BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS)

SUGGESTED ANSWERS
Chapter 15: LOCAL TAXES

CHAPTER 17
LOCAL TAXES

Problem 17–1
1. True
2. True
3. False – Subject to final approval of the executive.
4. False – cities
5. True
6. True
7. False – Only if employed, doing business or owner of real properties
8. True
9. False – Additional should be based on gross receipts.
10. False – P10,000.

Problem 17–2
1. True
2. True
3. True
4. True
5. True
6. True
7. True
8. False – Assessed value.
9. True
10. True

Problem 17–3
1. A 5. D
2. D 6. D
3. D 7. D
4. A 8. D

Problem 17–4
Case 1:
The administrative order is not enforceable because such is not covered by any city tax
ordinance.

Case 2:
The tax ordinance is still unenforceable because of the lack of required public hearing.

Case 3:
No, because the issue does not involve the tax liability of the taxpayer, but the authority of
the enforcing government unit. The ambiguity of power to tax is to be resolved liberally in
favor of the taxing authority.

Case 4:
No, because with regards to exemption, the burden of proof must be on the part of the
taxpayer.

Case 5:
No. Although appropriately exercised by the Sanggunian (legislative branch), it will still need
the approval of the mayor or provincial governor (executive branch)
Problem 17–5
Case 1:
Taxable base, (higher value) P 600,000
Multiply by tax rate 0.5%
Tax on transfer - amount payable by Mon Ting P 3,000

Case 2:
There is no transfer or ownership tax because the land is intended as a site for personal
residence. Real property for the purpose of this tax refers only to land, building and
machineries intended by the owner for an industry or which tend directly to meet the needs
of the said industry or work. (Sec. 135, LGC)

Problem 17–6
Taxable base P 200,000
Multiply by tax rate 0.5%
Printing and Publication tax P 1,000

Problem 17–7
1. Total collections P4,000,000
Less: Receipts from the government (P1,000,000 x 50%) 500,000
Balance P3,500,000
Multiplied by 0.005
Local tax payable P 17,500

2. Basic P 5
Additional community tax:
Gross receipts (P4,000,000/P1,000) x P1 4,000
Total community tax P4,005

Problem 17–8

1. Total market value P6,000,000

Multiplied by provincial tax rate 10%
Provincial tax P 600,000

2. Basic P 500
Additional community tax:
Gross receipts (P9,000,000/P5,000) x P2 P3,600
Market value of real property (assumed as the assessed value)
(P20,000,000/P5,000) x P2 8,000 10,000
Total community tax P10,500

Problem 17–9
1. P50 annually.

2. Basic P 5.00
Additional [ (P150 x 365) /1,000] x P1.00 54.75
Total community tax P59.75

Problem 17–10
Local tax per unit P 500
Multiply by number of vans maintained 5
Total local tax for the delivery van P 2,500

Problem 17–11
Case 1:
1. Taxable base P1,500,000
Multiplied by tax rate bracket 0.25%
Municipal business tax P 3,750
 2. Taxable base P 600,000
Multiplied by tax rate bracket 0.5%
Municipal business tax P 3,000

Case 2:
None, because his business tax is payable to the barangay in as much as his sales is lesser
than P30,000. In that case, the barangay has the exclusive power to levy the local business
tax. (Sec. 152, LGC)

Problem 17–12
Case 1:
No, because the imposition is not in excess of what is provided in the Code. What is allowed
in the province is ½ of 1% of the total consideration for the transfer of Real Property.

The maximum that is allowed for the city is an increase of not more than 50% of what is
allowed for the province or municipalities, thus the maximum could be tabulated as:

Provincial rate 0.50%

Maximum percent increase 50%
Effective % increase 0.25%
Add: the basic rate for the province 0.50%
Maximum rate that a city could impose* 0.75%

*0.75% is the same as ¾ of 1%.

Case 2:
No, because the imposition is not in excess of what is provided in the Code. The allowed
minimum tax per year in municipalities is P165 of which a maximum of 50% increase is
allowed to compute the tax for the cities. Thus, the computation would be:

Minimum tax in municipalities per year P165.00

Add: Maximum increase allowed (P165 x 50%) 82.50
Maximum allowed for the cities P247.50

Case 3:
Yes. The city is only allowed of 30% maximum of what is allowed to the province. Amusement
and professional taxes are not included in the allowed 50% increase a city could make above
the province and the municipality could legally impose.

Case 4:
The retailer should be paying only his business tax to barangay, computed as follows:

Gross receipts P40,000

Multiply by rate of tax 2%
Business tax to the barangay P 800

The retailer is no longer required to pay to the city because its gross receipts is not exceeding
P50,000 per year.

Problem 17–13
Case 1:
The community tax of AWAN Corporation should be paid on or before February 28, 2005. The
amount of community tax to be paid is P500.

Case 2:
Basic P 5.00
Additional community tax (P200,000/1,000) x P1 200.00
Total P205.00
Add: Surcharge P205 x 25%) 51.25
Interest (P205 x 2% x 2 mos.) 8.20
Total community tax P264.45

Problem 17–14
Case 1:
Yes. Engr. Kitik is required to pay a professional tax because any professional, signing a
document in the exercise of his profession is required to indicate the PTR (professional tax
receipt) number on the document he is signing or certifying.

Case 2:
Mr. Max Cuenta need not obtain a PTR in Makati because a person who has paid the
corresponding professional tax shall be entitled to practice his profession in any part of the
Philippines.

Case 3:
Mr. Ado will have to pay P150 for his profession as CPA and another P150 for his profession
as a Lawyer.

Problem 17–15
Assume that the fair value is equal to assessed value.
Basic (P600,000 x 1%) P 6,000
Additional tax on idle lands (P600,000 x 5%) 30,000
Total amount P36,000

Problem 17–16

X’s total fees and taxes in order to obtain a business permit would be P2,000, computed as
follows:

Mayor’s permit P 500

Local business tax (P150,000 x 1%) 1,500
Total fees and taxes P2,000