LOCAL TAXATION 5/6/2023 Atty.

Villo-Murillo
_____________________________________________________________________________________

Section 5. Each local government unit shall have the power to create its own sources of revenues and to
levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively
to the local governments.
This is not an inherent power unlike the power of the state to tax
Section 130. Fundamental Principles. - The following fundamental principles shall govern the exercise of
the taxing and other revenue-raising powers of local government units:
(a) Taxation shall be uniform in each local government unit;

(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;

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition
unless otherwise specifically provided herein; and

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition
unless otherwise specifically provided herein; and

a(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

LIMITATIONS OF LOCAL TAX IMPOSITION

Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
NOT extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise
provided herein;

(d) Customs duties,

(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of local government units 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; (ex. Toll fee everytime mo agi Sumilao is not allowed because government owned
has free passage except on toll fees in expressway in Manila because they are collected by private
individuals)

(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;

(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a
period of six (6) and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the national Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;

(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on
goods or services except as otherwise provided herein; (take note)

(j) 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;

(k) Taxes on premiums paid by way or reinsurance or retrocession;

(l) 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; (LTO has the power except tricycles)

(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided
herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly
registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the "Cooperative Code of the Philippines" respectively; and

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and
local government units.

REMEMBER: IF NA IMPOSED NA SA OTHER AGENCY, DILI NA PWEDE I-IMPOSED SA LGU to

prevent double taxation.

BAR Q:

In 2018, City X amended its Revenue Code to include a new provision imposing a tax on every sale of
merchandise by a wholesaler based on the total selling price of the goods, inclusive of value-added taxes
(VAT). ABC Corp., a wholesaler operating within the city, challenged the new provision based on the
following contentions: 1. The new provision is a form of prohibited double taxation because it essentially
amounts to City X imposing VAT which was already being levied by the national government; and 2. since
the tax being imposed is akin to VAT, it is beyond the power of City X to levy the same.
Rule on each of ABC Corp.’s contentions. (5%)

SUGGESTED ANSWER:
With regard to the first contention, ABC Corp is incorrect. Under the NIRC, direct double taxation exists
only when all of the following requisites are present:
The two taxes must be imposed on the same:

1. subject matter,
2. purpose,
3. by the same taxing authority,
4. within the same jurisdiction
5. during the same taxing period;
6. the taxes must be of the same kind or character.

In this case, the taxing authorities are different. Hence, the tax to be imposed by the LGU is not a form of
direct double taxation.
With regard to the second contention, ABC Corp is incorrect. Under the LGC, LGU’s are empowered to
enact ordinances that will aid in their revenue generation, which is consonance with the principle of the
fiscal autonomy of LGU’s. Although the tax to be imposed is akin to VAT, the LGU may nevertheless
impose such local business tax.

SEC. 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city may levy the taxes,
fees and charges which the province or municipality may impose: Provided, however, That the taxes, fees
and charges levied and collected by highly urbanized and independent component cities shall accrue to
them and distributed in accordance with the provisions of this Code.

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.
(Kung sa City, pwede mag impose ug taxes that may be imposed by municipality or province)

3 kinds of cities
1. highly urbanized city
2. independent component cities (CDO, no need to remit tax collected sa province)
3. component cities (part sa province, need to remit tax collected sa province)

PROVINCES:

1. Tax on transfer of real property ownership (Sec. 135, LGC)

2. Tax on business of printing and publication (Sec. 136, LGC)
3. Franchise Tax (Sec. 137, LGC)
4. Tax on sand, gravel and other quarry resources (Sec. 138, LGC)
5. Professional tax (Sec. 139, LGC)
6. Amusement tax (Sec. 140, LGC)
7. Annual fixed tax for every delivery truck or van of manufacturers or producers, wholesalers of, dealers, or
retailer in certain products (Sec. 141, LGC)
8. Annual ad valorem tax on real property such as land, building, machinery, and other improvement not
specifically exempted at the rate not exceeding 1% of the assessed value of the real property (Sec. 232,
LGC)
9. Special levies on real property
10. Toll fees or charges for the use of any public road, pier, or wharf, waterway, bridge, ferry, or
telecommunication system funded and constructed by the provincial government (Sec. 155, LGC)
11. Reasonable fees and charges for services rendered (Sec. 153, LGC)
12. Charges for the operation of public utilities owned, operated, and maintained by the provincial
government (Sec. 154, LGC) 13. Slaughter fees, corral fees, market fees, charges for holding benefits
14. Tuition fees from the operation of the provincial high school, except in the public elementary grades

Professional tax (Sec. 139, LGC)

Every person legally authorized to practice his profession shall pay the professional tax to the province
where he practices his profession or where he maintains his principal office in case he practices his
profession in several places: Provided, however, That such person who has paid the corresponding
professional tax shall be entitled to practice his profession in any part of the Philippines without being
subjected to any other national or local tax, license, or fee for the practice of such profession.

Ex:
You practice in Bukidnon, and transferred to CDO kay na hire, no need to pay again for that year.
Also any prof. employed in the govt is exempt from paying prof. tax

Only those persons engaged in the practice of their profession with govt exams must pay
professional tax.

Amusement tax (Sec. 140, LGC)

Province cannot impose tax to resorts, bath houses, tourists’ spots are not included in amusement such as
cinemas, boxing stadium, theatre, circus and all other amusement activities to see to enjoy. (in NIRC,
boxing exhibitions, Jai Alai and race tracks, basketball games, etc)
WHEN BOXING EXHIBITIONS EXEMPTED FROM AMUSEMENT TAX (all 3 must be present to be
exempt)

(1) World or Oriental Championships in any division is at stake

(2) at least one of the contenders for World or Oriental Championship is a citizen of the Philippines and
(3) said exhibitions are promoted by a citizen/s of the Philippines or by a corporation or association at least
sixty percent (60%) of the capital of which is owned by such citizens

If NIRC –drtzo sa BIR

If province 50-50?

Golf cannot be taxed under LGC. This is not included in the amusement as define. They do not enter a golf
course to see and be amused but a physical activity.

MBM Corporation is the owner-operator of movie houses in Cavite. During the year 2010, it received a total
gross receipts of P20 Million from the operation of movies. It did not register as a VAT person. Which
statement below is correct?
a) MBM Corporation is exempt from the 12% VAT, but liable for the 20% amusement tax on admissions
under the Local Government Code; b) MBM Corporation is both liable for the 12% VAT and 20%
amusement tax on admissions; c) MBM Corporation is both exempt from the 12% VAT and 20%
amusement tax on admissions; d) MBM Corporation is liable for the 12% VAT, but exempt from the 20%
amusement tax on admissions

Answer:
A. If you engage services is already subjected to percentage taxes (such as amusement tax), you are
already exempted from the VAT. Amusement is a kind of percentage tax (but take note there is not
20% in the NIRC. In fails under cinema in the example above)

QUESTION ON LOCAL TAX

1. The City of Maharlika passed an ordinance imposing a tax on any sale or transfer of real
property located within the city at a rate of fifty percent (50%) of one percent (1%) of
the total consideration of the transaction. Jose sold a parcel of land in the city, which he
inherited from his deceased parents, and refused to pay the aforesaid tax. He instead
filed a case asking that the ordinance be declared null and void since the tax it imposed
can only be collected by the national government, as in fact he was paid the Bureau of
Internal Revenue (BIR) the required Capital Gain Tax. If you were the city legal officer
of Maharlika what defenses would you raise to sustain the validity of the ordinance?
QUESTION ON LOCAL TAX
1. The City of Maharlika passed an ordinance imposing a tax on any sale or transfer of real
property located within the city at a rate of fifty percent (50%) of one percent (1%) of
the total consideration of the transaction. Jose sold a parcel of land in the city, which he
inherited from his deceased parents, and refused to pay the aforesaid tax. He instead
filed a case asking that the ordinance be declared null and void since the tax it imposed
can only be collected by the national government, as in fact he was paid the Bureau of
Internal Revenue (BIR) the required Capital Gain Tax. If you were the city legal officer
of Maharlika what defenses would you raise to sustain the validity of the ordinance?
QUESTION ON LOCAL TAX
1. The City of Maharlika passed an ordinance imposing a tax on any sale or transfer of real
property located within the city at a rate of fifty percent (50%) of one percent (1%) of
the total consideration of the transaction. Jose sold a parcel of land in the city, which he
inherited from his deceased parents, and refused to pay the aforesaid tax. He instead
filed a case asking that the ordinance be declared null and void since the tax it imposed
can only be collected by the national government, as in fact he was paid the Bureau of
Internal Revenue (BIR) the required Capital Gain Tax. If you were the city legal officer
of Maharlika what defenses would you raise to sustain the validity of the ordinance?
BAR Q 2016:
The City of Maharlika passed an ordinance imposing a tax on any sale or transfer of real property located
within the city at a rate of fifty percent (50%) of one percent (1%) of the total consideration of the
transaction, Jose sold a parcel of land in the city, which he inherited from his deceased parents, and
refused to pay the aforesaid tax. He instead filed a case asking that the ordinance be declared null and void
since the tax it imposed can only be collected by the national government, as in fact he has paid the
Bureau of Internal Revenue (BIR) the required capital gains tax. If you were the City Legal Officer of
Maharlika, what defenses would you raise to sustain the validity of the ordinance? (5%)

Answer:

Tax on transfer of real property ownership (Sec. 135, LGC)

Imposed by diff. taxing agencies

Is it tenable? We do not know yet kay defense raman gi ask

(E) What is the basis for the computation of business tax on contractors under the Local
Government Code? (2%)
Remember the tax is based in the computation is based on gross sales or receipts from the preceding
calendar year)

(F) How are retiring businesses taxed under the Local Government Code? (2%) CURRENT YEAR
Gen Rule: Remember the tax is based in the computation is based on gross sales or receipts from the
preceding calendar year)
Exemption:
: Remember the tax is based in the computation is based on gross sales or receipts from the current
calendar year)

Section 145. Retirement of Business. - A business subject to tax pursuant to the preceding sections shall,
upon termination thereof, submit a sworn statement of its gross sales or receipts for the current year. If the
tax paid during the year be less than the tax due on said gross sales or receipts of the current year, the
difference shall be paid before the business is considered officially retired.

BAR Q:
KM Corporation, doing business in the City of Kalookan, has been a distributor and retailer of cleaning and
household materials. It has been paying the City of Kalookan local taxes based on Sections 15 (Tax on
Wholesalers, Distributors or Dealers) and 17 (Tax on Retailers) of the Revenue Code of Kalookan City
(Code). Subsequently, the Sangguniang Panlungsod enacted an ordinance amending the Code by
inserting Section 21 which imposes a tax on “Businesses Subject to Excise, Value-Added and Percentage
Taxes under the National Internal Revenue Code (NIRC),” at the rate of 50% of 1% per annum on the
gross sales and receipts on persons “who sell goods and services in the course of trade or business.” KM
Corporation paid the taxes due under Section 21 under protest, claiming that (a) local government units
could not impose a tax on businesses already taxed under the NIRC and this would amount to double
taxation, since its business was already taxed under Sections 15 and 17 of the Code. (a) May local
government units impose a tax on businesses already subjected to tax under the NIRC? (2.5%) (b) Does
this amount to double taxation? (2.5%)
Note: if taas ra kau question, go directly to the question itself
ANSWER:
a.) Yes (NIRC)
b.) Gen rule is NO when lgu imposed taxes which is diff agency but as to facts, YES because they are
the same nature of tax (1 ordinance) and same nature of tax.
BAR Q:
The Sangguniang Bayan of the Municipality of Sampaloc, Quezon, passed an ordinance imposing a
storage fee of ten centavos (P0.10) for every 100 kilos of copra deposited in any bodega within the
Municipality’s jurisdiction. The Metropolitan Manufacturing Corporation (MMC), with principal office in
Makati is engaged in the manufacture of soap, edible oil, margarine, and other coconut oil-based products.
It has a warehouse in Sampaloc, Quezon, used as storage space for the copra purchased in Sampaloc and
nearby towns before the same is shipped to Makati. MMC goes to court to challenge the validity of the
ordinance, demanding the refund of the storage fees it paid under protest. Is the ordinance valid? Explain
your answer. (4%)

Answer:
Yes the Sampaloc may imposed a storage fee imposed under Sec 147 of LCC
Yes. The municipality is authorized to impose reasonable fees and charges as a regulatory measure in an
amount commensurate with the cost of regulation, inspectionand licensing (Section 147, LGC). In the case
at bar, the storage of copra in anywarehouse within the municipality can be the proper subject of regulation
pursuant tothe police power granted to municipalities under the Revised Administrative Code or the“general
welfare clause”.A warehouse used for keeping or storing copra is anestablishment likely to endanger the
public safety or likely to give rise to conflagrationbecause the oil content of the copra, when ignited, is
difficult to put under control by
SECTION 147. Fees and Charges. - The municipality may impose and collect such reasonable fees and
charges on business and occupation and, except as reserved to the province in Section 139 of this Code,
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.

Section 150. Situs of the Tax. –

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

Ex. Jollibee Malaybalay can be assessed by the City even if the principal place of business is in
Makati.

Ex. Online seller from Cebu and your customers is here in MC. You cannot be taxed because you do
not have a physical branch here but the sales shall be taxed in Cebu as income.

(b) The following sales allocation shall apply to manufacturers, assemblers, contractors, producers, and
exporters with factories, project offices, plants, and plantations in the pursuit of their business:
(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.

Ex. NCR contractor was asked to pay assessed tax project in Surigao. They cannot be assessed
because they do not have a physical project office there (not just a mere project).

Ex. The rule above applies to Del Monte because they have an office in Bugo and Plantation in
Manolo as specified in B(2) above is applicable
(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 (b) of subsection (2) above shall be divided as follows:

(1) Sixty percent (60%) to the city or municipality where the factory is located; and (60% of the 70% above)
(2) Forty percent (40%) to the city or municipality where the plantation is located. (40% of the 70% above)

Here there are 3 LGUs

(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 (b) of subsection (2) 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.

(e) The foregoing sales allocation shall be applied irrespective of whether or not sales are made in the
locality where the factory, project office, plant, or plantation is located. (Maski pag factory ra xa, we need to
pay)

BAR Q
Ferremaro, Inc. a manufacturer of handcrafted shoes, maintains its principal office in Cubao, Quezon City.
It has branches/sales offices in Cebu and Davao. Its factory is located in Marikina City where most of its
workers live. Its principal office in Quezon City is also a sales office. Sales of finished products for calendar
year 2009 in the amount of P10 million were made at the following locations:
ii) Cebu branch 25%
iii) Davao branch 15%
iv) Quezon City branch 60%
Total 100%
Where should the applicable local taxes on the shoes be paid? Explain. (3%)
Cebu – Sec 150 A where branch is located 2.5M 25%
Dvao _ Sec 150 A where branch is located 1.5M 15%
Quezon _ Sec 150 B – 30% (of the 60% is 18%) where the principal office is located & 70%(60% of 70% is
42%) where the factory is located

Under the LGC, the manufacturers maintaining a branch or sales outlet shall record the sale in the
branch or sales outlet making the sale and pay the tax in the city or municipality where the branch or
sales outlet is located. Since Ferremaro, Inc., maintains one factory, the sales recorded in the
principal offices shall be allocated and 30% of said sales are taxable in the place where the principal
office is located while 70% is taxable in the place where the factory is located. Hence, 25% of total
sales or Php 2.5M shall be taxed in Cebu and 15% of total sales or Php 1.5Mshall be taxed in Davao.
For the remaining 60% sales amounting to Php 6.0M which is recorded in the principal office, 30%
thereof or Php 1.8M is taxable in Quezon City where the principal office is locatedand 70% or Php
4.2M is taxable in Marikina City where the factory is located.

BAR Q
Kathang Isip, Inc. (KII) is a domestic corporation engaged in the business of manufacturing, importing,
exporting, and distributing toys both locally and abroad. Its principal office is located in Kalookan City,
Philippines. It has 50 branches in different cities and municipalities in the country. When KII applied for
renewal of its mayor’s permit and licenses in its principal office in January this year, Kalookan City
demanded payment of the local business tax on the basis of the gross sales reported by the corporation in
its audited financial statements for the preceding year. KII protested, contending that Kalookan City may tax
only the sales consummated by its principal office but not the sales consummated by its branch offices
located outside Kalookan City.

 Is KII’s contention that Kalookan City can only collect local  business taxes based on sales
consummated in the principal office meritorious? (2.5%)

SUGGESTED ANSWER:
Yes. Section 150 of the Local Government Code (LGC) provides that for purposes of collection of taxes on
business, when the taxpayer is  operating a branch or sales outlet elsewhere, the tax on the sales made
therein shall accrue and shall be paid to the city or municipality where such branch or sales outlet is
located.

 Is the Kalookan City counsel correct in saying that Atty. Kabuyao’s PTR issued in Aklan cannot be
used in Kalookan? (2.5%)

SUGGESTED ANSWER:
No. As provided under Section 139 of the LGC, payment of Atty. Kabuyao of her PTR in Aklan entitles her
to practice her profession in any part of the Philippines.

SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory
Public Hearings. –

The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the
provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the
enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances
or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the
Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the
appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That
within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary
of Justice acting upon the
appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

USE THIS FOR LEGALITY OR CONSTITUTIONALITY, FILE WITHIN 30 DAYS TO SEC. OF JUSTICE
FROM EFFECTIVITY (NOT FORM THE TIME NA GI ASSESS KA) 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. (Cepalco v CDO) Cepalco failed to appeal within 30 days when the ordinance took effect and it is
fatal to the case and filed in RTC which also caused wrong remedy because it should be in Sec. of Justice
as the one who has competent jurisdiction.

BAR Q:
In 2014, M City approved an ordinance levying customs duties and fees on goods coming into the territorial
jurisdiction of the city. Said city ordinance was duly published on February 15, 2014 with effectivity date on
March 1, 2014.

a. Is there a ground for opposing said ordinance? (2%)

b. What is the proper procedural remedy and applicable time period for challenging the ordinance? (4%)

SUGGESTED ANSWERS:
 
(A) Yes. Under  Sec. 133 of the Local Government Code, the exercise of the taxing powers of
provinces, cities and barangays shall not extend to the levy of taxes, fees or charges of any kind
already imposed by the National Government. This extends to customs and charges under the
Customs and Tariffs Code of the Philippines, which the governing law for the imposition of, among
others, customs duties and is implemented by the Bureau of Customs. Thus, M City has no authority
to levy customs duties and fees coming into the territorial jurisdiction of the city.
 
 (B) Under Sec. 187 of the Local Government Code, any question on the constitutionality or legality of
tax ordinances or revenue measures may be raised on appeal within 30 days from effectivity thereof
to the Secretary of Justice who shall render a decision within 60 days from the date of receipt of the
appeal. Furthermore, within 30 days after the lapse of the 60-day period without the Secretary acting
upon the appeal, the aggrieved party may file a petition with a court of competent jurisdiction.
           
 Here, since the city ordinance’s effectivity is on March 1, 2014, a petition to question the legality or
constitutionality of the ordinance must be filed with the Secretary within 30 days thereafter. If the
Secretary fails to act within the 60-day period allowed by law, a petition may thereafter be filed with
the appropriate court, this being the Court of Tax Appeals, 30 days after the lapse the 60-day period.
 RTC jurisdiction for petition for declatory relief.

BAR Q:
In accordance with the Local Government Code (LGC), the Sangguniang Panglungsod (SP) of Baguio City
enacted Tax Ordinance No. 19, Series of 2014, imposing a P50.00 tax on all the tourists and travellers
going to Baguio City. In imposing the local tax, the SP reasoned that the tax collected will be used to
maintain the cleanliness of Baguio City and for the beautification of its tourist attractions. Claiming the tax to
be unjust, Baguio Travellers Association (BTA), an association of travel agencies in Baguio City, filed a
petition for declaratory relief before the Regional Trial Court (RTC) because BTA was apprehensive that
tourists might cancel their bookings with BTA’s member agencies. BTA also prayed for the issuance of a
Temporary Restraining Order (TRO) to enjoin Baguio City from enforcing the local tax on their customers
and on all tourists going to Baguio City. The RTC issued a TRO enjoining Baguio City from imposing the
local tax. Aggrieved, Baguio City filed a petition for certiorari before the Supreme Court (SC) seeking to set
aside the TRO issued by the RTC on the ground that collection of taxes cannot be enjoined. Will the
petition prosper? (5%)

SUGGESTED ANSWER:
 
Yes. The petition for certiorari will prosper. The RTC has no jurisdiction to entertain any action
concerning the validity of a Tax Ordinance and to enjoin the imposition of taxes levied by it. Any
question on the legality of the tax ordinance can only be raised on appeal with the Secretary of
Justice and the appeal shall not have the effect of suspending the effectivity of the ordinance and the
accrual and the payment of the tax levied therein (Section 187, LGC). (dili pwede mudrtzo sa RTC)

Section 195. Protest of Assessment. –

When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges
have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the
amount of deficiency, the surcharges, interests and penalties. Within sixty (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 sixty (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 thirty (30) days from the receipt of the denial of the
protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal with the court
of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.
MUST FILE PROTEST TO THE ASSESSMENT TO THE TREASUSRER W/N 60 DAYS FROM THE
RECEIPT OF NOTICE TO RTC WHO HAS THE COMPETENT COURT JURISDICTION.
On May 15, 2009, La Manga Trading Corporation received a deficiency business tax assessment of
P1,500,000.00 from the Pasay City Treasurer. On June 30, 2009, the corporation contested the
assessment by filing a written protest with the City Treasurer. On October 10, 2009, the corporation
received a collection letter from the City Treasurer, drawing it to file on October 25, 2009 an appeal against
the assessment before the Pasay Regional Trial Court (RTC).

a. Was the protest of the corporation filed on time? Explain. (3%)

SUGGESTED ANSWER:

The protest was filed on time. The taxpayer has the right to protest an assessmentwithin 60 days from
receipt thereof (Sec. 195, LGC).

b. Was the appeal with the Pasay RTC filed on time? Explain. (3%)

SUGGESTED ANSWER:
The appeal was not filed on time. When an assessment is protested, the treasurer has 60 days within
which to The taxpayer has 30 days from receipt of the denial of the protest or from the lapse of the 60-day
period decide, whichever comes first, otherwise the assessment becomes conclusive and unappeallable.
Since no decision on the protest was made, the taxpayer should have appealed to the RTC within 30 days
from the lapse of the period to decide the protest (Sec. 195, LGC).Doña Evelina, a rich widow engaged in
the business of currency exchange, was assessed a considerable amount of local business taxes by the
City Government of Bagnet by virtue of Tax Ordinance No. 24. Despite her objections thereto, DoñaEvelina
paid the taxes. Nevertheless, unsatisfied with said Tax Ordinance, DoñaEvelina, through her counsel Atty.
ELP, filed a written claim for recovery of saidlocal business taxes and contested the assessment. Her claim
was denied, andso Atty. ELP elevated her case to the Regional Trial Court (RTC)

RULE IS WHATEVER COMES FIRST

DO WE NEED TO PAY FIRST BEFORE FILING PROTEST?
LOCAL TAXES SUCH AS BUSINESS TAX, NOT NEEDED TO PAT FIRST
REAL PROPERTY TAX, MUST PAY FIRST BEFORE FILING THE PROTEST
In Davao City case, a tax ordinance cannot expand the law. Payment under protest only apply to real
property taxation and not in local taxes.
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
Ex. Casoreco electric cooperative is registered with the NEA under PD 269. SC said that coops that
remain to be exempt by tax is under R.A. No. 6938 as the new rule
BAR Q:
Prior to the enactment of the Local Government Code, consumer’s cooperatives registered under the
Cooperative Development Act enjoyed exemption from all taxes imposed by a local government. With the
Local Government Code’s withdrawal of exemptions, could these cooperatives continue to enjoy such
exemption?

A. Yes, because the Local Government code, a general law, could not amend a special law such as
the Cooperative Development Act

B. No, Congress has not by the majority vote of all its members granted exemption to consumers’
cooperatives.

C. No, the exemption has been withdrawn to level the playing field for all taxpayers and preserve the
LGU’s financial position

D. Yes, their exemption is specifically mentioned among those not withdrawn by the Local Government
Code. (Answer)
.
REAL PROPERTY TAXES

Section 234. 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 of otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit 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.

Section 234 d application:

Pilipinas palm oil rents a land in NGPI coop duly reg under RA 6938. Agusan del Sur province said
that PPO will pay because they are not a cooperative.
SC said PPO is exempt regardless of who used it when we are talking about cooperative because
there is no distinction given as to whether the beneficial use is taxable or not.
Unlike in govt owned that taxable if rented by a taxable person. Ex. Private entity rent’s a building of
a church.

Section 232. Power to Levy Real Property Tax. –

A province or city or a municipality within the Metropolitan Manila Area my levy an annual ad valorem tax
on real property such as land, building, machinery, and other improvement not hereinafter specifically
exempted.
A municipality may levy an annual ad valorem tax on real property such as land, building, machinery, and
other improvement only if (A) the real property is within the Metropolitan Manila Area. (B) the real property
is located in the municipality. (C) the DILG authorizes it to do so. (D) the power is delegated to it by the
province.

Section 240. 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.

BAR Q:
After the province has constructed a barangay road, the Sangguniang Panglalawigan may impose a special
levy upon the lands specifically benefitted by the road up to an amount not to exceed
(A) 60% of the actual cost of the road without giving any portion to the barangay.
(B) 100% of the actual project cost without giving any portion to the barangay.
(C) 100% of the actual project cost, keeping 60% for the province and giving 40% to the barangay.
(D) 60% of the actual cost, dividing the same between the province and the barangay.

WALA MAN GISULTI SA LAW NGA MAGHATAG SA BARANGAY.

2018 Bar Examination Question XVI.

In an action for ejectment filed by Kurt, the lessor-owner, against Kaka, the lessee, the trial court ruled in
favor of Kurt. However, the trial court required Kurt to pay the realty taxes due on the property for 2016
before he may recover possession thereof. Kurt objected, arguing that the delinquent realty taxes were
never raised as an issue in the ejectment case. At any rate, Kurt claimed that it should be Kaka who should
be made liable for the realty taxes since it was Kaka who possessed the property throughout 2016.

Is Kurt correct in resisting the trial court’s requirement to pay the taxes first? (2.5%)

(No. the trial court was correct. The law provides that any action involving ownership of real property, the
court not award ) – wala nkokaapas kay Atty hahaha

No. The Court may require the payment of delinquent real property taxes before ruling on the ejectment
case. The law provides that in any action involving the ownership or possession of, or succession to, real
property, the Court may, motu proprio upon representation of the local treasurer, award such ownership,
possession or succession to any party to the action upon payment to the court of the taxes with interest due
on the property (Sec. 268, LGC). Kurt cannot invoke the possession by Kaka in order to escape payment,
because the delinquent real property tax is a lien on the property superior to all liens (Sec. 257, LGC).

Section 252. Payment Under Protest. –

(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 thirty (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 sixty (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 sixty-day period prescribed in
subparagraph

(e), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book II of this Code.

BAR Q:
ABC, Inc. owns a 950-square meter commercial lot in Quezon City. It received a notice of assessment from
the City Assessor, subjecting the property to real property taxes (RPT). Believing that the assessment was
erroneous, ABC, Inc. filed a protest with the City Treasurer. However, for failure to pay the RPT, the City
Treasurer dismissed the protest.

(a) Was the City Treasurer correct in dismissing ABC, Inc.’s protest? Explain. (2.5%) (please note
applicable only to RPT and local tax is different.)

(b) Assuming that ABC, Inc. decides to appeal the dismissal, where should the appeal be filed? (2.5%)

SUGGESTED ANSWER:

 Yes, the City Treasurer was correct in dismissing ABC Inc.’s protest

Under Section 252 of the Local Government Code, no protest shall be entertained unless the taxpayer first
pays the tax, in which the words “paid under protest” shall be annotated on the tax receipts.
Here, ABC Inc. failed to first pay the real property tax assessed by the Quezon City when it filed a protest
before the City Treasurer.
 Assuming that ABC, Inc. decides to appeal the dismissal, the appeal should be filed with the Local
Board of Assessment Appeals (LBAA).

If the local treasurer denies the protest or fails to act upon it within the 60-day period provided for in Section
252, the taxpayer/real property owner may then appeal or directly file a verified petition with the LBAA
within sixty days from denial of the protest or receipt of the notice of assessment, as provided in Section
226 of R.A. No. 7160

Section 226. Local Board of Assessment Appeals. –

Any owner or person having legal interest in the property who is not satisfied with the action of the
provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the
date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the
provincial or city by filing a petition under oath in the form prescribed for the purpose
together with copies of the tax declarations and such affidavits or documents submitted in support of the
appeal.

Note that after LBAA is CBAA

Section 299
The owner of the property or the person having legal interest therein or the assessor who is not satisfied
with the decision of the Board, may, within thirty (30) days after receipt of the decision of said Board,
appeal to the Central Board of Assessment Appeals, as herein provided. The decision of the Central Board
shall be final and executory.