LOCAL TAXATION

1. Provincial Taxes
a. Real property and related taxes
b. Other privilege taxes
2. Municipal Taxes
a. Community tax
b. Local business tax
3. Barangay Tax

REAL PROPERTY TAX

 Imposed upon real properties (land and improvements) by the Provinces or cities
 Accrues every January 1
 Real property tax constitutes a lien on the property and is superior to any other lien, or encumbrance of any kind
 Subject to a maximum rate and varies per province/city/municipality

Procedures:
 Determine property fair market value
 Determine the assessment level
 Assessment level – fixed by the Provincial/City/Municipal Council (Sanggunian)
 Determine assessed value
 Determine Real Property Tax

Property classification:
- Residential 20%
- Agricultural 40%
- Commercial/Industrial and Mineral 50%
- Timberland 20%
- Special classes: Cultural, scientific 15%
- Hospital and water districts 10%

*Assessment for building & improvements and machineries varies according to values based on a table of assessment levels

Maximum tax rates

 Cities and Municipalities within Metro Manila – 2%
 Provinces – 1%

Illustration –
You own a residence here in Baguio City with the following fair value per assessment rolls of the city:
o Land – P1,000,000
o House – P2,500,000

The City council of Baguio set the maximum assessment level for land. The house has 40% assessment level based on its
value.

Required: Compute the Real Property Tax.

Deadline – pay before the Treasurer’s office on or before

 For lump sum – On or before January 31
- (On some jurisdiction early payment is entitled to a discount of up to 20%)
 For installment – due in four quarterly payments:
- March 31
- June 30
- September 30
- December 31

Penalties
- Surcharge of 25% on basic tax
- 2% interest per month on the unpaid amount until the tax is fully paid up to a maximum of 36 months

Exempted properties
 Public properties
 Religious, educational and Charitable entities
 Machineries and equipment actually, directly and exclusively used by local water districts and GOCCs engaged in the
supply and distribution of water and or distribution and transmission of electric
 Real properties of registered cooperatives
 Machinery and equipment used for pollution control and environmental protection

Special Education Fund Tax – uniform 1% rate with the same basis to the RPT
Ad valorem Tax on idle lands – 5% on same basis with RPT
 What is idle land?
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  Agricultural land with more than 1 hectare land area – ½ of which remain uncultivated or unimproved
 Land other than agricultural with more than 1,000 sq.m., ½ of which remain unutilized
 Residential lots in subdivision

Special Levy – lands within the territorial jurisdiction specially benefited by public works projects or improvements funded
by the LGU concerned. Special levy shall not exceed 60% of the actual cost of such projects and improvements.

Social Housing Tax - A tax of ½ of 1% of the value of all lands in urban areas in excess of P50,000. This may be imposed
by a province, city, municipality within MMA.

Tax on Transfer of Real Property Ownership – a tax on sale, donation, barter or any other mode of transferring ownership
or title to real property. The rate is not more than 50% of 1% for provinces and 75% of 1% in the case of cities or
municipalities in the MMA based on FMV or GSP w/e is higher.
- Exempt – Disposal of real property pursuant to CARP

Local Business Tax

Nature:
 There must be a local imposition (ordinance)
 Taxes and rates differs between LGUs
 Tax rates differ per business categories
 Local tax is imposed on the basis of per classification not per tax classification
 Situs – place of sale where fixed place of business is conducted

Local business taxes

 Provincial Taxes
 Municipal Taxes
 City Taxes
 Barangay Taxes

PROVINCIAL TAXES
 Tax on business of printing and publication
 Franchise tax
 Tax on gravel and quarry resources
 Professional tax
 Amusement tax
 Annual fixed tax on delivery trucks or vans

 Tax on business of printing and publication – not to exceed 50% of 1% of gross receipts of prior year
 For newly started, not to exceed 1/20 of 1% of capital investment
 Tax on franchise – not to exceed 50% of 1% of annual gross receipt.
 For newly started, not to exceed 1/20 of 1% of capital investment
 Electricity distribution
 Telecommunication
 Internet service providers/Cable operators
 Railway companies
 Tricycle operations

 Tax on Gravel and Quarry Resources – not exceeding 10% of the value in the locality per cubic meter of gravel or
quarry resources extracted from public lands or waters within the territorial jurisdiction

 Professional Tax – tax on each person engaged in the exercise of his/her profession requiring government examination –
not exceeding P300
 Applies to PRC licensure exam passers only (Note requirements on PTR)
 Amusement Tax - not exceeding 10% of admission fees of theaters, cinemas, concert halls, circuses, boxing stadia and
others
 Annual fixed tax on delivery trucks or vans used in the deliveries of distilled spirits, liquors, soft drinks, cigars,
cigarettes to outlets in the provinces - not exceeding P500/truck

MUNICIPAL TAXES
 The concept of business
 Tax basis: Gross sales or receipts
 Accounting period

Types of business
1. Sellers of goods
 Manufacturers
 Wholesalers, distributors or dealers
 Retailers

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 - Half- rate tax for those selling essential commodities.
 Peddlers
 Exporters – any goods (also at half-rate)

2. Sellers of services
 Contractors
 Banks and other financial intermediaries

3. Others

Essential commodities
1. Rice and corn;
2. Wheat or cassava flour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and
other agricultural, marine, and fresh water products, whether in their original state or not;
3. Cooking oil and cooking gas;
4. Laundry soap, detergents, and medicine;
5. Agricultural implements, equipment and post-harvest facilities, fertilizers, pesticides, insecticides, herbicides, and
other farm inputs;
6. Poultry feeds and other animal feeds;
7. School supplies; and
8. Cement.

List of municipal taxes

 Business Tax – graduated tax and fixed tax
 Manufacturers, assemblers, repakers, processors, brewers of liquors, distilled spirits and wines (with table table)
 Wholesalers, distributors or dealers in any article of commerce of whatever kind or nature (with tax table)
 Exporters, and manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of essential
commodities
 Contractors and other independent contractors (with tax table)
 Retailers - 2% for GR of P400,000 or less and 1% for GR of over P400,000
 Bank and other financial institutions – not exceeding 50% of 1% of gross receipts from lending activities,
financial leasing, dividend, insurance premium and rent on property and profit from exchange or sale of property
 Any business, not included in prior categories, to be taxed at a rate to be determined by the Sanggunian. If business
is excisable or vatable, the rate shall not exceed 2% of the gross sales or receipt.
- Peddlers – annual tax of P50/pedder

Exempt from municipal taxes:

 Businesses engaged in petroleum products
 Marginal farmers or fishermen
 BOI-registered enterprises during ITH
 PEZA-registered enterprises during ITH/GIT
 Common carriers
 Cooperatives, registered with CDA
 Local water districts
 Non-stock non-profit hospitals
 Educational institutions
 Business engaged in printing and publications

CITY TAXES

Types of cities:
 Component city
 Highly urbanized city
 Independent component city

Cities has the broadest taxation power for all LGUs since they can levy both municipal and provincial taxes. May impose
those imposed by provinces or municipalities at a rate which exceeds the maximum rates by not more than 50%, except
professional tax and amusement tax.

BARANGAY TAX
 Barangay may impose a tax of not more than 1% of gross sales or receipts on stores or retailers with fixed business
establishments with
 Annual sales or receipts of P50,000 or less for cities
 Annual sales or receipts of P30,000 or less for municipalities