreement between FELS and
NAPOCOR is that FELS will own and operate the barges
and not NAPOCOR.
Q: How is real property appraised?
All real property, whether taxable or exempt, shall be
appraised at the current and FMV prevailing in the locality
where the property is situated. (Sec. 201, LGC)

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Q: What is the purpose of a tax declaration?

A tax declaration only enables the assessor to identify the
property for purposes of determining the assessment
levels. It does not bind the assessor when he makes the
assessment. (Sec 202-204, LGC)
Q: Are tax declarations conclusive evidence of
As a rule, tax declarations are not conclusive evidence of
ownership. However, tax receipts and tax declarations
become strong evidence of ownership acquired by
prescription when accompanied by proof of actual
possession of the property.
Q: Who prepares the schedule of FMVs?
The provincial, city and the municipal assessors of the
municipalities within Metro Manila prepares the schedule of
the FMV for the different classes of real property situated in
their respective LGUs for enactment by ordinance of the
Sanggunian concerned. (Sec. 212, LGC)
Q: What are the classes of real property for
assessment purposes?
(1) Residential
(2) Agricultural
(3) Commercial
(4) Industrial
(5) Mineral
(6) Timberland or Special
(Sec. 215, LGC)
Q: What are the special classes of real property under
the LGC?
All lands, building, and other improvements actually,
directly and exclusively:
(1) used for hospitals, cultural or scientific purposes
(2) owned and used by local water districts
(3) owned and used by GOCCs rendering essential public
services in
(i) supply and distribution of water;
(ii) generation and transmission of electric
power. (Sec. 216, LGC)
Q: What is the basis for assessment?
Real property shall be classified, valued, and assessed on
the basis of its actual use regardless of where located,
whoever owns it, and whoever uses it. (Sec. 217, LGC)
Q: Define assessment.
Assessment is the act or process of determining the value
of a property or proportion thereof subject to tax, including
the discovery, listing, classification, and appraisal of
Q: Define assessment level.
It is the percentage applied to the FMV of the real property
to determine the taxable value of the property.
Q: Define assessed value.
It is the FMV of the real property multiplied by the
assessment level.

RTDG - ausl real property tax reviewer

Q: What is the procedure in computing real property

Market Value x Assessment Level (%)
= Assessed Value
Assessed Value x Tax Rate (%)
= Real Property Tax Payable
Q: What is the rule on assessment of RPT?
General Rule: The assessment must be made within 5
years from the date they become due.
Exception: If there is fraud or intent to evade taxes,
assessment may be made within 10 years from discovery
of fraud or intent to evade. (Sec. 270, LGC)

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In Testate Estate of Concordia Lim v. City of Manila

[Feb. 21, 1990], the Supreme Court held that unpaid real
estate taxes attaches to the property and is chargeable
against the taxable person who had actual or beneficial use
and possession of it, regardless of whether or not he is the
Q: When is there levy on real property?
After the expiration of the time required to pay the tax
levied, the real property subject to tax may be levied upon.
(Sec. 258, LGC)
The remedies of distraint or levy may be repeated if
necessary until the full amount due including all expenses
is collected. (Sec. 265, LGC)

Q: What is the rule on collection of RPT?

Collection of RPT must be made within 5 years from
Q: In what instances is the running of the prescriptive
period be suspended?
(1) Treasurer is legally prevented from assessing/
(2) Taxpayer requests for reinvestigation and executes
(3) Taxpayer is out of the country or cannot be located
Q: In what instances can there be a condonation or
reduction of RPT?
(1) general failure of crops
(2) substantial decrease in the price of agricultural or agribased products
(3) calamity
(Sec. 276, LGC) condonation is done by the Sanggunian
concerned by ordinance and upon recommendation of the
Local Disaster Coordinating Council
(4) when public interest so requires
(Sec. 277, LGC) only the President may exercise this
Q: What are the remedies available to the LGU for the
collection of RPT? (Sec. 256, LGC)
(1) Administrative action thru levy of real property
(i) Distraint of personal property
(ii) Lien on property subject to tax
(iii) Levy on real property tax
(2) Judicial action
Note: The remedies are concurrent and simultaneous
Q: What is the Local Governments Lien?
The basic RPT constitutes as a lien on the property subject
to tax, superior to all liens, charges or encumbrances in
favor of any person, irrespective of the owner or possessor
thereof, enforceable by administrative or judicial action and
may only be extinguished by payment of the tax and
related interests and expenses. (Sec. 257, LGC)

(1) Tax constitutes a lien on the property superior to all

liens and may only be extinguished upon payment of
the tax and charges (Sec. 257, LGC)
(2) Time for payment of real property taxes expires (Sec.
258, LGC)
(3) Warrant of Levy issued by the Local Treasurer (LT),
which has the force of legal execution in the LGU
concerned (Sec. 258, LGC)
(4) Warrant is mailed to or served upon the delinquent
owner (Sec. 258, LGC)
(5) Written notice of the levy and the warrant is mailed/
served upon the assessor and the Registrar of Deeds
of the LGU (sec. 258, LGC)
(6) 30 days from service of warrant, LT shall advertise
sale of the property by:
(i) posting notice at the main entrance of LGU hall/
building and in a conspicuous place in the barangay where
the property is located and
(ii) by publication once a week for 2 weeks (RPT)
(Sec. 260, LGC)
Note: In cases of levy for unpaid local taxes publication
once a week for 3 weeks
(7) Before the date of sale, the owner may stay the
proceedings by paying the delinquent tax, interest and the
expenses of sale
(8) Sale is held:
(i) at the main entrance of the LGU building, or
(ii) on the property to be sold, or
(iii) at any other place specified in the notice
Note: The next steps in the procedure will vary depending
on whether there is a bidder or not.
(i) for local taxes, the LGU may purchase levied
property for 2 reasons (1) there is no bidder or (2) the
highest bid is insufficient to cover the taxes and other
(ii) for RPT, the LGU may purchase for only 1
reason - there is no bidder.
Q: What is the redemption period for tax delinquent
properties sold at public auction?

RTDG - ausl real property tax reviewer

Under the LGC, the redemption period is within 1 year from

the date of sale. (Sec. 261, LGC)
Q: Civil action for collection of real property tax.
The civil action for collection of real property tax shall be
filed by the local treasurer in any court of competent
jurisdiction within 5 or 10 years wherein real property taxes
may be collected. (Sec. 266, LGC)

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YES. Sec. 252, LGC provides no protest shall be

entertained unless the taxpayer first pays the tax.
Q: When is payment under protest not required?
Prior payment under protest is applicable only if the issue
is anchored on the correctness, reasonableness, or
excessiveness of assessment, hence, considered a
question of fact.


If the taxpayer is questioning the validity of the tax
ordinance, the taxpayer may either question the legality of
a tax ordinance before the DOJ Secretary under Sec. 187
of the LGC or question the constitutionality of the
ordinance before the Regular Courts.
In this case,
payment under protest is not required.
If the taxpayer is questioning the correctness,
reasonableness or excessiveness of the assessment,
the taxpayer will resort to administrative remedies. In this
case, payment under protest is required.
Q: Who may contest the assessment of real property?
In order for a taxpayer to have legal standing to contest an
assessment to the LBAA, he must be a person having legal
interest in the property. (Sec. 226, LGC)
ASSESSMENT (Sec. 226 & 229, LGC)
(1) Pay the tax under protest and annotation of paid
under protest in receipt
(2) File written protest with local treasurer within 30 days
from payment of the tax
(3) Treasurer to decide within 60 days from receipt of the
(4) From treasurers decision or inaction, appeal to the
LBAA within 60 days
(5) LBAA to decide within 120 days
(6) Appeal LBAA decision to CBAA within 30 days from
receipt of adverse decision
(7) CBAA appealable to CTA en banc within 30 days from
receipt of the adverse decision of the CBAA
(8) Appeal to SC within 15 days from receipt of adverse
decision of CTA
Note: In (4), if the treasurers decision is in favor of the
taxpayer, he may now apply for a tax refund or tax credit.
Q: What is the effect of an appeal on assessment?
An appeal on assessments of real property shall, in no
case, suspend the collection of the corresponding realty
taxes on the property involved as assessed by the
provincial or city assessor, without prejudice to subsequent
adjustment depending upon the final outcome of the
appeal. (Sec. 231, LGC)
Q: Is payment a pre-requisite to protest an assessment
for RPT?

Prior payment under protest is not required when the

taxpayer is questioning the very authority and power of
the assessor to impose the assessment and of the
treasurer to collect the tax as opposed to questioning the
increase/decrease in the tax to be paid.
Q: Can the taxpayer file a case directly to the RTC if it
claims that it was questioning the authority of the
treasurer to assess and not only the amount of the
NO. In Olivares v. Joey Marquez [Sept. 22, 2004], it was
found that the taxpayer raised issues on prescription,
double taxation, and tax exemption. In such case, the
correctness of the assessment must be dealt with and the
treasurer has initial jurisdiction and his decision is
appealable to the LBAA. Payment under protest is
Q: The Province of Quezon assessed Mirant for unpaid
real property taxes. NAPOCOR, which entered a BOT
with Mirant, protested the assessment before the
LBAA, claiming the entitlement to tax exemption under
Sec. 234 of the LGC. The RPT assessed were not paid
prior to the protest. LBAA dismissed NAPOCORs
petition for failure to make a payment under protest. Is
NAPOCOR required to make a payment under protest?
YES. By claiming an exemption from realty taxation,
NAPOCOR is simply raising the question of the
correctness of the assessment. A such RPT must be paid
prior to the making of the protest. On the other hand, if the
taxpayer is questioning the authority of the local assessor
to assess RPT, it is not necessary to pay the RPT prior to
the protest. A claim for tax exemption, whether full or
partial, does not question the authority of the local
assessor to assess RPT as held in NAPOCOR v. Province
of Quezon [January 25, 2010].
Q: What is the rule on refunds of RPT?
The taxpayer must file the written claim within 2 years from
the date of payment of tax or from the date when the
taxpayer is entitled to reduction or adjustment.
The provincial treasurer has 60 days to decide the claim for
tax refund or credit.
Q: What is the remedy available if the claim for tax
refund or credit is denied?
Follow steps 4 to 8 in the procedure in contesting a RPT