Tax 2 November 30, 2018 Make up class

Local taxation- local taxes, which should be in the form of money, collected by LGUs. The power to collect is pursuant to a delegated
power by the Congress.
GR: the power to tax belongs exclusively to the legislature.
Except: imposition of local taxes by LGU.
The LGU should not go beyond the power delegated to it. It is contained in the LGC of 1991.

Legal foundations of the taxing power

1. Sec 5, Art 10, 1987 Constitution
Gives LGUs the power to raise its own revenues.
“Each LGU shall have the power to create its own sources of revenue and to levy taxes, fees and charges subject to such guidelines and
limitation as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the LGUs.”

2. Section 129 RA 7160

Each LGU shall exercise its power to:
(a) Create its own sources of revenue
(b) Levy taxes, fees, and charges.
Both are subject to the provisions in the LGC and consistent with local autonomy. Such taxes, fees and charges levied accrue exclusively
to the local government units.
The following are granted with the local power to tax. They are likewise referred to as the local government units:
1. Provinces
2. Cities
3. Municipalities
4. Barangays
TN: There is not more territorial jurisdiction known as the barrio or the sitio.

Scope of local taxation

1. Local taxation
Imposition of taxes pursuant to its power under RA 7160. Local taxes are imposed through ordinances. The amount of taxes is on a case
to case basis as RA 7160 only provides a limit or the maximum amount that a LGU may levy.
Local taxes would also depend on the classification: whether province, city, municipality or barangay.

2. Real property taxation

This is a nationwide imposition. All LGUs collect real property
taxes. The rate of taxes is uniform

Sources
 Internal Source of Government Funds of LGU- sourced through real property taxes, local business taxes, and non-revenue
sources (regulatory and license fees)
 External Source of Government Funds – internal revenue allotment (IRA) that the local government gets from the national
office.

FUNDAMENTAL PRINCIPLES
(PIE-CUP-UP)
1. Levied for a public purpose. – no hard and fast rule on what is public purpose because it changes from time to time

2. The revenue collected shall inure solely to the benefit of, and subject to the disposition by the LGU levying
the tax other imposition unless otherwise specifically provided.

3. Equitable and based as far as practicable on the taxpayer's ability to pay.

4. Not contrary to law, public policy, national economic policy, or in the restraint of trade.
It must not be contrary to law because the power to tax is just a delegated power. So the taxes LGU can collect must only be
what is specified under the law.
Case: an LGU collected amusement taxes on beach resorts and similar establishments, it was questioned on the ground that
it was not within the delegated power to the local government. The SC followed Ejusdem generis, that such establishment
does not fall within the power of the LGU.

5. Uniform in each local government unit.

6. The collection of local taxes, fees, charges and other impositions shall not be let to any private person.
A private person/entity cannot collect local taxes unlike in the case of national taxes.
 7. Not unjust, excessive, oppressive, or confiscatory.
But this must be duly proven with an actual proof. In a case, SC said you cannot allege oppressive taxes just because it will
decrease or reduce their expected profit in the future. The right to profit is not a guaranteed right under the law.

8. Each local government unit shall, as far as practicable, evolve a progressive system of taxation.
“as far as practicable” – not mandatory to follow. So, LGU can impose tax which has a regressive effect so long as it is allowed
under the local government code.

Nature of the taxing power of LGUs

A. Not inherent but a direct grant.
“The power of taxation is an inherent power of the State as long as the State exists.” However, the same is only true with
respect to the national government. When we say local government, it is limited based on the power delegated.

B. Limited
Unlike internal revenue taxes, local taxes are not plenary in nature. There is a specific list of taxes that each LGU can collect:
It is limited by the:
1. Constitutional limitations (due process, etc.)
2. Fundamental principles
3. Public hearing requirement
4. Principle of pre-emption or exclusionary rule – What the LGU can collect are only those taxes not collected by the national
government.
5. Common limitations on the taxing power of LGUs

C. Legislative
The levying authority is the Sanggunian (the legislative branch of each LGU)
1. Provinces – Sangguniang Panlalawigan
2. City – Sangguniang Panlungsod
3. Municipalities – Sangguniang Bayan
4. Barangay – Sangguniang Pambarangay
Sanguniang Kabataan is not included.

D. Territorial
Local taxing power can only be imposed within the territorial jurisdiction of the LGU concerned. Thus, if you go to another
LGU, you will be subject to another local tax.

E. Accrual of tax
Local tax will automatically accrue at the start of the year, which is why it is collected on or before the 20 th day of January.

Powers of the local taxing authority - Sanggunian

1. Power to impose local tax - 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.
There must be a quorum. Once passed in the Sangunian, it must be passed for approval to the local chief executive. The
province have 15 days to act. For municipalities and cities, they have 10 days. It can be vetoed but 2/3 vote of all members can
override the veto. Thereafter, it will be published in 3 consecutive days in newspaper of local circulation. Public hearing is
required, especially when it comes to imposition of local taxes. When it comes to real property tax, public hearing is not
required. A copy of the ordinance must be submitted to the local treasurer for public dissemination.

2. Power to prescribe penalties

The Sanggunian of a LGU is authorized to prescribe fines or other penalties for violation of tax ordinances
(a) In no case shall such fines be less than P1,000 nor more than P5,000
(b) Nor shall imprisonment be less than 1 month nor more than 6 months.

Such fine or other penalty, or both, shall be imposed at the discretion of the court.

The Sangguniang barangay may prescribe a fine of not less than P100 nor more than P1,000. No imprisonment.

3. Power to adjust local tax rates

LGUs shall have the authority to adjust the tax rates as prescribed not oftener than once every 5 years, but in no case shall the
adjustment exceed 10% of the rates fixed by the Local Government Code. The LGC provided for the rates. If you adjust, you
need to pass an ordinance.

4. Power to grant local tax exemptions or relief

Tax exemptions or tax reliefs may be granted in cases of:
(a) Natural calamities
(b) Civil disturbance
(c) General failure of corps
(d) Adverse economic conditions such as substantial decrease in prices of agricultural or agricultural-based products
The grant of exemptions shall also be through an ordinance.
Any exemption or relief granted to a type or kind of business shall apply to all businesses similarly situated.
Any exemption or relief granted shall take effect only during the next calendar year for a period not exceeding 12 months as may be
provided in the ordinance.

TN: this exemption is only for local tax, so when it comes to regulatory fees, they will be imposed continually. These are the fees that you
pay to the inspector of the government like the BFP for building inspection, Bureau of Fire, Garbage Collection fees, etc.

In the case of shared revenues, the exemption or relief shall only extend to the LGU granting such exemption or relief.
Shared revenues – revenues usually shared by the province and the city or municipality located in said province.
Ex. Mining – proceeds of mining are usually shared by the province and city where the mining is being done. If it is only the
municipality which grants the exemption, it does not follow that the share of the province is also exempted from local taxes.

TN: The taxing authority can only grant exemptions if it is the one who levies the tax. Otherwise, it cannot exempt.
Ex- local government cannot grant income tax exemptions.

When your exemption is pursuant to a law by the National Government, the local government need not pass an ordinance and the latter
is mandated to follow that law.

Tax incentives may be granted:

Shall be granted only to new investments in the locality and the ordinance shall prescribe the terms and conditions therefor.
The grant of tax incentive shall be for a definite period not exceeding 1 calendar year.
Shall be by ordinance passed prior to the first day of January of any year.
Any tax incentive granted to a type or kind of business shall apply to all businesses similarly situated.

5. Power to withdraw tax exemptions

Tax exemptions existing before the effectivity of LGC have been abolished
Prior to the passage of RA 7160, there were some GOCCs which are exempted from local taxation. However, upon the passage of said
law, Sec. 193 thereof specifically provides that tax exemptions existing before the effectivity of the LGC are abolished, except:
1. Local water districts
2. Cooperatives duly registered under RA 6938
3. Non-stock and non-profit hospitals
4. Non-stock and non-profit educational institutions
TN: The four exceptions above-stated still enjoy local tax exemption.

Common revenue-raising powers of LGUs

These are not local taxes, but they can still be a source of revenue which can be exercised by LGUs.
(S-P-T)
1. Service fees and charges (Section 153, LGC)
Ex- garbage collection fees, clearance fees.

2. Public utility charges (Section 154, LGC)

Ex – terminal fees, public market fees

3. Toll fees or charges (Section 154, LGC) - These must be funded and constructed by the LGU for it to collect fees for the use of
these facilities. If funded only but it was not the LGU who constructed rather maybe DPWH, it does not fall under this provision.
Exempted from imposition:
1. Officers and enlisted men of the AFP
2. Members of the Philippine National Police on mission
3. Post office personnel delivering mail
4. Physically-handicapped, and disabled citizens who are 65 years or older.

Local Tax Ordinance

Requisites of a valid tax ordinance
1. Filing of proposal.
2. Publication or posting (10/3/2) 10 days after the filing of the proposal, there must be publication
or posting.
(a) Publication – if there is a newspaper of local circulation (published in full for 3 consecutive days)
(b) Posting – if there is no newspaper of local circulation. In which case, it has to be posted in at least 2 conspicuous and
publicly accessible places. (Sec. 188, LGC)
3. Notification – to local treasurer office
4. Public hearing – prior to the enactment of the tax ordinance.
5. Approval by the Local Chief Executive (LCE)
(a) LCE has 15/10 days to act
15 days – provinces
10 days – cities or municipalities
(b) If not acted upon within said period – ordinance is deemed
approved.
(c) If LCE vetoed within said period – the Sangguniang Council
can override the veto by a 2/3 vote of all the members

Kinds of tax ordinances

1. Ordinances imposing local taxes enumerated under the LGC.
2. Ordinances imposing taxes not yet imposed by the national government nor specified in the Local Government Code.
 Doctrine of Pre-emption or Exclusionary rule - where the national government elects to tax a particular area or activity, it
impliedly withholds from the LGU the delegated power to tax the same area or activity. As a rule, the national government pre-
empts the taxing role of the LGUs, unless otherwise provided.

Common Limitations on the taxing power

These are taxes that cannot be collected by LGU.
Section 133, LGC
1. Income tax, except when levied on banks and other financial institutions.
This tax is already imposed by the NIRC. However, banks and other financial institutions are excepted (meaning, local taxes can still be
imposed on them) because they are given more protection by the government, being businesses involved in riskier ventures. This is in
line with the benefits received theory.

2. Documentary stamp tax.

3. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except local transfer tax.

4. Customs duties, registration fees of vessel 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 LGU concerned.
Wharfage is the payment if a vessel would load or unload cargoes in the wharf. This is not a tax on the goods but a tax on the right of the
vessel to load or unload goods.
GR: Not subject to local tax because they are already subjected to tax under the Tariff and Customs Code.
XPN: If the wharves are being constructed and maintained by the LGU concerned.

5. 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.
These are not covered because already covered under the Bureau of Customs.

6. Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen.
This covers only marginal farmers or fishermen – or those who farm and fish for their own subsistence. Commercial farming or fishing
are not covered by this provision. Thus, local tax may be imposed on them.

7. Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of 6
and 4 years, respectively from the date of registration.
This refers to the tax holiday benefit or incentive granted to pioneer or non-pioneer business enterprises. Since they do not
pay national taxes by reason of the holiday incentive, local taxes cannot also be imposed. For PEZA-registered enterprises: They pay 5%
in lieu of other local taxes. However, of the 5%, only 3% goes to the BIR. The other 2% goes to the LGUs.

8. Excise taxes on articles enumerated under the national Internal Revenue Code, as amended, and taxes, fees or
charges on petroleum products.

9. Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services
except as otherwise provided herein.
This is basic since this is already collected under the NIRC.
“except as otherwise provided herein” – this refers to exception under business taxes that may be collected by cities or municipalities
under Section 143 (a)-(h), LGC.

10.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.
This is not anymore subject to local tax because the gross receipts of transportation contractors of goods may already be
subject to the 12% VAT or OPT common carrier’s tax in case of transport of passengers. The exception as provided in the Code pertains
to the gross receipts or operations of tricycles. Thus, the LGU may collect taxes on operators of tricycles.

11.Taxes on premiums paid by way or reinsurance or retrocession.

Why? Because the premium on the original insurance contract has already been subjected to tax.
Reinsurance – insurer seeks another insurer
Retrocession – reinsurer seeks another insurer

12.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.
Not subject to local tax because taxes are already being collected by the national government through the LTO/LTFRB.
XPN: Tricycles – may be subject to local tax.

13.Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein.
Not subject to local tax because they are not consumed here in the Philippines. However, business taxes on those
engaged in export business in the locality may be collected, but not taxes on the product exported itself.

14.Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered
under R.A. No. 6810 and R.A. No. 6938 otherwise known as the "Cooperative Code of the Philippines" respectively.
Cooperatives registered under the CDA are exempted from taxation, it thus follows that local taxes cannot be imposed.

15.Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local
government units.
Is the local government required to comply with the withholding tax rules? Yes. That when an LGU fails to withhold, not only is the
accountant liable to the government but also the head of the LGU. But in one case, the SC that you cannot hold the mayor, governor,
and the barangay chairman liable together with the accountant because what the law provides is that only the accountant is liable. The
latter has the primary responsibility to withhold as per NIRC.

TYPES OF TAXES

PROVINCE
Sections 135-141, LGC
1. Tax on transfer of real property ownership
2. Tax on business of printing and publication
3. Franchise tax
4. Tax on sand, gravel and other quarry resources
5. Profession tax
6. Amusement tax
7. Annual fixed tax for every delivery truck or van of manufacturers or producers, wholesalers of, dealers, or retailers in, certain
products.

Tax on transfer of real property ownership

This is an exception to the general rule that the LGU cannot anymore collect estate tax or donor’s tax.

The province may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real property at
the rate of not more than fifty percent (50%) of the one percent (1%) of the total consideration involved in the acquisition of the
property or of the fair market value in case the monetary consideration involved in the transfer is not substantial, whichever is higher.
The sale, transfer or other disposition of real property pursuant to R.A. No. 6657 (Comprehensive Agrarian Reform Law) shall be
exempt from this tax.
 The rate provided is the maximum
 The province can lower the rate provided
 The province can increase provided made once every 5 years and not more than 10%.
 This tax is limited only on real property.
 Not covered under this type of a tax: transfer of socialized housing pursuant to Agrarian Reform or Personal property.
 It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein imposed within sixty (60)
days from
the date of the execution of the deed or from the date of the decedent's death.
 But if it is in a public auction, the reckoning point will start on the date of execution.
 TN: this is not the same with real property tax
 Non-stock, non-profit/religious/char institution and those exempted under real property taxation may be subject under this
type of tax.

Tax on business of 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, at a rate not exceeding 50% of 1% of the gross annual receipts
for the preceding calendar year. In the case of a newly started business, the tax shall not exceed 1/20 of 1% of the capital investment. In
the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the
preceding calendar year, or any fraction thereof, as provided herein. 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.
 GR: Only municipalities and cities are given the power to collect business tax.
XPN: Tax on business of printing and publication. Here, even provinces can impose taxes.
XPN to XPN: Printing and publication of prescribed textbooks by CHED or DepEd. (Not taxable)
 Remember that the transaction being subjected to tax is the business of printing and/or publication of books, cards, posters,
etc.
 Tax rate
A. Existing – not exceeding 50% of 1% of gross annual receipts for preceding calendar year.
B. Newly started business – not exceeding 1/20th of 1% of capital investment

Example:
 A printing company was established in 2017. The moment it gets the permit, that is the first year so the basis is the capital
investment. The local treasurer will check the capital investment by looking at the articles of the corporation. Say for example,
the capital investment was 10M. The printer’s tax is 1% of 10M over 20 equals to 5000php.
 For example, it operates for year 2017, and it has a gross receipt of 1M. for the second year, the rate applicable is 50% of 1% of
the gross annual receipt in the preceding period which is 1M. 1M x 1% x 50% = 5000php.
 If for year 2018 there was no operation, the computation on year 2019, we follow the ½ of 1% because it was not the start of
business. But since 0% gross receipt for 2018, you will also have 0.

Franchise tax
It is a tax on businesses enjoying a franchise. A tax on the privilege of transacting business exercising corporate franchise granted by the
State. This is not the primary franchise because that is taxed by the national government. We are referring to secondary franchises.

 Secondary franchise
as when the corporation having already primary franchise will utilize facilities of the LGU for them to exercise their right to
operate so they have the secondary franchise.
Ex. NGCP erection of poles on streets for installation of wires.
 Tax rate
A. Existing – not exceeding 50% of 1% of gross annual receipts for preceding calendar year.
B. Newly started business – not exceeding 1/20th of 1% of capital investment
 There are no specific exceptions, only counter-referred, which means that under all instances, it will be subject to franchise tax.
 In one 2014 case, the Supreme Court ruled on the issue of whether the imposition of local business tax amounts to double
taxation. The petitioners argued that the basis of business tax is the gross annual receipts (GAP) and the basis of franchise tax
is likewise GAP (unless newly started in business). Tax base is the same, and taxing authority
is the same, hence there is double taxation.

Tax on sand, gravel and other quarry resources

The province may levy and collect not more than 10% of FMV in the locality per cubic meter of ordinary stones, sand, gravel, earth, and
other quarry resources, as defined under the NIRC, as amended, extracted from public lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within its territorial jurisdiction.

 Tax is collected on extraction of stones, gravel, sand, earth and other quarry resources from public lands or beds of seas, lakes,
rivers, streams, creeks, and other public waters within its territorial jurisdiction.
 These are subject only to this tax if they are extracted from public land. If it be from private land, it is subject to NIRC
specifically excise tax and province cannot thus collect this tax. However, this entity still has to go through the government is
securing its business permit.
 Rate is not more than 10% of FMV in the locality per cubic meter of the subject property.
 Collection will be divided (shared revenue)
1. Province – 30%
2. Component City or Municipality where the sand, gravel, and other quarry resources are extracted – 30%
3. Barangay where the sand, gravel, and other quarry resources are extracted – 40%
 The imposing authority is the Sanguiniang Panlalawigan who will issue an ordinance allowing the quarrying. But the permit to
extract resources shall be issued exclusively by the provincial governor.

Professional tax
 Collected from those who are engaged in the exercise or practice of his profession requiring government examination (Bar and
Board).
 The maximum limit is P300.00
 Collected annually, on or before January 31 or before beginning the practice of the profession
  May pay at:
1. Place where he will practice his profession
2. Principal place of business (if practicing two or more professions)
 Exception: Those exclusively employed in the government
 Once acquired, can already practice anywhere in the Philippines. If practices two professions, must pay for two professional
taxes. If only practices one, then pay for only one professional tax

Amusement tax
 Tax collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other
places of amusement.
 SC said that what is common among these places of amusement is the spectator usually comes in, sits down, and enjoys the
show which is different from other types of amusement.
 Theme and ocean parks are included.
 This is different from Amusement Tax on OPT in the NIRC which exclusively specifies its subjects (i.e. cockpits, etc.). Meaning,
if you are not specified under tax collected by national government, you can be subjected to tax by the local government.
 Rate is not more than 30% of gross receipts from admission fees. (from 10%, as amended)
 Exceptions: (Not subject to tax) Holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows,
musical programs, literary and oratorical presentations.
 Exceptions to exceptions: (Subject to tax) Pop, rock, or similar concerts.
 Shared revenue. The proceeds of the tax shall be shared equally by province and the municipality where such amusement
places are located.

Annual fixed tax for delivery trucks of manufacturers, etc

(a) 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 as may be determined by the Sangguniang Panlalawigan, to sales outlets, or consumers, whether directly or
indirectly, within the province in an amount not exceeding Five hundred pesos (P500.00).
(b) 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.
 Why is the province given this power to collect? Because the province is also in charge in the maintenance of road and
highways within its jurisdiction. And these trucks are usually the cause of wear and tear of the roads.
 tax rate is not exceeding P500,000.

There is no fallback provision for these 7 types of tax collectible by the province.

MUNICIPALITIES
Section 143, 147-149, LGC
1. Tax on business
2. Fees and charges on regulation or licensing of business and occupation
3. Fees for sealing and licensing of weights and measures
4. Fishery rentals, fees and charges

Can the municipality impose its own VAT or OPT? No. Because of the Exclusionary Rule/Pre-emption. The LGC has provided the
amount collectible for business tax.

TAX ON BUSINESS
A. On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors,
distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature.
 This is a graduated annual fixed tax, the rate of which is based on the taxpayer’s gross sales or receipts for the preceding
calendar year. However, when the gross sales or receipts amount to P6.5M or more for the preceding calendar year the tax
ceases to be a fixed tax. A percentage tax of 37.5% of 1% is imposed instead.
 The local government cannot exceed the rate provided by law.

B. On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature.

 Also a graduated annual fixed tax, the rate of which is based on the gross sales or receipts for the preceding calendar year.
 However, where the gross sales or receipts amount to P2M or more, the tax becomes a percentage tax levied at a rate not
exceeding 50% of 1%.
 What is being subjected to tax here is the business and not the product. So can the LGU impose another tax on the product? In
one case the Sc said yes so long as it does not violate the Exclusionary Rule.
 In one case, an LGU subjected the bottles of soft drinks to tax, the SC said that there is double taxation but it is indirect.
C. On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of
essential commodities.

 These are the essential commodities:

Rice and corn;
Wheat or cassava flour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and other
agricultural, marine, and fresh water products, whether in their original state or not;
Cooking oil and cooking gas;
Laundry soap, detergents, and medicine;
Agricultural implements. equipment and post-harvest facilities, fertilizers, pesticides, insecticides, herbicides and
other farm inputs;
Poultry feeds and other animal feeds;
School supplies; and
Cement.
 At a rate not exceeding one-half of the rates for sales of articles mentioned in paragraphs (a), (b) and (d) of Sec. 143 of the LGC

D. On Retailers
 The tax on retailers is not graduated annual fixed tax but an annual percentage tax imposed at the following rates:
(a) On gross sales or receipts for the preceding calendar year not exceeding P400,000 – 2%; and
(b) On sales or receipts exceeding P400,000 – 1%

E. On Contractors and other independent contractors.

 Also a graduated annual fixed tax based on the gross receipts for the preceding calendar year. However, when the gross
receipts
amount to P12M or more, the contractor’s tax becomes a percentage tax. The tax rate is 50% of 1%.

F. Banks and other financial institutions.

 The tax is 50% of 1% on their gross receipts of the preceding calendar year derived from interests, commissions, and discounts
from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of
property,
insurance premium.
 The definition of gross receipt for a bank is different. The tax code specifies the items falling within the gross receipt of the
bank.
 There is one case, where a bank was required by a local government unit to pay taxes of 50% of 1% imposed for lending
activities, and another 50 of 1% on income of financing leasing. The Court of Tax Appeal said, that the base of the tax is not to
be
separated in according to an activity but must be imposed for the total amount of the income, if not, it may result to double
taxation.

G. Peddlers engaged in the sale of any merchandise or article of commerce.

 At a rate not exceeding fifty (50) pesos per peddler annually.

H. Any business, not otherwise specified above.

 Provided that on any business subject to excise, value-added or percentage tax under the NIRC, the rate of the tax shall not
exceed 2% of gross sales or receipts of the preceding calendar year. The Sanggunian concerned may impose a schedule of
graduated tax rates but in no case to exceed the rates prescribe in Sec. 143 of LGC.
 This is a fall back provision. If the business is not taxed by the NIRC and it is not within no. 1 to 7 above, it may imposed
business taxes.

For municipalities located within Metro Manila may impose higher business tax rates but it shall not exceed 50% of the rates as
mentioned in under Section 143 A-H. (Section 143, LGC). But this does not apply for professional and amusement taxes.

BARANGAY
1. Taxes
2. Service fees or charges
3. Barangay clearance
4. Other fees and charges

1. TAXES
  On stores or retailers with fixed business establishments with gross sales of receipts of the preceding calendar year of P50k or
less, in the case of cities and P30k or less, in the case of municipalities, at a rate not exceeding 1% on such gross sales or
receipts.

2. SERVICE FEES AND 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.

3. BARANGAY CLEARANCE

4. 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.

COMMUNITY TAX
Levied or imposed by cities and municipalities.

Who are liable?

1. Individuals
2. Juridical persons

INDIVIDUALS
(a) Every inhabitant of the Philippines, whether citizen or not
(b) 18 years or over, and at least either:
1. Regularly employed on a wage or salary basis for at least 30 consecutive working days during any calendar year
2. Engaged in business or occupation
3. Owns real property with an aggregate assessed value of P1k or more
4. Is required by law to file an income tax return

 Tax rate of P5 (basic) and an additional of P1 for every P1,000 of income regardless of whether from business or exercise of
profession or from property which shall in no case exceed P5,000

JURIDICAL PERSONS
Every corporation no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in the
Philippines.

 Tax rate is P500 and additional tax which in no case shall exceed P10,000.
 Additional tax is equal to P2 for every P5000 of value of property or gross receipts or earnings derived by it in the preceding
year. Dividends received by corporations are part of gross receipts.

EXEMPT PERSONS
1. Diplomatic and consular representatives; and
2. Transient visitors when their stay in the Philippines does not exceed 3 months.
 These are aliens who are holder of tourist visas

Where to pay?
- at the place of residence or principal place of business for corporation.

When to pay?
Rules for individuals:
 The community tax shall accrue on the 1st day of January of each year which shall be paid not later than the last day of
February of
each year.
 If a person reaches the age of 18 years or otherwise loses the benefit of exemption on or before the last day of June, he shall
be liable for the community tax on the day he reaches such age or upon the day the exemption ends.
 However, if a person reaches the age of 18 years or loses the benefit of exemption on or before the last day of March, he shall
have 20 days to pay the community tax without becoming delinquent.

Rules for corporations:

 Corporations established and organized on or before the last day of June shall be liable for the community tax for that year.
  But corporations established and organized on or before the last day of March shall have 20 days within which to pay the
community tax without becoming delinquent.
 Corporations established and organized on or after the first day of July shall not be subject to the community tax for that year

Penalty for delinquent payment

- interest of 24% per annum

Can the collection of Community Tax be delegated to Barangay?

Sec. 164, LGC – the city or municipal treasurer may deputize barangay treasurer to collect in their jurisdiction
 Requirement to Deputize
o There must be a bond
 If barangay treasurers are deputized, the proceeds of the tax collected through the barangay treasurers must be shared equally
between the cities or municipalities and the barangay

SITUS OF LOCAL BUSINESS TAXES

We need to know the situs for purposes of collection so that we know who has the right to collect (province, city, municipality). We need
to take note here if the business has branches/office/warehouse which is an extension of the personality of the business.

1. With branch, sales, office or warehouse

 Sale is recorded in the location of the branch/sales/office warehouse.
 The rule here is to pay taxes where the branch or principal business is located.

2. No branch, sales, office or warehouse

 Sale is recorded in the principal place of business.

3. With factory, project, plant or plantation

 Rule in allocation of sales:
 30%: Principal place
70%: Factory/project office/plant/plantation
 If Factory and Plantation are in different locations:
 60% of the 70% will go to the Factory
40% of the 70% will go to the Plantation
 If there are 2 or more factories
 Pro-rate the 60% based on the volume of production
 If there are 2 or more plantation
 Pro-rate the 40% based on the volume of harvest

4 .Sale by routes, trucks, vans or vehicles

 Sales will be reported in the place where the source branch/sales/office/warehouse is located.
 If there is no branch, sales office or warehouse that accepts orders and deliver sales, then the gross sales or receipts will be
recorded where the goods are withdrawn.

December 1, 2018 KMA Discussions

NB: In violet font, lifted from Tanya Notes

COURT OF TAX APPEALS

Governing Law: RA 1125

A. Composition

Rule 2, Section 1
The Court is composed of a presiding justice and 8 associate justices appointed by the President of the Philippines. In
appropriate cases, the court shall sit en banc, or in 3 Divisions of 3 justices each, including the presiding justice, who shall be the
Chairperson of the First Division and the 2 most Senior Associate Justices shall be serve as Chairpersons of the Second Division
and Third Divisions, respectively.

Sitting en banc:
 9 justices
(a) 8 Associate Justices
(b) 1 Presiding Justice

Sitting in division:
3 Divisions with 3 justices each division
(a) First division – headed by Presiding Justice
(b) Second and Third divisions – headed by the most senior associate justice

B. Quorum and Voting

Section 3, Rule 2
The presiding justice or, if absent, the most senior justice in attendance shall preside over the sessions of the Court en banc. The
attendance of 5 justices of the Court shall constitute a quorum for its session en banc.
The presence at the deliberation and the affirmative vote of 5 members of the Court en banc shall be necessary to reverse a
decision of a decision of a Division but only a simple majority of the justices present to promulgate a resolution or decision in all
cases.
Where the necessary majority vote cannot be had, the petition shall be dismissed; in appealed cases, the judgement or order
appealed from shall stand affirmed; and on all incidental matters, the petition or motion shall be denied.

Section 4, Rule 2
The Chairperson of the Division or, if absent, the most senior member shall preside over the sessions of the Court in Division.
The attendance of at least 2 justices of the court shall be necessary to constitute a quorum for its sessions in Divisions. The
presence at the deliberation and the affirmative vote of at least 2 justices shall be required for the pronouncement of a judgement
or final resolution of the Court Decision.

Sitting en banc
Quorum: 5 justices
Voting
General Rule: majority of the justices present (provided that they sit in quorum)
Except for Reversal, Modification, or if it involves First-Time issue:
Absolute Majority of all members (at least 5 votes)

Sitting in division
Quorum: 2 justices
Voting:
Affirmative vote of at least 2 justices

NB: Above contemplates CTA as a judicial body and not an administrative body

C. Jurisdiction in General

CTA is a specialized body such that its jurisdiction only covers those special laws pertaining to assessments and collections of taxes as
well as duties. Since it is a highly specialized body, its jurisdiction is limited.

Take note that in relation to Remedies, the action filed to the CTA is already considered a judicial action and this action is primarily
governed by the Revised Rules of Court of Tax Appeals.

When it comes to Jurisdiction of CTA, we first have to ascertain on whether it pertains to CTA en banc or CTA in division.

D. Jurisdiction of the CTA en banc

Exclusive Appellate Jurisdiction

The action was first initiated with an administrative body

Section 2, Rule 4
Cases within the jurisdiction of the Court en banc. – The Court en banc shall exercise exclusive appellate jurisdiction to review
by appeal the following:
(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive
appellate jurisdiction over:

(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of Customs, Department of Finance,
Department of Trade and Industry, Department of Agriculture;
(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original jurisdiction; and
(3) Tax collection cases decided by the Regional Trial Courts 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 one million pesos;

(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by them in the exercise of
their appellate jurisdiction;

(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection cases decided or resolved by them in the
exercise of their appellate jurisdiction;

(d) 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;

(e) Decisions of the Central Board of Assessment Appeals (CBAA) in 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;

(f) 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 cases involving criminal offenses arising from violations of the National Internal Revenue
Code or the Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or Bureau of Customs;

(g) 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 mentioned in the preceding subparagraph; and

(h) Decisions, resolutions or orders of the Regional trial Courts in the exercise of their appellate jurisdiction over criminal
offenses mentioned in subparagraph.

To sum it up, the exclusive appellate JD of CTA en banc includes:

1. Decisions or resolutions on motions for reconsideration or new trial of the Court of Tax Appeals in Divisions in the
exercise of its exclusive appellate jurisdiction

2. Decisions, resolutions or orders must come from the Regional Trial Courts in the exercise of its appellate jurisdiction
which covers:
o tax collection cases [civil case] where the principal amount of taxes and penalties claimed exclusive of the
increments is less than one million pesos;
o criminal offenses [criminal case] for violations of the NIRC or the CMTA and other laws administered by the
BIR or BOC where principal amount of taxes and penalties claimed exclusive of the increments is less than one
million pesos;
o Local tax cases

Since the RTC is exercising its appellate jurisdiction, the case was then originally filed with the MTC. Recall then the
jurisdictional amounts:

Personal Property:
MTC: not more than P300,000 outside Metro Manila, or not more than P400,000 in Metro Manila
RTC: exceeds P300,000 outside Metro Manila, or exceeds P400,000 in Metro Manila

Hence:

< 300,000 outside MM; < 400,000 inside MM [CTA en banc in its appellate JD under category 2]

MTC  RTC  CTA (en banc)

> 300,000 outside MM; > 400,000 inside MM [CTA en banc in its appellate JD under category 1]

RTC  CTA (in division)  CTA (en banc)

 3. Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of its appellate jurisdiction

Exclusive Original Jurisdiction

The action was first initiated with the CTA en banc

Section 2, Rule 2
Exercise of powers and functions- The Court shall exercise its adjudicative powers, functions and duties en banc or in Divisions
The Court shall sit en banc in the exercise of its administrative, ceremonial and non-adjudicative functions

 Administrative, Ceremonial and Non-adjudicative functions

D. Jurisdiction of the CTA in division

Section 3, Rule 4
Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the following:

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue
Code or other laws administered by the Bureau of Internal Revenue.
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws
administered by the BIR, where the NIRC or other applicable law provides a specific period for action:
Provided, that in case of disputed assessments, the inaction of the CIR within the 180-day period under Section 228 of the
NIRC shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not
necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case;
Provided, further, that should the taxpayer opt to await the final decision of the CIR on the disputed assessments beyond
the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under
Section 3(a), Rule 8 of these Rules; and
Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must
file a petition for review with the Court prior to the expiration of the 2-year period under Section 229 of the NIRC.

Atty: As far as the CTA is concerned, the lapse of the CIR’s given period to decide is deemed a denial of the protest. So
there is no problem even if the CIR would eventually render a decision beyond the period because the CTA already
acquired jurisdiction.
Important: This section affirms the rule that the 2 year period of prescription includes both administrative and judicial
action.

(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by them in the
exercise of their original jurisdiction.
(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges,
seizure, detention or release of property affected, fines, forfeitures of other penalties in relation thereto, or other matters
arising under the Customs Law or other laws administered by the Bureau of Customs.
(5) Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the
Commissioner of Customs adverse to the Government under Section 2315 of the Tariff and Customs Code; and
(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 Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic
Act No. 8800, where either party may appeal the decision to impose or not to impose said duties.

(b) Exclusive jurisdiction over cases involving criminal offenses

(1) Original jurisdiction over all criminal offenses arising from violations of the National internal Revenue Code or Tariff
and Customs Code and other laws administered by the Bureau of Internal Revenue of the Bureau of Customs, where the
principal amount of taxes and fees, exclusive of charges and penalties, claimed is one million pesos or more; and
 (2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial Courts in their
original jurisdiction in criminal offenses arising from violations of the National Internal Revenue Code or Tariff and
Customs Code and other laws administered by the Bureau of Internal Revenue or Bureau of Customs, where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than one million pesos or where there is no
specified amount claimed;

(c) Exclusive jurisdiction over tax collections cases

(1) Original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and
penalties, where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is one million pesos or
more; and
(2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
collection cases originally decided by them within their respective territorial jurisdiction.

Exclusive Appellate Jurisdiction

The exclusive appellate JD of CTA in division includes:

1. Decisions, resolutions or orders must come from the Regional Trial Courts in the exercise of its original jurisdiction
which covers:
o tax collection cases [civil case] where the principal amount of taxes and penalties claimed exclusive of the
increments is less than one million pesos;
o criminal offenses [criminal case] for violations of the NIRC or the CMTA and other laws administered by the
BIR or BOC where principal amount of taxes and penalties claimed exclusive of the increments is less than one
million pesos or where there is no specified amount claimed;
 “no specified amount” is only applicable to criminal offenses because in tax collection cases, the
amount of taxes to be collected must be certain for the case to pursue
o local tax cases

Recall again the jurisdictional amounts:

Personal Property:
MTC: not more than P300,000 outside Metro Manila, or not more than P400,000 in Metro Manila
RTC: exceeds P300,000 outside Metro Manila, or exceeds P400,000 in Metro Manila

Hence:

> 300,000 outside MM; > 400,000 inside MM

RTC  CTA (in division)

2. Decisions related to the imposition of duties and taxes of the following administrative bodies:
o Commissioner of Internal Revenue (Decisions and Inactions)
o Commissioner of Customs
o Secretary of Finance
o Secretary of Trade and Industry
o Secretary of Agriculture

3. Petition for Review on criminal cases decided by the RTC in its appellate jurisdiction.

Exclusive Original Jurisdiction

The exclusive original JD of CTA in division includes:

1. Criminal offenses arising from violations of the NIRC or CMTA 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 one million pesos or more;
2. Tax collection cases involving final and executory assessments for taxes, fees, charges and penalties, where the
principal amount of taxes and fees, exclusive of charges and penalties, claimed is one million pesos or more;
Important: Before, the Rules of Court were not strictly followed in the CTA. But with this Revised Rules of the CTA, it
expressly provides that the ROC apply suppletorily and that a petition for review will have to be filed; the same
procedures in Rules 42, 43 and 44 under the ROC will have to be followed.
D. Jurisdiction of the Regular Courts
1. Local Tax Cases
But note that even if the amount exceeds P1M, the case can still be filed before the RTC because the law provides that the
only instance where the local tax case can be initiated before the CTA in division is when it has something to do with the
NIRC and the CMTA, not the local government code.
2. Tax collection cases, basic principal tax of less than 1 Million
3. Criminal offenses under the NIRC and CMTA, basic tax assessed of less than 1 Million

All three depends on the jurisdictional amounts:

MTC: <P300,000 outside MM, or < P400,000 in MM; RTC if otherwise
MTC- always original; RTC- original or appellate

E. Basic Appeal Process

A.

a. Simple Collection Case

b. Civil Case questioning the inaction of the CIR, COC, SOF, Sec. of Trade and Industry, or Sec. of Agriculture, etc
c. Cases filed before the RTC in its appellate jurisdiction

Petition for Review under Rule 42 before the CTA in division within 30 days from the receipt of the
adverse decision or from the lapse of the 180 days given to the administrative agency to decide

File Motion for Reconsideration or Motion for New Trial within 15 days from receipt of adverse
decision (jurisdictional)

File Petition for Review under Rule 43 before the CTA en banc

File Motion for Reconsideration or Motion for New Trial within

15 days from receipt of adverse decision

B.
File Petition for Review under Rule 45 before the Supreme
Court
a. Cases decided by CBAA in the exercise of its appellate jurisdiction
b. Cases filed before the RTC in its original jurisdiction

File Petition for Review under Rule 43 before the CTA en banc

File Motion for Reconsideration or Motion for New Trial within

15 days from receipt of adverse decision

File Petition for Review under Rule 45 before the Supreme

Court

C.

Criminal cases filed before the RTC in its original jurisdiction

Ordinary Appeal (Notice of Appeal) before the CTA in division within 15 days from the receipt of the
adverse decision

File Motion for Reconsideration or Motion for New Trial within 15 days from receipt of adverse
decision (jurisdictional)
 File Motion for Reconsideration or Motion for New Trial within
15 days from receipt of adverse decision

File Petition for Review under Rule 45 before the Supreme

Court

D.

Criminal cases filed before the RTC in its appellate jurisdiction

File Petition for Review under Rule 43 before the CTA en banc

File Motion for Reconsideration or Motion for New Trial within

15 days from receipt of adverse decision

File Petition for Review under Rule 45 before the Supreme

CourtDiscussions
December 3, 2018 KMA

NB: In violet font, lifted from Tanya Notes

LOCAL GOVERNMENT TAXATION

Remedies of the LGUs

A. Administrative Remedies
Remedies without necessarily going to the Court
Tax constitutes a lien superior to all liens and may only be extinguished upon payment of the tax
and charges (Sec, 173, LGC)

Time for payment local tax expires

DISTRAINT- LT shall, upon LEVY- real property may be

written notice, seize sufficient levied on, before,
personal property to satisfy the simultaneously, or after distraint
tax and charges of personal property

Officer posts notice in office of Same procedure for levy under RPT
LGU Chief Executive where the except that publication:
property is distrained and in at 1:3 for local taxes (published once a
least 2 public places specifying week for three consecutive weeks)
the time which is not less than 11:2 for real property taxes (published
20 days after the notice and once a week for two consecutive
place of sale, and distrained weeks)
goods
1. Local government’s lien
Section 173, LGC
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.

 Remember in Credit transactions where the law provides for the persons who are given preferred right over the
property; and when it comes to local taxes, the lien of the government is superior to all liens. Because of this, if the
time for payment for local taxes expires, then the local government can basically proceed with the distraint or the
levy.

Atty: This attaches to the property (it must be annotated). Even if you transfer ownership or the tax declaration changes,
so long as you have not settled the unpaid liabilities, that lien continues to exist

2. Distraint of personal property

Section 175, LGC
Distraint of Personal Property. - The remedy by distraint shall proceed as follows:
(a) Seizure - Upon failure of the person owing any local tax, fee, or charge to pay the same at the time required, the
local treasurer or his deputy may, upon written notice, seize or confiscate any personal property belonging to that
person or any personal property subject to the lien in sufficient quantity to satisfy the tax, fee, or charge in question,
together with any increment thereto incident to delinquency and the expenses of seizure. In such case, the local
treasurer or his deputy shall issue a duly authenticated certificate based upon the records of his office showing the
fact of delinquency and the amounts of the tax, fee, or charge and penalty due. Such certificate shall serve as sufficient
warrant for the distraint of personal property aforementioned, subject to the taxpayer's right to claim exemption under
the provisions of existing laws. Distrained personal property shall be sold at public auction in the manner hereon
provided for.
(b) Accounting of distrained goods. - The officer executing the distraint shall make or cause to be made an account of
the goods, chattels or effects distrained, a copy of which signed by himself shall be left either with the owner or person
from whose possession the goods, chattels or effects are taken, or at the dwelling or place or business of that person
and with someone of suitable age and discretion, to which list shall be added a statement of the sum demanded and a
note of the time and place of sale.
(c) Publication - The officer shall forthwith cause a notification to be exhibited in not less than three (3) public and
conspicuous places in the territory of the local government unit where the distraint is made, specifying the time and
place of sale, and the articles distrained. The time of sale shall not be less than twenty (20) days after the notice to the
owner or possessor of the property as above specified and the publication or posting of the notice. One place for the
posting of the notice shall be at the office of the chief executive of the local government unit in which the property is
distrained.
(d) Release of distrained property upon payment prior to sale - If at any time prior to the consummation of the sale, all
the proper charges are paid to the officer conducting the sale, the goods or effects distrained shall be restored to the
owner.
(e) Procedure of sale - At the time and place fixed in the notice, the officer conducting the sale shall sell the goods or
effects so distrained at public auction to the highest bidder for cash. Within five (5) days after the sale, the local
treasurer shall make a report of the proceedings in writing to the local chief executive concerned.
Should the property distrained be not disposed of within one hundred and twenty (120) days from the date of distraint,
the same shall be considered as sold to the local government unit concerned for the amount of the assessment made
thereon by the Committee on Appraisal and to the extent of the same amount, the tax delinquencies shall be cancelled.
Said Committee on Appraisal shall be composed of the city or municipal treasurer as chairman, with a representative
of the Commission on Audit and the city or municipal assessor as members.
(f) Disposition of proceeds - The proceeds of the sale shall be applied to satisfy the tax, including the surcharges,
interest, and other penalties incident to delinquency, and the expenses of the distraint and sale. The balance over and
above what is required to pay the entire claim shall be returned to the owner of the property sold. The expenses
chargeable upon the seizure and sale shall embrace only the actual expenses of seizure and preservation of the
 property pending the sale, and no charge shall be imposed for the services of the local officer or his deputy. Where the
proceeds of the sale are insufficient to satisfy the claim, other property may, in like manner, be distrained until the full
amount due, including all expenses, is collected.

 The local treasurer shall, upon written notice, seize or confiscate any personal property belonging to that person to
satisfy the tax and the charges
 In the NIRC, we talked about two types of distraint: Actual and Constructive Distraint
 However in local taxation, we only have Actual Distraint and there is no Constructive Distraint
 Procedures:
o At the time and place for distraint, the officer conducting the sale shall sell the distrained goods or effects at
public auction to the highest bidder for cash.
o Within 5 days, the LT shall report such sale to the local chief executive. Excess of proceeds shall be returned to
the owner of the property sold.
o IF property distrained is not disposed within 20 days, it shall be considered sold to the LGU for the amount of
the assessment made by the Committee on Appraisal; the tax delinquencies shall be cancelled;
o If proceeds of the sale are insufficient, other properties may be distrained until fill amount due, including all
expenses is collected.

Personal properties subject to distraint: 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.

3. Levy of real property

Section 176, LGC
Levy on Real Property
After the expiration of the time required to pay the delinquent tax, fee, or charge, real property may be levied on before,
simultaneously, or after the distraint of personal property belonging to the delinquent taxpayer. To this end, the
provincial, city or municipal treasurer, as the case may be, shall prepare a duly authenticated certificate showing the
name of the taxpayer and the amount of the tax, fee, or charge, and penalty due from him. Said certificate shall operate
with the force of a legal execution throughout the Philippines. Levy shall be effected by writing upon said certificate the
description of the property upon which levy is made. At the same time, written notice of the levy shall be mailed to or
served upon the assessor and the Register of Deeds of the province or city where the property is located who shall
annotate the levy on the tax declaration and certificate of title of the property, respectively, and the delinquent taxpayer
or, if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability
arose, or if there be none, to the occupant of the property in question.
In case the levy on real property is not issued before or simultaneously with the warrant of distraint on personal
property, and the personal property of the taxpayer is not sufficient to satisfy his delinquency, the provincial, city or
municipal treasurer, as the case may be, shall within thirty (30) days after execution of the distraint, proceed with the
levy on the taxpayer's real property.
A report on any levy shall, within ten (10) days after receipt of the warrant, be submitted by the levying officer to the
sanggunian concerned.

 This covers real property and interest in or rights to real property

o Excluding those provided in the Family Code: Family Home, a number of carabaos, tools and implements
used for livelihood or subsistence
 There is a warrant of levy that is sent to the Register of Deeds and this levy can be done before, simultaneously or after
the distraint of personal property.
 Same with the National government, when the Local Government distrains or levies your property, the next step there
is the sale of that property through a public auction. Once sold, the proceeds thereof will be used to settle your tax
liability.
 Note that the taxpayer will be notified that his property is going to be distrained or levied in consonance with the due
process requirements. But there may be instances where the taxpayer will not be notified because of perhaps the
change of administration. That is why, for some, they immediately received a notice of demand

 Procedure:
(a) Preparation of a duly authenticated certificate by the LGU Treasurer effecting the levy on the real property
(b) Service of written notice of levy to the assessor and Register of Deeds
(c) Annotation of the levy on the tax declaration and the certificate of title
 (d) Advertisement and Sale (Sec. 178, LGC)

 Section 178, LGC

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 they 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.
Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the sale to the
sanggunian concerned, and which shall form part of his records. After consultation with the sanggunian, the local
treasurer shall make and deliver to the purchaser a certificate of sale, showing the proceeding of the sale, describing
the property sold, stating the name of the purchaser and setting out the exact amount of all taxes, fees, charges, and
related surcharges, interests, or penalties: Provided, however, That any excess in the proceeds of the sale over the
claim and cost of sales shall be turned over to the owner of the property.
The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the costs of collection by
means of the remedies provided for in this Title, including the preservation or transportation in case of personal
property, and the advertisement and subsequent sale, in cases of personal and real property including improvements
thereon

4. Compromise

B. Judicial Remedies

1. Court Action
Section 183, LGC
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.

Atty: This would depend on the jurisdictional amount.

(a) MTC principal amount of the taxes and fees exclusive of interest does not exceed 300,000 (P400,000 in Metro
Manila)
(b) RTC
o Original jurisdiction – principal amount of the taxes and fees exclusive of interest exceeds 300k (P400k Metro
Manila), provided that the amount is less than P1M.
o Appellate jurisdiction for court actions which originated in the MTC.
(c) CTA in division
o Original jurisdiction – principal amount of the taxes and fees exclusive of interest exceeds P1M
o Appellate jurisdiction for court actions originating in the RTC.
(d) CTA en banc
o Appellate jurisdiction for decisions or resolutions by the CTA in division
o Petitions for review of the judgment, resolutions of the RTC in the exercise of their appellate jurisdiction over
tax cases originally filed in the MTC.

2. Declaratory relief

3. Injunction
NB: For declaratory relief and injunction, the local government will not raise that against the taxpayer, but against a
higher department, say, Department of Finance or Department of Justice
Remedies of Taxpayer

A. Extrajudicial Remedies

i. BEFORE Assessment
1. Question the constitutionality of the ordinance imposing the local tax.
Section 187, LGC
Any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within
30 days from the effectivity thereof to the Secretary of Justice who shall render a decision within 60 days from the date
of receipt of the appeal.
Within 30 days after receipt of the decision or the lapse of the 60- period without the Secretary of Justice acting upon the
appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

o The question on the constitutionality of the ordinance must first be filed before the Secretary of Justice (SOJ)
within 30 days from the date of enactment of the ordinance.
o The SOJ has 60 days to decide from receipt
o If the resolution is adverse to the taxpayer, he has to go to the RTC within 30 days from the receipt of the
adverse decision or from the lapse of the 60-day period

Important: The court of competent jurisdiction here is the RTC

2. Declaratory relief- same procedure as the Rules of Court.

o Usually filed before the RTC

ii. AFTER Assessment

1. Protest
Section 195, LGC
Within 60 days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local
treasurer contesting the assessment; otherwise, the assessment shall become final and executory.
The local treasurer shall decide the protest within 60 days from the time of its filing. If the local treasurer finds the
protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment.
However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or
partly with notice to the taxpayer.
The taxpayer shall have 30 days from the receipt of the denial of the protest or from the lapse of the 60 day period
prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes
conclusive and unappealable.

Protest (within 60 days from receipt of

notice of assessment)

Local Treasurer decides within 60 days from filing of the protest

(a) If meritorious – notice of assessment is cancelled
(b) If unmeritorious – deny the protest

Appeal to the court of competent jurisdiction within 30 days from:1.

Receipt of the denial of the protest; or2. From the lapse of the 60 day
period (counted from the day the taxpayer filed a protest before the local
treasurer)
  Take note that unlike in the Notice of Assessment by the BIR where it must contain not only the computation of the
tax liability but also the factual and legal basis for such, in Local Government Code, the assessment usually is just a
computation of tax liabilities
 Protest must be in writing
 Is payment required before one can file a protest?
o Assessment for Real Property taxes: There has to be payment before one can protest before the office of the
Local Treasurer
o Assessment Local Business taxes: No need for payment; can file protest immediately before the office of the
Local Treasurer
 Court of Competent jurisdiction” depends on the amount of the tax assessed.

2. Claim for refund or credit for erroneously or illegally collected tax

Section 196, LGC

No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or
illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding
shall be entertained in any court after the expiration of 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.

 Remedy for the taxpayer if he had already paid the taxes

 This usually occurs when there is an erroneous application of the law by the tax officer
 Requirements:
o Administrative written claim for refund or credit before the Local Treasurer;
o It must state that there was an illegal collection or erroneous payment of local taxes; and
o There must be written claim stating the facts and the law supporting the case.
o The written claim must have a categorical demand for refund or credit;
o Must be attached with supporting documents (eg. official receipts evidencing payment of local tax)
o It must be filed within a period of 2 years from the payment of the tax fee or charge or from the date the
taxpayer is entitled to a refund or credit

TN: Unlike the NIRC, the running of the two year period may be suspended by an intervening cause.

3. Redemption of property sold

Section 179, LGC

Within 1 year from the date of sale, the delinquent taxpayer or his representative shall have the right to redeem the
property upon payment to the local treasurer of the total amount of taxes xxx. Such payment shall invalidate the
certificate of sale issued to the purchaser and the owner shall be entitled to a certificate of redemption from the
provincial, city or municipal treasurer or his deputy.
The owner shall not, however, be deprived of the possession of said property and shall be entitled to the rentals and
other income thereof until the expiration of the time allowed for its redemption.

Atty: The period given to the taxpayer to redeem his property is 1 year from the date of sale. Note that the right of pre-
emption may still be applied.

Important: The owner shall not be deprived of the possession or the rentals or the income until the expiration of the
redemption period.

B. Judicial Remedies

1. Court action
Same as above. (Section 187)

2. Declaratory relief

3. Injunction
 Atty: Under the NIRC, injunction is prohibited except if issued by the CTA for justifiable reasons. Under the LGC, there
is no such prohibition. You may file an injunction before the court.

Angeles City v. Angeles City Electric Co

The LGC does not contain a provision prohibiting courts from enjoining the collection of local taxes. Such lapse may
have allowed preliminary injunction under Rule 58, ROC where local taxes are involved.

Matters involving Collection of Local Taxes

Period for collection

Section 165, LGC
Unless otherwise provided in this Code, the tax period of all local taxes, fees and charges shall be the calendar year. Such
taxes, fees and charges may be paid in quarterly installments.

 In local taxes, there is no such thing as fiscal year in local taxation even if it involves corporations. We only follow
calendar year; so from January 1 to December 31.
 Manner of payment: may be paid in quarterly installments in the local treasurer’s office.

Accrual of tax
Section 166, LGC
Unless otherwise provided in this Code, all local taxes, fees, and charges shall accrue on the 1st day of January of each
year. However, new taxes, fees or charges, or changes in the rates thereof, shall accrue on the 1st day of the quarter next
following the effectivity of the ordinance imposing such new levies or rates.

 GR: Accrues on the first day of January of each year.

XPN: New taxes, fees or charges, or changes in the rates thereof – accrue on the 1st day of the quarter next
following the effectivity of the ordinance imposing such new levies or rates.
Time of Payment
Section 167, LGC
Unless otherwise provided in this Code, all local taxes, fees, and charges shall be paid within the first 20 days of January or
of each subsequent quarter, as the case may be. The Sanggunian concerned may, for a justifiable reason or cause, extend
the time of payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding 6
months.

 justifiable reason or cause: cases involving casualties; prolonged labor disputes

Surcharges and penalties

Section 168, LGC
The Sanggunian may impose a surcharge not exceeding 25% of the amount of taxes, fees or charges not paid on time and
an interest at the rate not exceeding 2% per month of the unpaid taxes, fees or charges including surcharges, until such
amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed 36 months.

 So in short, there shall be compounding of imposition when it comes to local taxes

 But the good thing is, the law provides that the interest of 2% per month shall in no case exceed 36 months of the
unpaid amount or portion thereof; so basically, the compounding lang is good for three (3) years.
 Take note that the 25% surcharge is not imposed only on the basic tax; it also includes the interest and the
surcharges.
 If your arrears for local tax have not been paid even for 5 years, the surcharge is good only for 36 months (3 years)

Interests on Unpaid Revenues

Section 169, LGC
Where the amount of any other revenue due a local government unit, except voluntary contributions or donations, is 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, there shall be collected as part of that amount an interest thereon at the rate not exceeding 2% per
month from the date it is due until it is paid, but in no case shall the total interest on the unpaid amount or a portion thereof
exceed 36 months.
  24% or an interest not exceeding 2% per month on the date that is due or on the date it is paid but similar as in
surcharges the computation of the interest must not exceed 36 months or 3 years.

Atty: This is a distinction from the NIRC. Because in NIRC, there is no limit to the limit of years to get surcharges or
interests collected. In LGC, it is only limited to 36 months.

Collection of Local Revenues

Section 168, LGC
All local taxes, fees, and charges shall be collected by the provincial, city, municipal, or Barangay treasurer, or their duly
authorized deputies. The provincial, city or municipal treasurer may designate the Barangay treasurer as his deputy to
collect local taxes, fees, or charges. In case a bond is required for the purpose, the provincial, city or municipal government
shall pay the premiums thereon in addition to the premiums of bond that may be required under this Code.

 Who collects the taxes?

- The Provincial, City, Municipal, or Barangay treasurer, or their duly authorized deputies

Period of Assessment and Collection of Local Taxes

Section 194, LGC
(a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. No action for the
collection of such taxes, fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such
period: Provided, That. taxes, fees or charges which have accrued before the effectivity of this Code may be assessed within
a period of three (3) years from the date they became due.

(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years
from discovery of the fraud or intent to evade payment.

(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or
judicial action. No such action shall be instituted after the expiration of said period: Provided, however, That, taxes, fees or
charges assessed before the effectivity of this Code may be collected within a period of three (3) years from the date of
assessment.

(d) The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during
which:
(1) The treasurer is legally prevented from making the assessment of collection;
(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within
which to assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be located.

 Assessment
GR: must be made within 5 years from the date they become due (generally that’s from January 20 of that year; so
Jan 20, 2018, it will prescribe on Jan 20, 2023)
XPN: In case of fraud or intent to evade tax – within 10 years from discovery of fraud or intent to evade payment.
 Collection must be made within 5 years from the date of its assessment
 There is no crime for evasion; the proper charge should be Attempt to evade payment of taxes (Attempted Tax
Evasion); walay consummated na evasion kay nadakpan man ka so, wala gyud nacomplete
 Grounds for suspension of the 5-year prescriptive period to Assess or to Collect:
1. If the treasurer is legally prevented from the assessment or collection from the tax;
2. If the taxpayer requests for a reinvestigation and executes a waiver; and
3. If the taxpayer is out of the country or cannot be located
 Take note that when it comes to local taxes, since this is just a delegated power, the exclusive jurisdiction for local
tax cases falls under the jurisdiction of the regular courts. The regular courts may issue an injunction as
compared to the NIRC which may only be issued by the CTA.

REAL PROPERTY TAXATION

A. General Concepts
Real Property tax (RPT)
A direct tax on ownership of lands and buildings or other improvements thereon payable regardless of whether the property is used or
not, although the value may vary in accordance with such factors.

 Real Property tax is taxed on the ownership of real property

Transfer on real property tax is taxed on the transfer of ownership to somebody else and taxed by the Province

Coverage
i. Real property
Subject to the definition given by Art 415 of the Civil Code.

ii. Improvement
Valuable addition made to a property or amelioration in its condition amounting to a more than a mere replacement of parts.
Increasing the value of the property or extending the useful life of the property for more than a year

iii. Machinery
Embraces machine, equipments, mechanical contrivances, instruments, appliances, or apparatus which may or may not be
attached permanently or temporarily to the real property including the physical facilities for production, installation and
other appurtenant facilities; those which are mobile, self-powered or self-propelled and those that are not permanently attached
to the real property which are actually, directly, exclusively used to meet the needs of a particular industry or service activity

iv. Other improvements not specifically exempted

B. Characteristics of Real Property Tax (DAPIL)

1. Direct Tax on the ownership of real property;

2. Ad valorem tax (based on a tax base)
3. Proportionate (tax is calculated based on the percentage of the value assessed which primarily depends on the classification
of the real property: Residential, Commercial, Industrial or Agricultural)
4. Indivisible, single obligation
5. Local Tax

C. Who could levy the Real Property Tax?

1. Provinces
2. Cities
3. Municipalities within Metro Manila

 As of the moment, there are no more municipality within Metro Manila, the last being Municipality of Pateros, hence,
only the Provinces and Cities may levy Real Property Tax and no municipality may levy RPT

D. Extent of the Power to Levy (BE-ISS)

1. Basic Real Property Tax
Province- not exceeding 1% of the assessed value
City or Municipality- not exceeding 2% of the assessed value

2. Additional 1% RPT to finance the Special Education Fund

Section 235,LGC
Additional Levy on Real Property for the Special Education Fund. - A province or city, or a municipality within the
Metropolitan Manila Area, may levy and collect an annual tax of one percent (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 (SEF).

3. 5% additional ad valorem tax on Idle lands

Section 237, LGC
Idle Lands, Coverage. For purposes of real property taxation, idle lands shall include:
(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.

4. Special Levy by Local Government Units

Section 240, LGC
Special Levy by Local Government Units. - A province, city or municipality may impose a special levy on the lands
comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded
by the local government unit concerned: Provided, however, That the special levy shall not exceed sixty percent
(60%) of the actual cost of such projects and improvements, including the costs of acquiring land and such other
real property in connection therewith: Provided, further, That the special levy 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 local government
unit concerned for the construction of such projects or improvements.

 Purpose primarily is to recover the cost used to finance the improvement in the locality
 Feeder Roads: Internal roads which connects one highway to another highway
 Take note that this Special Levy is not considered as a tax because it’s more of recovery of the costs for
a particular project
 special levy should not exceed sixty percent (60%) of the actual cost of such projects and
improvements

5. Socialized Housing Tax- additional 1.% of the assessed value

E. Powers of the Sanggunian

Can the Sanggunian other than imposing the RPT also impose a fine under the LGC?
 YES, the Sanggunian may impose a fine from 1,000- 5,000 or imprisonment from 1 month-6 months

Is there a need for public hearing for the Sanggunian to impose RPT?
 Note that in Local Business Tax, there is a need for a public hearing prior to the passage of an ordinance imposing or
increasing or changing the local business tax
 But for Real Property Tax, there is no express requirement for public hearing under the Code. Why? Because the law
already provides for the rate as well as the assessment level. So all the Sanggunian has to do is to comply with it.
 But there are some Sanggunian, especially when they change na the assessment level, they do public hearing prior to
changing it
 However, for Special Levy or Assessments, public hearing is required

E. Fundamental Principles governing Real Property Taxation (FEU-UP)

Section 198, LGC
Fundamental Principles. - The appraisal, assessment, levy and collection of real property tax shall be guided by the following
fundamental principles:

(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for assessment purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a uniform classification within each local government unit;
(d) The appraisal, assessment, levy and collection of real property tax shall not be left to any private person; and
(e) The appraisal and assessment of real property shall be equitable.

 Unlike sa local tax na ang starring is the local treasurer, when it comes to RPT, the City Assessor is also involved
primarily because it is the assessor who will assess the Market valuation of the real property

E. Exemptions from Real Property Taxation

Section 234, LGC
 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.

 Lung Center Case- the portion leased to a taxable person must be subject to RPT
 Philippine Fisheries Development Authority- operating the Lucena Sports Complex is just an instrumentality of
the government. Therefore, it is not a GOCC and therefore it is exempt from RPT
 Manila International Airport Authority Committee- A GOCC must be organized as a stock or non-stock
corporation. MIAA is not organized as a stock or non-stock corporation. Its charter mandates that MIAA must remit
25% of its annual gross operating income to the national treasury. It is a government instrumentality vested with its
corporate powers under its charter and therefore, the airport’s land is of public dominion. Hence, exempt from RPT.

Tax 2- December 4, 2018

REAL PROPERTY TAX

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.
If the one using the lot is a taxable person, whether natural or juridical, then the Republic or any of its political subdivisions is
subject to RPT.
Beneficial use – refers to actual use by a taxable person
Political subdivisions – covers government instrumentalities (ex. MCAA, PPA, UP, GSIS, BSP). Thus, these are not taxable.
Phil. Ports Authority v. Iloilo
GOCCs are not covered by the exemption since the exemption only refers to instrumentalities without personalities distinct
from
the government.

2. 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.
This is not automatic. You
3. All machineries and equipment actually, directly and exclusively used by local water districts GOCCs engage
in the supply and distribution of water and/or generation and transmission of electric power.
Requisites:
(a) Actually, directly and exclusively used by local water
districts and GOCCs
(b) Engaged in the supply and distribution of water and/or
generation and transmission of electric power
Example: MERALCO.
4. All real property owned by duly registered cooperatives as provided for under R. A. No. 6938.
5. Machinery and equipment used for pollution control and environmental protection.

Procedure in the administration of Real Property Tax

Section 202-203, LGC
1. Declaration by the owner or administrator
(a) Prepare a sworn statement declaring the true value of the property which shall be the current and fair market value of
the property.
(b) It must contain a sufficient description of the property to enable the assessor or his deputy to identify the same for assessment
purposes
(c) The declaration must be filed with the assessor once every 3 years during the period from January 1 to June 30.
For newly-acquired property
the owner or the administrator must file in the assessor’s office within 60 days from the date of transfer, a Sworn Statement
containing the:
1. Fair Market Value
2. Description of the property
For improvements of the property
The owner or administrator must file within 60 days upon completion or occupation, whichever comes earlier, a Sworn Statement
containing the:
1. Fair Market Value
2. Description of the property
2. Declaration by any person acquiring real property or making improvements
The sworn statement declaring the true value of the property must be filed to the provincial, city or municipal assessor within 60 days
after the acquisition or upon completion or occupancy of the improvement, whichever comes earlier.
3. Declaration by the Provincial or City or Municipal Assessor
When the person required to file the sworn declaration refuses or fails to make such declaration, the provincial, city or municipal
assessor shall declare the property in the name of the defaulting owner. No oath shall be required of such declaration.

Proof of exemption of Real Property from taxation

Section 206, LGC
Any person by or for whom the real property is declared, who shall claim tax exemption, shall file with the assessor together with
sufficient
documentary evidence in support of such claim. This must be done within 30 days from the date of the declaration of the property.
(Section
206)

Assessment of property subject to back taxes

Section 222, LGC
Real property declared for the first time shall be assessed for taxes for the period during which it would have been liable but in no case
for
more than 10 years prior to the date of initial assessment. Such taxes shall be computed on the basis of the applicable schedule of values
in force during the corresponding period.
 But in any case, if you are assessed with back taxes, you can still request for a compromise agreement with the LGU.

Listing of the Real Property

Section 205, LGC
The local assessor must maintain an assessment roll wherein all real property, whether taxable or exempt, located within the territorial
jurisdiction of the LGU, is listed.

Real property identification system

Section 207, LGC
All declarations of real property made under the provisions of this Title shall be kept and filed under a uniform classification system to
be
established by the provincial, city or municipal assessor.

 The title is transferred first before the tax declaration

Appraisal and Valuation of Real Property

Section 201, LGC
All 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. The Department of Finance shall promulgate the
necessary rules and regulations for the classification, appraisal, and
assessment of real property pursuant to the provisions of this Code.
Two properties involved:
1. Land
2. Machineries

For land
Section 213, LGC
The assessor of the city or province may summon the owner of the properties to be affected and may take their positions concerning the
property, its ownership, amount, nature and value.
Persons who may aid the assessor in determining the FMV
1. The person transferring the real property – may be summoned by the assessor to ascertain the FMV as provided in.
2. The Register of Deeds – has the duty to apprise or advise the assessor of the possible FMV.
3. Official issuing building permit or certificate of registration of machinery – has the duty to also advise or apprise the assessor of the
fair market value of the building and the machinery which basically apprises the improvements.
4. Geodetic engineers – obligated to assist the assessor in computing the fair market value.

Steps undertaken by the assessor and the local government officials in determining the FMV
1. The owner of the property is summoned
2. The assessor prepares a schedule of FMV for different classes of property
3. The Sanggunian enacts through an ordinance the schedule of the FMV
4. The schedule of the FMV is published in a newspaper of general circulation in the PCM, or in absence thereof, shall be posted at the
provincial capitol, city or municipal hall and two other conspicuous public places.

Public hearing not required

Public hearing is not a requirement before the Sanggunian can enact an ordinance imposing this real property tax, provided there is
publication in the newspaper of general circulation in the locality; or the least, there is posting in two conspicuous public places and in
the provincial capitol, city or the municipal hall.

Important: This rule applies only to Basic RPT, Special Education Fund, and Ad Valorem Tax on Idle Lands. In Special Assessment
and Special
Levy on Public Improvements, it is a requirement that a public hearing must be conducted. There has to have consultation and public
hearing
of the stakeholders to be affected.

Classes of real property for assessment purposes

Section 215, LGC
For purposes of assessment, real property shall be classified as residential, agricultural, commercial, industrial, mineral, or special. The
city or municipality within the Metropolitan Manila Area, through their respective Sanggunian, have the power to classify lands as
residential, agricultural, commercial, industrial, mineral, timberland, or special in accordance with their zoning ordinances.

(C-A-R-M-I-T-S)
1. Commercial land
A land is considered a commercial land when it is devoted principally for the object of profit and is not classified as agricultural,
industrial, mineral, timber or residential land.
2. Agricultural Land
(a) A land devoted principally on planting of trees, raising of crops, livestock or poultry, etc. including inland fishing and similar
aquaculture activities and other agricultural activities
(b) Not classified as industrial, mineral, commercial, timber or residential land
3. Residential Land
When the property is principally devoted for habitation.
4. Mineral Land
Land in which minerals, metallic or non-metallic, exist in sufficient quantity or grade to justify the necessary expenditures to extract
and utilize such minerals.
5. Industrial Land
Land devoted principally in industrial activity, as capital investment and not classified as residential, mineral, agricultural or
commercial, timber land.
6. Timber Land
Forest, reserved area.
7. Special Land
All lands, buildings and other improvements actually, directly and exclusively used for hospital, cultural or scientific purposes, and
those owned by local water districts and other GOCCs rendering essential public services in the supply and distribution of water and
electricity.

For Machinery
How FMV of machineries determined
1. Brand new machinery
(a) Domestically purchased – acquisition cost only
(b) Imported – acquisition cost includes freight, insurance, bank and other duties
2. All other cases (not brand new) – Prorated on the remaining economic life divided by the estimated economic life multiplied by
the replacement or reproduction cost.
Formula:
Economic life
----------------------------- X Replacement or reproduction cost
Estimated economic life

When we talk of the economic life of the machinery, we are referring to the duration of the period of time where you expect to have a
return or to have a cash flow, the least, out of that particular investment [so the benefit is greater than the cost]
TN: The useful life is not necessarily the economic life

Assessment of Real Property Tax

1. Determine or compute the assessed value
Assessed value – FMV multiplied with the assessment level.
Section 199 (g), LGC
“Assessment level” is the percentage applied to the FMV to determine the taxable value of the property. The assessment levels shall be
fixed by ordinances of the Sanggunian at rates not exceeding those prescribed in Section 218. The assessment level is already provided
under the LGC depending on the classification of the land or property.

2. Determine the real property tax payable

After getting the assessed value, multiply it with the tax rates:
(a) Province – Not exceeding 1% of the assessed value
(b) Cities or municipalities within Metro Manila – Not exceeding 2% of the assessed value
(c) Special Education Fund – Not exceeding 1%
(d) Ad valorem tax on idle lands – Not exceeding 5%

General revisions of assessments and property classification

The fair market value is not on a yearly basis but the Sanggunian may opt to revise it every 3 years as a rule.

Section 219, LGC

The local assessor shall undertake a general revision of real property assessments every 3 years.

Date of effectivity of assessment or reassessment

Section 221, LGC
GR: All assessments or reassessments made after the 1st day of January of any year shall take effect on the 1st day of the January of the
succeeding year.

XPNs: When the reassessment of real property was due to:

1. Its partial or total destruction
2. A major change in its actual use
3. Any great and sudden inflation or deflation of real property values
4. Gross illegality of the assessment when made
5. Any other abnormal cause

Here, the assessment shall be made within 90 days from the date any of such cause occurred, and shall take effect at the beginning of
the quarter next following the reassessment.

Payment of Real Property Tax

Date of accrual
Section 246, LGC
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.
Atty: It constitutes as a superior lien. Meaning, it attaches to the res or the property and is not affected by change of ownership.

Notice of collection
Section 249, LGC
(a) On or before the 31st of January each year or on any date prescribed, the local treasurer shall post the notice of the dates when the
tax may be paid without interest at a conspicuous and publicly accessible place at the city or municipal hall.
(b) Said notice shall likewise be published in a newspaper of general circulation in the locality once a week for 2 consecutive weeks.

Manner of payment
A. Basic Real Property Tax
It is paid in four (4) equal installments:
1. On or before March 31
2. On or before June 30
3. On or before September 30
4. On or before December 30
Atty: In other local taxes, you also have the option to pay in 4 equal or quarterly installments like above. However, the deadline of
payment is not specified unlike in Real property tax

B. Special levies
Deadline of payment depends on the ordinance imposing it (but usually every January)

Interest on unpaid real property tax

Section 255, LGC
In case of failure to pay the basic real property tax when due, shall subject the taxpayer to the payment of interest at the rate of 2% per
month on the unpaid amount until the delinquent tax shall have been fully paid. But the total interest on the unpaid tax shall not exceed
36 months.
- 24% per annum.

Actual use of property as basis for assessment

Section 217, LGC
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.
Atty: Who has the responsibility to pay? The owner. But the basis whether the property is taxable or not, is the actual usage. Meaning,
for example, if USC does not own the property where the school stands but only borrowed from Ms. Ronulo, Ms. Ronulo does not have
to pay the real property tax. However, it is not automatic. She has to get a certificate of exemption.

Question: Why is the government liable for paying tax for its beneficial use of a property?
ANS: As a general rule, the government shall not be subject to tax but only if it is exercising its governmental function. If the
government is exercising a proprietary function, then it can be subjected to tax (i.e. lease of land to a private entity)

Tax discount for prompt payment

Section 251, LGC
If the basic real property tax and the additional tax accruing to the Special Education Fund (SEF) are paid in advance in accordance
with the prescribed schedule of payment as provided under Section 250, the Sanggunian concerned may grant a discount not exceeding
20% of the annual tax due.
Atty: To encourage owners to pay on time or to pay in advance, there is this “promo” given by the government.
(a) For advance payment – discount not exceeding 20% of the annual tax due may be granted
(b) For prompt payment – discount not exceeding 10% of the annual tax due may be granted.

Place of payment
Section 247, LGC
The collection of the real property tax shall be the responsibility of the city or municipal treasurer concerned. The city or municipal
treasurer may deputize the Barangay treasurer to collect all taxes on real property located in the Barangay: Provided, that the Barangay
treasurer is properly bonded for the purpose:

Period to collect
Section 270, LGC
The basic RPT and any other tax levied shall be collected within 5 years from the date they become due. No action for the collection of
the tax,
whether administrative or judicial, shall be instituted after the expiration of such period. In case of fraud or intent to evade payment of
the tax, such action may be instituted for the collection of the same within 10 years from the discovery of such fraud or intent to evade
payment.

The prescriptive period to collect is either 5 years or 10 years, depending if there was a fraudulent intent to evade payment.
(a) Within 5 years from the date they become date.
Important: It is not 5 years from the day of assessment because there is no assessment to speak of here. In RPT, the fair market values
are already laid down and the assessed value and tax rates are already enumerated.
(b) Within 10 years from discovery of fraud or intent to evade payment

Suspension of the prescriptive period

Section 270, LGC
The period of prescription within which to collect shall be suspended for the time during which:
1. The local treasurer is legally prevented to collect tax.
2. The owner or property requests for reinvestigation and writes a waiver before expiration of period to collect.
Unlike in NIRC that the BIR can be prevented by an injunction order from the CTA, the local treasurer may be prevented by the local
courts or Secretary of DOJ.
3. The owner of property is out of the country or cannot be located.

Remedies for collection of the Government

Administrative Remedies
1. Local Government’s Lien
The basic real property tax and any other tax levied 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.

2. Levy on Real Property

Section 258, LGC
Upon the failure to pay the tax when due, the local treasurer shall issue a warrant levying the real property subject to tax. The warrant
shall include a duly authenticated certificate showing the name of the owner or person having legal interest therein, description of the
property, amount of the tax due and interest thereon. The warrant of levy may be issued on or before, or simultaneous with the
institution of the civil action for the collection of the delinquent tax.
(a) Warrant must be mailed or served to owner or person having legal interest in the property.
(b) Written notice of levy must be mailed or served to the delinquent owner, the assessor and the Register of Deeds where the
property is located.
(c) The Register of Deeds must annotate the levy on the tax declaration and certificate of title.

3. Sale of Real Property

Within 30 days after service of the warrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction the property
as may be necessary to satisfy the tax delinquency and expenses of sale.
(a) Posting a notice at the main entrance of the LGU and in a publicly accessible and conspicuous place in the barangay where the
real property is located
(b) Publication once a week for 2 weeks in a newspaper of general circulation. The sale shall be held either at:
(a) The main entrance of the provincial, city or municipal building
(b) On the property to be sold
(c) Any other place as specified in the notice of the sale.
Owner may exercise the right of pre-emption. If bid is not enough, the property is forfeited in favor of the LGU (certificate
of forfeiture), but still subject to the 1 year right of redemption.
 For Redemption under LGC, it is different in terms of counting as compared to NIRC, under LGC, the counting is from the date
of sale or date of forfeiture.
 In so far as levy for RPT is concerned, there must be personal notice to the taxpayer. Publication and posting is not adequate.

Judicial Remedies
Section 266, LGC
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 Code.

Remedies of the Taxpayer

1. Protest as owner or with legal interest in the property
A. Protest by means of appeal directly to the Secretary of Justice
Section 187, LGC
Any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within 30 days from the
effectivity thereof to the Secretary of Justice (SOJ) who shall render a decision within 60 days from the date of receipt of the appeal.
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. If within thirty 30 days after receipt of the decision or the lapse of the 60-day period without the SOJ acting upon the
appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

Section 187 is applicable to local government taxes as well as real property taxes.
Grounds:
It is grounded on the impropriety of passing the ordinance or not following any of the mandatory requirements or procedures set by law
like publication, posting or hearing.

B. Protest against the Real Property Tax Deficiency

Section 252, LGC
(a) 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 the provincial, city treasurer or municipal
treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within 60 days from receipt.
(b) The tax or a portion thereof paid under protest, shall be held in trust by the treasurer concerned.
(c) 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.
(d) In the event that the protest is denied or upon the lapse of the 60-day period prescribed in subparagraph (a), the taxpayer may avail
of the remedies as provided for in Chapter 3, Title II, Book II of this Code.

Process under Section 252:

1. Receipt of Assessment.
2. Payment (indicate if you are paying under protest).
 When you are questioning the constitutionality of the ordinance, you need not pay first.
3. Within 30 days from payment, protest assessment to the local treasurer of province, city or municipality who is
given 60 days to decide.
4. If treasurer’s decision unfavorable or does not act within 60 days, taxpayer has 30 days from the receipt of the unfavorable decision
or lapse of the 60-day period of inaction by the treasurer, to appeal to the Local Board of Assessments Appeals (LBAA) which has 120
days to decide.
5. If LBAA decision is unfavorable or does not act on your appeal within 120 days, then you appeal to Central Board of Assessments
Appeals (CBAA) within 30 days from decision or lapse of the 120 day period. The CBAA has no mandatory period to decide.
6. If CBAA decision is unfavorable, appeal to CTA en banc (Not division) within 30 days. It is en banc because this is reviewing the
decision of the CBAA in the exercise of CBAA’s appellate jurisdiction.
TN: BIR has nothing to do with this.
7. If CTA’s decision is unfavorable, file a motion for reconsideration.
8. If MR still unfavorable, Certiorari Rule 45 to Supreme Court within 15 days.

Payment before protest

Unlike other types of protest, payment is required before protest in Real Property Taxation. However, the same is applicable only if
there is a valid assessment where the taxpayer merely does not agree with the computation or the results. It is simply questioning the
correctness of the computation.
Important: It is different if you question the validity of the computation, like when you question the classification of the land as
residential and not as LGU classified commercial. Here, you can file the protest directly. There is no need for payment first.

2. Tax Refund or Tax Credit

Section 253, LGC
When an assessment of basic real property tax, or any other tax levied is found to be illegal or erroneous and the tax is accordingly
reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer
within 2 years from the date the taxpayer is entitled to such reduction or adjustment. The provincial or city treasurer shall decide the
claim for tax refund or credit within 60 days from receipt thereof. In case the claim for tax refund or credit is denied, the taxpayer may
avail of the remedies as provided in Chapter 3, Title II, Book II of this Code.
Example is when your property is classified as commercial but later discovered that it was actually residential. Since you paid higher tax,
you may claim tax refund or credit.
(a) Where: To the local treasurer who has 60 days to decide.
(b) When: 2 years from date of payment

Judicial Remedies
1. Question the validity of a tax sale at public auction Section 267, LGC
No court shall entertain any action assailing the validity of any sale at public auction until the taxpayer shall have deposited with the
court the amount for which the real property was sold, together with interest of 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 of
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.

Requirements:
(a) Deposited with the court the amount for which the real property was sold.
(b) Together with interest of 2% per month from the date of sale to the time of the institution of the action.

In what cases can you question the validity of an auction sale?

ANS: Although the law says that the court cannot declare a public auction invalid simply by reason of irregularities or informalities on
the conduct of the sale, the public auction is invalid when a substantive right of the real property owner has been impaired. When you
say substantive right, it includes irregularities such as for example in levy, there is a need for public auction, posting of notices, warrant
of levy, certificate of sale, and more. If any of these is violated, then you can question the validity. But then again, if you question, you
need to post a bond or deposit.