October 2021

LOCAL GOVERNMENT TAXES

(Atty. C. Llamado)

Power To Levy Other Taxes, Fees or Charges

Local Government Units (“LGUs”) may exercise the power to levy taxes, fees or charges on any
base or subject not otherwise specifically enumerated herein or taxed under the provisions of the
National Internal Revenue Code, as amended, or other applicable laws.

Provided, that the taxes, fees1, or charges2 shall not be unjust, excessive, oppressive, confiscatory
or contrary to declared national policy.

Provided, further, that the ordinance levying such taxes, fees or charges shall not be enacted
without any prior public hearing conducted for the purpose.3 (Sec. 186, LGC).

Notes:

(a) The aforementioned power includes the power to levy fees that are regulatory in nature.4

(b) Such power also includes the power to levy charges which are pecuniary liabilities such as
rents or fees against persons or property. An example would be the imposition of “goodwill
fees” upon stall holders at the municipal public market.5

(c) The requirements made mandatory by law for the levy of such taxes, fees, or charges must
be observed. Otherwise, such levy shall be void.

In Ongsuco, et. al. v. Hon. Malones, G.R. No. 182065 (October 27, 2009), since no public
hearing had been duly conducted prior to the enactment of an ordinance imposing
“goodwill fees” upon stall holders at a public market, said ordinance was declared void.

Fundamental Principles in Local Taxation

The following fundamental principles shall govern the exercise of the taxing and other revenue-
raising powers of LGUs:

(a) Taxation shall be uniform in each LGU;

(b) Taxes, fees, charges, and other impositions shall:
(1) Be equitable and based, as far as practicable, on the taxpayer’s ability to pay;
(2) Be levied and collected only for public purposes;
(3) Not be unjust, excessive, oppressive, or confiscatory;
(4) Not be contrary to law, public policy, national economic policy, or in the restraint of trade;
(c) The collection of local taxes, fees, charges, and other impositions shall in no case be let to any
private person;

1
"Fee" means a charge fixed by law or ordinance for the regulation or inspection of a business or activity
(Sec. 131(l), LGC).
2
"Charges" refers to pecuniary liability, as rents or fees against persons or property (Sec. 131(g), LGC).
3
Sec. 186, LGC.
4
Dr. Joseph Emmanuel L. Angeles, Restatement of the Law on Local Government, citing Smart
Communications, Inc. v. Municipality of Malvar, G.R. No. 204429, February 18, 2014.
5
Ongsuco, et. al. v. Hon. Malones, G.R. No. 182065 (October 27, 2009)
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October 2021

(d) The revenue collected pursuant to the provisions of the Local Government Code of 1991
(“LGC”) shall inure solely to the benefit of, and be subject to the disposition by, the LGU
levying the tax, fee, charge, or other imposition unless otherwise specifically provided in the
LGC;
(e) Each LGU shall, as far as practicable, evolve a progressive system of taxation; and
(f) Territoriality – an LGU cannot ordinarily tax property or persons unless the situs thereof is
within its territory.

Taxing Authority

The power to impose a tax, fee, or charge, or to generate revenue under the LGC shall be exercised
by the sanggunian of the LGU concerned through an appropriate ordinance.6

6
Sec. 132, LGC.

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October 2021

PROVINCES

The following are the local taxes that may be imposed by provinces:

1. Tax on Transfer of Real Property Ownership

Tax imposed on: The sale, donation, barter, or on any other mode of transferring
ownership or title of real property.
Tax base The total consideration involved in the acquisition of the property
or of the fair market value7 thereof, whichever is higher.
Tax rate Not more than fifty percent (50%) of one percent (1%)
Time of Payment 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 (Sec. 135(b), LGC).
Exemption The sale, transfer or other disposition of real property pursuant
to R.A. No. 6657 (the “Comprehensive Agrarian Reform Law of
1988”).

2. Tax on Business of Printing and Publication

Tax imposed 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.
Tax base and tax (a) In the case of a newly started business, the tax shall not
rate: exceed one-twentieth (1/20) of one percent (1%) of the
capital investment8.
(b) In the succeeding calendar year, regardless of when the
business started to operate, the tax shall not exceed fifty
percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year or any fraction
thereof.
Exemption 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.

3. Franchise Tax

Tax imposed on: Businesses enjoying a franchise.

Tax base and tax (a) In the case of a newly started business, the tax shall not
rate: exceed one-twentieth (1/20) of one percent (1%) of the
capital investment.
(b) In the succeeding calendar year, regardless of when the
business started to operate, the tax shall not exceed fifty
percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year or any fraction
thereof.

7
The fair market value shall be that reflected in the prevailing schedule of fair market values enacted by
the sanggunian concerned (Art. 224(a), Rules and Regulations Implementing the LGC of 1991).
8
“Capital Investment” is the capital which a person employs in any undertaking, or which he contributes
to the capital of a partnership, corporation, or any other juridical entity or association in a particular taxing
jurisdiction (Sec. 131(f), LGC).

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October 2021

4. Tax on Sand, Gravel, and Other Quarry Resources

Tax imposed on: Ordinary stones, sand, gravel, earth, and other quarry resources,
as defined under Tax Code extracted from:
(a) public lands or
(b) the beds of seas, lakes, rivers, streams, creeks, and other
public waters

within the territorial jurisdiction of the province.

Tax base Fair market value in the locality
Tax rate Not more than ten percent (10%)

5. Professional Tax

Tax imposed on: Each person engaged in the exercise or practice of his profession
requiring government examination.
Tax Such amount and reasonable classification as the sangguniang
panlalawigan may determine but shall in no case exceed Three
Hundred Pesos (₱300.00).
Place of Payment Province, city, or the lone municipality within the MMA where
where taxpayer practices his profession or where he maintains
his principal office in case he practices his profession in several
places. See Note (a) below.
Time of Payment Annually, on or before the thirty-first (31st) day of January.
After January 31, if taxpayer first begins to practice his
profession after the month of January.

Exemption Professionals exclusively employed in the government

Notes:

(a) Cities and the lone municipality within the MMA may also levy and collect the
professional tax. However, such person who has paid the corresponding professional
tax shall be entitled to practice his profession in any part of the Philippines without
being subjected to any other national or local tax, license, or fee for the practice of such
profession.9
(b) A line of profession does not become exempt even if conducted with some other
profession for which the tax has been paid.10
(c) Any individual or corporation employing a person subject to professional tax shall
require payment by that person of the tax on his profession before employment and
annually thereafter.11
(d) Any person subject to the professional tax shall write in deeds, receipts, prescriptions,
reports, books of account, plans and designs, surveys and maps, as the case may be, the
number of the official receipt issued to him.12
(e) The professionals subject to this professional tax are only those who have passed the
bar examinations, or any board or other examination conducted by the Professional
Regulation Commission (“PRC”). For example, a lawyer who is also a Certified Public

9
Sec. 139(b), LGC.
10
Sec. 139(d), LGC.
11
Sec. 139(c), LGC.
12
Sec. 139(e), LGC.
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October 2021

Accountant (“CPA”) must pay the professional tax on lawyers and that fixed for CPAs,
if he is to practice both professions.13
(f) Before accepting payment of the professional tax for the current year, the provincial
treasurer or his duly authorized representative shall require from such professionals
their current annual registration cards issued by competent authority.14
(g) The PRC shall likewise require proof of payment of the professional tax before
registration of professionals or renewal of their licenses.15

6. Amusement Tax

Tax imposed on: Proprietors, lessees, or operators of (a) theaters, (b) cinemas, (c)
concert halls, (d) circuses, (e) boxing stadia, and (f) other places
of amusement.
Tax Base Gross receipts from admission fees
Tax Rate Not more than ten percent (10%)
Exemption Operas, concerts, dramas, recitals, painting and art exhibitions,
flower shows, musical programs, literary and oratorical
presentations shall be exempt.
Exception: Pop, rock, or similar concerts shall not be exempt
from the amusement tax

Note: A percentage tax of 15% is imposed by the National Government on the gross
receipts from professional basketball games under Section 125 of the Tax Code.
This precludes the province from imposing a local tax thereon pursuant to Section
133(i) of the LGC.

Sale of movie tickets is subject to the local amusement tax, and not to VAT.

7. Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers in, Certain Products

Tax imposed on: 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 to sales outlets, or
consumers, whether directly or indirectly, within the province.
Tax An amount not exceeding Five Hundred Pesos (₱500.00).

Note: The manufacturers, producers, wholesalers, dealers and retailers referred to above
shall be exempt from the tax on peddlers prescribed in Section 143(g) of the LGC.

13
Art. 228(f), LGC IRR.
14
Ibid.
15
Ibid.
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October 2021

MUNICIPALITIES

The following may be imposed by municipalities:

1. Tax on Business (“Local Business Tax”)16

(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, in
accordance with the schedule found in Section 143(a) of the LGC.

The amount of tax per annum shall be a fixed amount that increases with the taxpayer’s
domestic gross sales or receipts for the preceding calendar year. However, when such
gross sales or receipts is ₱6.5 Million or more, the tax shall equal the sales/receipts
multiplied by a tax rate not exceeding 37.5% of 1.0%.

(b) On wholesalers, distributors, or dealers in any article of commerce of whatever

kind or nature in accordance with the schedule found in Section 143(b) of the
LGC.

The amount of tax per annum shall be a fixed amount that increases with the taxpayer’s
gross sales or receipts for the preceding calendar year. However, when such gross sales
or receipts is ₱2.0 Million or more, the tax shall equal the sales/receipts multiplied by
a tax rate not exceeding 50.0% of 1.0%.

Note: The businesses in paragraph (a) above shall no longer be subject to the tax on
wholesalers, distributors, or dealers provided in paragraph (b).

(c) On exporters, and on manufacturers, millers, producers, wholesalers,

distributors, dealers or retailers of essential commodities enumerated hereunder
at a rate not exceeding one-half (½) of the rates prescribed under subsection (a),
(b) and (d) of Section 143 of the LGC:17

(1) Rice and corn;

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

Note: For purposes of Section 143 of the LGC, the term “exporters” shall refer to
those who are principally engaged in the business of exporting goods and
merchandise, as well as manufacturers and producers whose goods or products
are both sold domestically or abroad. The amount of export sales shall be
excluded from the total sales, and shall be subject to the rates not exceeding ½

16
"Business" means trade or commercial activity regularly engaged in as a means of livelihood or with a
view to profit (Sec. 131(d), LGC).
17
Sec. 143(c), LGC.

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of the rates prescribed in paragraphs (a), (b), and (d) of Section 143 of the
LGC.18

(d) On retailers in accordance with the following schedule provided in Section 143(d)
of the LGC:19

(1) The rate of 2% per annum shall be imposed on sales not exceeding ₱400,000. The
rate of 1% per annum shall be imposed on sales in excess of the first ₱400,000.

(2) The barangays shall have the exclusive power to levy taxes, as provided in Section
152 of the LGC on gross sales or receipts of the preceding calendar year of Fifty
Thousand Pesos (₱50,000.00) or less, in the case of barangays in cities, and Thirty
Thousand Pesos (₱30,000.00) or less, in the case of barangays in municipalities.

(e) On contractors20 and other independent contractors, in accordance with the

schedule provided in Section 143(e) of the LGC.

The amount of tax per annum shall be a fixed amount that increases with the taxpayer’s
gross sales or receipts for the preceding calendar year. However, when such gross sales
or receipts is ₱2.0 Million or more, the tax shall equal the sales/receipts multiplied by
a tax rate not exceeding 50.0% of 1.0%.

(f) On banks and other financial institutions21, at a rate not exceeding fifty percent
(50%) of one percent (1%) on the gross receipts of the preceding calendar year
derived from interest, commissions and discounts from lending activities, income
from financial leasing, dividends, rentals on property and profit from exchange
or sale of property, and insurance premium.

Notes:

(1) All other income and receipts of banks and financial institutions not otherwise
enumerated above shall be excluded from the taxing authority of the LGU
concerned.22

(2) Dividends and interest earned are not subject to the LBT under Section 143(f) of
the LGC, unless the corporation is a bank or non-bank financial intermediary.23

18
Art. 232(c), LGC IRR.
19
Art. 232(d) LGC IRR; Sec. 143(d), LGC.
20
"Contractor" includes persons, natural or juridical, not subject to professional tax under Section 139 of
the LGC, whose activity consists essentially of the sale of all kinds of services for a fee, regardless of
whether or not the performance of the service calls for the exercise or use of the physical or mental
faculties of such contractor or his employees.
21
"Banks and other financial institutions" include non-bank financial intermediaries, lending investors,
finance and investment companies, pawnshops, money shops, insurance companies, stock markets,
stock brokers and dealers in securities and foreign exchange, as defined under applicable laws, or rules
and regulations thereunder (Sec. 131(e), LGC).
22
Art. 232(g), LGC.
23
City of Davao and Bella Linda N. Tanjili, in her official capacity as the Officer-in-Charge City
Treasurer’s Office of Davao City vs. First Meridien Development, Inc., CTA En Banc Case No. 1590,
December 18, 2017; City of Davao, et. al. vs. ARC Investors, Inc., CTA EB Case No. 1589, September
11, 2019.

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October 2021

(g) On peddlers24 engaged in the sale of any merchandise or article of commerce, at a

rate not exceeding Fifty Pesos (₱50.00) per peddler annually.

Note: Delivery trucks, vans, or motor vehicles used by manufacturers, producers,

wholesalers, or retailers enumerated in Section 141 of the LGC shall be exempt
from the peddler’s tax.

(h) On any business, not otherwise specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax. Provided, that on any business
subject to the excise tax, VAT or OPT under the Tax Code, as amended, the rate
of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding
calendar year.

The sanggunian concerned may prescribe a schedule of graduated tax rates but
in no case to exceed the rates prescribed in the LGC.

Note: In line with existing national policy, any business engaged in the production,
manufacture, refining, distribution or sale of oil, gasoline, and other
petroleum products shall not be subject to any local tax imposed under Section
143(h) of the LGC.25

Notes:

(i) Newly started business entities shall not be subject to and/or liable to the payment
of initial LBT, and shall only be subject to the payment of Business Permit and
other regulatory fees and charges.26

However, for a newly started business on printing and publication, and on a business
enjoying a franchise, a local tax based on capital investment may be imposed.27

(ii) Base of the local business tax (“LBT”) is the gross sales or receipts of the
preceding calendar year. Based on Section 143 of the LGC, the LGU may impose
taxes on businesses based on their gross sales or receipts28 of the preceding calendar

24
"Peddler" means any person who, either for himself or on commission, travels from place to place and
sells his goods or offers to sell and deliver the same. Whether a peddler is a wholesale peddler or a retail
peddler of a particular commodity shall be determined from the definition of wholesale dealer or retail
dealer as provided in Book II, Title I of the LGC (Sec. 131(t), LGC).
25
Art. 232(h), LGC IRR.
26
BLGF Opinion dated February 22, 2012.
27
Secs. 136, 137, and 151, LGC.
28
If applicable, the following shall not form part of gross sales/receipts:
(1) Receipts from the sale of real properties unless one is engaged in the business of buying and selling
real estate (BLGF Opinion dated August 22, 2011);
(2) Determinable discounts at the time of sales, sales returns, excise tax, and VAT (Sec. 131(n), LGC);
(3) Passive income, i.e. interest, dividends, and gains from sale of shares (BLGF Opinion dated
September 23, 2009);
(4) Passive income of a holding company particularly interest, rental, and dividend income, as well as
the gain on the sale of fixed assets (City of Makati vs. Metro Pacific Investments Corporation, CTA
AC No. 143, July 20, 2016);
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year. If a taxpayer has submitted or declared its gross sales or receipts, the local
treasurer shall compute the LBT based on the gross receipts.

(1) In the absence of audited Financial Statements, the LBT shall be based on the
Sworn Declaration of gross sales or receipts by the taxpayer,29 or its ITR.30

In case of suspected underdeclaration of gross sales/receipts, the business may be

subjected to examination of its books of accounts by the local treasurer.31 Such
examination shall be done after the business renewal period.

(2) The Presumptive Income Level Assessment Approach (“PILAA”) may be used in
computing the LBT only if the taxpayer is unable to provide proof of its gross
sales/receipts.32

Furthermore, the PILAA may be used in estimating a taxpayer’s gross

sales/receipts provided that the PILAA is in the local tax ordinance that has
undergone public hearings and publication. Absent such ordinance authorizing the
use of the PILAA and embodying the presumptive income levels to be used by the
Local Treasurer, the collection of additional LBTs based on such PILAA is
illegal.33

(iii) Rates of Tax Within the Metropolitan Manila Area – The municipalities within the
Metropolitan Manila Area (“MMA”) may levy taxes on businesses enumerated in
Section 143 of the LGC at rates which shall not exceed by Fifty Percent (50%) the
maximum rates prescribed for said businesses under the same section of the LGC.34

(iv) Retirement of Business - A business subject to tax on business pursuant to Section

143 of the LGC shall, upon termination thereof, submit a sworn statement of its gross
sales or receipts for the current year. If it is found that the retirement or termination of
the business is legitimate, and the tax paid during the year be less than the tax due on
said gross sales or receipts of the current year, the difference shall be paid before the
business is considered officially retired or terminated.35

(v) Payment of Business Taxes36 –

(a) The taxes imposed under Section 143 of the LGC shall be payable for every
separate or distinct establishment or place where business subject to the tax is
conducted. One line of business does not become exempt by being conducted with

(5) Amounts earmarked, whether delivered or received, which are reserved for some person other than
the taxpayer (City of Manila and the City Treasurer of Manila vs. Asian Terminals, Inc., CTA Case
No. AC-199, September 25, 2019); and
(6) For those engaged in the business of printing and publication, receipts from the printing and/or
publication of books and other reading materials prescribed by the Department of Education as school
texts and references (Sec. 136, LGC).
29
First Planters Pawnshop Inc. vs. City of Pasay, CTA EB Case No. 501, December 10, 2010.
30
JMC No. 01, series of 2016, August 30, 2016.
31
Sec. 171, LGC.
32
First Planters Pawnshop, Inc. vs. City Treasurer of Pasay City, CTA EB Case No. 501, December 10,
2010; BLGF Opinion, September 4, 2017.
33
Ibid.
34
Sec. 144, LGC, Art. 236(a), LGC IRR.
35
Sec. 145, LGC; Art. 241(b), LGC IRR.
36
Sec. 146, LGC.
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October 2021

some other business for which such tax has been paid. The tax on a business must
be paid by the person conducting the same.

(b) In cases where a person conducts or operates two (2) or more of the businesses
mentioned in Section 143 of this Code which are subject to the same rate of tax, the
tax shall be computed on the combined total gross sales or receipts of the said two
(2) or more related businesses.

(c) In cases where a person conducts or operates two (2) or more businesses mentioned
in Section 143 of this Code which are subject to different rates of tax, the gross
sales or receipts of each business shall be separately reported for the purpose of
computing the tax due from each business.

(vi) Situs of the Tax

(a) For purposes of collection of the business taxes under Section 143 of the LGC, the
businesses maintaining or operating a branch or sales outlet, or warehouse
elsewhere shall record the sale in the branch or sales outlet, or warehouse making
the sale or transaction, and the tax thereon shall accrue and shall be paid to the
city/municipality where such branch or sales outlet, or warehouse is located.

In cases where there is no such branch or sales outlet or warehouse in the city or
municipality where the sale or transaction is made, the sale shall be duly recorded
in the principal office along with the sales made by said principal office, and the
taxes due shall accrue and shall be paid to such city or municipality where said
principal office is located.37

(b) Where the taxpayer has a factory, project office, plant, or plantation, and all sales
are recorded in the principal office, the following sales allocation shall apply:

(1) Thirty percent (30%) of all sales recorded in the principal office shall be taxable
by the city or municipality where the principal office is located; and
(2) Seventy percent (70%) of all sales recorded in the principal office shall be
taxable by the city or municipality where the factory, project office, plant, or
plantation is located.

(c) In case of a plantation located at a place other than the place where the factory is
located, said seventy percent (70%) mentioned in subparagraph (2) of subsection
(b) above shall be divided as follows:

(1) Sixty percent (60%) to the city or municipality where the factory is located; and
(2) Forty percent (40%) to the city or municipality where the plantation is located.

(d) In cases where a manufacturer, assembler, producer, exporter or contractor has two
(2) or more factories, project offices, plants, or plantations located in different
localities, the seventy percent (70%) sales allocation mentioned in subparagraph
(2) of subsection (b) above shall be prorated among the localities where the
factories, project offices, plants, and plantations are located in proportion to their
respective volumes of production during the period for which the tax is due.38

37
Sec. 150(a), LGC; Art. 243 (b)(1), LGC IRR.
38
Sec. 150(d), LGC.
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In the case of project offices of service and other independent contractors, the term
“production” shall refer to the cost of projects actually undertaken during the tax
period.39

2. Fees and Charges

(a) Permits/Licenses

The municipality may impose and collect such reasonable fees and charges on business
and occupation and, except as reserved to the province in Section 13940 of the LGC, on
the practice of any profession or calling, commensurate with the cost of regulation,
inspection and licensing before any person may engage in such business or occupation, or
practice such profession or calling.

Provided that, such fees or charges shall only be commensurate to the cost of issuing the
license or permit, and the expenses incurred in the conduct of the necessary inspection or
surveillance.

No such fee or charge shall be based on capital investment or gross sales or receipts of the
person or business liable therefor.41

Notes:

(1) The conduct or operation of 2 or more related businesses under Art. 143 of the LGC
by any one person, natural or juridical, shall require the issuance of a separate permit
or license to each business.

(2) A professional who has paid his professional tax shall be exempt from the payment
of the business permit fee in the operation of his clinic or office. However, such
professional must still secure a business permit, at no cost, from the concerned LGU
during the registration of his clinic/office and renewal thereof, subject to a duly
enacted local ordinance.

(b) Fees for Sealing and Licensing of Weights and Measures

The municipality may levy fees for the sealing and licensing of weights and measures
at such reasonable rates as shall be prescribed by the sangguniang bayan.

(c) Fishery Rentals, Fees, and Charges

Municipalities shall have the exclusive authority to grant fishery privileges in the
municipal waters and impose rentals, fees or charges therefor in accordance with the
provisions of Section 149 of the LGC.

39
Art. 243(b)(5), LGC IRR.
40
The province may levy an annual professional tax on each person engaged in the exercise or practice of
his profession requiring government examination at such amount and reasonable classification as the
sangguniang panlalawigan may determine but shall in no case exceed Three Hundred Pesos (₱300.00).
41
Art. 233, LGC IRR.

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Additional Taxing Power of Municipalities Within the Metropolitan Manila Area

(“MMA”)

The municipalities within MMA, pursuant to Section 186 of the LGC, may also levy and collect
the taxes which may be imposed by the province under Sections 135 to 141 of the LGC at rates
not exceeding those prescribed therein.42

42
Art. 236(b), LGC IRR.

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CITIES

Scope of Taxing Powers of Cities

1) Except as otherwise provided in the LGC, the city may levy the taxes, fees, and charges which
the province or municipality may impose.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the
province or municipality by not more than fifty percent (50%) except the rates of professional
and amusement taxes.43

Note: The rates of the following taxes shall be uniform for the city and the province:

(a) Professional tax which shall not exceed Three Hundred Pesos (₱300); and

(b) Amusement tax on paid admission, the rate of which shall not be more than ten
percent (10%) of the gross receipts from admission fees.

Provided, however, that the taxes, fees and charges levied and collected by highly urbanized
and independent component cities shall accrue to them and shall be distributed in accordance
with the provisions of the LGC.44

2) The city may also levy and collect a percentage tax on any business not otherwise specified
under paragraphs (a) to (g) of Section 143 of the LGC at rates not exceeding three percent (3%)
of the gross sales or receipts of the preceding calendar year.

3) In addition to the annual fixed tax imposed under Section 141 of the LGC, cities may also
collect from the same manufacturers, producers, wholesalers, retailers, and dealers using route
trucks, a mayor’s permit fee which shall be imposed in a local tax ordinance pursuant to Section
147 in relation to Section 132 of the LGC.

43
Sec. 151, LGC.
44
Ibid.

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BARANGAYS

The following may be imposed by barangays:

a) Taxes of Stores/Retailers45

Tax imposed on: Stores or retailers with fixed business establishments with gross
sales or receipts of the preceding calendar year of:
(a) Not more than ₱50,000 for stores in a barangay within a
city;
(b) Not more than ₱30,000 for stores in a barangay within a
municipality.
Tax base Gross sales or receipts
Tax rate Not more than one percent (1%)

b) Service Fees or Charges

Barangays may collect reasonable fees or charges for services rendered in connection with
the regulation or the use of barangay-owned properties or service facilities such as palay,
copra, or tobacco dryers.46

c) Barangay Clearance47

No city or municipality may issue any license or permit for any business or activity unless
a clearance is first obtained from the barangay where such business or activity is located
or conducted.

For such clearance, the sangguniang barangay may impose a reasonable fee.

The application for clearance shall be acted upon within seven (7) working days from the
filing thereof. In the event that the clearance is not issued within the said period, the city
or municipality may issue the said license or permit.

d) Other Fees and Charges48

The barangay may levy reasonable fees and charges:

(1) On commercial breeding of fighting cocks, cockfights and cockpits;

(2) On places of recreation49 which charge admission fees;
(3) On billboards, signboards, neon signs, and outdoor advertisements50 at rates not
exceeding the rates found in Section 240(d)(4) of the Implementing Rules.

45
Sec. 152(a), LGC.
46
Sec. 152(b), LGC.
47
Sec. 152(c), LGC.
48
Sec. 152(d), LGC.
49
Places of recreation shall include places of amusement where one seeks admission to entertain himself
by seeing or viewing the show or performance, or those where one amuses himself by direct
participation.
50
Signs, signboards, advertisements, including stickouts, streamers, lighted signs, and other electronic
media, posters, privilege panels, store signs, placards, price strips, buntings, and the like, belonging to
manufacturers, producers, or professionals, but displayed:
a) At the place where a business or profession is conducted; or
b) On delivery or other service and public utility vehicles
14
October 2021

COMMON REVENUE-RAISING POWERS

The following revenue-raising powers are available to all LGUs:

1) Service Fees and Charges

LGUs may impose and collect such reasonable fees and charges for services rendered.51

Such fees and charges must be in an amount reasonably commensurate to the service rendered
by the LGU.

Provided, that no service charge shall be based on capital investments, or gross sales or receipts
of the person or business liable therefor.52

2) Public Utility Charges

LGUs may fix the rates for the operation of public utilities owned, operated and maintained
by them within their jurisdiction.53

The rates shall be fixed by the sanggunian concerned.54

3) Toll Fees or Charges

LGUs may prescribe the terms and conditions, through an appropriate ordinance enacted by
their sanggunians, for the use of any public road, pier, or wharf, waterway, bridge, or ferry, or
telecommunication system. LGUs, thru ordinances, may also fix reasonable toll fees and
service charges for the use thereof.

Provided, that no such toll fees or charges shall be collected from:

a) officers and enlisted men of the Armed Forces of the Philippines and members of the
Philippine National Police on mission,
b) post office personnel delivering mail,
c) persons who are physically-handicapped, and
d) disabled citizens who are sixty-five (65) years or older.

When the public safety and welfare so require, the sanggunian concerned may discontinue the
collection of the tolls and charges, and thereafter the said facility shall be free and open for
public use.55

shall be exempt from such fees or charges provided in Section 240(d)(4) and other impositions that may be
imposed by the barangay.
51
Sec. 153, LGC.
52
Art. 244(a), LGC IRR.
53
Sec. 154, LGC.
54
Art. 244(b), LGC IRR.
55
Sec. 155, LGC; Art. 244(b), LGC IRR.

15
October 2021

EXEMPTIONS:

A) FROM BUSINESS PERMIT (MAYOR’S PERMIT)

1) A professional who has paid his professional tax shall be exempt from the
payment of the business permit in the operation of his office/clinic. However, he
is still required to secure a business permit, at no cost, from the concerned LGU
during the registration of his office/clinic.56

Note: However, if a professional is actually engaged in any business activity that

does not constitute a practice of profession, he shall be liable to pay the
annual local business tax to the city or municipality concerned.

2) Service contractors providing temporary and/or outsourced services to clients

outside the LGU where it maintains its principal office, branch office, and
administrative office, are not required to secure a mayor’s/business permit in those
areas.

B) FROM LOCAL TAXES

1) BOI-registered business enterprises availing of the ITH and certified as pioneer and
non-pioneer for a period of 6 and 4 years, respectively, from the date of
registration.57

2) PEZA-registered enterprises under the ITH, except for: (a) RPT on land and
buildings; and (b) the RPT on machinery and equipment after the 3-year exemption
from such RPT.58

3) PEZA-registered business enterprises enjoying the 5% gross income tax in lieu of

all other taxes, except for RPT on land owned by developers.

4) Special Economic Zones, as may be provided by specific law.

5) Businesses engaged in the production, manufacturing, refining, distribution, or sale

of oil, gasoline, and other petroleum products.59

6) All cooperatives duly registered with the Cooperative Development Authority,

regardless of the amount of accumulated reserves and undivided net earnings.60

7) Non-stock, non-profit educational institutions. To avail of the exemption, such

institution must factually prove that it actually, directly, and exclusively used for
educational purposes the revenues and incomes sought to be exempted.61

56
BLGF MC No. 1-2020.
57
Sec. 133(g), LGC.
58
These enterprises shall also be exempted from payment of the RPT on machineries and equipment they
acquire or use in their production operations, during the first three (3) years of use of such machinery
and equipment (PEZA MC No. 2004-024).
59
Sec. 133(h), LGC.
60
Sec. 133(n), LGC.
61
CIR vs. De La Salle University, Inc., G.R. No. 196596, November 9, 2016.
16
October 2021

COMMUNITY TAX

What LGU Can Levy A Community Tax?

Cities or municipalities may levy a community tax in accordance with the provisions of Sections
156 to 164 of the LGC.62

Community Tax of Individuals

Individuals Liable to the Payment of Community Tax63

(1) Every inhabitant of the Philippines eighteen (18) years of age or over who has been
regularly employed on a wage or salary basis for at least thirty (30) consecutive
working days during any calendar year, or
(2) An individual who is engaged in business or occupation, or
(3) An individual who owns real property with an aggregate assessed value of One
Thousand Pesos (₱1,000.00) or more, or
(4) An individual who is required by law to file an income tax return.

Rate of Community Tax Payable by Individuals64

(1) The rate of community tax that may be levied and collected from said individuals shall
be:

a) An annual (basic) community tax of Five Pesos (₱5.00) plus

b) An annual additional tax of One Peso (₱1.00) for every One Thousand Pesos
(₱1,000.00) of income regardless of whether from business, exercise of profession
or from property, which in no case shall exceed Five Thousand Pesos (₱5,000.00).

(2) In the case of husband and wife, each of them shall be liable to pay the basic tax of
₱5.00, but the additional tax imposable on the husband and wife shall be ₱1.00 for
every ₱1,000 of income from the total property owned by them and/or the total gross
receipts or earnings derived by them.

Community Tax of Juridical Persons

Juridical Persons Liable to the Payment of Community Tax

Every corporation65 no matter how created or organized, whether domestic or resident

foreign, engaged in or doing business in the Philippines shall be liable to pay the
community tax.66

62
Sec. 156, LGC.
63
Sec. 157, LGC.
64
Sec. 157, LGC; Art. 246(a) and (b), LGC IRR.
65
"Corporation" includes partnerships, no matter how created or organized, joint-stock companies, joint
accounts (cuentas en participacion), associations or insurance companies but does not include general
professional partnerships and a joint venture or consortium formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal, and other energy operations pursuant
to an operating or consortium agreement under a service contract with the government.
66
Sec. 158, LGC.
17
October 2021

Note: A cooperative enjoying exemption from local taxes, including the real property tax,
is still required to secure a Mayor’s permit and the Community Tax Certificate.67

Rate of Community Tax Payable by Juridical Persons68

(1) An annual community tax of Five Hundred Pesos (₱500.00) plus

(2) An annual additional tax, which, in no case, shall exceed Ten Thousand Pesos
(₱10,000.00) in accordance with the following schedule:
(a) For every Five Thousand Pesos (₱5,000.00) worth of real property in the Philippines
owned by it during the preceding year based on the valuation used for the payment
of real property tax under existing laws, found in the assessment rolls of the city or
municipality where the real property is situated - Two Pesos (₱2.00); and
(b) For every Five Thousand Pesos (₱5,000.00) of gross receipts or earnings derived
by it from its business in the Philippines during the preceding year - Two Pesos
(₱2.00).

Note: Dividends received by a corporation from another corporation shall, for the
purpose of the additional tax, be considered as part of the gross receipts or
earnings of said corporation.

Exemptions from Payment of the Community Tax

The following are exempt from the community tax:69

(1) Diplomatic and consular representatives; and

(2) Transient visitors when their stay in the Philippines does not exceed three (3) months.

Place and Time of Payment of the Community Tax

The community tax shall be paid in the city/municipality where the individual resides, or in the
city/municipality where the principal office of the juridical entity is located regardless if the entity
operates a branch or sales office in any other LGU.70

The community tax shall accrue on the first (1st) day of January of each year which shall be paid
not later than the last day of February of each year.71

Corporations established and organized on or before the last day of June shall be liable for the
community tax for that year.

Corporations established and organized on or before the last day of March shall have twenty (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.

67
BLGF Opinion No. 26-2016, September 16, 2016.
68
Sec. 158, LGC.
69
Sec. 159, LGC.
70
Sec. 160, LGC; BLGF MC No. 001-2020, January 2, 2020.
71
Sec. 161, LGC.
18
October 2021

Penalties for Delinquency

If the community tax is not paid within the time prescribed above, there shall be added to the
unpaid amount an interest of twenty-four percent (24%) per annum from the due date until it is
paid.72

Note: The total interest on the unpaid amount or portion shall not exceed 36 months. Thus, the
penalty for late payment of the community tax shall not go beyond 36 months or 72% of
the unpaid amount.73

Community Tax Certificate74

A community tax certificate shall be issued to every person or corporation upon payment of the
community tax.

A community tax certificate may also be issued to any person or corporation not subject to the
community tax upon payment of One Peso (₱1.00).

Presentation of Community Tax Certificate On Certain Occasions75

(a) When an individual subject to the community tax:

(1) acknowledges any document before a notary public;
(2) takes the oath of office upon election or appointment to any position in the government
service;
(3) receives any license, certificate, or permit from any public authority;
(4) pays any tax or fee;
(5) receives any money from any public fund;
(6) transacts other official business; or
(7) receives any salary or wage from any person or corporation with whom such transaction is
made or business done or from whom any salary or wage is received to require such
individual to exhibit the community tax certificate.

However, the presentation of community tax certificate shall not be required in connection
with the registration of a voter.

(b) When, through its authorized officers, any corporation subject to the community tax receives
any license, certificate, or permit from any public authority, pays any tax or fee, receives
money from public funds, or transacts other official business, it shall be the duty of the public
official with whom such transaction is made or business done, to require such corporation to
exhibit the community tax certificate.

(c) The community tax certificate required in the two preceding paragraphs shall be the one issued
for the current year, except for the period from January until the fifteenth (15th) of April each
year, in which case, the certificate issued for the preceding year shall suffice.

72
Sec. 161, LGC.
73
Secs. 168, 169, LGC; BLGF MC No. 001-2020, January 2, 2020.
74
Sec. 162, LGC.
75
Sec. 164, LGC.
19
October 2021

Collection of the Community Tax and Distribution of Proceeds

The city or municipal treasurer shall deputize the barangay treasurer to collect the community tax
in their respective jurisdictions: Provided, however, that said barangay treasurer shall be bonded
in accordance with existing laws.76

76
Sec. 164(b), LGC.

20
October 2021

COLLECTION OF LOCAL TAXES

Tax Period and Manner of Payment

Unless otherwise provided in the LGC, 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, as may be provided in the tax
ordinance.77

Accrual of Tax

Unless otherwise provided in the LGC, all local taxes, fees, and charges shall accrue on the first
(1st) day of January of each year.

However, new taxes, fees or charges, or changes in the rates thereof, shall accrue on the first (1st)
day of the quarter next following the effectivity of the ordinance imposing such new levies or
rates.78

Time of Payment

Unless otherwise provided in the LGC, all local taxes, fees, and charges shall be paid within the
first twenty (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 for payment of
such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding
six (6) months.79

Penalties

Surcharges and Interest on Unpaid Taxes

The sanggunian may impose a surcharge not exceeding twenty-five (25%) of the amount of
taxes, fees or charges not paid on time, and an interest at the rate not exceeding two percent
(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
thirty-six (36) months.80

Penalties for Violation of Tax Ordinances

The sanggunian of an LGU is authorized to prescribe fines and other penalties for the violation
of tax ordinances. Such fines shall not be less than One Thousand Pesos (₱1,000) nor shall it
be more than Five Thousand Pesos (₱5,000). The penalty of imprisonment shall not be less
than one (1) month nor shall it be more than six (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 One Hundred Pesos (₱100)
nor more than One Thousand Pesos (₱1,000).81

77
Sec. 165, LGC; Art. 253, LGC IRR.
78
Sec. 166, LGC.
79
Sec. 167, LGC.
80
Sec. 168, LGC.
81
Sec. 516, LGC.
21
October 2021

Collection of Local Revenue by Treasurer

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 the LGC.82

CIVIL REMEDIES FOR COLLECTION OF REVENUES

Local Government's Lien

Local taxes, fees, charges and other revenues constitute a lien, superior to all liens, charges or
encumbrances in favor of any person, enforceable by appropriate administrative or judicial action,
not only upon any property or rights therein which may be subject to the lien but also upon property
used in business, occupation, practice of profession or calling, or exercise of privilege with respect
to which the lien is imposed.

The lien may only be extinguished upon full payment of the delinquent local taxes, fees and
charges including related surcharges and interest.83

Civil Remedies

(1) Assessment

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.84

Note: Local taxes accrue on the 1st day of January of each year unless otherwise provided in the
LGC. However, 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.85

Exception to the Period of Limitation

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.86

82
Sec. 170, LGC.
83
Sec. 173, LGC.
84
Sec. 194(a), LGC.
85
Sec. 166, LGC.
86
Sec. 194(b), LGC.
22
October 2021

(2) Collection

Period of Collection

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.87

The civil remedies for the collection of local taxes, fees, or charges, and related surcharges
and interest resulting from delinquency shall be:88

(a) By administrative action thru:

(i) distraint of goods, chattels, or effects, and other personal property of whatever
character, including stocks and other securities, debts, credits, bank accounts, and
interest in and rights to personal property, and
(ii) by levy upon real property and interest in or rights to real property; and

(b) By judicial action. The LGU concerned may enforce collection by civil action in any
court of competent jurisdiction. The case shall be filed by the local treasurer.

Either of these remedies or all may be pursued concurrently or simultaneously at the

discretion of the LGU concerned.

Personal Property Exempt from Distraint or Levy

The following properties shall be exempt from distraint and the levy, attachment or execution
thereof for delinquency in the payment of any local tax, fee or charge, including the related
surcharge and interest:89

(a) Tools and implements necessarily used by the delinquent taxpayer in his trade or
employment;
(b) One (1) horse, cow, carabao, or other beast of burden, such as the delinquent taxpayer may
select, and necessarily used by him in his ordinary occupation;
(c) His necessary clothing, and that of all his family;
(d) Household furniture and utensils necessary for housekeeping and used for that purpose by
the delinquent taxpayer, such as he may select, of a value not exceeding Ten Thousand
Pesos (₱10,000.00);
(e) Provisions, including crops, actually provided for individual or family use sufficient for
four (4) months;
(f) The professional libraries of doctors, engineers, lawyers and judges;
(g) One fishing boat and net, not exceeding the total value of Ten Thousand Pesos
(₱10,000.00), by the lawful use of which a fisherman earns his livelihood; and
(h) Any material or article forming part of a house or improvement of any real property.

Suspension of the Running of the Prescriptive Periods

The running of the periods of prescription for assessment and collection of the local taxes, fees,
and charges shall be suspended for the time during which:90

(1) The treasurer is legally prevented from making the assessment or collection;

87
Sec. 194(c), LGC.
88
Sec, 174, LGC.
89
Sec. 185, LGC.
90
Sec. 194(d), LGC.
23
October 2021

(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.

TAXPAYERS’ REMEDIES

(1) Protest of Assessment

Receipt of Assessment

Within 60 days

File Protest with

Local Treasurer

Within 60 days

Protest is denied OR Not Acted Upon

Within 30 days

Appeal to the Regional

Trial Court (“RTC”)

Appeal is Denied by the

RTC

Within 15 days

Appeal to the Court of

Tax Appeals (“CTA”)

Notes:

(a) There is no requirement that the local tax be paid before the taxpayer can file a protest to
contest the assessment.
(b) Administrative remedies must first be exhausted before the taxpayer can seek redress in
the RTC.

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 October 2021

(2) Injunction Against the Collection of Local Taxes

Injunction91 against the collection of local taxes is available but only when the following
conditions concur:

i) Such a suit is not forbidden by law;

ii) The ground for issuing an injunction is to prevent the collection of wrongful taxes by an
LGU; and
iii) There is no other adequate remedy to redress the injury to property which would be
inflicted by enforcing the payment of the tax.92

(3) Claim for Refund or Tax Credit

Payment of the tax, fee or charge

Within 2 years

File Claim for Refund or Tax Credit with

the Local Treasurer

Denial of Claim
Within 2 years

Within 30 days
Appeal to the Regional
Trial Court (“RTC”)

Appeal is Denied by the

RTC

Within 15 days

Appeal to the Court of

Tax Appeals (“CTA”)

Notes:

(a) All taxpayers entitled to a refund or tax credit shall file with the local treasurer a claim in
writing duly supported by evidence of payment (e.g., official receipts, tax clearance, and such
other proof evidencing overpayment) within 2 years from payment of the tax, fee, or charge.

91
Issued by the Regional Trial Court.
92
Valley Trading Co., Inc., v. Court of First Instance, et. al. 171 SCRA 601 (1989).
25
October 2021

(b) Exhaustion of administrative remedies is required. No case or proceeding shall be entertained

in any court without the aforementioned claim in writing, and after the expiration of 2 years
from the date of payment of such tax, fee, or charge.

(c) The tax credit granted a taxpayer shall not be refundable in cash but shall only be applied to
future tax obligations of the same taxpayer for the same business.

Any unpaid balance of the tax credit shall be refunded in cash in the event he terminates
operation of the business involved within the locality.93

93
Art. 286, LGC IRR.
26
October 2021

REAL PROPERTY TAXATION

Fundamental Principles

The appraisal94, assessment95, 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 value96;
(b) Real property shall be classified for assessment purposes on the basis of its actual use97;
(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 let to any private
person; and
(e) The appraisal and assessment of real property shall be equitable.

Municipal Corporations That May Levy Real Property Taxes

Under Section 232 of the LGC, only the following municipal corporations may levy a real property
tax, namely:

(1) Provinces;
(2) Cities; and
(3) Municipality within the Metropolitan Manila Area (“MMA”)98.

The above-mentioned LGUs may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not specifically exempted by the LGC.99

Note: Municipalities outside the MMA have no power to levy real property taxes.

Persons Liable for Real Property Tax

The liability for the real property tax generally rests on the owner of the real property at the time
the tax accrues as a necessary repercussion of exclusive dominion. However, personal liability for
real property taxes may also expressly rest on the entity with the beneficial use of real property.
In either case, the unpaid tax attaches to the property, and is chargeable against the taxable person
who had actual or beneficial use and possession of it regardless of whether or not he is the owner.100

94
"Appraisal" is the act or process of determining the value of property as of a specified date for a specific
purpose (Sec. 199(e), LGC).
95
"Assessment" is the act or process of determining the value of a property, or proportion thereof subject to
tax, including the discovery, listing, classification, and appraisal of properties (Sec. 199(f), LGC).
96
"Fair Market Value" is the price at which a property may be sold by a seller who is not compelled to sell
and bought by a buyer who is not compelled to buy (Sec. 199(l), LGC).
97
“Actual Use” refers to the purpose for which the property is principally or predominantly utilized by the
person in possession thereof (Sec. 199(b), LGC).
98
The lone municipality in Metro Manila is Pateros.
99
Sec. 232, LGC.
100
To impose the real property taxes on a taxpayer who was neither the owner nor the beneficial user of
the property during the designated periods would not only be contrary to law but also unjust (Provincial
27
October 2021

A contractual assumption of the obligation to pay real property tax, by itself, is insufficient to make
one liable for taxes. The contractual assumption of tax liability must be supplemented by an
interest that the party assuming the liability had on the property. The person from whom payment
is sought must also have acquired the beneficial use of the property taxed. In other words, he must
have the use and possession of the property.101

Computation of Real Property Tax Due

Procedural steps in computing the real property tax:

(1) Ascertain the assessment level of the property.

(2) Multiply the market value by the applicable assessment level to get the assessed value.
(3) Find the tax rate which corresponds to the class of the property.
(4) Multiply the assessed value by the applicable tax rates.

APPRAISAL AND ASSESSMENT

Appraisal of Real Property

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.

Declaration of Real Property

a) By the Owner or Administrator,
b) By the Person Acquiring Real Property or Making Improvement Thereon, or
c) By the Assessor

Notes:
1) The declaration shall be in the form of a sworn statement declaring the true value of
their property, whether previously declared or undeclared, taxable or exempt, which
shall be the current and fair market value of the property, as determined by the
declarant.
2) The local assessor shall declare only real property previously undeclared for taxation
purposes.

Assessment

Listing of Real Property in the Assessment Rolls

In every province and city, including the municipalities within the Metropolitan Manila Area,
there shall be prepared and maintained by the provincial, city or municipal assessor an
assessment roll wherein shall be listed all real property, whether taxable or exempt, located
within the territorial jurisdiction of the LGU concerned.

Government of Cavite and Provincial Treasurer of Cavite vs. CQM Management, Inc., Supreme Court
(2nd Division) G.R. No. 248033, July 15, 2020).
101
National Power Commission vs. Province of Quezon, Supreme Court, 610 PHIL 456 (2009).
28
October 2021

Real property shall be listed, valued and assessed in the name of the owner or administrator,
or anyone having legal interest in the property.

Actual Use of Real Property as Basis for Assessment

Real property shall be classified, valued and assessed on the basis of its actual use regardless
of where located, whoever owns it, and whoever uses it.102 (Sec. 217, LGC).

Classes of Real Property for Assessment Purposes

For purposes of assessment, real property shall be classified as:

(a) residential, (b) agricultural, (c) commercial, (d) industrial, (e) mineral103, (f)
timberland, or (g) special104

by the provincial and city assessors, including the municipal assessors of the Metropolitan
Manila Area.

The cities or municipalities within the Metropolitan Manila Area, through their respective
sanggunian, shall have the power to classify lands as residential, agricultural, commercial,
industrial, mineral, timberland, or special in accordance with their zoning ordinances provided
such classification is on the basis of actual use as provided in Section 217 of the LGC.105

Appraisal and Assessment of Machinery106

(a) The fair market value of a brand new machinery shall be the acquisition cost (including the
cost of transportation, handling, and installation). In all other cases, the fair market value
shall be determined by dividing the remaining economic life of the machinery by its
estimated economic life, and multiplied by the replacement or reproduction cost.

102
Sec. 217, LGC.
103
"Mineral Lands" are lands in which minerals, metallic or non-metallic, exist in sufficient quantity or
grade to justify the necessary expenditures to extract and utilize such materials (Sec. 199(p), LGC).
104
“Special Lands” are lands, buildings, and other improvements thereon actually, directly and exclusively
used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts,
and GOCCs rendering essential public services in the supply and distribution of water and/or generation
and transmission of electric power (Sec. 216, LGC).
105
Sec. 215, LGC; Art. 306, LGC IRR.
106
"Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or
apparatus which may or may not be attached, permanently or temporarily, to the real property.

Machinery which are of general purpose or use including but not limited to office equipment,
typewriters, telephone equipment, breakable or easily damaged containers (glass or cartons),
microcomputers, facsimile machines, telex machines, cash dispensers, furnitures and fixtures,
refrigerators, display cases or racks, fruit juice or beverage automatic dispensing machines which are
not directly and exclusively used to meet the needs of a particular industry, business or activity, shall
not be considered within the definition of machinery.

Residential machinery shall include machines, equipment, appliances or apparatus permanently attached
to residential land and improvements or those immovable by destination (Art. 290(o), LGC IRR).

29
October 2021

(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and
other charges, brokerage, arrastre and handling, duties and taxes, plus cost of inland
transportation, handling, and installation charges at the present site. The cost in foreign
currency of imported machinery shall be converted to peso cost on the basis of foreign
currency exchange rates as fixed by the Central Bank.107

Depreciation Allowance for Machinery

For purposes of assessment, a depreciation allowance shall be made for machinery at a rate
not exceeding five percent (5%) of its original cost or its replacement or reproduction cost,
as the case may be, for each year of use.

Provided, however, that the remaining value108 for all kinds of machinery shall be fixed at
not less than twenty percent (20%) of such original, replacement, or reproduction cost for
so long as the machinery is useful and in operation.109

107
Sec. 224, LGC; Art. 315, LGC IRR).
108
"Remaining Value" is the value corresponding to the remaining useful life of the machinery (Sec. 199(s),
LGC).
109
Sec. 225, LGC.
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Assessment Levels110

The assessment levels to be applied to the fair market value of real property to determine its
assessed value111 shall be fixed by ordinances of the sangguniang panlalawigan, sangguniang
panlungsod, or sangguniang bayan of a municipality within the Metropolitan Manila Area.

110
"Assessment Level" is the percentage applied to the fair market value to determine the taxable value of
the property. These shall be set by the sanggunian concerned but shall not exceed the following:

(a) On Lands:
ASSESSMENT
CLASS
LEVELS
Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%
Timberland 20%

(b) On Buildings and Other Structures:

(1) Residential
Fair Market Value Assessment
Not Over
Over Level
₱ 175,000 0%
₱ 175,000 300,000 10%
300,000 500,000 20%
500,000 750,000 25%
750,000 1,000,000 30%
1,000,000 2,000,000 35%
2,000,000 5,000,000 40%
5,000,000 10,000,000 50%
10,000,000 60%

(2) Agricultural
Fair Market Value Assessment
Not Over
Over Level
₱300,000 25%
₱300,000 500,000 30%
500,000 750,000 35%
750,000 1,000,000 40%
1,000,000 2,000,000 45%
2,000,000 50%

(3) Commercial/Industrial
Fair Market Value Assessment
Not Over
Over Level
₱300,000 30%
₱300,000 500,000 35%
500,000 750,000 40%
750,000 1,000,000 50%
1,000,000 2,000,000 60%
2,000,000 5,000,000 70%
5,000,000 10,000,000 75%
10,000,000 80%

(4) Timberland
Fair Market Value Assessment
Not Over
Over Level
₱300,000 45%

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October 2021

Real Property Tax Rates

(1) Basic Real Property Tax

(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed
value of real property; and
(b) In the case of a city or a municipality within the Metropolitan Manila Area, at the
rate not exceeding two percent (2%) of the assessed value of real property.112

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 GOCCs 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; and
(e) Machinery and equipment used for pollution control and environmental protection.

₱300,000 500,000 50%

500,000 750,000 55%
750,000 1,000,000 60%
1,000,000 2,000,000 65%
2,000,000 70%

(c) On Machineries:
ASSESSMENT
CLASS
LEVELS
Agricultural 40%
Residential 50%
Commercial 80%
Industrial 80%

(d) On Special Classes: Assessment levels for all

lands, buildings, machineries, and other
improvements
ASSESSMENT
ACTUAL USE
LEVELS
Cultural 15%
Scientific 15%
Hospital 15%
Local Water Districts 10%
GOCCs engaged in the 10%
supply and distribution of
water and/or generation
and transmission of
electric power
111
"Assessed Value" is the fair market value of the real property multiplied by the assessment level. It is
synonymous to taxable value (Sec. 199(h), LGC).
112
Sec. 233, LGC.
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October 2021

(f) PEZA-registered business enterprises which are non-developers and which are
enjoying the 5% gross income tax in lieu of all other taxes.

(g) PEZA-registered enterprises under the ITH shall be exempted from payment of the
RPT on machineries and equipment they acquire or use in their production operations,
during the first three (3) years of use of such machinery and equipment.113

(2) Special Levies

(a) Additional Levy on Real Property for the Special Education Fund (“SEF”)
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”).114

(b) Additional Ad Valorem Tax on Idle Lands

A province or city, or a municipality within the Metropolitan Manila Area, may levy
an annual tax on idle lands at the rate not exceeding five percent (5%) of the assessed
value of the property which shall be in addition to the basic real property tax.115

For purposes of real property taxation, idle lands shall include the following:

(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation,
dairying, inland fishery, and other agricultural uses, one-half (1/2) of which remain
uncultivated or unimproved by the owner of the property or person having legal
interest therein.

Exceptions: The following shall not be considered idle land:

(1) Agricultural lands planted to permanent or perennial crops with at least fifty
(50) trees to a hectare; and
(2) Lands actually used for grazing purposes.

(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.

However, a province or city or a municipality within the Metropolitan Manila Area

may exempt idle lands from the additional levy by reason of force majeure, civil
disturbance, natural calamity or any cause or circumstance which physically or legally
prevents the owner of the property or person having legal interest therein from
improving, utilizing or cultivating the same.116

(c) Special Levy (Special Assessment) 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 LGU concerned.

113
PEZA MC No. 2004-024.
114
Sec. 235, LGC.
115
Sec. 236, LGC.
116
Sec. 238, LGC.
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October 2021

Provided, however, that:

(1) 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; and

(2) the special levy shall not apply to (a) lands exempt from basic real property tax,
and (b) the remainder of the land portions of which have been donated to the LGU
concerned for the construction of such projects or improvements.117

COLLECTION OF REAL PROPERTY TAX

Date of Accrual of Tax

The real property tax for any year shall accrue on the first day of January and from that date it
shall constitute a lien on the property which shall be superior to any other lien, mortgage, or
encumbrance of any kind whatsoever, and shall be extinguished only upon the payment of the
delinquent tax.118

Collection of Tax

The collection of the real property tax with interest thereon and related expenses, and the
enforcement of the remedies provided for in Title II of the LGC or any applicable laws, shall be
the responsibility of the city or municipal treasurer concerned.119

The city or municipal treasurer may deputize the barangay treasurer to collect all taxes on real
property located in the barangay. Provided, that:

(a) the barangay treasurer is properly bonded for the purpose; and
(b) the premium on the bond shall be paid by the city or municipal government concerned.120

Notes: Before any document of transfer, alienation, or encumbrance of real property may be
registered, the Registrar of Deeds shall require the presentation of a certificate or clearance
issued by the Local Treasurer concerned to the effect that all current and past year basic
real property tax, the additional special educational fund levy, other real property taxes,
and the tax on transfer of real property ownership due on the subject property, have been
paid in full including interests or penalties due thereon.121

Payment of Real Property Taxes in Installments

The owner of the real property or the person having legal interest therein may pay the basic real
property tax and the additional tax for Special Education Fund (“SEF”) due thereon without
interest in four (4) equal installments:

117
Sec. 240, LGC.
118
Sec. 246, LGC.
119
Sec. 247, LGC.
120
Ibid.
121
Art. 300(b), LGC IRR.

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October 2021

(1) the first installment to be due and payable on or before March Thirty-one (31);
(2) the second installment, on or before June Thirty (30);
(3) the third installment, on or before September Thirty (30); and
(4) the last installment on or before December Thirty-one (31).

However, the payment of the special levy (special assessment) shall be governed by ordinance of
the sanggunian concerned.

The date for the payment of any other tax imposed under this Title without interest shall be
prescribed by the sanggunian concerned.

Payments of real property taxes shall first be applied to prior years’ delinquencies, interests, and
penalties, if any. Only after said delinquencies are settled may tax payments be credited for the
current period.122

Periods Within Which To Collect Real Property Taxes

The basic real property tax and any other tax levied under Title II of Book II of the LGC shall
be collected within five (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 ten (10) years from the discovery of such fraud or intent to
evade payment.

Note: For purposes of the ordinary prescriptive period of 5 years, the real property tax accrues
on the 1st day of January. The special levy accrues on the 1st day of the quarter
following the effectivity of the ordinance imposing the levy.123

Suspension of the Running of the Prescriptive Period

The period of prescription within which to collect shall be suspended for the time during
which:124

(1) The local treasurer is legally prevented from collecting the tax;

(2) The owner of the property or the person having legal interest therein requests for
reinvestigation, and executes a waiver in writing before the expiration of the period
within which to collect; and

(3) The owner of the property or the person having legal interest therein is out of the
country or otherwise cannot be located.

122
Sec. 250, LGC.
123
Secs. 245 and 246, LGC.
124
Sec. 270, LGC.
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 October 2021

REMEDIES OF THE TAXPAYER

(1) PROTEST and ASSESSMENT APPEALS

Payment of the tax under protest

Within 30 days

File Protest with the Local Treasurer

Within 60 days

Denial of Protest

Within 60 days

Appeal to the Local Board of Assessment

Appeals (“LBAA”)

Within 120 days

Adverse Decision of the LBAA

Note: Within the same 30 days

from the time of receipt of the
adverse decision, the taxpayer can
also file a Motion for
Reconsideration with the LBAA. Within 30 days

Appeal to the Central Board of

Assessment Appeals (“CBAA”)

Adverse decision of the CBAA

Within 30 days

File a Petition for Review with the CTA

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October 2021

Notes:

(1) A taxpayer must first exhaust his administrative remedies, i.e. file a protest with the local
treasurer, and appeal to the LBAA, before seeking redress from the courts.

However, if what is being questioned is the very authority and power of the assessor to
impose the tax, the administrative proceedings provided in the LGC will not apply.

In cases where immediate resort to the courts is allowed without the taxpayer exhausting
the administrative remedies provided by law, the taxpayer can bring the matter to the
Regional Trial Courts (“RTCs”).

If a taxpayer is not satisfied with the decision of the RTC, the taxpayer may file, within
thirty (30) days from receipt of the assailed decision, a Petition for Review with the Court
of Tax Appeals (“CTA”). A division of the CTA shall hear the case.

(2) Appeal taken to the CTA shall not suspend the payment, levy, distraint, and/or sale of any
property of the taxpayer for the satisfaction of his tax liability as provided by existing law.

Provided, however, that when in the opinion of the CTA the collection may jeopardize the
interest of the Government and/or the taxpayer, the CTA, at any stage of the proceeding,
may suspend the said collection and require the taxpayer either to deposit the amount
claimed or to file a surety bond for not more than double the amount with the CTA.125

(2) CLAIM FOR REFUND/CREDIT

When an assessment of basic real property tax, or any other tax levied under this Title II of
the LGC, 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 two (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 sixty (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 “Assessment Appeals.”

(3) INJUNCTION

When in the opinion of the CTA the collection may jeopardize the interest of the Government
and/or the taxpayer, the CTA, at any stage of the proceeding, may suspend the said collection
and require the taxpayer either to deposit the amount claimed or to file a surety bond for not
more than double the amount with the CTA.126

125
R.A. No. 9282.
126
Ibid.

37