Taxation2requirement MDABBarcoma

REQUIREMENTS FOR THE COMPLETION OF TAXATION 2
Ma. Danice Angela Balde-Barcoma

Law 3E
LOCAL TAXATION
PRELIMINARY MATTERS AND GENERAL PROVISION
Power to Tax of Local Government Units (LGUs)
The following are the legal foundation of the LGU’s Taxing Power:
 Art. X, Sec. 5 of the 1987 Constitution - “Each LGU shall have the power to create their
own sources of revenues and to levy taxes, fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively to the local
governments.”
 Sec. 129 of the Local Government Code (LGC) - “Each LGU shall exercise its power to
create its own sources of revenue and to levy taxes, fees, and charges consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to
the LGUs.”
Under the regime of the 1935 Constitution no similar delegation of tax powers was
provided, and local government units instead derived their tax powers under a limited
statutory authority.
The LGU’s power to tax was incorporated in the 1973 Constitution, particularly in Section
5, Article XI, which provides that each local government unit shall have the power to create
its own sources of revenue and to levy taxes, subject to such limitations as may be provided
by law. It also in the same constitution that mandates the Batas Pambansa to enact the
Local Government Code which now serves as a foundation of the LGU’s Powers.
Jurisprudence in relation to the power to tax of local government units
Pepsi Cola Bottling vs. Municipality of Tanauan, 69 SCRA 460

The power of taxation is an essential and inherent attribute of sovereignty, belonging as a
matter of right to every independent government, without being expressly conferred by the
people. It is a power that is purely legislative and which the central legislative body cannot
delegate either to the executive or judicial department of the government without
infringing upon the theory of separation of powers. The exception, however, lies in the case
of municipal corporations, to which, said theory does not apply. Legislative powers may be
delegated to local governments in respect of matters of local concern. This is sanctioned by
immemorial practice. By necessary implication, the legislative power to create political
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corporations for purposes of local self-government carries with it the power to confer on
such local governmental agencies the power to tax.
When it is said that the taxing power may be delegated to municipalities and the like, it is
meant that there may be delegated such measure of power to impose and collect taxes as
the legislature may deem expedient. Thus, municipalities may be permitted to tax subjects
which for reasons of public policy the State has not deemed wise to tax for more general
purposes. This is not to say though that the constitutional injunction against deprivation of
property without due process of law may be passed over under the guise of the taxing
power, except when the taking of the property is in the lawful exercise of the taxing power,
as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is
observed; (3) either the person or property taxed is within the jurisdiction of the
government levying the tax; and (4) in the assessment and collection of certain kinds of
taxes notice and opportunity for hearing are provided.
Mactan Cebu International Airport Authority vs. Marcos, GR No. 120082, September 11,
1996
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its
range, acknowledging in its very nature no limits, so that security against its abuse is to be
found only in the responsibility of the legislature which imposes the tax on the
constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed
by the people through their Constitutions. Our Constitution, for instance, provides that the
rule of taxation shall be uniform and equitable and Congress shall evolve a progressive
system of taxation. So potent indeed is the power that it was once opined that "the power to
tax involves the power to destroy." Verily, taxation is a destructive power which interferes
with the personal and property for the support of the government. Accordingly, tax statutes
must be construed strictly against the government and liberally in favor of the
taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the
nation, the law frowns against exemptions from taxation and statutes granting tax
exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor
of the taxing authority. A claim of exemption from tax payment must be clearly shown and
based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule,
exemption therefrom is the exception. However, if the grantee of the exemption is a
political subdivision or instrumentality, the rigid rule of construction does not apply
because the practical effect of the exemption is merely to reduce the amount of money that
has to be handled by the government in the course of its operations.
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as
before, but pursuant to direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be subject to such guidelines
and limitations as the Congress may provide which, however, must be consistent with the
basic policy of local autonomy.
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Manila Electric Company vs. Province of Laguna, GR No. 131359, May 6, 1999
The basic rationale for the current rule is to safeguard the viability and self-sufficiency of
local government units by directly granting them general and broad tax powers.
Nevertheless, the fundamental law did not intend the delegation to be absolute and
unconditional; the constitutional objective obviously is to ensure that, while the local
government units are being strengthened and made more autonomous,[6] the legislature
must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple
and unreasonable impositions; (b) each local government unit will have its fair share of
available resources; (c) the resources of the national government will not be unduly
disturbed; and (d) local taxation will be fair, uniform, and just. The 1991 Code explicitly
authorizes provincial governments, notwithstanding “any exemption granted by any law or
other special law, x x x (to) impose a tax on businesses enjoying a franchise.” Indicative of
the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to
local government units, the Local Government Code has effectively withdrawn under
Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities.
The Code, in addition, contains a general repealing clause in its Section 534 which states
that “All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly.”
NPC vs. City of Cabanatuan, GR No. 149110, April 9, 2003

The person claiming the exemption has the burden of proving its claim by clear grant of
exemption after the enactment of the LGC.
Taxes are the lifeblood of the government, for without taxes, the government can neither
exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives
its source from the very existence of the state whose social contract with its citizens obliges
it to promote public interest and common good. The theory behind the exercise of the
power to tax emanates from necessity; without taxes, government cannot fulfill its mandate
of promoting the general welfare and well-being of the people.
One of the most significant provisions of the LGC is the removal of the blanket exclusion of
instrumentalities and agencies of the National Government from the coverage of local
taxation. Although as a general rule, LGUs cannot impose taxes, fees, or charges of any kind
on the National Government, its agencies and instrumentalities, this rule now admits an
exception, i.e. when specific provisions of the LGC authorize the LGUs to impose taxes, fees,
or charges on the aforementioned entities. The legislative purpose to withdraw tax
privileges enjoyed under existing laws or charter is clearly manifested by the language
used on Sec. 137 and 193 categorically withdrawing such exemption subject only to
the exceptions enumerated. Since it would be tedious and impractical to attempt to
enumerate all the existing statutes providing for special tax exemptions or privileges, the
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LGC provided for an express, albeit general, withdrawal of such exemptions or privileges.
No more unequivocal language could have been used.
City Government of Quezon vs. Bayan Telecommunications, GR No. 162015, March 6,

2006
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely be virtue of a valid delegation as
before, but pursuant to direct authority conferred by Section 5, Article X of the
and limitations as the Congress may provide which, however, must be consistent with the
basic policy of local autonomy.
Clearly then, while a new slant on the subject of local taxation now prevails in the sense
that the former doctrine of local government units’ delegated power to tax had been
effectively modified with Article X, Section 5 of the 1987 Constitution now in place, the
basic doctrine on local taxation remains essentially the same. For as the Court stressed in
Mactan, "the power to tax is [still] primarily vested in the Congress."
Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that
the LGC has already withdrawn Bayantel’s former exemption from realty taxes, Congress
opted to pass Rep. Act No. 7633 using, under Section 11 thereof, exactly the same defining
phrase "exclusive of this franchise" which was the basis for Bayantel’s exemption from
realty taxes prior to the LGC. In plain language, Section 11 of Rep. Act No. 7633 states that
"the grantee, its successors or assigns shall be liable to pay the same taxes on their real
estate, buildings and personal property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay." The Court views this
subsequent piece of legislation as an express and real intention on the part of Congress to
once again remove from the LGC’s delegated taxing power, all of the franchisee’s
(Bayantel’s) properties that are actually, directly and exclusively used in the pursuit of its
franchise.
Film Development Council of the Philippines vs. Colon Heritage Realty, GR No. 203754
dated June 16, 2015
The Constitution is the basic law to which all laws must conform; no act shall be valid if it
conflicts with the Constitution. In the discharge of their defined functions, the three
departments of government have no choice but to yield obedience to the commands of the
Constitution. Whatever limits it imposes must be observed.
The power of taxation, being an essential and inherent attribute of sovereignty, belongs, as
a matter of right, to every independent government, and needs no express conferment by
the people before it can be exercised. It is purely legislative and, thus, cannot be delegated
to the executive and judicial branches of government without running afoul to the theory of
separation of powers. It, however, can be delegated to municipal corporations, consistent
with the principle that legislative powers may be delegated to local governments in respect
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of matters of local concern. The authority of provinces, cities, and municipalities to create
their own sources of revenue and to levy taxes, therefore, is not inherent and may be
exercised only to the extent that such power might be delegated to them either by the basic
law or by statute.
Accordingly, under the present Constitution, where there is neither a grant nor a
prohibition by statute, the tax power of municipal corporations must be deemed to exist
although Congress may provide statutory limitations and guidelines. The basic rationale for
the current rule on local fiscal autonomy is the strengthening of LGUs and the safeguarding
of their viability and self-sufficiency through a direct grant of general and broad tax
powers. Nevertheless, the fundamental law did not intend the delegation to be absolute and
unconditional. The legislature must still see to it that (a) the taxpayer will not be over-
burdened or saddled with multiple and unreasonable impositions; (b) each LGU will have
its fair share of available resources; ( c) the resources of the national government will not
be unduly disturbed; and ( d) local taxation will be fair, uniform, and just.
Section 132. Local Taxing Authority – “The power to impose a tax, fee, or charge or to
generate revenue under this Code shall be exercised by the Sanggunian of the local
government unit concerned through an appropriate ordinance.”
This is one of the characteristics of the taxing power of the LGUs. The Sanggunian is the
legislative body of the LGU tasked with making enabling laws to make sure that the spirit of
the Constitution is upheld, not just regarding taxation but all other provisions of the
Constitution. This is in line with the LGU’s power to create its own sources of revenue and
levy taxes, fees, and charges subject to the provisions herein, consistent with the basic
policy of local autonomy.
Jurisprudence in relation with Local Taxing Authority
Petron Corp. vs. Mayor Tobias Tiangco, GR No. 158881, April 16, 2008
Congress has the constitutional authority to impose limitations on the power to tax of local
government units and Section 133 of the Local Government Code (LGC) is one such limitation.
The prohibition with respect to petroleum products extends not only to excise taxes thereon,
but all taxes, fees and charges.
Evidently, Section 133 prescribes the limitations on the capacity of local government units
to exercise their taxing powers otherwise granted to them under the LGC. Apparently,
paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local
government units, namely: "excise taxes on articles enumerated under the National
Internal Revenue Code [(NIRC)], as amended;" and "taxes, fees or charges on petroleum
products."
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The power of a municipality to impose business taxes is provided for in Section 143 of the
LGC. Under the provision, a municipality is authorized to impose business taxes on a whole
host of business activities. Suffice it to say, unless there is another provision of law which
states otherwise, Section 143, broad in scope as it is, would undoubtedly cover the business
of selling diesel fuels, or any other petroleum product for that matter.
The Court concedes that a tax on a business is distinct from a tax on the article itself, or for
that matter, that a business tax is distinct from an excise tax. However, such distinction is
immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase “taxes,
fees or charges on petroleum products” does not qualify the kind of taxes, fees or charges
that could withstand the absolute prohibition imposed by the provision. It would have been
a different matter had Congress, in crafting Section 133(h), barred “excise taxes” or “direct
taxes,” or any category of taxes only, for then it would be understood that only such
specified taxes on petroleum products could not be imposed under the prohibition. The
absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum
products, including business taxes, are prohibited by Section 133(h). Where the law does
not distinguish, we should not distinguish.
The language of Section 133(h) makes plain that the prohibition with respect to petroleum
products extends not only to excise taxes thereon, but all “taxes, fees and charges.” The
earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of
taxation: all articles already covered by excise taxation under the NIRC, such as alcohol
products, tobacco products, mineral products, automobiles, and such non-essential goods
as jewelry, goods made of precious metals, perfumes, and yachts and other vessels
intended for pleasure or sports. In contrast, the later reference to “taxes, fees and charges”
pertains only to one class of articles of the many subjects of excise taxes, specifically,
“petroleum products”. While local government units are authorized to burden all such
other class of goods with “taxes, fees and charges,” excepting excise taxes, a specific
prohibition is imposed barring the levying of any other type of taxes with respect to
petroleum products.
Section 187. Procedure for Approval and Effectivity of Tax ordinances and Revenue Measures;
Mandatory Public Hearings. - The procedure for approval of local tax ordinances and
revenue measures shall be in accordance with the provisions of this Code: Provided, That
public hearings shall be conducted for the purpose prior to the enactment thereof:
Provided, further, That any question on the constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within thirty (30) days from the effectivity
thereof to the Secretary of Justice who shall render a decision within sixty (60) days from
the date of receipt of the appeal: Provided, however, That such appeal shall not have the
effect of suspending the effectivity of the ordinance and the accrual and payment of the tax,
fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of
the decision or the lapse of the sixty-day period without the Secretary of Justice acting
upon the appeal, the aggrieved party may file appropriate proceedings with a court of
competent jurisdiction.
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The periods stated in Section 187 of the Local Government Code are mandatory. (30-60-30
period: (1) Assail the tax ordinance within 30 days of its effectivity with the SOJ; (2) The
SOJ is given 60 days to decide; (3) After the lapse of 60 days, appeal before a competent
court within 30 days.
The following procedural details must be complied with:

a. Necessity of a quorum;
b. Submission for approval by the local chief executive;
c. The matter of veto and overriding the same;
d. Publication and effectivity
Further, Public hearings are required before any local tax ordinance is enacted.
Jurisprudence in relation with Procedure for Approval of and Effectivity of Tax Ordinances
Hagonoy Market vs. Municipality of Hagonoy GR No. 137621, February 6, 2002

The aforecited law requires that an appeal of a tax ordinance or revenue measure should
be made to the Secretary of Justice within thirty (30) days from effectivity of the ordinance
and even during its pendency, the effectivity of the assailed ordinance shall not be
suspended. In the case at bar, Municipal Ordinance No. 28 took effect in October 1996.
Petitioner filed its appeal only in December 1997, more than a year after the effectivity of
the ordinance in 1996. Clearly, the Secretary of Justice correctly dismissed it for being time
barred. At this point, it is apropos to state that the timeframe fixed by law for parties to
avail of their legal remedies before competent courts is not a "mere technicality" that can
be easily brushed aside. The periods stated in Section 187 of the Local Government Code
are mandatory.
Section 188. Publication of Tax ordinances and Revenue Measures. - Within ten (10) days
after their approval, certified true copies of all provincial, city, and municipal tax
ordinances or revenue shall be published in full for three (3) consecutive days in a
newspaper of local circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the same may be posted
in at least two (2) conspicuous and publicly accessible places.
The requirement of publication in full for 3 consecutive days is mandatory for a tax
ordinance to be valid. The tax ordinance will be null and void if it fails to comply with such
publication requirement
Other Preliminary Matters
Section 186. Power To Levy Other Taxes, Fees or Charges. - Local government units may
exercise the power to levy taxes, fees or charges on any base or subject not otherwise
specifically enumerated herein or taxed under the provisions of the National Internal
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Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or
charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such taxes, fees or charges
shall not be enacted without any prior public hearing conducted for the purpose.
Residual Taxing Power of the LGU means LGUs may exercise the power to levy taxes, fees
or charges on any base or subject NOT otherwise specifically enumerated herein or taxed
under the:
1. Local Government Code;
2. National Internal Revenue Code; or
3. Other applicable laws.
Doctrine of Pre-emption or Exclusionary Rule

Pre-emption in the matter of taxation simply refers to an instance where the national
government elects to tax a particular area, impliedly withholding from the local
government the delegated power to tax the same field. This doctrine primarily rests
upon the intention of Congress. Conversely, should Congress allow municipal corporations
to cover fields of taxation it already occupies, then the doctrine of preemption will not
apply.
Jurisprudence in relation with the Doctrine of Pre-emption or Exclusionary Rule
Victoria’s Milling Co., Inc. vs. Municipality of Victorias, L-21183, September 27, 1968
A municipality is authorized to impose three kinds of licenses: 1) license for regulation of
useful occupations or enterprises; 2) license for restriction or regulation of non-useful
occupations or enterprises; and 3) license for revenue. The first two easily fall within the
broad police power granted under the general welfare clause. The third class, however, is
for revenue purposes. It is not a license fee, properly speaking, and yet it is generally so
termed. It rests on the taxing power. That taxing power must be expressly conferred by
statute upon the municipality.
Section 4 (1) of CA 472 clearly and specifically allows municipal councils to tax persons
engaged in "the same business or occupation" on which "fixed internal revenue privilege
taxes" are "regularly imposed by the National Government," with certain exceptions
specified in Section 3 of the same statute. The instant case does not fall within the
exceptions. Clearly, Congress has not reserved to the national government the right to
impose the disputed taxes.
It is correct to say that presumption in the matter of taxation simply refers to an instance
where the national government elects to tax a particular area, impliedly withholding from
the local government the delegated power to tax the same field. This doctrine primarily
rests upon the intention of Congress. 35 Conversely, should Congress allow municipal
corporations to cover fields of taxation it already occupies, then the doctrine of preemption
will not apply.
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Scope of Taxing Powers
Section 128. Scope - The provision herein shall govern the exercise by provinces, cities,
municipalities, and Barangays of their taxing and other revenue-raising powers.
1. Each LGU shall exercise its power to create its own sources of revenue and to levy
taxes, fees, and charges, consistent with the basic policy of local autonomy. Such taxes,
fees, and charges shall exclusively accrue to it.
2. All LGUs are granted general powers to levy taxes, fees or charges on any base or
subject not otherwise specifically enumerated herein or taxed under the provisions of
the NIRC or other applicable laws. The levy must not be unjust, excessive, oppressive,
confiscatory or contrary to a declared national economic policy.
3. No such taxes, fees or charges shall be imposed without a public hearing having
been held prior to the enactment of the ordinance.
4. Copies of the provincial, city, and municipal tax ordinances or revenue measures
shall be published in full for three consecutive days in a newspaper of local circulation
or posted in at least two conspicuous and publicly accessible places.
Fundamental Principles
Section 130. 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 unjust, 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.
Common Limitations
An examination of the enumeration reveals that those taxes, charges, and fees already
imposed and collected by the National Government such as income taxes, estate taxes,
donor’s taxes, documentary stamps taxes. Simply stated, the LGUs cannot exercise taxing
powers reserved to the National Government. Thus, it is also called the “reservation rule”
or the “exclusionary rule”.
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Income Tax correlated with Section 143(f) of the LGC

Generally, LGU’s taxing authority shall not extend to the levy of income tax. An exception is
that income tax may be levied on banks and other financial institutions.
Section 143(f) provides that, the municipality may impose taxes on banks and other
financial institutions, at a rate not exceeding fifty percent (50% of one percent (1) on the
gross receipts of the preceding calendar year derived from interest, commissions and
discounts from lending activities, income from financial leasing, dividends, rentals on
property and profit from exchange or sale of property, insurance premium.
It seems that the exception to the general rule stated in Section 133(a) of the LGC is
provided for by Section 143(f).
Documentary Stamp Tax

Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property
incident thereto. It is provided for under the National Internal Revenue Code and beyond
the scope of the LGUs.
Transfer Taxes correlated with Section 135 of the LGC

Generally, taxes on estates, inheritance, gifts, legacies, and other acquisitions after death
cannot be levied by the LGUs. However Section 135 provides for an exception which is a tax
on transfer of real properties.
Customs Duties
LGUs cannot levy on 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.
Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of LGUs correlated with Section 155 of the LGC
Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of LGUs 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 shall not be levied by LGUs. However, as provided in Section 155 of
the LGC, 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, pier, or wharf,
waterway, bridge, ferry or telecommunication system funded and constructed by the local
government unit concerned. Thus, the LGU is allowed as an exception to impose toll fees or
charges for the use of any public road, pier, or wharf, waterway, bridge, ferry or
telecommunication system so long as it has been funded and constructed by the LGU
concerned.
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Panaligan vs. City of Tacloban, GR No. L-9319, September 27, 1957

A close scrutiny of the ordinances complained of reveals that the fees therein imposed are
not by reason of the services performed by the Mayor or the Veterinary Officer, but as an
imposition on every head of the specified animals to be' transported. The fact that the
ordinances in question make no reference to the purpose for which they were enacted, and
that such purpose was to preserve the public health or welfare of the residents and people
of the City of Tacloban, is a clear indication that leads this Court to believe that the fees
exacted were not as a regulatory measure in the exercise of its police power, but for the
purpose of raising revenue under the guise of license or inspection fees. An act or
ordinance imposing a license or license tax under the police power as a means of regulation
is valid only when it is within the limits of such power and is intended for regulation;
otherwise, it is invalid as where the license or tax is unnecessarily imposed on an
occupation or business not inherently subject to police regulation (Southwest Utility Ice Co.
vs. Liebmann, 52 F. 2d 349), for an act or ordinance imposing a license or license tax for
revenue purposes, under the guise of a police or regulatory measure, is invalid (Southern
Fruit Co. vs. Porter, 199 S.E. 537).
Palma Development Corp vs. Municipality of Malangas, GR No. 152492, October 16,
2003
By the express language of section 153 and 155 RA 7160, local government units, through
their sanggunian, may prescribe the terms and conditions for the imposition of toll fees or
charges for the use of any public road, pier or wharf funded and constructed by them. A
service fee imposed on vehicles using municipal roads leading to the wharf is thus valid,
however, section 133 (e) of RA 7160 prohibits the imposition, in the guise of wharfage fees
— as well as other taxes or charges in any form whatsoever on goods or merchandise. It is
therefore irrelevant if the fee imposed are actually for police surveillance on the goods,
because any other form of imposition on goods passing through the territorial jurisdiction
of the municipality is clearly prohibited by section 133 (e).
Under Section 131(y) of RA No. 7160, wharfage is defined as "a fee assessed against the
cargo of a vessel engaged in foreign or domestic trade based on quantity, weight, or
measure received and/or discharged by vessel." It is apparent that a wharfage does not
lose its basic character by being labeled as a service fee "for police surveillance on all
goods."
Unpersuasive is the contention of respondent that petitioner would unjustly be enriched at

the former’s expense. Though the rules thereon apply equally well to the government, for
unjust enrichment to be deemed present, two conditions must generally concur: (a) a
person is unjustly benefited, and (b) such benefit is derived at another’s expense or
damage.
In the instant case, the benefits from the use of the municipal roads and the wharf were not
unjustly derived by petitioner. Those benefits resulted from the infrastructure that the
municipality was mandated by law to provide. There is no unjust enrichment where the
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one receiving the benefit has a legal right or entitlement thereto, or when there is no causal
relation between one’s enrichment and the other’s impoverishment.
Taxes, Fees, and Charges on products sold by marginal farmers of fishermen

Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers
or fishermen.
City of Cebu vs. IAC, 144 SCRA 710
Taxes on Board of Investments-registered enterprises

Taxes on business enterprises certified to by the Board of Investments as pioneer or non-
pioneer for a period of six (6) and four (4) years, respectively from the date of registration.
Petron Corp. vs. Mayor Tobias Tiangco, GR No. 158881, April 16, 2008
Congress has the constitutional authority to impose limitations on the power to tax of local
government units and Section 133 of the Local Government Code (LGC) is one such limitation.
The prohibition with respect to petroleum products extends not only to excise taxes thereon,
but all taxes, fees and charges.
Excise Taxes under the NIRC/TFC on Petroleum Products

Excise taxes on articles enumerated under the NIRC, as amended, and taxes, fees, or
charges on petroleum products. LGUs may impose tax on a petroleum business. A tax on
business is distinct from a tax on the article itself.
Province of Bulacan vs. CA, GR No. 126232, November 27, 1998

As correctly pointed out by petitioners, section 186 of the same code allows petitioners to
levy taxes other than those specifically enumerated under the code, subject to the
conditions specified therein.
The tax imposed by the province of Bulacan is an excise tax, being a tax upon the
performance, carrying or an excise of an activity. Under section 133 of the local
government code, a province may not, therefore, levy excise taxes on articles already taxed
by the National Internal Revenue Code (NIRC).
The NIRC levies a tax on all quarry resources, regardless of origin, whether extracted from
public or private land. Thus, a province may not ordinarily impose taxes on stones, sand,
gravel, earth and other quarry resources, as the same are already taxed under NIRC. The
province can, however, impose a tax on stones, sand, gravel, earth and other quarry
resources extracted from public lands because it is expressly empowered to do so under
the local government code. As to stones, sand, gravel, earth and other quarry resources
extracted from private land, however it may not do so, because of the limitation provided
by section 133 of the code in relation to section 151 of the NIRC.
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Batangas City vs. Pilipinas Shell Petroleum Corporation, GR No. 187631 dated July 8,
2015
Section 133 of the LGC puts a limitation on LGUs power to tax. They shall have no power to
levy taxes, fees or charges on petroleum products. Thus, the omnibus grant of power to
LGUs under Section 143(h) of the LGC cannot overcome the specific exception or
exemption in Section 133(h) of the same Code.
Percentage Taxes and VAT

Percentage or VAT on sales, barters, or exchanges or similar transactions on goods or
services except as otherwise provided herein.
Pepsi Cola Bottling vs. Municipality of Tanauan, 69 SCRA 460

The ordinances do not partake of the nature of a percentage tax on sales, or other taxes in
any form based thereon. The tax is levied on the produce (whether sold or not) and not on
the sales. The volume capacity of the taxpayer's production of soft drinks is considered
solely for purposes of determining the tax rate on the products, but there is not set ratio
between the volume of sales and the amount of the tax.
Matalin Coconut Co, Inc. vs. The Municipal Council of Malabang, Lanao del Sur, GR No.
L-28138, August 13, 1986
The tax imposed under the ordinance can be stricken down on another ground. According
to Section 2 of the abovementioned Act, the tax levied must be "for public
purposes, just and uniform." The power to regulate as an exercise of police power does not
include the power to impose fees for revenue purposes.
Pelizloy Realty Corp. vs. Province of Benguet, GR No. 183137, April 10, 2013
Amusement taxes are percentage taxes. However, provinces are not barred from levying
amusement taxes even if amusement taxes are a form of percentage taxes. The levying of
percentage taxes is prohibited "except as otherwise provided" by the LGC. Section 140
provides such exception.
Section 140 expressly allows for the imposition by provinces of amusement taxes on "the
proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing
stadia, and other places of amusement."
However, resorts, swimming pools, bath houses, hot springs, and tourist spots are not
among those places expressly mentioned by Section 140 of the LGC as being subject to
amusement taxes. Thus, the determination of whether amusement taxes may be levied on
admissions to these places hinges on whether the phrase ‘other places of amusement’
encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots.
Under the principle of ejusdem generis, "where a general word or phrase follows an
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enumeration of particular and specific words of the same class or where the latter follow
the former, the general word or phrase is to be construed to include, or to be restricted to
persons, things or cases akin to, resembling, or of the same kind or class as those
specifically mentioned."
Section 131 (c) of the LGC already provides a clear definition: "Amusement Places" include
theaters, cinemas, concert halls, circuses and other places of amusement where one seeks
admission to entertain oneself by seeing or viewing the show or performances.
As defined in The New Oxford American Dictionary, ‘show’ means "a spectacle or display of
something, typically an impressive one"; while ‘performance’ means "an act of staging or
presenting a play, a concert, or other form of entertainment." As such, the ordinary
definitions of the words ‘show’ and ‘performance’ denote not only visual engagement (i.e.,
the seeing or viewing of things) but also active doing (e.g., displaying, staging or
presenting) such that actions are manifested to, and (correspondingly) perceived by an
audience.
Considering these, it is clear that resorts, swimming pools, bath houses, hot springs and
tourist spots cannot be considered venues primarily "where one seeks admission to
entertain oneself by seeing or viewing the show or performances". While it is true that they
may be venues where people are visually engaged, they are not primarily venues for their
proprietors or operators to actively display, stage or present shows and/or performances.
Taxes on Transportation contractors and common carriers

Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land, or water,
except as provided in this Code.
First Philippine Industrial Corporation vs. CA, GR No. 125948, December 29, 1998
The legislative intent is to exclude from the taxing power of the local government unit the
imposition of business tax against common carriers is to prevent a duplication of the so-
called "common carrier's tax."
FPIC is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code.[19] To tax FPIC again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the LGC.
City of Manila vs. Colet, GR No. 120051, December 10, 2014

Although the power to tax is inherent in the State, the same is not true for LGUs, to whom
the power must be delegated by Congress and must be exercised within the limitations that
Congress may provide.
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Among the common limitations on the taxing power of LGUs is Section 133(j) of the LGC
which clearly and unambiguously proscribes LGUs from imposing any tax on the gross
receipts of transportation contractors, persons engaged in the transportation of passengers
or freight by hire, and common carriers by air, land or water.
Section 133(j) of the LGC prevails over Section 143 (h) of the same Code. Section 143 of the
LGC defines the general power of the municipality (as well as the city, if read in relation to
Section 151 of the LGC) to tax businesses within its jurisdiction. While paragraphs (a) to (g)
thereof identify the particular businesses and fix the imposable tax rates for each,
paragraph (h) is apparently the “catch-all provision” allowing the municipality to impose
tax “on any business, not otherwise specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax.”
The succeeding proviso of Section 143(h) of the LGC which says “Provided, That on any
business subject to the excise, value-added or percentage tax under the National Internal
Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales
or receipts of the preceding calendar year” is not a specific grant of power to the
municipality or city to impose business tax on the gross sales or receipts of such a business.
Rather, the proviso only fixes a maximum rate of imposable business tax in case the
business taxed under Section 143(h) of the LGC happens to be subject to excise, value
added, or percentage tax under the Tax Code.
The grant of power to municipalities and cities under Section 143(h) of the LGC cannot
overcome the specific exemption in Section 133(j) of the same Code. This is in accord with
the rule on statutory construction that specific provision prevails over general ones. In case
of any doubt, any tax ordinance or revenue measure shall be construed strictly against the
LGU enacting it, and liberally in favor of the taxpayer.
The legislative intent is to withhold from the LGUs the power to tax transportation
contractors, persons engaged in the transportation of passengers or freight by hire, and
common carrier by air, land or water in order to prevent a duplication of the common
carrier’s tax.
RA No. 7716 (Expanded Value-Added Tax or the E-VAT Law) expressly amended Section
115 (now Section 117) of the Tax Code on Percentage Tax on carriers and keepers of
garages, to state that “(t)he gross receipts of common carriers derived from their incoming
and outgoing freight shall not be subjected to the local taxes imposed under the Local
Government Code.”
Taxes on Premiums
Taxes on premiums paid by way or reinsurance or retrocession.
Taxes, fees, or charges for registration of motor vehicles and issuance of licenses for driving
correlated with Section 458(3)(vi) of the LGC and Article 99(a)(3)(vi) of the IRR of the LGC
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Taxes, fees, or charges for the registration of motor vehicles and for the issuance of all
kinds of licenses or permits for the driving thereof, except tricycles which are subject to the
guidelines prescribed by the Department of Transportation and Communications.
LTO vs. City of Butuan, GR No. 131512, January 20, 2000

The newly delegated powers to LGU's pertain to the franchising and regulatory powers
exercised by the LTFRB and not to the functions of the LTO relative to the registration of
motor vehicles and issuance of licenses for the driving thereof. Corollary, the exercised of a
police power must be through a valid delegation. In this case the police power of
registering tricycles was not delegated to the LGU’s, but remained in the LTO.
Clearly unaffected by the Local Government Code are the powers of LTO under R.A.
No.4136 requiring the registration of all kinds of motor vehicles "used or operated on or
upon any public highway" in the country.
The Commissioner of Land Transportation and his deputies are empowered at anytime to
examine and inspect such motor vehicles to determine whether said vehicles are
registered, or are unsightly, unsafe, improperly marked or equipped, or otherwise unfit to
be operated on because of possible excessive damage to highways, bridges and other
infrastructures. The LTO is additionally charged with being the central repository and
custodian of all records of all motor vehicles.
Police power and taxation, along with eminent domain, are inherent powers of sovereignty
which the State might share with local government units by delegation given under a
constitutional or a statutory fiat. All these inherent powers are for a public purpose and
legislative in nature but the similarities just about end there. The basic aim of police power
is public good and welfare. Taxation, in its case, focuses on the power of government to
raise revenue in order to support its existence and carry out its legitimate objectives.
Although correlative to each other in many respects, the grant of one does not necessarily
carry with it the grant of the other. The two powers are, by tradition and jurisprudence,
separate and distinct powers, varying in their respective concepts, character, scopes and
limitations.
To construe the tax provisions of Section 133 (1) of the LGC indistinctively would result in
the repeal to that extent of LTO's regulatory power which evidently has not been intended.
If it were otherwise, the law could have just said so in Section 447 and 458 of Book III of
the Local Government Code in the same manner that the specific devolution of LTFRB's
power on franchising of tricycles has been provided. Repeal by implication is not favored.
The power over tricycles granted under Section 458(a)(3)(VI) of the Local Government
Code to LGUs is the power to regulate their operation and to grant franchises for the
operation thereof. The exclusionary clause contained in the tax provisions of Section 133
(1) of the Local Government Code must not be held to have had the effect of withdrawing
the express power of LTO to cause the registration of all motor vehicles and the issuance of
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licenses for the driving thereof. These functions of the LTO are essentially regulatory in
nature, exercised pursuant to the police power of the State, whose basic objectives are to
achieve road safety by insuring the road worthiness of these motor vehicles and the
competence of drivers prescribed by R. A. 4136. Not insignificant is the rule that a statute
must not be construed in isolation but must be taken in harmony with the extant body of
laws.
LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to
grant franchises for the operation thereof, and not to issue registration.
Taxes, fees, or charges on Philippine Products actually Exported correlated with Section
143(c)
Taxes, fees, or other charges on Philippine products actually exported, except as otherwise
provided in the LGC as in Section 143(c) which provides that municipalities may impose
taxes on exporters.
Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and R.A. No. 6938 or the "Cooperative Code of the
Philippines" respectively.
Taxes, fees, and charges on the National Government, its agencies and instrumentalities and
LGUs (to be discussed together with Sections 232 and 234 on Real Property Tax)
The prohibition on taxing the national government, its agencies and instrumentalities
under Section 133 is qualified by Sections 232 and 234, and accordingly, the only relevant
exemption now applicable to these bodies is what is now provided under Section 234(a) of
the Code. It may be noted that the express withdrawal of previously granted exemptions to
persons from the payment of real property tax by the LGC does not even make any
distinction as to whether the exempt person is a governmental entity or not. As Sections
193 and 234 of the Code both state, the withdrawal applies to "all persons, including
GOCCs," thus encompassing the two classes of persons recognized under our laws, natural
persons and juridical persons.
Philippine Fisheries Development Authority vs CA, GR No. 169836, July 31, 2007
The Real Property Tax liability of the IFPC is only on portions leased out to private entities.
PFDA is not a GOCC but is actually an instrumentality of the national government exempt
from Real Property Tax. Given this, it will only be subject to Real Property Tax on the
portions of the IFPC which is leased to private entities. It is not a GOCC since a GOCC must
satisfy two requirements: (i) capital stock divided into shares and (ii) authorized to
distribute dividends/profits. PFDA does have capital stock but the same is not divided into
shares and neither is it a non-stock corporation because it does not have members.
(Note: This was the same decision reached in MIAA vs. Paranaque (July 20, 2006) and again
in MIAA vs. Pasay (April 2, 2009) where the property in question was the airport premises.
In those cases, the Court additionally provided that other examples of government
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instrumentalities vested with corporate powers or what are know as “government

corporate entities” are Philippine Ports Authority, BSP and University of the Philippines.)
1996
The petitioner cannot claim that it was never a “taxable person” under its Charter. It was
only exempted from the payment of real property taxes. The grant of the privilege only in
respect of this tax is conclusive proof of the legislative intent to make it a taxable person
subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real
property tax, in light of the foregoing disquisitions, it had already become, even if it be
conceded to be an “agency” or “instrumentality” of the Government, a taxable person for
such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions
from the payment of real property taxes, which, as earlier adverted to, applies to the
petitioner.
MIAA vs. CA, GR No. 155650, July 20, 2006

The airport lands and buildings of MIAA are exempt from real estate tax imposed by local
governments. Sec. 243(a) of the LGC exempts from real estate tax any real property owned
by the Republic of the Philippines. This exemption should be read in relation with Sec.
133(o) of the LGC, which provides that the exercise of the taxing powers of local
governments shall not extend to the levy of taxes, fees or charges of any kind on the
National Government, its agencies and instrumentalities.
These provisions recognize the basic principle that local governments cannot tax the
national government, which historically merely delegated to local governments the power
to tax.
The rule is that a tax is never presumed and there must be clear language in the law
imposing the tax. This rule applies with greater force when local governments seek to tax
national government instrumentalities. Moreover, a tax exemption is construed liberally in
favor of national government instrumentalities.
MIAA vs. City of Pasay, GR No. 163072, April 2, 2009

MIAA is not a government-owned or controlled corporation but a government
instrumentality which is exempt from any kind of tax from the local governments.
Under Section 133(o)[11] of the Local Government Code, local government units have no
power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is
not liable to pay real... property tax for the NAIA Pasay properties.
The airport lands and buildings of MIAA are properties of public dominion intended for
public use, and as such are exempt from real property tax under Section 234(a) of the Local
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Government Code.If MIAA leases its real property to a taxable person, the specific property
leased becomes subject to real property tax. Only those portions of the NAIA Pasay
properties which are leased to taxable persons like private parties are subject to real
property tax by the City of
Pasay.
City of Davao vs RTC, GR No. 127383, August 18, 2005

Reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule,
as laid down in Section 133, the taxing powers of local government units cannot extend to
the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its
agencies and instrumentalities, and local government units"; however, pursuant to Section
232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the
real property tax except on, inter alia, "real property owned by the Republic of the
Philippines or any of its political subdivisions except when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable person," as provided in item (a)
of the first paragraph of Section 234.
TAXING AND OTHER REVENUE RAISING POWERS OF LGU
Provinces
Local Transfer Tax (Tax on Transfer of Real Property Ownership)

The province may impose a tax on the sale, donation, barter, or on any other mode of
transferring ownership or title of real property. The sale, transfer or other disposition of
real property pursuant to R.A. No. 6657 shall be exempt from this tax.
Business Tax on Printing and Publication

The province may impose a tax on the business of persons engaged in the printing and/or
publication of books, cards, posters, leaflets, handbills, certificates, receipts, pamphlets, and
others of similar nature. The receipts from the printing and/or publishing of books or other
reading materials prescribed by the Department of Education, Culture and Sports as school
texts or references shall be exempt from the tax herein imposed.
Franchise Tax
Notwithstanding any exemption granted by any law or other special law, the province may
impose a tax on businesses enjoying a franchise based on the gross receipts for the
preceding calendar year, or any fraction thereon, as provided herein.
NPC vs. City of Cabanatuan, GR No. 149110, April 9, 2003

As commonly used, a franchise tax is "a tax on the privilege of transacting business in the
state and exercising corporate franchises granted by the state." It is not levied on the
corporation simply for existing as a corporation, upon its property or its income, but on its
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exercise of the rights or privileges granted to it by the government. Hence, a corporation

need not pay franchise tax from the time it ceased to do business and exercise its franchise.
It is within this context that the phrase "tax on businesses enjoying a franchise" in section
137 of the LGC should be interpreted and understood. Verily, to determine whether the
petitioner is covered by the franchise tax in question, the following requisites should
concur: (1) that petitioner has a "franchise" in the sense of a secondary or special franchise;
and (2) that it is exercising its rights or privileges under this franchise within the territory
of the respondent city government.
NPC fulfills both requisites. To stress, a franchise tax is imposed based not on the
ownership but on the exercise by the corporation of a privilege to do business. The taxable
entity is the corporation which exercises the franchise, and not the individual stockholders.
By virtue of its charter, petitioner was created as a separate and distinct entity from the
National Government. It can sue and be sued under its own name, and can exercise all the
powers of a corporation under the Corporation Code.
Quezon City vs. ABS-CBN, GR No. 166408, October 6, 2008

The right to exemption from local franchise tax must be clearly established beyond
reasonable doubt and cannot be made out of inference or implications.
The uncertainty over whether the “in lieu of all taxes” provision pertains to exemption from
local or national taxes, or both, should be construed against Respondent who has the
burden to prove that it is in fact covered by the exemption claimed. Furthermore, the “in
lieu of all taxes” clause in Respondent’s franchise has become ineffective with the abolition
of the franchise tax on broadcasting companies with yearly gross receipts exceeding P10
million as they are now subject to the VAT.
City of Iriga vs. Camarines Sur III Electric Cooperative, Inc., GR No. 192945, September
5, 2012
The power of the local government units to impose and collect taxes is derived from the
Constitution itself which grants them "the power to create its own sources of revenues and
to levy taxes, fees and charges subject to such guidelines and limitation as the Congress
may provide." This explicit constitutional grant of power to tax is consistent with the basic
policy of local autonomy and decentralization of governance. With this power, local
government units have the fiscal mechanisms to raise the funds needed to deliver basic
services to their constituents and break the culture of dependence on the national
government. Thus, consistent with these objectives, the LGC was enacted granting the local
government units, like petitioner, the power to impose and collect franchise tax
Smart Communications vs. City of Davao, GR No. 155491, September 16, 2008
Tax exemptions are never presumed and are strictly construed against the taxpayer and
liberally in favor of the taxing authority. They can only be given force when the grant is
clear and categorical. The surrender of the power to tax, when claimed, must be clearly
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shown by a language that will admit of no reasonable construction consistent with the
reservation of the power. If the intention of the legislature is open to doubt, then the
intention of the legislature must be resolved in favor of the State.
In this case, the doubt must be resolved in favor of the City of Davao. The “in lieu of all
taxes” clause applies only to national internal revenue taxes and not to local taxes.
Tax on Sand, Gravel, and Quarry Resources

The province may levy and collect tax on sand, gravel, and quarry resources as defined
under the National Internal Revenue Code, as amended, extracted from public lands or
from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its
territorial jurisdiction.
The permit to extract sand, gravel and other quarry resources shall be issued exclusively by
the provincial governor, pursuant to the ordinance of the sangguniang panlalawigan.
Municipality of San Fernando vs. Sta. Romana, GR No. L-30159, March 31, 1987
The authority to impose taxes and fees for extraction of sand and gravel belongs to the
Province, not to the municipality where they are found. A Municipality cannot extract sand
and gravel from another Municipality without paying the corresponding taxes or fees that
may be imposed by the Province.
Province of Bulacan vs. CA, GR No. 126232, November 27, 1998

Section 186 of the Local Government Code of 1991 allows local governments to levy taxes
other than those specifically enumerated under the Code, subject to the conditions
specified therein. There must be a tax ordinance to authorize the levy of a tax.
Professional Tax and Professional Practices his profession in several places

The province may levy an annual professional tax on each person engaged in the exercise
or practice of his profession requiring government examination at such amount and
reasonable classification as the sangguniang panlalawigan may determine but shall in no
case exceed Three hundred pesos (P300.00).
Every person legally authorized to practice his profession shall pay the professional tax to
the province where he practices his profession or where he maintains his principal office in
case he practices his profession in several places: Provided, however, That 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,
license, or fee for the practice of such profession.
Amusement Tax as amended by RA No. 9640 dated May 21, 2009
Pelizloy Realty Corp. vs. Province of Benguet, GR No. 183137, April 10, 2013 (compared
with PBA vs. CA, GR No. 119122, August 8, 2000)
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The Local Tax Code indicates that the province can only impose a tax on admission from
the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses
and other places of amusement. The authority to tax professional basketball games is not
therein included, as the same is expressly embraced in PD 1959, which amended PD 1456.
From a reading of Section 268 of the said code, it is clear that the "proprietor, lessee or
operator of . . . professional basketball games" is required to pay an amusement tax
equivalent to fifteen per centum (15%) of their gross receipts to the Bureau of Internal
Revenue, which payment is a national tax. The said payment of amusement tax is in lieu of
all other percentage taxes of whatever nature and description.
While the Local Tax Code mentions "other places of amusement", professional basketball
games are definitely not within its scope. in determining the meaning of the phrase "other
places of amusement", one must refer to the prior enumeration of theaters,
cinematographs, concert halls and circuses with artistic expression as their common
characteristic. Professional basketball games do not fall under the same category as
theaters, cinematographs, concert halls and circuses as the latter basically belong to artistic
forms of entertainment while the former caters to sports and gaming.
Alta Vista Golf and Country Club vs. The City of Cebu, GR No. 180235 dated January 20,
2016
A golf course cannot be considered a place of amusement therefore beyond the power of LGU
to impose amusement tax.
Section 42 of the Revised Omnibus Tax Ordinance, as amended, imposing amusement tax
on golf courses is null and void as it is beyond the authority of respondent Cebu City to
enact under the LGC. A golf course cannot be considered a place of amusement. People do not
enter a golf course to see or view a show or performance. Proprietor or operators of the golf
course, do not actively display, stage, or present a show or performance. People go to a golf
course to engage themselves in a physical sport activity.
An LGU may exercise its residual power to tax when there is neither a grant nor a
prohibition by statute; or when such taxes, fees, or charges are not otherwise specifically
enumerated in the LGC, NIRC, or other applicable laws. In the present case, Section 140, in
relation to Section 131(c), of the LGC already explicitly and clearly cover amusement tax
and Cebu City must exercise its authority to impose amusement tax within the limitations
and guidelines as set forth in said statutory provisions.
Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products
The province may levy an annual fixed tax for every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or retailers in the delivery or distribution
of distilled spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products
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as may be determined by the sangguniang panlalawigan, to sales outlets, or consumers,

whether directly or indirectly, within the province.
The manufacturers, producers, wholesalers, dealers and retailers referred to in the

immediately foregoing paragraph shall be exempt from the tax on peddlers prescribed
elsewhere in this Code.
Municipalities
Municipalities may levy taxes, fees, and charges not otherwise levied by provinces, except
as otherwise provided in the LGC
Business Taxes
Ericson Telecommunications vs. City of Pasig, GR No. 176667, November 22, 2007
The power to tax is primarily vested in the Congress; however, it may be exercised by local
legislative bodies pursuant to direct authority conferred by Section 5, Article X of the
and limitations as Congress may provide. Respondent assessed deficiency local business
taxes on petitioner based on the latter’s gross revenue as reported in its financial
statements, arguing that gross receipts is synonymous with gross earnings/revenue, which,
in turn, includes uncollected earnings. Petitioner, however, contends that only the portion
of the revenues which were actually and constructively received should be considered in
determining its tax base.
Thus, respondent committed a palpable error when it assessed petitioner’s local business
tax based on its gross revenue as reported in its audited financial statements, as Section
143 of the Local Government Code and Section 22(e) of the Pasig Revenue Code clearly
provide that the tax should be computed based on gross receipts.
Yamane vs. BA Lepanto, GR No. 154992, October 25, 2005

Reference to the local tax ordinance is vital, for the power of local government units to
impose local taxes is exercised through the appropriate ordinance enacted by the
sanggunian, and not by the Local Government Code of 1991 alone. What determines tax
liability is the tax ordinance, the Code being the enabling law for the local legislative body.
Delegated power to tax, Congressional control.
City of Manila vs. Coca Cola Bottlers, GR No. 181845, August 4, 2009
When a municipality or city has already imposed a business tax on manufacturers of
liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section
143(a) of the Local Government Code (LGC), said municipality or city may no longer subject
the same manufacturers to a business tax under Section 143(h) of the same Code. In the
same way, businesses already subject to a local business tax under Section 14 of Tax
Ordinance No. 7794 (which is based on Section 143(a) of the LGC), can no longer be made
liable for local business tax under Section 21 of the same Tax Ordinance (which is based on
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Section 143(h) of the LGC). Otherwise, there will be double taxation since these two taxes
are being imposed: (1) on the same subject matter – the privilege of doing business in the
City of Manila; (2) for the same purpose – to make persons conducting business within the
City of Manila contribute to city revenues; (3) by the same taxing authority – the City of
Manila; (4) within the same taxing jurisdiction – within the territorial jurisdiction of the
City of Manila; (5) for the same taxing periods – per calendar year; and (6) with the same
kind or character – a local business tax imposed on gross sales or receipts of the business.
Alabang Supermarket Corporation vs. City of Muntinlupa CTA EB Case No. 386
February 12, 2009
It should be noted that petitioner has already been taxed as a distributor and dealer of
liquor, beer, wine, distilled spirits, cigarettes and tobacco products by the respondents,
based on the graduated rates provided for under Section 5(b) of the Revenue Code of
Muntinlupa City based on Section 143(b) of the LGC that taxes "any article of commerce of
whatever kind and nature", which is broad enough as to include products of petitioner.
When the law evidently does not distinguish the articles of commerce subject to the
business tax, thus, respondents' should not have done so. In addition, a general provision
that provides for the scope and extent of the city's taxing power like the above quoted
Section 151 of the LGC cannot be made to apply.
Cagayan Electric Power and Light Co., INc. vs. City of Cagayan de Oro, GR No. 191761,
November 14, 2012
The Tax Ordinance does not imposed a tax on income. Rather, it imposes tax on business.
Business is defined by Section 131(d) of the Local Government Code as "trade or

commercial activity regularly engaged in as a means of livelihood or with a view to profit."
Cities may impose taxes, fees, and charges on any business which is not specified in Section
143(a) to (g).
Further, CEPALCO is not exempt from tax. The LGC has already withdrawn tax exemption
privileges previously given to natural or juridical persons, and granted local government
units the power to impose franchise tax. CEPALCO’s claim of exemption under the "in lieu
of all taxes" clause must fail in light of Section 193 of the Local Government Code as well as
Section 9 of its own franchise.
Catch all provision – Section 143(h) of the LGC

A municipality may impose taxes on other business not specified (under Section 143(h) of
the LGC) which the sanggunian concerned may deem proper to tax.
Conditions to which other businesses not specified may the sanggunian concerned deem
proper to tax under Sec. 143 (h)
1. Business not subject to VAT or percentage tax under the NIRC; and
2. Tax rate not to exceed 2% of the gross sales/receipts of the preceding calendar year.
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Rates of Tax within Metropolitan Manila (Section 144 of the LGC)

The municipalities in Metro Manila may levy taxes at rates which shall not exceed by 50%
the maximum rates prescribed in Section 143, LGC.
Retirement of Business
A business subject to tax shall, upon termination thereof, submit a sworn statement of its
gross sales or receipts for the current year. If the tax paid during the year be less than the
tax due on said gross sales of receipts of the current year, the difference shall be paid
before the business is considered officially retired.
Mobil Phils vs. City Treasurer of Makati, GR No. 154092, July 14, 2005
Business taxes imposed in the exercise of police power for regulatory purposes are paid for
the privilege of carrying on a business in the year the tax was paid. It is paid at the
beginning of the year as a fee to allow the business to operate for the rest of the year. It is
deemed a prerequisite to the conduct of business.
On the year an establishment retires or terminates its business within the municipality, it
would be required to pay the difference in the amount if the tax collected, based on the
previous year’s gross sales or receipts, is less than the actual tax due based on the current
year’s gross sales or receipts.
Payment of Business Taxes

Payment of Business Taxes, when made:
1. Taxes shall be payable for every separate or distinct establishment or place where
business subject to the tax is conducted and one line of business does not become exempt
by being conducted with some other business for which such tax has been paid.
2. The tax on a business must be paid by the person conducting the same.
3. In cases where a person conducts or operates
4. 2 or more of the businesses mentioned in Section 143 of LGC which are subject to:
a. Same rate of tax – the tax shall be computed on the combined total gross sales or
receipts of the said 2 or more related business.
b. Different rates of tax – the gross sales or receipts of each business shall be separately
reported for the purpose of computing the tax due from each business.
Situs of Tax – Where to pay business tax?

For purposes of collection of the taxes under Section 143 of this Code, manufacturers,
assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled
spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers,
contractors, banks and other financial institutions, and other businesses, maintaining or
operating branch or sales outlet elsewhere shall record the sale in the branch or sales
outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to
the municipality where such branch or sales outlet is located. In cases where there is no
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such branch or sales outlet in the city or municipality where the sale or transaction is
made, 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.
Shell Co vs. Municipality of Sipocot, 105 Phil 1263

The Situs of Tax with respect to sale, it is the place of the consummation of the sale,
associated with the delivery of the things which are the subject matter of the contract that
determines the situs of the contract for purposes of taxation, and not merely the place of
the perfection of the contract.
Phil Match vs. City of Cebu, L-30745, January 18, 1978

The city can validly tax the sales of matches to customers outside of the city as long as the
orders were booked and paid for in the company’s branch office in the city. Those matches
can be regarded as sold in the city, as contemplated in the ordinance, because the matches
were delivered to the carrier in Cebu City. Generally, delivery to the carrier is delivery to
the buyer (Article 1523, Civil Code). A different interpretation would defeat the tax
ordinance in question or encourage tax evasion through the simple expedient of arranging
for the delivery of the matches at the outskirts of the city though the purchases were
effected and paid for in the company’s branch office in the city. The municipal board of the
city is empowered to provide for the levy and collection of taxes for general and special
purposes in accordance with law.
Note further that the taxing power of cities, municipalities and municipal districts may be
used (1) "upon any person engaged in any occupation or business, or exercising any
privilege" therein; (2) for services rendered by those political subdivisions or rendered in
connection with any business, profession or occupation being conducted therein, and (3) to
levy, for public purposes, just and uniform taxes, licenses or fees.
Iloilo bottlers vs. City of Iloilo, GR No. 52019, August 18, 1988
A tax on the privilege of distributing, manufacturing or bottling softdrinks is an excise tax.
Being an excise tax, it can be levied by the taxing authority only when the acts, privileges or
businesses are done or performed within the jurisdiction of the said authority. The situs of
the act of distributing, bottling or manufacturing softdrinks must be within city limits.
As compared with the current LGC provisions, excise tax is a tax imposed on the performance
of an act or occupation, enjoyment of a privilege. Therefore, the power to levy such tax
depends on the place in which the act is performed or the occupation is engaged in; not
upon the location of the office.
Fees and charges (Section 147)

The municipality may impose and collect such reasonable fees and charges on business and
occupation except professional taxes reserved for provinces.
Others (Sections 148 and 149)

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 The municipality may levy fees for Sealing and Licensing of Weights and Measures
as well as Fishery Rentals, Fees and Charges, including the authority to grant fishery
privileges within municipal waters, as well as issue licenses for the operation of fishing
vessels of three tons or less.
 The sanggunian may penalize the use of explosives, noxious, or poisonous
substances, electricity, muro–ami, and other deleterious methods of fishing and prescribe a
criminal penalty therefore.
Cities
A city shall not levy the taxes and other impositions enumerated under the common
limitations on the taxing powers of local governments. Except:
1. Tax that may be levied by cities on the transfer of real property ownership; and
2. Wharfage on wharves constructed and maintained by the city.
Barangays
The barangays may levy taxes, fees, and charges, which shall exclusively accrue to them.
Taxes - On stores or retailers with fixed business establishments with gross sales of
receipts of the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the
case of cities and Thirty thousand pesos (P30,000.00) or less, in the case of municipalities,
at a rate not exceeding one percent (1%) on such gross sales or receipts.
Service Fees or Charges. - Barangays may collect reasonable fees or charges for services
rendered in connection with the regulations or the use of barangay-owned properties or
service facilities such as palay, copra, or tobacco dryers.
Barangay Clearance. - 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. For such clearance, the sangguniang barangay
may impose a reasonable fee. The application for clearance shall be acted upon within
seven (7) working days from the filing thereof. In the event that the clearance is not issued
within the said period, the city or municipality may issue the said license or permit.
Other fees and Charges. - The barangay may levy reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor advertisements.
Common Revenue Raising Powers
Fees, service or user charges – LGUs may impose and collect such reasonable fees and
charges for services rendered (Sec. 153, LGC).
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Public utility charges – LGUs may fix the rates for the operation of public utilities owned,
operated, and maintained by them within their jurisdiction (Sec. 154, LGC).
Toll fees or charges – 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,
pier, or wharf, waterway, bridge, ferry or telecommunication system funded and
constructed by the LGU concerned.
Other Matters
Public Hearings (Article 324 IRR of the LGC vs. Section 187)
Article 324, IRR of LGC provides that, No public hearing shall be required before the
enactment of a local tax ordinance levying the basic real property tax.
Section 187 of the LGC provides that, Public hearings are required before any local tax
ordinance is enacted.
Figuerres vs. CA, GR No. 119172, March 25, 1999

The lack of a public hearing is a negative allegation. Hence, the party asserting it has the
burden of proof. Failure to rebut the presumption of validity that no public hearings were
conducted prior to the enactment thereof means the constitutionality or legality of the
questioned ordinance must be upheld. The same rule applies to ordinances that fix the
assessment levels, being in the nature of a tax ordinance.
Alabang Supermarket Corporation vs. City of Muntinlupa, CTA EB Case No. 386
February 12, 2009
When the law evidently does not distinguish the articles of commerce subject to the
business tax, thus, respondents' should not have done so. In addition, a general provision
that provides for the scope and extent of the city's taxing power like the above quoted
Section 151 of the LGC cannot be made to apply.
Mindanao Shopping Destination Corporation Corporation vs. Duterte, GR No. 211093

dated June 6, 2017
Section 191 of the LGC presupposes that the following requirements are present for it to
apply, to wit:
(1) there is a tax ordinance that already imposes a tax in accordance with the provisions of
the LGC; and
(2) there is a second tax ordinance that made adjustment on the tax rate ﬁxed by the ﬁrst
tax ordinance.
Authority to adjust Tax Rates

Local government units shall have the authority to adjust the tax rates as prescribed herein
not oftener than once every five (5) years, but in no case shall such adjustment exceed ten
percent (10%) of the rates fixed under this Code.
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Authority to Grant Tax Exemptions

Local government units may, through ordinances duly approved, grant tax exemptions,
incentives or reliefs under such terms and conditions as they may deem necessary.
PLDT vs. City of Davao, GR No. 143867, August 22, 2001

The ordinance is valid as it was passed pursuant to the powers of provinces and cities to
impose taxes on businesses with franchises under the Local Government Code (LGC). The
LGC, which took effect on January 1, 1992, withdrew tax exemptions or incentives
previously enjoyed by all persons, except certain entities.
PLDT is liable to pay the local franchise taxes because its legislative franchise was granted
by Congress prior to the passage of the LGC. Thus, the provision of the LGC withdrawing tax
exemptions or incentives applies to PLDT. Smart and Globe are exempt from the local
franchise taxes imposed by the province since their respective legislative franchises were
granted in 1998, or after the enactment of the LGC.
Therefore, with respect to Smart and Globe, the withdrawal of tax exemptions or incentives
under the LGC was superseded by the legislative franchise requiring payment of the 5%
franchise tax “in lieu of all taxes”.
NPC vs. Cabanatuan, GR No. 149110, April 9, 2003

The person claiming the exemption has the burden of proving its claim by clear grant of
exemption after the enactment of the LGC.
Withdrawal of Tax Exemption Privileges

Tax exemptions or incentives granted to or enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations are hereby withdrawn
upon the effectivity of the Local Government Code.
Community Tax
The community tax is a poll or capitation tax imposed upon residents of a city or
municipality. It replaced the former residence tax.
Who may impose

It may be levied by a city or municipality but not a province.
Individuals liable to pay

Every inhabitant of the Philippines 18 years of age or over:
a. who has been regularly employed on a wage or salary basis for at least 30 consecutive
working days during any calendar year; or
b. who is engaged in business or occupation;
c. or who owns real property with an aggregate assessed value of P1,000.00 or more; or
d. who is required by law to file an income tax return.
Juridical Persons liable to community tax

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Every corporation no matter how created or organized, whether domestic or resident

foreign, engaged in or doing business in the Philippines.
Exemptions
Diplomatic and consular representatives and Transient visitors when their stay in the
Philippines does not exceed three (3) months are exempted from paying community tax.
Place of Payment
Residence of the individual, or in the place where the principal office of the juridical entity
is located.
Time of payment
Accrues on the 1st day of January of each year which shall be paid not later than the last
day of February of each year.
Community tax certificate

It is issued to every person or corporation upon payment of the community tax. It may also
be issued to any person or corporation NOT subject to the community tax upon payment of
P1.00
Presentation of CTC on certain occassions

Presentation of community tax certificate, when required:
1. Acknowledgment of any document before a notary public. (This is in accordance with the
provisions of the LGC, note that this is no longer included under the competent evidences of
identity under the Revised Rules on Notarial Practice);
2. Taking an oath of office upon election or appointment to any position in the government
service;
3. Receiving any license, certificate or permit from any public authority;
4. Paying any tax or fee;
5. Receiving any money from any public fund;
6. Transacting other official business; or
7. Receiving any salary or wage from any person or corporation.
COLLECTION OF TAXES AND REMEDIES
Collection of Taxes
Tax Period
The tax period of all local taxes, fees and charges shall be the calendar year.
Manner of Payment
Taxes may be paid in quarterly installments.
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Accrual of Tax
Unless otherwise provided in this Code, all local taxes, fees, and charges shall accrue on the
first (1st) day of January of each year. Except for new taxes, fees or charges, or changes in
the rates thereof, shall accrue on the first (1st) day of the quarter next following the
effectivity of the ordinance.
Time of Payment
Unless otherwise provided in this Code, all local taxes, fees, and charges shall be paid
within the first twenty (20) days of January or of each subsequent quarter.
It may be extended by the sanggunian concerned for a justifiable reason or cause without
surcharges or penalties, but only for a period not exceeding six (6) months.
Surcharges and Penalties

The sanggunian may impose:
Surcharge- not exceeding twenty-five (25%) of the amount of taxes, fees or charges not
paid on time
Interest- not exceeding two percent (2%) per month of the unpaid taxes, fees or charges
including surcharges, until such amount is fully paid
In no case shall the total thirty-six (36%) months.
NPC vs. City of Cabanatuan, GR No. 177332 dated October 1, 2014

Taxes and its surcharges and penalties cannot be construed in such a way as to become
oppressive and confiscatory. Taxes are implied burdens that ensure that individuals and
businesses prosper in a conducive environment assured by good and effective government.
A healthy balance should be maintained such that laws are interpreted in a way that these
burdens do not amount to a confiscatory outcome. Taxes are not and should not be
construed to drive businesses into insolvency. To a certain extent, a reasonable surcharge
will provide incentive to pay; an unreasonable one delays payment and engages
government in unnecessary litigation and expense.
Interest on Other Unpaid Revenues

Not exceeding two percent (2%) per month from the date it is due until it is paid, in no case
shall the total thirty-six (36%) months.
The provision also states that this is applicable to any other revenue due a local
government unit, except voluntary contributions or donations, not paid on the date fixed in
the ordinance, or in the contract, expressed or implied, or upon the occurrence of the event
which has given rise to its collection
Collection of Local Revenues by Treasurer

All local taxes, fees, and charges shall be collected by Provincial, City, Municipal, or
Barangay Treasurer or, Their Duly Authorized Deputies.
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Examination of Books of Accounts and Pertinent Records

The provision states the persons authorized to inspect the books of any person,
partnership, corporation, or association:
1) Provincial, City, Municipal, or Barangay Treasurer; or,
2) Any of his deputies duly authorized in writing
The written authority of the deputy concerned shall specifically state the taxpayer’s:
1. name
2. address
3. business
4. date and place of such examination and,
5. procedure to be followed in conducting the same
The examination shall be made:
1. During regular business hours
2. Only once for every tax period
3. Certified to by the examining official, the certificate shall be made of record in the
books of accounts of the taxpayer examined
Remedies of the Government
Local Government’s Lien

Local taxes, fees, charges and other revenues constitute a lien, superior to all liens, charges
or encumbrances in favor of any person, enforceable by appropriate administrative or
judicial action, not only upon any property or rights therein which may be subject to the
lien but also upon property used in business, occupation, practice of profession or calling,
or exercise of privilege with respect to which the lien is imposed. The lien may only be
extinguished upon full payment of the delinquent local taxes fees and charges including
related surcharges and interest.
Civil Remedies
The civil remedies for the collection of local taxes, fees, or charges, and related surcharges
and interest resulting from delinquency shall be by administrative action thru distraint of
goods, chattels, or effects, and other personal property of whatever character, including
stocks and other securities, debts, credits, bank accounts, and interest in and rights to
personal property, and by levy upon real property and interest in or rights to real property;
Distraint
Distraint shall be applied to personal properties while Levy shall be applied to real
properties by judicial action.
Levy on Real Property

Levy on real property may be made before, simultaneously or after the distraint of personal
property of the same taxpayer.
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It may be effected by serving upon the taxpayer a written notice of levy in the form of a
duly authenticated certificate prepared by Revenue District Officer containing:
1. Description of the property upon which levy is made;
2. Name of the taxpayer;
3. Amount of tax and penalty due.
Advertisement and Sale

Within thirty (30) days after the levy, the local treasurer shall proceed to publicly advertise
for sale or auction the property or a usable portion thereof as may be necessary to satisfy
the claim and cost of sale; and such advertisement shall cover a period of at least thirty (30)
days. It shall be effected by posting a notice at the main entrance of the municipal building
or city hall, and in a public and conspicuous place in the barangay where the real property
is located, and by publication once a week for three (3) weeks in a newspaper of general
circulation in the province, city or municipality where the property is located.
The advertisement shall contain the amount of taxes, fees or charges, and penalties due
thereon, and the time and place of sale, the name of the taxpayer against whom the taxes,
fees, or charges are levied, and a short description of the property to be sold. At any time
before the date fixed for the sale, the taxpayer may stay the proceedings by paying the
taxes, fees, charges, penalties and interests. If he fails to do so, the sale shall proceed and
shall be held either at the main entrance of the provincial, city or municipal building, or on
the property to be sold, or at any other place as determined by the local treasurer
conducting the sale and specified in the notice of sale.
Redemption of Property Sold

Within 1 year from the date of sale, the taxpayer or anyone for him, may pay to the
Revenue District Officer the total amount of the following:
a. Public taxes;
b. Penalties;
c. Interest from the date of delinquency to the date of sale; and
d. Interest on said purchase price at the rate of 15% per annum from the date of sale to the
date of redemption.
If the property was forfeited in favor of the government: the Redemption price shall include
only the taxes, penalties and interest plus costs of sale – no interest on purchase price since
the Government did not “purchase” the property, for it was forfeited.
Purchase of LGU for want of bidder

In case there is no bidder for the real property advertised for sale as provided herein, or if
the highest bid is for an amount insufficient to pay the taxes, fees, or charges, related
surcharges, interests, penalties and costs, the local treasurer conducting the sale shall
purchase the property in behalf of the local government unit concerned to satisfy the claim
and within two (2) days thereafter shall make a report of his proceedings which shall be
reflected upon the records of his office. It shall be the duty of the Registrar of Deeds
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concerned upon registration with his office of any such declaration of forfeiture to transfer
the title of the forfeited property to the local government unit concerned without the
necessity of an order from a competent court.
Resale of Real Estate Tax for Taxes, Fees, or Charges

The sanggunian concerned may, by ordinance duly approved, and upon notice of not less
than twenty (20) days, sell and dispose of the real property acquired under the preceding
section at public auction. The proceeds of the sale shall accrue to the general fund of the
local government unit concerned.
Judicial Action
The local government unit concerned may enforce the collection of delinquent taxes, fees,
charges or other revenues by civil action in any court of competent jurisdiction. The civil
action shall be filed by the local treasurer within the period prescribed in Section 194 of
this Code.
Further Distraint and Levy

The remedy of distraint and levy may be repeated if necessary until the full amount of the
tax delinquency due including all expenses is collected from the taxpayer. Otherwise, a
clever taxpayer who is able to conceal most of the valuable part of his property would
escape payment of his tax liability by sacrificing an insignificant portion of his holdings.
However, further distraint and levy does not apply when the real property was forfeited to
the government for it is in satisfaction of the claim in question.
Personal Property Exempt from Disraint or Levy

The following property shall be exempt from distraint and the levy, attachment or
execution thereof for delinquency in the payment of any local tax, fee or charge, including
the related surcharge and interest:
1. Tools and implements necessarily used by the delinquent taxpayer in his trade or
employment;
2. One horse, cow, carabao, or other Beast of burden, such as the delinquent taxpayer may
select, and necessarily used by him in his ordinary occupation;
3. His necessary Clothing, and that of all his family;
4. Household furniture and utensils necessary for housekeeping and used for that purpose
by the delinquent taxpayer, such as he may select, of a value not exceeding P10,000.00;
5. Provisions, including crops, actually provided for individual or family use sufficient for 4
months;
6. The professional Libraries of doctors, engineers, lawyers and judges;
7. One fishing Boat and net, not exceeding the total value of P10,000.00, by the lawful use of
which a fisherman earns his livelihood; and
8. Any Material or article forming part of a house or improvement of any real property.
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Taxpayer’s Remedies
Question Constitutionality of Ordinance

The procedure for approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided, That public hearings shall be
conducted for the purpose prior to the enactment thereof: Provided, further, That any
question on the constitutionality or legality of tax ordinances or revenue measures may be
raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of
Justice who shall render a decision within sixty (60) days from the date of receipt of the
appeal: Provided, however, That such appeal shall not have the effect of suspending the
effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied
therein: Provided, finally, That within thirty (30) days after receipt of the decision or the
lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of competent jurisdiction.
Drilon vs Lim, G.R. No. 112497, August 04, 1994

The Secretary argues that the procedural requirements for the enactment of tax ordinances
as specified in the Local Government Code had indeed not been observed.
Judge Palattao found otherwise. He declared that all the procedural requirements had been
observed in the enactment of the Manila Revenue Code and that the City of Manila had not
been able to prove such compliance before the Secretary only because he had given it only
five days within which to gather and present to him all the evidence (consisting of 25
exhibits) later submitted to the trial court.
The Court acceded to the motion of the respondents and called for the elevation to it of the
said exhibits. We have carefully examined every one of these exhibits and agree with the
trial court that the procedural requirements have indeed been observed.
The only exceptions are the posting of the ordinance as approved but this omission does
not affect its validity, considering that its publication in three successive issues of a
newspaper of general circulation will satisfy due process. It has also not been shown that
the text of the ordinance has been translated and disseminated, but this requirement
applies to the approval of local development plans and public investment programs of the
local government unit and not to tax ordinances.
Cagayan Electric Power and Light Co., Inc. vs City of Cagayan de Oro, G.R. No. 191761,
November 14, 2012
The Sangguniang Panlungsod of Cagayan de Oro approved Ordinance No. 9503-2005 on 10
January 2005. Section 5 of said ordinance provided that the "Ordinance shall take effect
after 15 days following its publication in a local newspaper of general circulation for at
least three (3) consecutive issues." Gold Star Daily published Ordinance No. 9503-2005 on
1 to 3 February 2005. Ordinance No. 9503-2005 thus took effect on 19 February 2005.
CEPALCO filed its petition for declaratory relief before the Regional Trial Court on 30
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September 2005, clearly beyond the 30-day period provided in Section 187. CEPALCO did
not file anything before the Secretary of Justice. CEPALCO ignored our ruling in Reyes v.
Court of Appeals on the mandatory nature of the statutory periods.
Clearly, the law requires that the dissatisfied taxpayer who questions the validity or
legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30
days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30
days is allowed for an aggrieved party to go to court. But if the Secretary does not act
thereon, after the lapse of 60 days, a party could already proceed to seek relief in court.
These three separate periods are clearly given for compliance as a prerequisite before
seeking redress in a competent court. Such statutory periods are set to prevent delays as
well as enhance the orderly and speedy discharge of judicial functions. For this reason the
courts construe these provisions of statutes as mandatory.
A municipal tax ordinance empowers a local government unit to impose taxes. The power
to tax is the most effective instrument to raise needed revenues to finance and support the
myriad activities of local government units for the delivery of basic services essential to the
promotion of the general welfare and enhancement of peace, progress, and prosperity of
the people. Consequently, any delay in implementing tax measures would be to the
detriment of the public. It is for this reason that protests over tax ordinances are required
to be done within certain time frames. In the instant case, it is our view that the failure of
petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of
R.A. 7160 is fatal to their cause.
Smart Communications, Inc. vs. Municipality of Malvar, G.R. No. 204429, February 18,
2014
The Court finds that the fees imposed under Ordinance No. 18 are not taxes.
Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of
the identified special projects, which included "cell sites" or telecommunications towers,
the fees imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily
revenue-raising. While the fees may contribute to the revenues of the Municipality, this
effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes.
Considering that the fees in Ordinance No.18 are not in the nature of local taxes, and Smart
is questioning the constitutionality of the ordinance, the CTA correctly dismissed the
petition for lack of jurisdiction. Likewise, Section 187 of the LGC, which outlines the
procedure for questioning the constitutionality of a tax ordinance, is inapplicable,
rendering unnecessary the resolution of the issue on non-exhaustion of
administrative remedies.
Publication
Within 10 days after their approval, publication in full for 3 consecutive days in a
newspaper of general circulation. In the absence of such newspaper in the province, city or
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municipality, then the ordinance may be posted in at least two conspicuous and publicly
accessible places.
Coca-Cola Bottlers vs City of Manila, G.R. No. 156252, June 27, 2006
It is undisputed from the facts of the case that Tax Ordinance No. 7988 has already been
declared by the DOJ Secretary, in its Order, dated 17 August 2000, as null and void and
without legal effect due to respondents’ failure to satisfy the requirement that said
ordinance be published for three consecutive days as required by law. Neither is there
quibbling on the fact that the said Order of the DOJ was never appealed by the City of
Manila, thus, it had attained finality after the lapse of the period to appeal.
Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28 November 2001,
reiterated the findings of the DOJ Secretary that respondents failed to follow the procedure
in the enactment of tax measures as mandated by Section 188 of the Local Government
Code of 1991, in that they failed to publish Tax Ordinance No. 7988 for three consecutive
days in a newspaper of local circulation. From the foregoing, it is evident that Tax
Ordinance No. 7988 is null and void as said ordinance was published only for one day in the
22 May 2000 issue of the Philippine Post in contravention of the unmistakable directive of
the Local Government Code of 1991.
Period of Assessment and Collection

Local taxes, fees, or charges may be collected within 5 years from the date of assessment by
administrative or judicial action.
Protest of Assessment
Within 60 days from the receipt of the notice of assessment, the taxpayer may file a written
protest with the local treasurer; otherwise, the assessment shall become final and
executory. The local treasurer shall decide the protest within 60 days from the time of its
filing.
The taxpayer shall have 30 days from the receipt of the denial of the protest or from the
lapse of the 60-day prescribed period within which to appeal with the court of competent
jurisdiction.
San Juan vs Castro, G.R. No. 174617, December 27, 2007

In the case at bar, the condition that "there is no other plain, speedy and adequate remedy
in the ordinary course of law" is absent.
Under Section 195 of the Local Government Code, a taxpayer who disagrees with a tax
assessment made by a local treasurer may file a written protest thereof.
That petitioner protested in writing against the assessment of tax due and the basis thereof
is on record as in fact it was on that account that respondent sent him the above-quoted
July 15, 2005 letter which operated as a denial of petitioner’s written protest. Petitioner
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should thus have, following Section 195 of the Local Government Code, either appealed the
assessment before the court of competent jurisdiction or paid the tax and then sought a
refund.
Petitioner did not observe any of these remedies available to him, however. He instead
opted to file a petition for mandamus to compel respondent to accept payment of transfer
tax as computed by him.
Mandamus lies only to compel an officer to perform a ministerial duty (one which is so
clear and specific as to leave no room for the exercise of discretion in its performance) but
not a discretionary function (one which by its nature requires the exercise of judgment).
Respondent’s argument that Mandamus cannot lie to compel the City Treasurer to accept
as full compliance a tax payment which in his reasoning and assessment is deficient and
incorrect" is thus persuasive.
China Banking vs City Treasurer of Manila, G.R. No. 204117, July 01, 2015
Even if the Court considers CBC’s appeal from the "denial due to inaction" by the City
Treasurer to have been timely filed, the same must be dismissed because it was not filed
with a court of competent jurisdiction.
With the passage of R.A. No. 9282, the authority to exercise either original or appellate
jurisdiction over local tax cases depended on the amount of the claim. In cases where the
RTC exercises appellate jurisdiction, it necessarily follows that there must be a court
capable of exercising original jurisdiction – otherwise there would be no appeal over which
the RTC would exercise appellate jurisdiction.
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Civil Cases. – Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise: (1) Exclusive original jurisdiction over civil
actions and probate proceedings, testate and intestate, including the grant of provisional
remedies in proper cases, where the value of the personal property, estate, or amount of
the demand does not exceed One hundred thousand pesos (₱100,000.00) or, in Metro
Manila where such personal property, estate, or amount of the demand does not exceed
Two hundred thousand pesos (₱200,000.00).
The Court cannot consider the City Treasurer as the entity that exercises original
jurisdiction not only because it is not a "court" within the context of Batas Pambansa
(B.P.)Blg. 129, but also because, "B.P. 129 expressly delineates the appellate jurisdiction of
the Regional Trial Courts, confining as it does said appellate jurisdiction to cases decided by
Metropolitan, Municipal, and Municipal Circuit Trial Courts." Verily, unlike in the case of the
CA, B.P. 129 does not confer appellate jurisdiction on the RTC over rulings made by non-
judicial entities. The RTC exercises appellate jurisdiction only from cases decided by the
Metropolitan, Municipal, and Municipal Circuit Trial Courts in the proper cases. The nature
of the jurisdiction exercised by these courts is original, considering it will be the first time
that a court will take judicial cognizance of a case instituted for judicial action.
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Indeed, in cases where the amount sought to be refunded is below the jurisdictional
amount of the RTC, the Metropolitan, Municipal, and Municipal Circuit Trial Courts are
clothed with ample authority to rule on such claims.
Appeal to the CTA

The taxpayer may appeal to CTA in case of denial by CIR of the claim for refund. It must be
filed within 30 days from receipt of the decision of the CIR but not to exceed the 2-year
period from date of payment of the tax or penalty regardless of any supervening cause that
may arise after payment.
In case the decision of the CIR takes too long and the 2-year period is about to end,
proceedings in the CTA must be commenced and there would no longer be any need to wait
for the decision of the CIR.
Claim for Refund

A written claim for refund or credit is filed with the local treasurer. A claim or proceeding is
then filed with the court of competent jurisdiction (depending upon the jurisdictional
amount) within 2 years from the date of the payment of such tax, fee, or charge, or from the
date the taxpayer is entitled to a refund or credit.
The filing of a written claim for refund with the local treasurer is a condition precedent for
maintaining a court action. If the local treasurer does not act on the written claim for
refund and the 2-year statute of limitation is about to expire, the taxpayer should forthwith
initiate the court action and consider the treasurer’s inaction as a denial of his claim for
refund.
Is injunction available?
Injunction may be resorted to as an ancillary remedy in an action for declaratory relief or
for annulment of a tax ordinance, provided it be shown that the collection of tax pending
the final resolution of the case would cause irreparable injury to the taxpayer who has no
other adequate remedy in the ordinary cause of law.
Angeles City vs Angeles Electric Corporation, G.R. No. 166134, June 29, 2010
A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the
government should be collected promptly, without unnecessary hindrance or delay. In line
with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly provides
that no court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the code. An exception to this rule
obtains only when in the opinion of the Court of Tax Appeals (CTA) the collection thereof
may jeopardize the interest of the government and/or the taxpayer. The situation,
however, is different in the case of the collection of local taxes as there is no express
provision in the LGC prohibiting courts from issuing an injunction to restrain local
governments from collecting taxes.
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As a rule, the issuance of a preliminary injunction rests entirely within the discretion of the
court taking cognizance of the case and will not be interfered with, except where there is
grave abuse of discretion committed by the court. For grave abuse of discretion to prosper
as a ground for certiorari, it must be demonstrated that the lower court or tribunal has
exercised its power in an arbitrary and despotic manner, by reason of passion or personal
hostility, and it must be patent and gross as would amount to an evasion or to a unilateral
refusal to perform the duty enjoined or to act in contemplation of law. In other words, mere
abuse of discretion is not enough.
Guided by the foregoing, we find no grave abuse of discretion on the part of the RTC in
issuing the writ of injunction. Petitioner, who has the burden to prove grave abuse of
discretion, failed to show that the RTC acted arbitrarily and capriciously in granting the
injunction. Neither was petitioner able to prove that the injunction was issued without any
factual or legal justification. In assailing the injunction, petitioner primarily relied on the
prohibition on the issuance of a writ of injunction to restrain the collection of taxes. But as
we have already said, there is no such prohibition in the case of local taxes. Records also
show that before issuing the injunction, the RTC conducted a hearing where both parties
were given the opportunity to present their arguments. During the hearing, AEC was able
to show that it had a clear and unmistakable legal right over the properties to be levied and
that it would sustain serious damage if these properties, which are vital to its operations,
would be sold at public auction. As we see it then, the writ of injunction was properly
issued.
REAL PROPERTY TAXATION
PRELIMINARY MATTERS
Definition of Real Property Tax

Real property tax is a direct tax on ownership of lands and buildings or other
improvements thereon not specially exempted, and is payable regardless of whether the
property is used or not, although the value may vary in accordance with such factor.
Real property tax is a fixed proportion of the assessed value of the property being taxed
and requires, therefore, the intervention of assessors.
Villanueva vs. City of Iloilo, L-26521, December 28, 1968

The real estate tax is a tax on property; the real estate dealer’s tax is a tax on the privilege
to engage in business; while the income tax is a tax on the privilege to earn an income.
These taxes are imposed by different taxing authorities and are essentially of different kind
and character.
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Who should pay the real property tax?

The present law on real property taxation (R.A. 7160, LGC) adopts actual use of real
property as basis of assessment, even if the user is not the owner.
Baguio vs. Busuego, GR No. 29772, September 18, 1980

Section 40(a) of Presidential Decree No. 464 entitled “The Real Property Tax Code”
provides:
Sec. 40.Exemptions from Real Property Tax. — The exemptions shall be as follows:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions and any government-owned corporation so exempt by its charter; Provided,
however, That this exemption shall not apply to real property of the above-named entitles
the beneficial use of which has been granted, for consideration or otherwise, to a taxable
person.
Thus under this provision, while the GSIS may be exempt from real estate tax the
exemption does not cover property belonging to it "where the beneficial use thereof has
been granted for consideration or otherwise to a taxable person." There can be no doubt
that under the provisions of the contract in question, the purchaser to whose possession
the property had been transferred was granted beneficial use thereof. It follows on the
strength of the provision sec. 40(a) of PD 464 that the said property is not exempt from the
real property tax. The end result is but in consonance with the established rule in taxation
that “exemptions are held strictly against the taxpayer and liberally in favor of the taxing
authority”.
NPC vs. Province of Quezon, GR No. 171586, July 15, 2009

The National Power Corporation (NPC) cannot claim exemption from payment of real
property tax on the power plant owned and operated by the Mirant Pagbilao Corporation.
To successfully claim exemption under Section 234(c) of the Local Government Code, NPC
must prove that it is the one actually, directly, and exclusively using the real property, and
the use must be devoted to the generation and transmission of electric power. Although the
power plant is devoted to the generation of electric power, it is Mirant, a private
corporation, which actually uses and operates it.
NPC vs. Province of Quezon, GR No. 171586, January 25, 2010 (Resolution)
The two entities vested with personality to contest an assessment are (a) the owner or (b)
the person with legal interest in the property. NPC is neither the owner nor the
possessor/user of the subject machineries even if it will acquire ownership of the plant at
the end of 25 years. The Court said that legal interest should be an interest that is actual
and material, direct and immediate, not simply contingent or expectant. While the
Petitioner does indeed assume responsibility for the taxes due on the power plant and its
machineries, the tax liability referred to is the liability arising from law that the local
government unit can rightfully and successfully enforce, not the contractual liability that is
enforceable between the parties to a contract. The local government units can neither be
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compelled to recognize the protest of a tax assessment from the Petitioner, an entity
against whom it cannot enforce the tax liability.
GSIS vs. City Treasurer and Assessor of Manila, GR NO. 186242, December 23, 2009
The Government Service Insurance System (GSIS) enjoys full tax exemption under its
present charter. Moreover, as an instrumentality of the national government, it is itself not
liable to pay real estate taxes assessed by the City of Manila against two of its properties.
Following the “beneficial use” rule, however, accrued real property taxes are due from the
property being leased to a taxable entity. But the corresponding liability for the payment
thereof devolves on the taxable beneficial user. At any event, such leased property cannot
be subject of a public auction sale, notwithstanding its realty tax delinquency. This means
that the City of Manila has to satisfy its tax claim by serving the accrued realty tax
assessment on the taxable beneficial user and, in case of nonpayment, through means other
than the sale at public auction of the leased property.
Fundamental Pronciples
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.
(Doctrine of Usage)
Actual use refers to the purpose for which the property is principally or predominantly
utilized by the person in possession of the property.
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.
Important Definitions
Section 199 of the LGC provides the definitions used in the determination of Real Property
Taxes. The NIRC and the LGC prevail in classifying property for tax purposes.
Real Property for RPT Purposes (Section 412 of the New Civil Code)
The SC has generally held that Art 415 of the Civil Code provides an exclusive enumeration
of what constitutes real property, for tax purposes, however, it is common for otherwise
personal properties under the Civil Code to be classified as real property.
Machineries
Under the LGC, machinery, which may or may not be permanently attached to land, is
subject to real property tax.
Mindanao Bus vs. City Assessor and Treasurer, L-17870, September 29, 1962
The SC ruled in favor of Mindanao Bus, contending that movable equipment[s] to be
immobilized in contemplation of the law must first be “essential and principal elements” of
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an industry or works without which such industry or works would be “unable to function
or carry on the industrial purpose for which it was established.” We may here distinguish,
therefore, those movable which become immobilized by destination because they are
essential and principal elements in the industry for those which may not be so considered
immobilized because they are merely incidental, not essential and principal.
Here the machineries in question, by their nature, not essential and principal elements of
the business of transporting passengers and cargoes by motor trucks. They are merely
incidentals — acquired as movables and used only for expediency to facilitate and/or
improve its service. Even without such tools and equipment, its business may be carried on,
as petitioner has carried on, without such equipment, before the war. The transportation
business could be carried on without the repair or service shop if its rolling equipment is
repaired or serviced in another shop belonging to another.
Caltex Philippines, Inc. vs. CBAA, GR No. 50466, May 31, 1982
Properties considered as personal under the Civil Code may nonetheless be considered as
real property for tax purposes where said property is essential to the conduct of business.
The property to be considered as immobilized for RPT must be “essential and a principal
element” of an industry without which such industry would be unable to carry on the
principal industrial purpose for which it was established.
The Court held that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) 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 or
embedded therein, are taxable improvements and machinery within the meaning of the
Assessment Law and the Real Property Tax Code. Under the Real Property Tax Code,
“improvements” are defined as “valuable addition made to property or an amelioration in
its condition, amounting to more than mere repairs or replacement of waste, costing labor
or capital and intended to enhance its value, beauty or utility or to adapt it for new or
further purposes.” On the other hand, “machinery” is embraces “machines, mechanical
contrivances, instruments, appliances and apparatus attached to the real estate.”
Improvements on land are commonly taxed as realty even though for some purposes they
might be considered personalty.
Manila Electric Co. vs. CBAA, L-47943, May 31, 1982

Section 2 of the Assessment Law provides that the realty tax is due “on real property,
including land, buildings, machinery, and other improvements.” This provision is
reproduced with some modification in Section 38, Real Property Tax Code, which provides
that “there shall be levied, assessed, and collected xxx annual ad valorem tax on real
property such as land, buildings, machinery, and other improvements affixed or attached to
real property.”
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It is incontestable that the pipeline of Meralco Securities does not fall within any of the
classes of exempt real property enumerated in section 3 of the Assessment Law and section
40 of the Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying
liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth,
carrying with it the right to the use of the soil in which it is placed.
Article 415[l] and [3] provides that real property may consist of constructions of all kinds
adhered to the soil and everything attached to an immovable in a fixed manner, in such a
way that it cannot be separated therefrom without breaking the material or deterioration
of the object.
The pipeline system in question is indubitably a construction adhering to the soil. It is

attached to the land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.
Manila Electric Company vs. The City Assessor and City Treasurer of Lucena City, GR No.
166102 dated August 5, 2015
The last paragraph of Section 234 had unequivocally withdrawn, upon the effectivity of the
Local Government Code, exemptions from payment of real property taxes granted to
natural or juridical persons, including government-owned or controlled corporations,
except as provided in the same section.
MERALCO, a private corporation engaged in electric distribution, and its transformers,

electric posts, transmission lines, insulators, and electric meters used commercially do not
qualify under any of the ownership, character, and usage exemptions enumerated in
Section 234 of the Local Government Code. It is a basic precept of statutory construction
that the express mention of one person, thing, act, or consequence excludes all others as
expressed in the familiar maxim expressio unius est exclusio alterius. Not being among the
recognized exemptions from real property tax in Section 234 of the Local Government
Code, then the exemption of the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO from real property tax granted under its franchise was
among the exemptions withdrawn upon the effectivity of the Local Government Code on
January 1, 1998.
Provincial Assessor of Agusan del Sur vs. Filipinas Palm Oil, GR No. 183416 dated
October 5, 2016
Under Section 133(n) of the LGC, the taxing power of LGUs shall not extend to the levy of
taxes, fees, or charges on duly registered cooperatives under the Cooperative Code. The
exemption from real property taxes given to cooperatives applies regardless of whether or
not the land owned is leased. This exemption benefits the cooperative's lessee.
However, the assessment pertaining to the machinery is proper. The definition of

“machinery” under Section 199 of the LGC includes machines which may or may not be
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attached, permanently or temporarily, to the real property. (The characterization of

machinery as real property is governed by the Local Government Code and not the Civil
Code.)
Capitol Wireless, Inc. vs. Provincial Treasurer of Batangas, GR No. 180110 dated May
30, 2016
As far as local government units are concerned, the areas described above are to be
considered subsumed under the term 'municipal waters' which, under the Local
Government Code, includes 'not only streams, lakes, and tidal waters within the
municipality, not being the subject of private ownership and not comprised within the
national parks, public forest, timber lands, forest reserves or fishery reserves, but also
marine waters included between two lines drawn perpendicularly to the general coastline
from points where the boundary lines of the municipality or city touch the sea at low tide
and a third line parallel with the general coastline and fifteen (15) kilometers from it'.
Thus, the jurisdiction or authority over such part of the subject submarine cable system
lying within Philippine jurisdiction includes the authority to tax the same, for taxation is
one of the three basic and necessary attributes of sovereignty and such authority has been
delegated by the national legislature to the local governments with respect to real property
taxation.
Actual Use
Actual use refers to the purpose for which the property is principally or predominantly
utilized by the person in possession of the property.
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.
Patalinghug vs. CA, GR No. 104786, January 27, 1994

A tax declaration is not conclusive of the nature of the property for zoning purposes. A
property may have been declared by its owner as residential for real estate taxation
purposes but it may well be within a commercial zone. A discrepancy may thus exist in the
determination of the nature of property for real estate taxation purposes vis-a-vis the
determination of a property for zoning purposes.
A tax declaration is not conclusive of the nature of the property for zoning purposes. Once a
local government has reclassified an area as commercial, that determination for zoning
purposes must prevail.
Appraisal
Appraisal is the act or process of determining the value of property as of a specified date for a
specific purpose.
Assessment
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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
properties.
Assessed Value
Assessed Value is the fair market value of the real property multiplied by the assessment
level. It is synonymous to taxable value. To determine the assessed value, the fair market
value of the property is multiplied by the assessment level as determined from an ordinance
promulgated by the sanggunian concerned.
Appraisal of Real Property

All real property, whether taxable or exempt, appraised at the current and fair market value
prevailing in the locality where the property is situated.
Sesbreno vs. CBAA, 270 SCRA 263

Section 5 of PD 464 provides unequivocally that "(a)ll real property, whether taxable or
exempt, shall be appraised at the current and fair market value prevailing in the locality
where the property is situated.
Assessors, in fixing the value of property, have to consider all the circumstances and
elements of value, and must exercise a prudent discretion in reaching conclusions. Courts,
therefore, will not presume to interfere with the intelligent exercise of the judgment of men
specially trained in appraising property. Where, as the Supreme Court of Louisiana says,
(when) the judicial mind is left in doubt, it is a sound rule to leave the assessment
undisturbed.
Declaration of Real Property by Owner or Administrator

It shall be the duty of all persons, natural or juridical, owning or administering real
property, including the improvements therein, within a city or municipality, or their duly
authorized representative, to prepare, or cause to be prepared, and file with the
provincial, city or municipal assessor, a sworn statement declaring the true value of their
property, whether previously declared or undeclared, taxable or exempt, which shall be the
current and fair market value of the property, as determined by the declarant.
In case improvements are made

It shall also be the duty of any person, or his authorized representative, acquiring at any
time real property in any municipality or city or making any improvement on real property,
to prepare, or cause to be prepared, and file with the provincial, city or municipal assessor,
a sworn statement declaring the true value of subject property, within sixty (60) days after
the acquisition of such property or upon completion or occupancy of the improvement,
whichever comes earlier.
By Assessor
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When any person, by whom real property is required to be declared under Sec. 202 of the
LGC refuses or fails for any reason to make such declaration within the time prescribed the
assessor shall himself declare the property in the name of the defaulting owner, if known,
or against an unknown owner, as the case may be, and shall assess the property for
taxation.
Notification of Transfer of Real Property Ownership

Any person who shall transfer real property ownership to another shall notify the assessor
concerned within 60 days from the date of such transfer. The notification shall include the
mode of transfer, the description of the property alienated, the name and address of the
transferee.
Assessment of Real Property
Preparation of Schedule of Fair Market Values

The schedule of fair market values shall be published in a newspaper of general circulation
in the province, city or municipality concerned or in the absence thereof, shall be posted in
the provincial capitol, city or municipal hall and in two other conspicuous public places
therein.
Lopez vs. City of Manila, GR No. 127139, February 19, 1999

The preparation of fair market values as a preliminary step in the conduct of general
revision was set forth in Section 212 of R.A. 7160, to wit: (1) The city or municipal assessor
shall prepare a schedule of fair market values for the different classes of real property
situated in their respective Local Government Units for the enactment of an ordinance by
the sanggunian concerned. (2) The schedule of fair market values shall be published in a
newspaper of general circulation in the province, city or municipality concerned or the
posting in the provincial capitol or other places as required by law.
With the introduction of assessment levels, tax rates could be maintained, although tax
payments can be made either higher or lower depending on their percentage (assessment
level) applied to the fair market value of property to derive its assessed value which is
subject to tax. Moreover, classes and values of real properties can be given proper
consideration, like assigning lower assessment levels to residential properties and higher
levels to properties used in business. 19 The procedural steps in computing the real
property tax are as follows:
"1) Ascertain the assessment level of the property
2) Multiply the market value by the applicable assessment level of the property
3) Find the tax rate which corresponds to the class (use) of the property and multiply the
assessed value by the applicable tax rates."
Classes of Real Property Assessment

For purposes of assessment, real property shall be classified as residential, agricultural,
commercial, industrial, mineral, timberland or special.
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The city or municipality within the Metropolitan Manila Area, through their respective
sanggunian, shall have the power to classify lands as residential, agricultural, commercial,
industrial, mineral, timberland, or special in accordance with their zoning ordinances.
Special Classes of Real Property

Lands, buildings, and other improvements thereon which are:
1. Actually, directly and exclusively used for hospitals, cultural, or scientific purposes;
2. Owned and used by local water districts;
3. Owned and used by Government-owned or controlled corporations rendering essential
public services in the supply and distribution of water and/or generation and transmission
of electric power.
Special classes of real property have lower assessment level compared with other classes of
real property.
City Assessor of Cebu City vs. Association de Benevola de Cebu, GR No. 152904, June 8,
2007
The exemption in favor of property used exclusively for charitable or educational purposes
is "not limited to property actually indispensable" therefore, but extends to facilities which
are "incidental to and reasonably necessary for" the accomplishment of said purposes, such
as, in the case of hospitals, "a school for training nurses, a nurses’ home, property use to
provide housing facilities for interns, resident doctors, superintendents, and other
members of the hospital staff, and recreational facilities for student nurses, interns and
residents”, such as "athletic fields," including "a farm used for the inmates of the
institution"
Verily, being an integral part of CHH, CHHMAC should be under the same special
assessment level of as that of the former.
Special Classes of Real Property.––All lands, buildings, and other improvements

thereon actually, directly and exclusively used for hospitals, cultural or scientific
purposes, and those owned and used by local water districts, and government-owned or
controlled corporations rendering essential public services in the supply and distribution
of water and/or generation and transmission of electric power shall be classified as
special.
Actual Use as 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.
Testate Estate of Concordia Lim vs. City of Manila, GR No. 90639, February 21, 1990
Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted for consideration or otherwise to a
taxable person. However, this exemption shall not apply to real properties the beneficial
use of which has been granted, for consideration or otherwise, to a taxable person.
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Patalinghug vs. CA. GR No. 104786, January 27, 1994

A tax declaration is not conclusive of the nature of the property for zoning purposes. A
property may have been declared by its owner as residential for real estate taxation
purposes but it may well be within a commercial zone. A discrepancy may thus exist in the
determination of the nature of property for real estate taxation purposes vis-a-vis the
determination of a property for zoning purposes.
LRTA vs. CBAA, GR No. 127316, October 12, 2000

While it is true that carriageways and terminal stations are anchored, at certain points, on
public roads, said improvements do not form part of the public roads since the former are
constructed over the latter in such a way that the flow of vehicular traffic would not be
impaired. These carriageways and terminals serve a function different from the public
roads. The former are part and parcel of the LRT system which, unlike the latter, are not
open to use by the general public. The carriageways are accessible only to the LRT trains,
while the terminal stations have been built for the convenience of LRTA itself and its
customers who pay the required fare. Even granting that the national government owns the
carriageways and terminal stations, the property is not exempt because their beneficial use
has been granted to LRTA which is a taxable entity.
Allied Banking Corporation vs. Quezon City Government, GR No. 154126, October 11,
2005
The appraisal, assessment, levy and collection of real property tax shall not be let to any
private person," but it will completely destroy the fundamental principle in real property
taxation – that 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. Necessarily, allowing the parties to a private sale to dictate the fair market value of the
property will dispense with the distinctions of actual use stated in the Code and in the
regulations.
The invalidity of the assessment or appraisal system adopted by the proviso is not cured
even if the proviso mandates the comparison of the stated consideration as against the
prevailing BIR zonal value, whichever is higher, because an integral part of that system still
permits valuing real property in disregard of its "actual use."
Assessment Levels
Assessment level is the percentage applied to the fair market value to determine the
taxable value of the property.
The assessment levels to be applied to the fair market value of real property to determine
its assessed value shall be fixed by ordinances of the sangguniangpanlalawigan,
sangguniangpanlungsod or sangguniang bayan of a municipality within the Metropolitan
Manila Area, at the rates not exceeding those enumerated under Sec 218 of the LGC.
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General Revision of Assessments and Property Classification

The provincial, city, or municipal assessor shall undertake a general revision of real
property assessments within 2 years after the effectivity of this Code and every 3 years
thereafter.
Valuation of Real Property

In cases where (a) real property is declared and listed for taxation purposes for the first
time; (b) there is an ongoing general revision of property classification and assessment; or
(c) a request is made by the person in whose name the property is declared, the provincial,
city or municipal assessor or his duly authorized deputy shall, in accordance with the
provisions of this Chapter, make a classification, appraisal and assessment or taxpayer's
valuation thereon: Provided, however, That the assessment of real property shall not be
increased oftener than once every three (3) years except in case of new improvements
substantially increasing the value of said property or of any change in its actual use.
2005
An ordinance that contravenes any statute is ultra vires and void. A proviso in an ordinance
directing that the real property tax be based on the actual amount reflected in the deed of
conveyance or the prevailing Bureau of Internal Revenue-zonal value is invalid not only
because it mandates an exclusive rule in determining the fair market value but more so
because it departs from the established procedures stated in the Local Assessment
Regulations No. 1-92 and unduly interferes with the duties statutorily placed upon the local
assessor by completely dispensing with his/her analysis and discretion which the Local
Government Code of 1991 and the regulations require to be exercised. Further, the charter
does not give the local government that authority.
Date of effectivity of assessment or reassessment

All assessments or reassessments made after the 1st day of January of any year shall take
effect on the 1st day of January of the succeeding year: Provided, however, That the
reassessment of real property due to its partial or total destruction, or to a major change in
its actual use, or to any great and sudden inflation or deflation of real property values, or to
the gross illegality of the assessment when made or to any other abnormal cause, shall be
made within 90 days from the date of any such cause or causes occurred, and shall take
effect at the beginning of the quarter next following the reassessment.
Assessment of Property subject to Back Taxes

Real property declared for the first time shall be assessed for taxes (back taxes) for the
period during which it would have been liable but in no case of more than 10 years prior to
the date of initial assessment: Provided, however, that such taxes shall be computed on the
basis of the applicable schedule of values in force during the corresponding period.
If such taxes are paid on or before the end of the quarter following the date the notice of
assessment was received by the owner, no interest for delinquency shall be imposed
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thereon; otherwise, taxes shall be subject to interest at the rate of 2% per month or a
fraction thereof from the date of the receipt of the assessment until such taxes are fully
paid.
Sesbreno vs. CBAA, 270 SCRA 263

If Section 24 is the only applicable provision in cases where a taxpayer has eluded the
payment of the correct amount of taxes for more than nine (9) years, as in this case, Section
25 of PD 464 which requires the payment of back taxes will be rendered superfluous and
nugatory. Such interpretation could not have been intended by the law. It is a familiar rule
in statutory construction that" (t)he legal provision being therefore susceptible of two
interpretations, we adopt the one in consonance with the presumed intention of the
legislature to give its enactments the most reasonable and beneficial construction, the one
that will render them operative and effective and harmonious with other provisions of
law."
Section 24 merely lays down the general rule that assessments under PD 464 are to be
given prospective application. It cannot be construed in such a manner as to eliminate the
imposition of back taxes. If Section 24, instead of Section 25, were made to apply as
suggested by petitioner, he would in effect be excused from the payment of back taxes on
the undeclared excess area of his property. The Court, clearly, cannot allow a taxpayer to
evade his obligation to the government by letting him pay taxes on a property based on its
gross undervaluation at P60,000.00, when the same had then a current market value of
P449,860.00.
Notification of New or Revised Assessment

When real property is assessed for the first time or when an existing assessment is
increased or decreased, the provincial, city, or municipal assessor shall within 30 days give
written notice of such new or revised assessment to the person in whose name the
property is declared. The notice may be delivered personally or by registered mail or
through the assistance of the punong barangay to the last known address of the person to
be served.
The Court cannot help but attribute the lack of a valid notice of assessment to the apparent
lack of a valid appraisal and assessment conducted by the City Assessor of Lucena in the
first place. It appears that the City Assessor of Lucena simply lumped together all the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO
located in Lucena City under Tax Declaration Nos. 019-6500 and 019-7394, contrary to the
specificity demanded under Sections 224 and 225 of the Local Government Code for
appraisal and assessment of machinery. The City Assessor and the City Treasurer of Lucena
did not even provide the most basic information such as the number of transformers,
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electric posts, insulators, and electric meters or the length of the transmission lines
appraised and assessed under Tax Declaration Nos. 019-6500 and 019-7394.
Appraisal and Assessment of Machinery

For brand new machinery, FMV is the acquisition cost
b. In all other cases:
FMV = Remaining of Economic Life x Replacement (or Reproduction) cost
Estimated Economic Life
Depreciation Allowance for Machinery

Depreciation allowance:
i. Rate not exceeding 5% of original cost OR replacement or reproduction cost for each year
of use;
ii. Remaining value shall be fixed at not less than 20% of the cost;
iii. Machinery remains useful and in operation
Condonation of Real Property Tax
Condonation and Reduction of Real Property Tax

The sanggunian by ordinance passed prior to the 1st day of January of any year and upon
recommendation of the local disaster coordinating council, may condone or reduce, wholly
or partially, the taxes and interest thereon for the succeeding year or years in the city or
municipality affected by the calamity in cases of:
1. General failure of crops;
2. Substantial decrease in the price of agricultural or agri-based products;
3. Calamity in any province, city or municipality.
Condonation and Reduction of Real Property Tax by the President
The president may, when public interest so requires, condone or reduce the real property
tax and interest for any year in any province or city or a municipality within the Metro
Manila Area.
IMPOSITION OF REAL PROPERTY TAX
Power to Levy Real Property Tax

A province or city or a municipality within the Metropolitan Manila Area my levy an annual
ad valorem tax on real property such as land, building, machinery, and other improvement
not hereinafter specifically exempted.
Rates of Levy
A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform
rate of basic real property tax applicable to their respective localities as follows:
(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed
value of real property; and
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(b) In the case of a city or a municipality within the Metropolitan Manila Area, at the rate
not exceeding two percent (2%) of the assessed value of real property.
Allied Bank vs. Quezon City Government, GR No. 154126, October 11, 2005
A formal approach used exclusively in appraising man-made improvements such as
buildings and other structures, based on such data as materials and labor costs to
reproduce a new replica of the improvement.
Exemptions from Real Property Tax

The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government owned or controlled corporations engaged in the supply
and distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No.
6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including all
government-owned or controlled corporations are hereby withdrawn upon the effectivity
of this Code.
Proof of Exemption from RPT

A taxpayer claiming exemption must submit sufficient documentary evidence to the local
assessor within 30 days from the date of the declaration of real property; otherwise, it shall
be listed as taxable in the Assessment Roll.
Provincial Assessor of Marinduque vs. CA, GR No. 170532, April 4, 2009

A mining Company’s siltation dam and decant system are not machineries but
improvements subject to real property tax.
The exemption under Section 234(e) of the Local Government Code (LGC) to “machinery
and equipment used for pollution control and environmental protection” is based on usage.
The term usage means direct, immediate and actual application of the property to the
exempting purpose. Section 199 of the LGC defines actual use as “the purpose for which the
property is principally or predominantly utilized by the person in possession thereof.” It
contemplates concrete, as distinguished from mere potential, use. Thus, a claim for
exemption under Section 234(e) should be supported by evidence that the property sought
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to be exempt is actually, directly and exclusively used for pollution control and
environmental protection.
Constitutional Provisions on RPT Exemption
Lung Center of the Philippines vs. Quezon City, 433 SCRA 119
The Court ruled that under the 1987 Constitution, for "lands, buildings, and improvements"
of the charitable institution to be considered exempt, the same should not only be
"exclusively" used for charitable purposes; it is required that such property be used
"actually" and "directly" for such purposes.
Basis: Charitable institutions, churches and parsonages or convents appurtenant thereto,

mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually,
directly, and exclusively used for religious, charitable, or educational purposes shall be
exempt from taxation (Article IV, Sec. 28 [3], Phil Constitution).
Fels Energy Inc. vs. Province of Batangas, GR No. 168557, February 16, 2007
Assessments are prima facie presumed correct and made in good faith, with the taxpayer
having the burden of proving otherwise.
Article 415 (9) of the New Civil Code 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 are considered immovable property. Thus, power barges are categorized as
immovable property by destination, being in the nature of machinery and other
implements intended by the owner for an industry or work which may be carried on in a
building or on a piece of land and which tend directly to meet the needs of said industry or
work.
Philippine Fisheries Development Authority vs. CA, GR No. 169836, July 31, 2007
The Real Property Tax liability of the IFPC is only on portions leased out to private entities.
PFDA is not a GOCC but is actually an instrumentality of the national government exempt
from Real Property Tax. Given this, it will only be subject to Real Property Tax on the
portions of the IFPC which is leased to private entities. It is not a GOCC since a GOCC must
satisfy two requirements: (i) capital stock divided into shares and (ii) authorized to
distribute dividends/profits. PFDA does have capital stock but the same is not divided into
shares and neither is it a non-stock corporation because it does not have members.
1996
Since the last paragraph of Section 234 unequivocally withdrew upon the effectivity of the
LGC, exemption from payment of real property tax granted to natural or juridical persons
including GOCCs, except as provided in the said section, and MCIAA is, undoubtedly a
government-owned corporation it necessarily follows that its exemption from such tax
granted it in Section 14 of its Charter, RA No. 6958, has been withdrawn. Furthermore, note
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that Section 40(a) of PD 464 as reproduced in Section 234(a), the phrase “and any GOCC so
exempt by its charter” was excluded in the enumeration of exemption from real property
tax.
MIAA vs. CA, GR No. 155650, July 20, 2006
MIAA is not a GOCC but an instrumentality of the National Government and thus exempt
from local taxation. MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other government
instrumentality; the only difference is that MIAA is vested with corporate powers. Second,
the real properties of MIAA are owned by the Republic of the Philippines and thus exempt
from real estate tax. Airport lands and buildings are outside the commerce of man. The
airport lands and buildings of MIAA are devoted to public use and thus are properties of
public dominion.
Mactan-Cebu International Airport Authority vs. City of Lapu-Lapu, GR No. 181756

dated June 15, 2015
MIAA is a government instrumentality vested with corporate powers and performing
essential public services pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. As a government instrumentality, MIAA is not subject to any kind of
tax by local governments under Section 133(o) of the Local Government Code. The
exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a
taxable entity under the Local Government Code. Such exception applies only if the
beneficial use of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. Properties of public dominion are owned by the
State or the Republic. As properties of public dominion owned by the Republic, there is no
doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local Government Code.
Provincial Assessor of Marinduque vs. CA, GR No. 170532, April 4, 2009

The exemption under Section 234(e) of the Local Government Code (LGC) to “machinery
and equipment used for pollution control and environmental protection” is based on usage.
The term usage means direct, immediate and actual application of the property to the
exempting purpose. Section 199 of the LGC defines actual use as “the purpose for which the
property is principally or predominantly utilized by the person in possession thereof.” It
contemplates concrete, as distinguished from mere potential, use. Thus, a claim for
exemption under Section 234(e) should be supported by evidence that the property sought
to be exempt is actually, directly and exclusively used for pollution control and
environmental protection.

The National Power Corporation (NPC) has no personality to protest the real property tax
assessed on the power plant owned and operated by the Mirant Pagbilao Corporation. This
notwithstanding a provision in their contract vesting ownership over the power plant to
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NPC at the end of 25 years, and granting to NPC the right to control and supervise the
construction and operation of the power plant. Under Sections 226 and 250 of the Local
Government Code, only the owner and the person with legal interest in the property may
contest a real property assessment. Legal interest should be actual and material, direct and
immediate, not simply contingent or expectant.
The National Power Corporation (NPC) has no personality to appeal the real property tax
assessment on the power plant owned and operated by the Mirant Pagbilao Corporation, as
NPC has no legal title over the said property. That NPC contractually assumed liability for
the taxes that may be imposed on the said property does not clothe it with legal title over
the same. The phrase “person having legal interest in the property” in Section 226 of the
Local Government Code does not include an entity that assumes another person’s tax
liability by contract.
GSIS vs. City Treasurer and Assessor of Manila, GR NO. 186242, December 23, 2009
Pursuant to Sec. 33 of P.D. 1146, GSIS enjoyed tax exemption from real estate taxes, among
other tax burdens, until January 1, 1992 when the LGC took effect and withdrew
exemptions from payment of real estate taxes privileges granted under PD 1146. R.A. 8291
restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what was
once Sec. 33 of P.D. 1146. If any real estate tax is due, it is only for the interim period, or
from 1992 to 1996, to be precise.
City of Pasig vs. Republic, GR No. 185023 dated August 24, 2011
Only those portions of the properties leased to taxable entities are subject to real estate
taxes for the period of such leases and may also be sold at public auctioned to satisfy the
tax delinquency. While it was established that the owner of the properties is now clearly
the Republic of the Philippines given the voluntary surrender, the Local Government Code
clearly states that the exemption will not apply “when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person”. The Court cited several cases
to support the decision such as Philippine Fisheries, GSIS, MIAA, and Lung Center.
Republic vs City of Parañaque, GR No. 191109 dated July 28, 2012

When the law vests in a government instrumentality corporate powers, the instrumentality
does not necessarily become a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers.
This Court is convinced that PRA is not a GOCC either under Section 2(3) of the
Introductory Provisions of the Administrative Code or under Section 16, Article XII of the
1987 Constitution. The facts, the evidence on record and jurisprudence on the issue
support the position that PRA was not organized either as a stock or a non-stock
corporation. Neither was it created by Congress to operate commercially and compete in
the private market. Instead, PRA is a government instrumentality vested with corporate
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powers and performing an essential public service pursuant to Section 2(10) of the
Introductory Provisions of the Administrative Code. Being an incorporated government
instrumentality, it is exempt from payment of real property tax.
Angeles University Foundation vs. City of Angeles, GR No. 189999, June 27, 2012
In distinguishing tax and regulation as a form of police power, the determining factor is the
purpose of the implemented measure. If the purpose is primarily to raise revenue, then it
will be deemed a tax even though the measure results in some form of regulation. On the
other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an
exercise of the police power of the state, even though incidentally, revenue is generated.
City of Lapu-Lapu vs. PEZA, GR No. 184203 dated November 26, 2014
Under Section 234(a) of the Local Government Code, real properties owned by the Republic
of the Philippines are exempt from real property taxes. Properties owned by the state are
either property of public dominion or patrimonial property as per Art. 420.
Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction
sale of any property of public dominion is void for being contrary to public policy. Essential
public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale.
In this case, the properties sought to be taxed are located in publicly owned economic
zones. These economic zones are property of public dominion – sites which were reserved
by President Marcos under Proclamation No. 1811, Series of 1979 (Mactan).
Provincial Assessor of Agusan del Sur vs. Filipinas Palm Oil, GR No. 183416 dated
October 5, 2016
Under Section 133(n) of the LGC, the taxing power of LGUs shall not extend to the levy of
taxes, fees, or charges on duly registered cooperatives under the Cooperative Code. NGPI-
NGEI, as the owner of the land being leased by respondent, falls within the purview of the
law. Section 234 of the LGC exempts all real property owned by cooperatives without
distinction. Nothing in the law suggests that the real property tax exemption only applies
when the property is used by the cooperative itself. Similarly, the instance that the real
property is leased to either an individual or corporation is not a ground for withdrawal of
tax exemption.
The roads that Filipinas Palm constructed within the leased area should not be assessed
with real property taxes. The roads constructed became permanent improvements on the
land owned by the NGPI-NGEI by right of accession under Article 440 and 445 of the Civil
Code. Hence, whatever is incorporated in the land, either naturally or artificially, belongs to
the NGPI-NGEI as the landowner. Although the roads were primarily built for Filipinas
Palm’s benefit, the roads were also being used by the members of NGPI and the public.
Additional Levy for Special Education Fund

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A province, city, or a municipality within the Metro Manila area may levy and collect an
annual tax of 1% on the assessed value of real property, which shall be in addition to the
basic real property tax. The proceeds thereof shall exclusively accrue to the Special
Education Fund created under RA 5447.
RPT on Idle Lands

A province or city or a municipality within the Metro Manila area may levy an annual tax on
idle lands at the rate not exceeding 5% of the assessed value of the property which shall be
in addition to the basic real property tax.
Coverage of Idle Lands

For purposes of real property taxation, idle lands shall include the following:
(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying,
inland fishery, and other agricultural uses, one-half (1/2) of which remain uncultivated or
unimproved by the owner of the property or person having legal interest therein.
Agricultural lands planted to permanent or perennial crops with at least fifty (50) trees to a
hectare shall not be considered idle lands. Lands actually used for grazing purposes shall
likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city or municipality, more than one thousand
(1,000) square meters in area one-half (1/2) of which remain unutilized or unimproved by
the owner of the property or person having legal interest therein.
Regardless of land area, this Section shall likewise apply to residential lots in subdivisions
duly approved by proper authorities, the ownership of which has been transferred to
individual owners, who shall be liable for the additional tax: Provided, however, That
individual lots of such subdivisions, the ownership of which has not been transferred to the
buyer shall be considered as part of the subdivision, and shall be subject to the additional
tax payable by subdivision owner or operator.
Agricultural lands planted to permanent or perennial crops with at least fifty (50) trees to a
hectare shall not be considered idle lands. Lands actually used for grazing purposes shall
likewise not be considered idle lands.
Idle lands exempt from Tax
A province or city or a municipality within the Metropolitan Manila Area may exempt idle
lands from the additional levy by reason of force majeure, civil disturbance, natural
calamity or any cause or circumstance which physically or legally prevents the owner of
the property or person having legal interest therein from improving, utilizing or cultivating
the same.
Special Levies
A province, city or municipality may impose a special levy on the lands within its territorial
jurisdiction specially benefited by public works projects or improvements by the LGU
concerned.
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However, it shall not apply to lands exempt from basic real property tax and the remainder
of the land, portions of which have been donated to the concerned for the construction of
such projects or improvements.
Ordinance imposing special levy

The ordinance shall
a. Describe the nature, extent, and location of the project;
b. State estimated cost; and
c. Specify metes and bounds by monuments and lines
It must state the number of annual installments, not less than 5 years nor more than 10
years.
In the apportionment of special levy, Sanggunian may fix different rates depending
whether such land is more or less benefited by the proposed work.
Publication and Public Hearing

Before the enactment of an ordinance imposing a special levy, the sanggunian concerned
shall conduct a public hearing thereon; notify in writing the owners of the real property to
be affected or the persons having legal interest therein as to the date and place thereof and
afford the latter the opportunity to express their positions or objections relative to the
proposed ordinance.
Fixing Amount of Special Levy

The special levy authorized herein shall be apportioned, computed, and assessed according
to the assessed valuation of the lands affected as shown by the books of the assessor
concerned, or its current assessed value as fixed by said assessor if the property does not
appear of record in his books. Upon the effectivity of the ordinance imposing special levy,
the assessor concerned shall forthwith proceed to determine the annual amount of special
levy assessed against each parcel of land comprised within the area especially benefited
and shall send to each landowner a written notice thereof by mail, personal service or
publication in appropriate cases.
Taxpayers’ Remedies
Any owner of real property affected by a special levy or any person having a legal interest
therein may, upon receipt of the written notice of assessment of the special levy, avail of
the remedies provided for in Chapter 3, Title Two, Book II of the LGC.
Accrual of Special Levy

The special levy shall accrue on the first day of the quarter next following the effectivity of
the ordinance imposing such levy.
COMPUTATION OF REAL PROPERTY TAX

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Date of Accrual
Real property tax for any year shall accrue on the first day of January. From that date it
shall constitute a lien on the property superior to any other lien, mortgage, or encumbrance
of any kind whatsoever extinguished only upon the payment of the delinquent tax.
Notice of Time of Collection

Treasurer shall post the notice of the dates when the tax may be paid without interest in a
publicly accessible place at the city or municipal hall. Notice shall likewise be published in a
newspaper of general circulation in the locality once a week for two consecutive weeks on
or before the 31st day of January each year in the case of the basic real property tax and the
additional tax for the Special Education Fund or any other date to be prescribed by the
sanggunian concerned in the case of any other tax levied under this title.
Payment of RPT in Installments

The owner or the person having legal interest may pay the basic real property tax and the
additional tax for Special Education Fund (SEF) due without interest in four equal
installments (on or before March 31/June30/September 30/December 31).
Tax Discount for Advanced Prompt Payment

If the basic real property tax and the additional tax accruing to the Special Education Fund
(SEF) are paid in advance the sanggunian may grant a discount not exceeding 20% of the
annual tax due.
REMEDIES
Local Government Units’ Remedies
Date of Accrual of Tax

The real property tax for any year shall accrue on the first day of January and from that
date it shall constitute a lien on the property which shall be superior to any other lien,
mortgage, or encumbrance of any kind whatsoever, and shall be extinguished only upon the
payment of the delinquent tax.
LGU’s Lien
The basic real property tax and any other tax levied under this Title constitutes 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 upon payment of the tax and the related
interests and expenses.
Interest on unpaid RPT
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The rate is (2%) per month on the unpaid amount until the delinquent tax shall have been
fully paid. Provided, in no case shall the total interest on the unpaid tax or portion thereof
exceed 36 months.
Period to Collect
Period of collection of real property tax under local government code
General Rule is within 5 years from the date taxes become due. An exception is in case of
fraud or intent to evade payment - within 10 years from discovery of fraud or intent.
Levy on Real Property

After the expiration of the time required to pay the basic real property tax or any other tax
levied under this Title, real property subject to such tax may be levied upon through the
issuance of a warrant on or before, or simultaneously with, the institution of the civil action
for the collection of the delinquent tax.
Advertisement Sale
Within thirty (30) days after service of the warrant of levy, the local treasurer shall proceed
to publicly advertise for sale or auction the property or a usable portion thereof as may be
necessary to satisfy the tax delinquency and expenses of sale. The advertisement shall be
effected by posting a notice at the main entrance of the provincial, city or municipal
building, and in a publicly accessible and conspicuous place in the barangay where the real
property is located, and by publication once a week for two (2) weeks in a newspaper of
general circulation in the province, city or municipality where the property is located.
Puzon vs. Abellera, 169 SCRA 789

While it may be argued that Article 4 of the New Civil Code prohibits the retroactive
application of laws unless expressly provided therein, such rule allows some exceptions. A
statute operates prospectively only and never retroactively, unless the legislative intent to
the contrary is made manifest either by the express terms of the statute or by necessary
implications.
Spouses Tan vs. Bantequi, GR No. 154027, October 24, 2005

The failure to give notice to the right person i.e., the real owner, will render an auction sale
void.
The auction sale of land to satisfy alleged delinquencies in the payment of real estate taxes
derogates or impinges on property rights and due process. Thus, the steps prescribed by
law for the sale, particularly the notices of delinquency and of sale, must be followed
strictly. Failure to observe those steps invalidates the sale. The auction sale of real property
for the collection of delinquent taxes is in personam, not in rem. Although sufficient in
proceedings in rem like land registration, mere notice by publication will not satisfy the
requirements of proceedings in personam. “Publication of the notice of delinquency [will]
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not suffice, considering that the procedure in tax sales is in personam.” It is still incumbent
upon the city treasurer to send the notice directly to the taxpayer – the registered owner of
the property – in order to protect the latter’s interests. Although preceded by proper
advertisement and publication, an auction sale is void absent an actual notice to a
delinquent taxpayer. The sale of land “for tax delinquency is in derogation of property
rights and due process and the prescribed steps must be followed strictly.” In the present
case, notices either of delinquency or of sale were not given to the delinquent taxpayer.
Those notices are mandatory, and failure to issue them invalidates a sale.
Redemption of Property Sold

Within one year from sale, owner may redeem upon payment of the delinquent tax, interest
due, expenses of sale (from date of delinquency to date of sale), and additional interest of
2% per month on the purchase price from date of sale to date of redemption. Delinquent
owner retains possession and right to the fruits. Price paid plus interest of 2% per month
shall be returned to the buyer.
Purchase of Property by the Local Government Units for Want of Bidder

Within one year from forfeiture, owner may redeem prop by paying to Treasurer full
amount of tax, interest, costs of sale.
Court Action for Collection

The local government unit concerned may enforce the collection of the basic real property
tax or any other tax levied under this Title by civil action in any court of competent
jurisdiction. The civil action shall be filed by the local treasurer within the period
prescribed in Section 270 of this LGC.
Taxpayer’s Remedies
Action Assailing Validity of Tax Sale

No court shall entertain any action assailing the validity or any sale at public auction of real
property or rights therein under this Title until the taxpayer shall have deposited with the
court the amount for which the real property was sold, together with interest of two
percent (2%) per month from the date of sale to the time of the institution of the action.
The amount so deposited shall be paid to the purchaser at the auction sale if the deed is
declared invalid but it shall be returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction invalid by reason or irregularities or
informalities in the proceedings unless the substantive rights of the delinquent owner of
the real property or the person having legal interest therein have been impaired.
Action Involving Ownership

In any action involving the ownership or possession of, or succession to, real property, the
court may, motu propio or upon representation of the provincial, city, or municipal
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treasurer or his deputy, award such ownership, possession, or succession to any party to
the action upon payment to the court of the taxes with interest due on the property and all
other costs that may have accrued, subject to the final outcome of the action.
Payment under protest

1. No protest shall be entertained unless the taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid under protest" The protest in writing must
be filed within 30 days from payment of the tax to treasurer who shall decide the protest
within 60 days from receipt.
2. The tax or a portion paid under protest shall be held in trust by the treasurer concerned.
3. In the event that the protest is finally decided in favor of the taxpayer, the amount or
portion of the tax protested shall be refunded to the protestant, or applied as tax credit
against his existing or future tax liability.
4. In the event that the protest is denied or upon the lapse of the 60-day period, the
taxpayer may
avail appeal the assessment before the Local Board of Assessment Appeals (Sec. 252, LGC).
5. In case there is adverse decision by the LBAA, the taxpayer may appeal with the CBAA
within 30 from receipt of the adverse decision by the LBAA.
Section 252 of the Local Government Code mandates that “[n]o protest shall be entertained
unless the taxpayer first pays the tax.” It is settled that the requirement of “payment under
protest” is a condition sine qua non before an appeal may be entertained. Section 231 of the
same Code also dictates that “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.” Clearly, under the Local Government
Code, even when the assessment of the real property is appealed, the real property tax due
on the basis thereof should be paid to and/or collected by the local government unit
concerned.
Ramie Textile vs. Mathay, 89 SCRA 586
Protest is not a requirement in order that a taxpayer who paid under a mistaken belief that
it is required by law, may claim for a refund. Section 54 of Commonwealth Act No. 470 does
not apply to petitioner which could conceivably not have been expected to protest a
payment it honestly believed to be due. The same refers only to the case where the
taxpayer, despite his knowledge of the erroneous or illegal assessment, still pays and fails
to make the proper protest, for in such case, he should manifest unwillingness to pay, and
failing so, the taxpayer is deemed to have waived his right to claim a refund.
Ty vs. Trampe, GR No. 117577, December 1, 1995

The protest contemplated in Section 252 of the LGC is needed when there is a question as
to the reasonableness of the amount assessed, not where the question raised is on the very
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authority and power of the assessor to impose the assessment and of the treasurer to
collect the tax.
Olivarez vs. Marquez, 438 SCRA 679

The exhaustion of administrative remedies was not required. However, payment under
protest is required before an appeal to the LBAA can be made.

Section 226 of the LGC lists down the two entities vested with the personality to contest an
assessment: the owner and the person with legal interest in the property.
A person legally burdened with the obligation to pay for the tax imposed on a property has
legal interest in the property and the personality to protest a tax assessment on the
property. This is the logical and legal conclusion when Section 226, on the rules governing
an assessment protest, is placed side by side with Section 250 on the payment of real
property tax; both provisions refer to the same parties who may protest and pay the tax.
Under Section 226 of the LGC,[3] any owner or person having legal interest in the property
may appeal an assessment for real property taxes to the LBAA. Since Section 250 adopts
the same language in enumerating who may pay the tax, we equated those who are liable to
pay the tax to the same entities who may protest the tax assessment. A person legally
burdened with the obligation to pay for the tax imposed on the property has the legal
interest in the property and the personality to protest the tax assessment.
Camp John Hay Development Corporation vs. CBAA, GR No. 169234, October 2, 2013
By posting the surety bond, a taxpayer may be considered to have substantially complied
with Section 252 of the LGC for the said bond already guarantees the payment to the Office
of the Local Treasurer of the total amount of real property taxes and penalties due.
There is no merit in CJHDC's present petition because John Hay Special Economic Zone
(JHSEZ) is not tax-exempt. Any tax protest filed by CJI-IDC, therefore, can only refer to the
correctness of the amount of the assessment, in which case CJHDC must pay the assessed
tax under protest as a condition for contesting the assessment. (concurring opinion of
Justice Carpio)
NPC vs. Municipal Government of Navotas, GR No. 192300 dated November 24, 2014
In the event that the taxpayer questions the authority and power of the assessor to impose
the assessment and of the treasurer to collect the real property tax, resort to judicial action
may prosper. Although as a rule, administrative remedies must first be exhausted before
resort to judicial action can prosper, there is a well-settled exception in cases where the
controversy does not involve questions of fact but only of law. In the present case, the
parties, even during the proceedings in the lower court on 11 April 1994, already agreed
"that the issues in the petition are legal", and thus, no evidence was presented in said
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court., if a taxpayer disputes the reasonableness of an increase in a real estate tax

assessment, he is required to "first pay the tax" under protest. Otherwise, the city or
municipal treasurer will not act on his protest. In the case at bench, however, the
petitioners are questioning the very authority and power of the assessor, acting solely and
independently, to impose the assessment and of the treasurer to collect the tax. These are
not questions merely of amounts of the increase in the tax but attacks on the very validity
of any increase. Accordingly, if the only issue is the legality or validity of the assessment – a
question of law – direct recourse to the RTC is warranted. the issue is clearly legal given
that it involves an interpretation of the contract between the parties vis-à-vis the
applicable laws, i.e., which entity actually, directly and exclusively uses the subject
machineries and equipment. The CTA En Banc erred in dismissing the petition for review
en banc, and affirming the CTA Second Division’s position that the RTC has no jurisdiction
over the instant case for failure of petitioner to exhaust administrative remedies which
resulted in the finality of the assessment.
City of Lapu-Lapu vs. PEZA, GR No. 184203 dated November 26, 2014
Payment under protest and appeal to the Local Board of Assessment Appeals are
“successive administrative remedies to a taxpayer who questions the correctness of an
assessment.” The Local Board Assessment Appeals shall not entertain an appeal “without
the action of the local assessor” on the protest.
CE Casecnan Water and Energy Company, Inc. vs. The Province of Nueva Ecija, GR No.
196278 dated June 17, 2015
Jurisdiction over the subject matter is required for a court to act on any controversy. It is
conferred by law and not by the consent or waiver upon a court. As such, if a court
lacks jurisdiction over an action, it cannot decide the case on the merits and must dismiss
it.
NPC vs. Provincial Treasurer of Benguet, GR No. 209303 dated November 14, 2016
At the outset, settled is the rule that should the taxpayer/real property owner question the
excessiveness or reasonableness of the assessment, Section 252 of the LGC of 1991 directs
that the taxpayer should first pay the tax due before his protest can be entertained.
As settled in jurisprudence, a claim for exemption from the payment of real property taxes
does not actually question the assessor's authority to assess and collect such taxes, but
pertains to the reasonableness or correctness of the assessment by the local assessor, a
question of fact which should be resolved, at the very first instance, by the LBAA. The same
may be inferred in Section 206 of the LGC of 1991. Thus, if the property being taxed has not
been dropped from the assessment roll, taxes must be paid under protest if the exemption
from taxation is insisted upon.
Refunds
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The taxpayer may file a written claim for refund or credit for taxes and interests with the
local treasurer, in case an assessment of RPT or any other tax under Real Property Taxation
(Title II, LGC) is found to be illegal or erroneous.
2005 (Motion for Clarification of Decision)
It bears stressing, however, that entitlement to a tax refund does not necessarily call for the
automatic payment of the sum claimed.12 The amount of the claim being a factual matter, it
must still be proven in the normal course and in accordance with the administrative
procedure for obtaining a refund of real property taxes, as provided under the Local
Government Code.
Under Section 253 of the Local Government Code, the claim for refund or credit for taxes
must be filed before the city treasurer13 who shall decide the claim based on the tax
declarations, affidavits, documents and other documentary evidence to be presented by
petitioner.
Assessment Appeals
Any owner or person having legal interest in the property not satisfied with the action of
the assessor in the assessment of his property may within 60 days from the date of receipt
of the written notice of assessment appeal to the Board of Assessment Appeals of the
provincial or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in
support of the appeal.
Appeal with the LBAA

Appeal to the LBAA – If protest is denied or upon the lapse of the 60-day period for the
Treasurer to decide, the taxpayer may appeal to the LBAA within 60 days and the case
decided within 120 days.
City Government of Quezon City vs. Bayan Telecommunications, GR No. 162015, March
6, 2006
Bayantel can withdraw its appeal before the Local Board of Assessment Appeals (LBAA)
and instead file a petition for prohibition before the regional trial court since the appeal
before the LBAA is not a speedy and adequate remedy since its real property were set to be
auctioned off and the issue involves a pure question of law.
Systems Plus Computer College of Caloocan vs. Local Government of Caloocan, GR No.
146382, August 7, 2003
The authority to receive evidence, as basis for classification of properties for taxation, is
legally vested on the City Assessor whose action is appealable to the Local Board of
Assessment Appeals and the Central Board of Assessment Appeals, if necessary. An
aggrieved party cannot bypass the authority of the concerned administrative agencies and
directly seek redress from the courts even on the pretext of raising a supposedly pure
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question of law without violating the doctrine of exhaustion of administrative remedies.

Hence, when the law provides for remedies against the action of an administrative board,
body, or officer, relief to the courts can be made only after exhausting all remedies
provided therein. Otherwise stated, before seeking the intervention of the courts, it is a
precondition that petitioner should first avail of all the means afforded by the
administrative processes.
Fels Energy Inc. vs. Province of Batangas, GR No. 168557, February 16, 2007
Section 226 of R.A. No. 7160 gives the taxpayer 60 days to appeal from a decision of the
LBAA to the CBAA. Instead of appealing to the Board of Assessment Appeals (as stated in
the notice), NPC opted to file a motion for reconsideration of the Provincial Assessors
decision, a remedy not sanctioned by law.
The last action of the local assessor on a particular assessment shall be the notice of
assessment; it is this last action which gives the owner of the property the right to appeal to
the LBAA. The procedure likewise does not permit the property owner the remedy of filing
a motion for reconsideration before the local assessor.
Action by the LBAA

LBAA has Jurisdiction to hear appeals of owners or persons having legal interest in the
property who are not satisfied with the action of the assessor on an assessment of his
property.
The LBAA shall decide the appeal within 120 days from the date of receipt of such appeal.
The Board, after hearing, shall render its decision based on substantial evidence or such
relevant evidence on record as a reasonable mind might accept as adequate to support the
conclusion.
Appeal to the CBA

If not satisfied with the decision of the LBAA, appeal to the CBAA within 30 days from
receipt of a copy of the decision.
Appeal to CTA En Banc

Instances where CTA (En Banc) has exclusive appellate jurisdiction over cases filed with
CBAA:
1. In the exercise of its appellate jurisdiction
2. Over cases involving the assessment and taxation of real property
3. Originally decided by the provincial or CBAA
Effect of Appeal on Payment of RPT

An appeal on assessments of real property shall in no case, suspend the collection of the
corresponding realty taxes the property involved as assessed. This is without prejudice to
subsequent adjustment depending upon the final outcome of the appeal.
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COURT OF TAX APPEALS
JURISDICTION OF THE COURT OF TAX APPEALS

The CTA has jurisdiction over both civil and criminal aspects of a tax case. The
concentration of tax cases in one court will enhance the disposition of these cases since it
will take them out of the jurisdiction of regular courts which, admittedly, do not have
expertise in the field of taxation.
Exclusive appellate jurisdiction over civil tax cases
Cases within the jurisdiction of the Court en Banc

The Court en banc shall exercise exclusive appellate jurisdiction to review by appeal the
following:
1. Decisions or resolutions on motions for reconsideration or new trial of the Court in
Divisions in the exercise of its exclusive appellate jurisdiction over:
a. Cases arising from administrative agencies – BIR, BOC, DoF, DTI, and DA;
b. Local tax cases decided by the RTC in the exercise of their original jurisdiction; and
c. Tax collection cases decided by the RTC in the exercise of their original jurisdiction
involving final and executory assessments for taxes, fees, charges and penalties, where the
principal amount of taxes and penalties claimed is less than P1 million pesos;
2. Decisions, resolutions or orders of the RTC in cases decided or resolved by them in the
exercise of their appellate jurisdiction over:
a. Local tax cases
b. Tax collecton cases;
3. Decisions, resolutions or orders on motions for reconsideration or new trial of the Court
in Division in the exercise of its exclusive original jurisdiction over tax collection cases; and
4. Decisions of the CBAAin the exercise of its appellate jurisdiction over cases involving the
assessment and taxation of real property originally decided by the provincial or city board
of assessment appeals.
Cases within the jurisdiction of the court in Divisions

1. Decisions of the CIR in cases involving:
a. Disputed assessments
b. Refunds of internal revenue taxes, fees or other charges and penalties imposed thereto;
c. Other matters arising under NIRC or other laws administered by the BIR.
2. Inaction by the CIR in cases involving:
a. Disputed assessments;
b. Refunds of internal revenue taxes, fees or other charges and penalties imposed thereto;
c. Other matters arising under NIRC or other laws administered by the BIR, where the NIRC
provides a specific period for action.
3. Decisions, Orders or Resolutions of the RTC in the exercise of their original jurisdiction
over local tax cases and tax collection cases.
4. Decisions of the COC in cases involving:
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a. Liability for customs duties, fees or other money charges;

b. Seizure, detention or release of property affected;
c. Fines, forfeitures or other penalties in relation thereto; or
d. Other matters arising under Customs Law or other laws administered by the BOC.
5. Decisions of the Secretary of Finance on customs cases elevated for automatic review
from decisions of the COC which are adverse to the Government under Section 2315 of the
TCCP
6. Decisions of the Secretary of Trade and Industry, in the case of non-agricultural product,
commodity or article, and the Secretary of Agriculture in the case of agricultural product,
commodity or article, involving dumping and countervailing duties under Sections 301 and
302, respectively of the TCCP, and safeguard measures under RA 8800, where either party
may appeal the decision to impose or not to impose said duties.
Criminal Cases
Exclusive original jurisdiction

The CTA in Division have exclusive original jurisdiction over all criminal offenses arising
from violations of the NIRC or TCCP and other laws administered by the BIR or the BOC,
where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
P1 million or more.
Exclusive appellate jurisdiction in criminal cases

CTA in Divisions
Exclusive appellate jurisdiction over:
1. Appeals from the Judgments, Resolutions or Orders of the RTC in their original
jurisdiction in criminal offenses arising from violations of the NIRC or TCCP and other laws
administered by the BIR or BOC, where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is less than P1 million or where there is no specified amount
claimed; and
2. Criminal offenses over Petitions for Review of the Judgments, Resolutions or Orders of
the RTC in the exercise of their appellate jurisdiction on cases originally decided by the
MeTC, MTC and MCTC.
CTA en banc
Exclusive appellate jurisdiction to review by appeal the following:
1. Decisions, Resolutions or Orders on Motions for Reconsideration or New Trial of the
Court in division in the exercise of its exclusive original jurisdiction over criminal offenses
arising from violations of the NIRC or TCCP and other laws administered by the BIR or BOC
where the principal amount of taxes and fees, exclusive of charges and penalties is P1
million or more;
2. Decisions, Resolutions or Orders on Motions for Reconsideration or New Trial of the
Court in division in the exercise of its exclusive appellate jurisdiction over criminal offenses
arising from violations of the NIRC or TCCP and other laws administered by the BIR or BOC;
and
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3. Decisions, Resolutions or Orders of the RTC decided or resolved by them in the exercise
of their appellate jurisdiction over criminal offenses arising from violations of the NIRC or
TCCP and other laws administered by the BIR or BOC where the principal amount of taxes
and fees, exclusive of charges and penalties claimed is less than P1 million.
Judicial Procedures
Judicial action for collection of Taxes

Tax (Local or National) Collection Cases are filed
a. MTC, MeTC, MCTC, MTCs in cities
b. RTCs
c. CTA (in division)
Internal Revenue Taxes

Initiatory action – Where the assessment has attained a state of finality because the
assessment has not been disputed, the BIR files an ordinary suit for the collection of a sum
of money with the court of appropriate jurisdiction. (MTC and RTC)
Appealed cases – Decisions of the MTCs rendered in the exercise of their original
jurisdiction are appealed to the RTC by means of notice of appeal.
Decision of the RTC rendered in aid of their appellate jurisdiction shall be appealed to the
CTA en banc, by means of petition for review.
Adverse decisions of the CTA en banc shall be appealed to the SC by means of petition for
review.
Local Taxes
The procedures for internal revenue taxes are the same for local and real property taxes if
the case is brought before the CTA in division in the exercise of its original jurisdiction.
Prescriptive Period
Assessment
General Rule - Within 5 years from the date they become due.
No action for collection of such taxes, fees, or charges, whether administrative or judicial,
shall be instituted after the expiration of such period.
Exception - In case of fraud or intent to evade the payment of taxes, fees, or charges, the
assessment may be made 10 years from discovery of fraud or intent to evade payment.
Collection
Within 5 years from date of assessment by administrative or judicial action.
Civil Cases
Who may appeal, mode of appeal, effect of appeal

The following may appeal to the CTA in Division:
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Any party adversely affected by a decision, ruling, or inaction of the:

a. CIR on disputed assessments or claims for refund of internal revenue taxes;
b. COC;
c. Secretary of Finance;
d. Secretary of Trade and Industry;
e. Secretary of Agriculture; or
f. RTC in the exercise of its original jurisdiction.
The following may appeal to the CTA en banc:

Any party adversely affected by a decision or ruling of:
a. The CTA in Division on a MR or MNT;
b. The CBAA, in the exercise of its appellate jurisdiction; or
c. The RTC, in the exercise of its appellate jurisdiction.
Mode of Appeal
In appeals to the CTA in Division:
1. By filing a Petition for Review under a procedure analogous to that provided for under
Rule 42 of the ROC, within 30 days from the receipt of the decision or ruling or from the
expiration of the period fixed by law or inaction of the CIR on disputed assessments or
claim for refund of internal revenue taxes erroneously or illegally collected, the COC, the
Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and
the RTC in the exercise of their original jurisdiction.
The 30-day period to appeal decisions of the RTC to CTA is extendible.
In case of disputed assessments, inaction of the CIR within the 180-day period shall be
deemed a denial, thus, appealable via a petition for review to the CTA within 30 days from
receipt of copy of decision. Should the taxpayer opt to await the final decision of the CIR
beyond the 180-day period, appeal to the CTA should be made within 30 days after receipt
of copy of such decision.
In case of inaction of the CIR on claims for refund of internal revenue taxes erroneously or
illegally collected under Sec. 204(C) and 229 of the NIRC, the 30-day period to file the
petition for review before the CTA after the lapse of 180 days must be within the 2-year
period prescribed by law from payment of tax. However, the 2-year period is not
jurisdictional and may be suspended for reasons of equity and other special circumstances.
In claims for refund for unutilized input VAT payments, 2-year period does not refer the
filing of judicial claim with the CTAbut to the filing of the administrative claim with the CIR.
The taxpayer will always have 30 days to file the judicial claim regardless of his action or
inaction.
Effect of Appeal
General Rule - An appeal to the CTA shall not suspend payment, levy, distraint and/or sale
of any property of taxpayer for the satisfaction of his tax liability.
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Exception - However, when in the opinion of the CTA, the collection of tax may jeopardize
the interest of the government and/or the taxpayer, the Court may suspend or restrain
collection of tax and require the taxpayer either to:
1. To deposit the amount claimed; or
2. To file a surety bond for not more than double the amount of the tax due
Suspension on Collection of Tax

Requisites for suspension of collection of tax:
1. There is an appeal to the CTA from a decision of the CIR;
2. In the opinion of the CTA, the collection may jeopardize the interest of the government
and/or the taxpayer;
3. The taxpayer may be required to deposit the amount claimed or to file a surety bond for
not more than double the amount with the Court (Sec. 11, RA 1125); and
4. That the appeal is not frivolous or dilatory.
Injunction not available to restrain collection

Collection of internal revenue taxes and customs duties cannot be enjoined. Even an appeal
to the CTA shall not suspend the payment, levy, distraint and sale of taxpayer’s property as
a rule. However, the CTA is empowered to suspend the collection of internal revenue taxes
and custom duties in cases pending appeal only when:
1. in the opinion of the court the collection by the BIR may jeopardize the interest of the
government and/ or taxpayer; and
2. the taxpayer is willing to deposit the amount being collected or to file a surety bond for
more than double the amount of the tax to be fixed by the court.
The CTA may issue injunction only in the exercise of its appellate jurisdiction.
Taking of Evidence
CTA may receive evidence in the following cases:
1. In all cases falling within the original jurisdiction of the CTA in division.
2. In appeals in both civil and criminal cases where the court grants new trial.
Motion for Reconsideration or New Trial

The filing of the MR or MNT shall suspend the running of the period within which an appeal
may be perfected. No second MR or MNT shall be allowed.
Appeal to CTA, en banc

The petition for review of a decision or resolution of the Court in Division must be preceded
by the filing of a timely motion for reconsideration or new trial with the Division.
Petition for review on certiorari to the Supreme Court

A party adversely affected by a decision or ruling of the Court en banc may appeal
therefrom by filing with the Supreme Court a verified petition for review on certiorari
within 15 days from receipt of a copy of the decision or resolution, as provided in Rule 45
of the ROC.
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If such party has filed a MR or MNT, the period herein fixed shall run from the party’s
receipt of a copy of the resolution denying the MR or MNT.
Criminal Cases
Institution and prosecution of criminal actions

All criminal actions before the Court in Division in the exercise of its original jurisdiction
shall be instituted by the filing of an information in the name of the People of the
Philippines.
In criminal actions involving violations of the NIRC and other laws enforced by BIR, the CIR
must approve their filing. In criminal actions involving violations of the TCCP and other
laws enforced by the BOC, the COC must approve their filing. All criminal actions will be
under the direction and control of the public prosecutor.
Institution of civil action with criminal action

The criminal action and the corresponding civil action for the recovery of civil liability for
taxes and penalties shall be deemed jointly instituted in the same proceeding. The filing of
the criminal action shall necessarily carry with it the filing of the civil action. No right to
reserve the filing of such civil action separately from the criminal action shall be allowed or
recognized.
Appeal and period to appeal

An appeal to the Court in criminal cases decided by a RTC in the exercise of its original
jurisdiction shall be taken by filing a notice of appeal pursuant to Sections 3(a) and 6, Rule
122 of the ROC within 15 days from receipt of a copy of the decision or final order with the
court which rendered the final judgment or order appealed from and by serving a copy
upon the adverse party. The Court in Division shall act on the appeal.
An appeal to the CTA en banc in criminal cases decided by the Court in Division or the RTC
in the exercise of their appellate jurisdiction shall be taken by filing a petition for review as
provided in Rule 43 of the ROC within 15 days from receipt of a copy of the decision or
resolution appealed from.
Solicitor General as counsel for the People and government officials sued in their official
capacity
The Solicitor General shall represent the People of the Philippines and government officials
sued in their official capacity in all cases brought to the CTA in the exercise of its appellate
jurisdiction. He may deputize the legal officers of the BIR in cases brought under the NIRC
or other laws enforced by the BIR, or the legal officers of the BOC in cases brought under
the TCCP or other laws enforced by the BOC, to appear in behalf of the officials of said
agencies sued in their official capacity: Provided, however, such duly deputized legal
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officers shall remain at all times under the direct control and supervision of the Solicitor
General.
Petition for Review on Certiorari to the Supreme Court

A party adversely affected by a decision or ruling of the Court en banc may appeal
therefrom by filing with the SC a verified petition for review on certiorari within 15 days
from receipt of a copy of the decision or resolution, as provided in Rule 45 of the ROC. If
such party has filed a motion for reconsideration or for new trial, the period herein fixed
shall run from the party’s receipt of a copy of the resolution denying the motion for
reconsideration or for new trial.
Taxpayer’s suit impugning the validity of tax measures or acts of taxing authorities
Taxpayer’s suit, defined

It is a case where the act complained of directly involves the illegal disbursement of public
funds collected through taxation.
Taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed,
or that public money is being deflected to any improper purpose, or that there is wastage of
public funds through the enforcement of an invalid or unconstitutional law. It is proper
only when there is an exercise by the Congress of its spending or taxing power.
Distinguished from citizen’s suit

The plaintiff in a taxpayer’s suit is in a different category from the plaintiff in a citizen’s suit.
In the former, the plaintiff is affected by the expenditure of public funds, while in the latter,
he is but the mere instrument of the public concern.
In a citizen’s suit, the interest of the petitioner assailing the constitutionality of a statute
must be direct and personal. He must be able to show, not only that the law or any
government act is invalid, but also that he sustained or is in imminent danger of sustaining
some direct injury as a result of its enforcement, and not merely that he suffers thereby in
some indefinite way. It must appear that the person complaining has been or is about to be
denied some right or privilege to which he is lawfully entitled or that he is about to be
subjected to some burdens or penalties by reason of the statute or act complained of.
Requisites for challenging the constitutionality of a tax measure or act of taxing authority
1. Public funds derived from taxation are disbursed by a political subdivision or
instrumentality and in doing so, a law is violated or some irregularity is committed; and
2. The petitioner is directly affected by the alleged act.
Concept of Locus Standi as applied in taxation

The party suing as a taxpayer must prove that he has sufficient interest in preventing the
illegal expenditure of money raised by taxation. Thus, taxpayers have been allowed to sue
where there is a claim that public funds are illegally disbursed or that public money is
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being deflected to any improper purpose, or that public funds are wasted through the
enforcement of an invalid or unconstitutional law.
Doctrine of Transcendental Importance

The doctrine that "the rule on standing is a matter of procedure, hence, can be relaxed for
non-traditional plaintiffs like ordinary citizens, taxpayers, and legislators when the public
interest so requires, such as when the matter is of transcendental importance, of
overreaching significance to society, or of paramount public interest.”
Ripeness for judicial determination

An actual, current controversy worthy of adjudication must exist before a court may hear a
case. The court determines if a controversy between parties with adverse legal interests is
of sufficient immediacy and reality to warrant judicial intervention.
CUSTOMS MODERNIZATION AND TARIFF ACT (RA 10863)
BUREAU OF CUSTOMS (BOC)
Functions of the BOC

The Bureau shall exercise the following duties and functions:
(a) Assessment and collection of customs revenues from imported goods and other dues,
fees, charges, fines and penalties accruing under this Act;
(b) Simplification and harmonization of customs procedures to facilitate movement of
goods in international trade;
(c) Border control to prevent entry of smuggled goods;
(d) Prevention and suppression of smuggling and other customs fraud;
(e) Facilitation and security of international trade and commerce through an informed
compliance program
(f) Supervision and control over the entrance and clearance of vessels and aircraft engaged
in foreign commerce;
(g) Supervision and control over the handling of foreign mails arriving in the Philippines
for the purpose of collecting revenues and preventing the entry of contraband;
(h) Supervision and control on all import and export cargoes, landed or stored in piers,
airports, terminal facilities, including container yards and freight stations for the protection
of government revenue and prevention of entry of contraband;
(i) Conduct a compensation study with the end view of developing and recommending to
the President a competitive compensation and remuneration system to attract and retain
highly qualified personnel, while ensuring that the Bureau remains financially sound and
sustainable;
(j) Exercise of exclusive original jurisdiction over forfeiture cases under this Act; and
(k) Enforcement of this Act and all other laws, rules and regulations related to customs
administration.
Powers and Function of the BOC Commissioner

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The Commissioner shall have the following powers and functions:

(a) Exclusive and original jurisdiction, to interpret the provisions of this Act, in
collaboration with other relevant government agencies, subject to review by the Secretary
of Finance;
(b) Exercise any customs power, duties and functions, directly or indirectly;
(c) Review any action or decision of any customs officer performed pursuant to the
provisions of this Act;
(d) Review and decide disputed assessments and other matters related thereto, subject to
review by the Secretary of Finance and exclusive appellate jurisdiction of the Court of Tax
Appeals (CTA);
(e) Delegate the powers vested under this Act to any customs officer with the rank
equivalent to division chief or higher, except for the following powers and functions:
(1) Promulgation of rules and regulations;
(2) Issuance, revocation or modification of rulings; and
(3) Compromise or abate of customs obligations.
(f) Assignment or reassignment of any customs officer subject to the approval of the
Secretary of Finance: Provided, That District Collectors and other customs officers that
perform assessment functions shall not remain in the same area of assignment for more
than three (3) years; and
(g) Perform all other duties and functions as may be necessary for the effective
implementation of this Act and other customs related laws.
TARIFF COMMISSION
Functions of the Tariff Commission

The Commission shall have the following functions:
(a) Adjudicate cases on the application of trade remedies against imports pursuant to
Sections 711, 712 and 713 of this Act;
(b) Study the impact of tariff policies and programs on national competitiveness and
consumer welfare in line with the economic objectives of the government;
(c) Administer the Philippine tariff schedules and tariff nomenclatures;
(d) Issue advance rulings on tariff classification of imported goods and render rulings on
disputes over tariff classification of goods pursuant to Section 1100 of this Act, except in
cases involving goods on which the Commission has provided advance ruling on tariff
classification;
(e) Provide the President and Congress with independent analysis, information and
technical support on matters related to tariff and nontariff measures affecting Philippine
industries and exports for policy guidance;
(f) Analyze the nature and composition, and the classification of goods according to tariff
commodity classification and heading number for customs and other related purposes,
which information shall be furnished the NEDA, DTI, DA, DOF, DENR, and BSP;
(g) Review the trade agreements for negotiation and trade agreements entered into by the
Philippines and make recommendations, if necessary, on the consistency of the terms of the
agreements with the national policy objectives;
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(h) Conduct public consultations and public hearings pursuant to its functions; and
(i) Deputize or delegate, to appropriate government agency its function of rendering
rulings on disputes over tariff classification of goods, until the plantilla positions necessary
for undertaking such function have been approved and filled-up: Provided, That such
delegation of function shall not extend beyond three (3) years from the effectivity of this
Act.
Chief Officials of the Tariff Commission

The officials of the Tariff Commission shall consist of a Chairperson and two (2)
Commissioners to be appointed by the President of the Philippines. The Chairperson and
the Commissioners shall be natural-born citizens of the Philippines, of good moral
character and proven integrity, and who, by experience and academic training possess the
necessary qualifications requisite for developing expert knowledge of tariff and trade
related matters.
During their terms of office, the Chairperson and the Commissioners shall not engage in the
practice of any profession, or intervene directly or indirectly in the management or control
of any private enterprise which may, in anyway, be affected by the functions of their office.
They shall not be, directly or indirectly, financially interested in any contract with the
government, or any subdivision or instrumentality thereof.
IMPORTATION
Importation
Importation refers to the act of bringing in of goods from a foreign territory into Philippine
territory, whether for consumption, warehousing, or admission as defined in this Act
10863.
Exportation
Exportation refers to the act, documentation, and process of bringing goods out of
Philippine territory.
Article subject to Duty

Except as otherwise provided for in this Act or in other laws, all goods, when imported into
the Philippines, shall be subject to duty upon importation, including goods previously
exported from the Philippines.
Liability for Duties and Taxes

Unless relieved by laws or regulations, the liability for duties, taxes, fees, and other charges
attached to importation constitutes a personal debt due and demandable against the
importer in favor of the government and shall be discharged only upon payment of duties,
taxes, fees and other charges. It also constitutes alien on the imported goods which may be
enforced while such goods are under customs' custody.
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Types of Importation
Freely Importable Goods

Unless otherwise provided by law or regulation, all goods may be freely imported into and
exported from the Philippines without need for import and export permits, clearances or
licenses.
Regulated Importation
Goods which are subject to regulation shall be imported or exported only after securing the
necessary goods declaration or export declaration, clearances, licenses, and any other
requirements, prior to importation or exportation. In case of importation, submission of
requirements after arrival of the goods but prior to release from customs custody shall be
allowed but only in cases provided for by governing laws or regulations.
Prohibited Importation
1. Written or printed articles in any form containing any matter advocating or inciting
treason, or rebellion, insurrection, sedition, against the Government of the Philippines, or
forcible resistance to any law of the Philippines, or containing any threat to take the life of,
or inflict bodily harm upon any person in the Philippines;
2. Goods, instruments, drugs and substances designed, intended or adapted for producing
unlawful abortion, or any printed matter which advertises, describes or gives direct or
indirect information where, how or by whom unlawful abortion is committed;
3. Written or printed goods, negatives or cinematographic film, photographs, engravings,
lithographs, objects, paintings, drawings, or other representation of an obscene or immoral
character;
4. Any article manufactured in whole or in part of gold, silver or other precious metals or
alloys and the stamp, brand or mark does not indicate the actual fineness of quality of the
metals or alloys.
5. Any adulterated or misbranded food or goods for human consumption or any
adulterated or misbranded drug in violation of relevant laws and regulations;
6. Infringing goods as defined under the Intellectual Property Code and related laws;and
7. All other articles and parts thereof, the importation and exportation are explicitly
prohibited by law or rules and regulations issued by competent authority.
Restricted Importation
1. Dynamite, gunpowder, ammunitions and other explosives, firearms, and weapons of war,
and parts thereof.
2. Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or
mechanical devices used in gambling or distribution of money, cigars, cigarettes, or other
goods when such distribution is dependent on chance, including jackpot and pinball
machines or similar contrivances, or parts thereof.
3. Lottery and sweepstakes tickets, except advertisements thereof and list of drawings
therein.
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4. Marijuana, opium, poppies, coca leaves, heroin or any other narcotics or synthetic drugs
which are or may hereafter be declared habit forming by the President of the Philippines,
or any compound, manufactured salt, derivative, or preparation thereof, except when
imported by the government of the Philippines or any person duly authorized by the
Dangerous Drugs Bard, for medicinal purposess;
5. Opium pipes or parts thereof, of whatever material; and
6. Any other goods whose importation and exportation are restricted.
Tariff Classification and Advance Ruling
Advance Ruling System

Advance Ruling refers to an official and binding written ruling issued by the BOC
Commissioner which provides the requesting person with an assessment of (1) origin, or
(2) treatment to be applied on a certain element of customs value, prior to an import or
export transaction for a specific period.
An advance ruling can prevent delays in processing shipments and provide substantial cost
savings to traders. Moreover, it simplifies clearing of goods at the border and minimizes
surprises or unpredictable factors arising from erroneous classification.
CAO No. 3-2016 on Establishment of an Advance Ruling System for Valuation and Rules of
Origin
This Order makes the Advance Ruling part of the law. The ruling gives an assessment of
origin or treatment to be applied on a certain element of customs value, or on other
matters related to the importation or exportation of goods under customs jurisdiction,
prior to an import or export transaction for a specified period.
The CAO establishes general guidelines in the advance ruling system on customs valuation
methodology and preferential and non-preferential rules of origin. This CAO aims to
provide rulings on the origin and valuation methodology of goods prior to their
importation or exportation, in order to add certainty and predictability to international
trade and help commercial importers or foreign exporters make informed business
decisions based on legally binding rules.
It further helps ensure uniformity and consistency in the application of customs policies,
rules and regulations on customs valuation and rules of origin.
Commission Order No. 2017-01 of Procedure on Application for an Advance Ruling on Tariff
Classification related to Importation or Exportation of Goods
This order establishes the procedure for advance ruling regarding tariff classification in
relation with the importation and exportation of goods. It also applies to movement of
goods from and into free zones.
Basis of Tariff Classification (ASEAN Harmonized Tariff Nomenclature (AHTN) 2017 effective
28 July 2017)
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The AHTN seeks to establish uniformity of application in the classification of goods in

ASEAN; enhance transparency in the classification process for goods in the region; simplify
the AHTN; and create a nomenclature which conforms to international standards.
Tariff Valuation and Advance Ruling
Tariff Valuation Method
Transaction Value System

The transaction value shall be the price actually paid or payable for the goods when sold
for export to the Philippines adjusted in accordance with the provisions of Section 701 of
the CMTA.
Transaction Value of Identical Goods System

Where the dutiable value cannot be determined under method one, the dutiable value shall
be the transaction value of identical goods sold for export to the Philippines and exported
at or about the same time as the goods being valued.
Transaction Value of Similar Goods

Where the dutiable value cannot be determined under the preceding method (Identical
Goods System), the dutiable value shall be the transaction value of similar goods sold for
export to the Philippines and exported at or about the same time as the goods being valued.
For purposes of this section, "Similar goods" refer to goods which, although not alike in all
respects, have like characteristics and similar component materials which enable them to
perform the same functions and to be commercially interchangeable. The quality of the
goods, its reputation and the existence of a trademark shall be among the factors to be
considered in determining whether goods are similar.
Deductive Value
The deductive value which shall be based on the unit price at which the imported goods or
identical or similar imported goods are sold in the Philippines, in the same condition as
when imported, in the greatest aggregate quantity, at or about the time of the importation
of the goods being valued, to persons not related to the persons from whom they buy such
goods, subject to deductions for the following:
(1) Either the commissions usually paid or agreed to be paid or the additions usually made
for profit and general expenses in connection with sales in such country of imported goods
of the same class or kind;
(2) The usual costs of transport and insurance and associated costs incurred within the
Philippines;
(3) Where appropriate, the costs of: (i) transport of the imported goods from the port of
exportation to the port of entry in the Philippines; (ii) loading, unloading and handling
charges associated with the transport of the imported goods from the country of
exportation to the port of entry in the Philippines; and (iii) insurance; and
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(4) The customs duties and other national taxes payable in the Philippines by reason of the
importation or sale of the goods.
Computed Value
Where the dutiable value cannot be determined under the preceding method, the dutiable
value shall be the computed value of the sum of:
(1) The cost or the value of materials and fabrication or other processing employed in
producing the imported goods;
(2) The amount for profit and general expenses equal to that usually reflected in the sale of
goods of the same class or kind as the goods being valued which are made by producers in
the country of exportation for export to the Philippines;
(3) The freight, insurance fees and other transportation expenses for the importation of the
goods;
(4) Any assist, if its value is not included under paragraph (1) hereof; and
(5) The cost of containers and packing, if their values are not included under paragraph (1)
hereof.
Fallback Value
If the dutiable value cannot be determined under the preceding methods described above,
it shall be determined by using other reasonable means and on the basis of data available in
the Philippines.
Basic Computation of Customs Duties & Taxes

The importer/broker shall compute the duties and taxes using the appropriate valuation
method.
There are two processes involved in the computation of customs duties on imported
articles:
1. Classification of the articles into their appropriate tariff heading;
2. Determination of the valuation if the rate is ad valorem or mixed.
Basics of Importation
Importation refers to the act of bringing in of goods from a foreign territory into Philippine
territory, whether for consumption, warehousing, or admission as defined in this Act.
Special Types of Entry
Balikbayan Boxes
OFWs shall be allowed to bring in balikbayan boxes free of importation, provided the FCA
value shall not exceed P150,000; provided further that the boxes shall only contain
personal and household effects and shall neither be in commercial value nor intended for
sale or barter, etc. This privilege can only be availed up to 3 times in a calendar year.
Postal Items
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Postal item or mail shall include letter-post and parcels, as described in international
practices and agreements, such as the Acts of the Universal Postal Union (AUPU), currently
in force.
A simplified procedure shall be used in the clearance of postal item or mail, including the
collection of the applicable duties and taxes on such items or goods.
Returning Residents/OFWs
Returning residents shall refer to nationals who have stayed in a foreign country for a
period of at least 6 months. Personal and household effects of returning residents or OFWs
should arrive with them or within a reasonable time after their arrival but not to exceed 60
days after the owner’s return.
To be free from tax and duty, the FCA or FOB value of the returning residents’ personal and
household effects and other goods expressly allowed to be conditionally free should not
exceed:
a. P350,000 for those who have stayed in the foreign country for at least 10 years and have
not availed of this privilege within 10 years prior to arrival (previous amount is P10,000);
b. P250,000 for those who have stayed in the foreign country for at least 5 but not more
than 10 years and have not availed of this privilege within 5 years prior to arrival (previous
amount is P10,000);
c. P150,000 for those who have stayed in a foreign country for a period of less than 5 years
and have not availed of this privilege within 6 months prior to arrival (previous amount is
P10,000);
Any amount in excess of the above-stated threshold shall be subject to the corresponding
duties and taxes.
Authority to Release of Imported Goods (ATRIG)
Section 131, NIRC

Excise taxes on imported articles shall be paid by the owner or importer to the Custom
Officers, conformably with the regulations of the Department of Finance and before the
release of such articles from the customs house, or by the person who is found in
possession of articles which are exempt from excise taxes other than those legally entitled
to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons, entities,
or agencies exempt from tax which are subsequently sold, transferred or exchanged in the
Philippines to non-exempt persons or entitles, the purchasers or recipients shall be
considered the importers thereof, and shall be liable for the duty and internal revenue tax
due on such importation.
Section 172, NIRC
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Any revenue officer may detain any package containing or supposed to contain articles
subject to excise tax when he has good reason to believe that the lawful tax has not been
paid or that the package has been or is being removed in violation of law, and every such
package shall be held by such officer in a safe place until it shall be determined whether the
property so detained is liable by law to be proceeded against for forfeiture; but such
summary detention shall not continue in any case longer than seven (7) days without due
process of law or intervention of the officer to whom such detention is to be reported.
Section 268(c) of NIRC

Forfeiture of Goods Illegally Stored or Removed. - Unless otherwise specifically authorized
by the Commissioner, all articles subject to excise tax should not be stored or allowed to
remain in a distillery, distillery warehouse, bonded warehouse or other place where made,
after the tax thereon has been paid; otherwise, all such articles shall be forfeited. Articles
withdrawn from any such place or from customs custody or imported into the country
without the payment of the required tax shall likewise be forfeited.
Revenue Regulation No. 2-2016

This Circular is being issued to set forth guidelines and procedures in securing and issuing
an Authority to Release Imported Goods (ATRIGs) for imported automobiles already
released from customs custody. This Circular is likewise being issued to clarify the legal
basis for the issuance of an ATRIG and the legal consequences of not securing an ATRIG
prior to the release of imported automobiles.
Revenue Memorandum Circular 48-2002

This lists down the imported articles that no longer require the issuance of ATRIG from the
BIR prior to release from the custody of the Bureau of Customs.
BOC Powers
Pursuant to internationally accepted standards, the Bureau may adopt nonintrusive

examination of goods, such as the use of x-ray machines. Physical examination, when
required, shall be conducted in an expeditious manner.
The Commissioner may exempt from physical examination the goods of authorized
economic operators or of those provided for under any existing trade facilitation program
of the Bureau.
Search, Seizure, and Arrest

Goods seized by deputized officers pursuant to this section shall be physically turned-over
immediately to the Bureau, unless provided under existing laws, rules and regulations.
For this purpose, mission orders shall clearly indicate the specific name carrying out the
mission and the tasks to be carried out.
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Subject to the approval of the Secretary of Finance, the Commissioner shahl define the
scope, areas covered, procedures and conditions governing the exercise of such police
authority including custody and responsibility for the seized goods. The rules and
regulations to this effect shall be furnished to the concerned government agencies and
personnel for guidance and compliance.
All seizures pursuant to this section must be effected in accordance with the provisions on
the conduct of seizure proceedings provided for in Chapters 3 and 4 of Title XI of this Act.
Complement of Exercise of Police Auhtority

The BoC may exercise its police authority through seizure, require assistance and
information from National Law Enforcement Agencies, enter properties, vessel or aircraft
searches (including persons or goods conveyed therein), searches of persons arriving from
overseas, and controlled delivery investigations. Among other ways and methods, the BoC
can exercise its police authority through inspection and visits.
The power to inspect and visit authorizes the BoC to demand evidence of payment of duties
and taxes on imported goods openly offered for sale or kept in storage. For reasons of
security, safety, and economy, the BoC may constitute the premises where the goods are at
as a special customs area for the duration of the exercise of the power. During this period,
the goods are deemed, for all intents and purposes, in customs custody; the owner of the
goods will be unable to remove, sell, or dispose of such goods.
Customs Jurisdiction
The Bureau shall exercise jurisdiction over all seas within Philippine territory and all
coasts, ports, airports, harbors, bays, rivers and inland waters whether navigable or not
from the sea and any means of conveyance.
Doctrine of Hot Pursuit

The Bureau shall pursue imported goods subject to seizure during its transport by land,
water and air and shall exercise jurisdiction as may be necessary for the effective
enforcement of this Act. When a vessel or aircraft becomes subject to seizure for violation
of this Act, a pursuit of such vessel or aircraft which began within the territorial waters or
air space may continue beyond the same, and the vessel or aircraft may be seized in the
high seas or international air space.
Customs Control
The Bureau shall, for customs purposes, have exclusive control, direction and management
of customs offices, facilities, warehouses, ports, airports, wharves, infrastructure and other
premises in the Customs Districts, in all cases without prejudice to the general police
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powers of the local government units (LGUs), the Philippine Coast Guard and of law
enforcement agencies in the exercise of their respective functions.
Forfeiture
The forfeiture shall be effected only when and while the goods are in the custody or within
the jurisdiction of customs officers, or in the possession or custody of or subject to the
control of the importer, exporter, original owner, consignee, agent of another person
effecting the importation, entry or exportation in question, or in the possession or custody
of or subject to the control of persons who shall receive, conceal, buy, sell, or transport the
same, or aid in any of such acts, with knowledge that the goods were imported, or were the
subject of an attempt at importation or exportation contrary to law.
Seizure or Release of Goods

The District Collector shall issue an order of release or a warrant of seizure within five (5)
days, or two (2) days in case of perishable goods, upon the recommendation of the alerting
officer or any other customs officer. The District Collector shall immediately make a report
of such seizure or release to the Commissioner.
Special Duties and Measures
Compulsory Acquisition
In order to protect government revenues against undervaluation of goods, the
Commissioner may, motu proprio or upon the recommendation of the District Collector,
acquire imported goods under question for a price equal to their declared customs value
plus any duties already paid on the goods, payment for which shall be made within ten (10)
working days from issuance of a warrant signed by the Commissioner for the acquisition of
such goods.
An importer who is dissatisfied with a decision of the Commissioner pertaining to this

section may, within twenty (20) working days after the date on which notice of the decision
is given, appeal to the Secretary of Finance, and thereafter If still dissatisfied, to the CTA as
provided for in Section 1136 of this Act.
Where no appeal is made by the importer, or upon reaffirmation of the Commissioner's

decision during the appeals process, the Bureau or its agents shall sell the acquired goods
pursuant to existing laws and regulations.
Marking Duty
Duty imposed on an ad valorem basis imposed for improperly marked articles.
Anti-Dumping Duty
The amount imposed shall be equal to the margin of dumping on such product, commodity
or article and on like product, commodity or article thereafter imported to the Philippines
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under similar circumstances, in addition to ordinary duties, taxes and charges imposed by
law on the imported product, commodity or article.
Safeguard Measures
The Secretary shall apply a general safeguard measure upon a positive final determination
of the Commission that a product is being imported into the country in increased
quantities, whether absolute or relative to the domestic production, as to be a substantial
cause of serious injury or threat thereof to the domestic industry; however, in the case of
non-agricultural products, the Secretary shall first establish that the application of such
safeguard measures will be in the public interest.
Countervailing Duty
Duty equal to the ascertained or estimated amount of the subsidy or bounty or subvention
granted by the foreign country on the production, manufacture, or exportation into the
Philippines of any article likely to injure an industry in the Philippines or retard or
considerably retard the establishment of such industry.
Discriminatory Measures
Duty imposed on imported goods whenever it is found as a fact that the country of origin
discriminates against the commerce of the Philippines in such a manner as to place the
commerce of the Philippines at a disadvantage compared with the commerce of any foreign
country.
QUESTIONS and SUGGESTED ANSWERS FROM PREVIOUS BAR EXAMS IN RELATION TO

TOPICS ABOVE
Local Taxation: Actual Use of Property (2002)

The real property of Mr. and Mrs Angeles, situated in a commercial area in front of the
public market, was declared in their Tax Declaration as residential because it had been
used by them as their family residence from the time of its construction in 1990. However,
since January 1997, when the spouses left for the United States to stay there permanently
with their children, the property has been rented to a single proprietor engaged in the sale
of appliances and agri-products. The Provincial Assessor reclassified the property as
commercial for tax purposes starting January 1998. Mr. and Mrs. Angeles appealed to the
Local Board of Assessment Appeals, contending that the Tax Declaration previously
classifying their property as residential is binding. How should the appeal be decided?
SUGGESTED ANSWER:
The appeal should be decided against Mr. and Mrs. Angeles. The law focuses on the actual
use of the property for classification, valuation and assessment purposes regardless of
ownership. Section 217 of the Local Government Code provides that "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".
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Local Taxation: Legality/ Constitutionality; Tax Ordinance (2003)

X, a taxpayer who believes that an ordinance passed by the City Council of Pasay is
unconstitutional for being discriminatory against him, want to know from you, his tax
lawyer, whether or not he can file an appeal. In the affirmative, he asks you where such
appeal should be made: the Secretary of Finance, or the Secretary of Justice, or the Court of
Tax Appeals, or the regular courts. What would your advice be to your client, X?
SUGGESTED ANSWER:
The appeal should be made with the Secretary of Justice. Any question on the
constitutionality or legality of a tax ordinance may be raised on appeal with the Secretary
of Justice within 30 days from the effectivity thereof. (Sec. 187, LGC; Hagonoy Market
Vendor Association v. Municipality of Hagonoy, 376 SCRA 376 [2002])
Real Property Taxation: Principles & Limitations: LGU (2000)

Give at least two (2) fundamental principles governing real property taxation, which are
limitations on the taxing power of local governments insofar as the levying of the realty tax
is concerned. (2%)
SUGGESTED ANSWER:
Two (2) fundamental principles governing real property taxation are:
1) The appraisal must be at the current and fair market value; and
2) Classification for assessment must be on the basis of actual use. (Sec. 198, Local
Government Code)
ALTERNATIVE ANSWER:
The examinee should be given credit if he chooses the above two (2) or any two (2) of
those enumerated below:
1) Assessment must be on the basis of uniform classification;
2) Appraisal, assessment, levy and collection shall not be let to private persons; and
3) Appraisal and assessment must be equitable. (Sec. 198 Local Government Code)
POTENTIAL BAR EXAM QUESTIONS IN RELATION TO ANY OF THE TOPICS DISCUSSED
Local Taxation:
Aside from the basic real estate tax, give three (3) other taxes which may be imposed by
provincial and city governments as well as by municipalities in the Metro Manila area.
SUGGESTED ANSWER:
The following real property taxes aside from the basic real property tax may be imposed by
provincial and city governments as well as by municipalities in the Metro Manila area:
1. Additional levy on real property for the Special Education Fund (Sec. 235, LGC);
2. Additional Ad-valorem tax on Idle lands (Sec. 235 LGC); and
3. Special levy (Sec. 240).
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Local Taxation:
May local governments impose an annual realty tax in addition to the basic real property
tax on idle or vacant lots located in residential subdivisions within their respective
territorial jurisdictions?
SUGGESTED ANSWER:
Not all local government units may do so. Only provinces, cities, and municipalities within
the Metro Manila area may impose an ad valorem tax not exceeding five percent (5%) of
the assessed value of idle or vacant residential lots in a subdivision, duly approved by
proper authorities regardless of area.
Local Taxation:
What properties are exempt from real property taxes under the Local Government Code?
SUGGESTED ANSWER:
The following properties are exempt from real property taxes:
1. Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person;
2. All lands, buildings and improvements actually, directly, and exclusively used for
religious, charitable or educational purposes by charitable institutions, churches,
parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries;
3. All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned or controlled corporations engaged in the supply
and distribution of water and/or generation and transmission of electric power;
4. All real property owned by duly registered cooperatives as provided for under R.A. No.
6938; and
5. Machinery and equipment used for pollution control and environmental protection.
Page 88 of 88

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REQUIREMENTS FOR THE COMPLETION OF TAXATION 2

Ma. Danice Angela Balde-Barcoma

PRELIMINARY MATTERS AND GENERAL PROVISION

Power to Tax of Local Government Units (LGUs)

Jurisprudence in relation to the power to tax of local government units

Pepsi Cola Bottling vs. Municipality of Tanauan, 69 SCRA 460

Ma. Danice Angela Balde-Barcoma

Ma. Danice Angela Balde-Barcoma

NPC vs. City of Cabanatuan, GR No. 149110, April 9, 2003

Ma. Danice Angela Balde-Barcoma

City Government of Quezon vs. Bayan Telecommunications, GR No. 162015, March 6,

Ma. Danice Angela Balde-Barcoma

Jurisprudence in relation with Local Taxing Authority

Ma. Danice Angela Balde-Barcoma

Ma. Danice Angela Balde-Barcoma

The following procedural details must be complied with:

Hagonoy Market vs. Municipality of Hagonoy GR No. 137621, February 6, 2002

Other Preliminary Matters

Ma. Danice Angela Balde-Barcoma

Doctrine of Pre-emption or Exclusionary Rule

Jurisprudence in relation with the Doctrine of Pre-emption or Exclusionary Rule

Ma. Danice Angela Balde-Barcoma

Scope of Taxing Powers

Ma. Danice Angela Balde-Barcoma

Income Tax correlated with Section 143(f) of the LGC

Documentary Stamp Tax

Transfer Taxes correlated with Section 135 of the LGC

Ma. Danice Angela Balde-Barcoma

Panaligan vs. City of Tacloban, GR No. L-9319, September 27, 1957

Unpersuasive is the contention of respondent that petitioner would unjustly be enriched at

Ma. Danice Angela Balde-Barcoma

Taxes, Fees, and Charges on products sold by marginal farmers of fishermen

City of Cebu vs. IAC, 144 SCRA 710

Taxes on Board of Investments-registered enterprises

Excise Taxes under the NIRC/TFC on Petroleum Products

Province of Bulacan vs. CA, GR No. 126232, November 27, 1998

Ma. Danice Angela Balde-Barcoma

Percentage Taxes and VAT

Pepsi Cola Bottling vs. Municipality of Tanauan, 69 SCRA 460

Ma. Danice Angela Balde-Barcoma

Taxes on Transportation contractors and common carriers

City of Manila vs. Colet, GR No. 120051, December 10, 2014

Ma. Danice Angela Balde-Barcoma

Ma. Danice Angela Balde-Barcoma

LTO vs. City of Butuan, GR No. 131512, January 20, 2000

Ma. Danice Angela Balde-Barcoma

Ma. Danice Angela Balde-Barcoma

instrumentalities vested with corporate powers or what are know as “government

MIAA vs. CA, GR No. 155650, July 20, 2006

MIAA vs. City of Pasay, GR No. 163072, April 2, 2009

Ma. Danice Angela Balde-Barcoma

City of Davao vs RTC, GR No. 127383, August 18, 2005

TAXING AND OTHER REVENUE RAISING POWERS OF LGU

Local Transfer Tax (Tax on Transfer of Real Property Ownership)

Business Tax on Printing and Publication

NPC vs. City of Cabanatuan, GR No. 149110, April 9, 2003

Ma. Danice Angela Balde-Barcoma

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