CTT REVIEWER LOCAL TAXES

PART I - REAL PROPERTY TAX
Real property tax is an ad valorem tax collected by a
city, municipality or province on real property such as
land, buildings, machinery and other improvements
affixed or attached to real property.
Exemptions from real property tax
1. Real property owned by the Republic of the
Philippines or any of its political subdivision except
when the beneficial use thereof has been granted
to taxable person;
2. Charitable institutions, churches, and parsonages
or convents appurtenant thereto, mosques, non-
profit cemeteries, and all lands, buildings and
improvements, actually, directly, and exclusively
used for religious, charitable, or educational
purposes.
necessary expenditures to extract and utilize such
mineral.
6. SPECIAL - lands, buildings and other improve-
ments thereon, actually, directly and exclusively
used for (a) hospitals, (b) cultural, or (c) scientific
purposes, and (d) those owned and used by local
water districts, and (e) GOCCs rendering essential
public services in the supply and distribution of
water and/or generation and transmission of
electric power.
Assessment level and assessed value
1. ASSESSMENT LEVEL- the percentage applied to
the FMV to determine the assessed value of the
property.
2. ASSESSED VALUE (taxable value)-the FMV of the
real property multiplied by the assessment level.

3. Non-profit or religious cemeteries or burial Limitations on assessment level(maximum rates)

grounds; A. On Lands and Machineries
4. Machineries and equipment that are actually, Classification Assessment Levels
directly and exclusively used by local water district Land Machineries
and GOCCs engaged in the supply of water and/or Residential 20% 50%
generation of electric power; Timberland 20% -
5. All real property owned by duly registered Agricultural 40% 40%
cooperatives as provided for under R.A. No. 9520 Commercial, industrial 50% 80%
(Cooperative Code of the Philippines), and Mineral 50% -
Special classes: cultural, 15% 15%
6. Machineries and equipment used for pollution
hospital, scientific
control and environmental protection.
Local water districts 10% 10%
Fundamental principles Government owned or controlled
The appraisal, assessment, levy and collection of real corporations engaged in the 10% 10%
property tax shall be guided by the following: supply and/or generation/
transmission of electric power
1. Real property shall be appraised at its current and
fair market value;
B. On Improvements
2. Real property shall be classified for assessment Fair market value Commercial/
purposes on the basis of its actual use; Over Not over Residential Industrial Agricultural Timberland
3. Real property shall be assessed on the basis of a (+000) (+000)
uniform classification within each local P175 0% 0% 0% 0%
government unit; P175 300 10% 30% 25% 45%
4. The appraisal, assessment, levy and collection of 300 500 20% 35% 30% 50%
real property tax shall not be let to any private 500 750 25% 40% 35% 55%
person; and 750 1M 30% 50% 40% 60%
5. The appraisal and assessment of real property 1M 2M 35% 60% 45% 70%
shall be equitable. 2M 5M 40% 70% 50% 70%
5M 10 M 50% 75% 50% 70%
Fair market value
10 M 60% 80% 50% 70%
The price at which a property may be sold by a seller
who is not compelled to sell and bought by a buyer Tax rates on the basic tax
who is not compelled to buy. - Not exceeding 1% of
In provinces
For assessment purposes, it is also known as the the assessed value
“assessor’s value.” In cities, and munici- - Not exceeding 2% of
pality of Pateros the assessed value
Actual use and not ownership
Real property shall be classified, valued and assessed Assessment when classification conflicts with
on the basis of its actual use regardless of where its use
located, whoever owns it, and whoever uses When land is located in a commercial area but the
building is residential, the classification of the land
Classes of land for assessment purposes
conflicts with its use, the following rules shall be
1. RESIDENTIAL - principally devoted to habitation
observed:

2. AGRICULTURAL-devoted principally to the planting Classification of LAND to

of trees, raising of crops, livestock and poultry determine
dairying, salt making, inland fishing and similar L – land Fair Market Assessment
aquacultural activities, and other agricultural B – building Value Level
activities, commercial or industrial. R – residential
C – commercial
3. COMMERCIAL- devoted principally for the object of
profit and is not classified as agriculture, 1. L in R area, B is C Residential Commercial
industrial, mineral, timber, or residential land.
2. L in C area, B is R Commercial Residential
4. INDUSTRIAL - devoted principally to industrial
activity as capital investment and is not classified 3. L in mixed R/C
Commercial Commercial
as agricultural, commercial, timber, mineral or area, B is C
residential land.
4. L mixed R/C area,
5. MINERAL - mineral metallic or non-metallic, exist Residential Residential
B is R
in sufficient quantity or grade to justify the
5. L in mixed R/C

area, B is vacant Residential Residential
6. L in mixed R/C
Predominant Predominant
area, and B is used
Use Use
for mixed R/C
purpose
Additional levy (in addition to basic RPT)
Special Education Fund Tax (SEF) – 1% of AV
Transfer tax on transfer of real property
ownership
Tax on the sale, donation, barter, or on any other
mode of transferring ownership or title of real
property at the rate of not more than
- 1/2% in province/municipality and
- 3/4% in cities
Based on whichever is higher between
- the total consideration involved in the acquisition
of the property and
- the FMV in case the monetary consideration
involved in the transfer is not substantial.
Notes:
1. Not taxable - sale, transfer or other disposition of
real property pursuant to RA 6657 (CARL).
2. Register of Deeds shall, before registering a
deed, require the presentation of the evidence of
payment of this tax.
3. The assessor shall make the same requirement
before cancelling an old tax declaration and
issuing a new one in place thereof.
4. Seller, donor, transferor, executor or
administrator shall be liable to pay this tax within
60 days from the date of the execution of the
deed or from the date of the decedent’s death.
Collection of real property tax
1. Date of accrual of tax – The real property tax for
any year shall accrue on the 1st day of January
2. Payment of real property taxes in installment –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 the Special
Education Fund (SEF) thereon without interest in
four (4) equal installments as follows:
1st installment – on or before March 31
2nd installment – on or before June 30
3rd installment – on or before September 30
4th installment – on or before December 31
3. Application of payment of real property taxes –
The payments shall first be applied to prior years’
delinquencies, interests, and penalties, if any, and
only after said delinquencies are settled may tax
payments be credited for the current period.
4. Tax discount for advanced prompt payment – If
the basic real property tax and the SEF are paid in
advance, a discount of not exceeding 20% of the
annual tax due may be granted to the taxpayer.
5. Interests on unpaid real property tax –2% per
month on the unpaid amount or a fraction thereof,
until the delinquent tax (basic and special levies)
shall have been fully paid, but not to exceed 36
months.
Condonation or reduction of real property tax
and interest
Condonation or reduction of real property tax and
interest may be done either thru an ordinance, or by
the President of the Philippines.
a. Condonation/reduction thru an ordinance.
b. Condonation/reduction by the President.
Person or office tasked to collect the tax
1. Collection and enforcement of the remedies -
responsibility of the city or municipal treasurer
concerned.
2
2. The treasurer may deputize the barangay
treasurer to collect all taxes on real property
located in the barangay, provided, the barangay
treasurer is properly bonded.
OTHER LOCAL TAXES, FEES AND CHARGES
Fundamental principles
The following fundamental principles shall govern the
exercise of the taxing and other revenue-raising
powers of local government units:
1. Taxation shall be uniform in each local
government unit;
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as far as practicable on
the taxpayer’s ability to pay;
b. be levied and collected only for public
purposes;
c. not be unjust, excessive, oppressive, or
confiscatory;
d. not be contrary to law, public policy, national
economic policy, or in restraint of trade;
3. The collection of local taxes, fees, charges and
other impositions shall in no case be let to any
private person;
4. The revenue collected shall inure solely to the
benefit of, and be subject to disposition by, the
local government unit levying the tax, fee, charge
or other imposition unless otherwise specifically
provided; and
5. Each local government unit shall, as far as
practicable, evolve a progressive system of
taxation.
Common limitations on the taxing power of
local government units
LGUS cannot collect the following taxes:
1. Income tax, except when levied on banks and
other financial institutions;
2. Documentary stamp tax;
3. Estate tax;
4. Customs duties, registration fees of vessel and
wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained
by the local government unit concerned;
5. Taxes, fees or charges and other impositions upon
goods carried into or out of, passing through, the
territorial jurisdiction of local government units in
the guise of charges for wharfage, tools for
bridges or otherwise, or other taxes, fees or
charges in any form whatsoever upon such goods
or merchandise;
6. Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or
fishermen;
7. Taxes on business enterprises certified to by the
Board of Investments (BOI) as pioneer or non-
pioneer for a period of six (6) and four (4) years,
respectively, from the date of registration;
8. Excise taxes on articles enumerated under the
National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
9. Percentage or VAT on sales, barters or exchanges
or similar transactions on goods or services except
as otherwise provided herein;
10. Taxes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight by for hire
and common carriers by air, land or water, except
as provided in this Code;

11. Taxes on premiums paid by way of reinsurance or
retrocession;
12. Taxes, fees and charges for the registration of
motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except
tricycles;
13. Taxes, fees, or other charges on Philippine
products actually exported, except as otherwise
provided herein;
14. Taxes, fees, or charges on Countryside and
Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and Republic
Act 9520 otherwise known as the “Cooperatives
Code of the Philippines” respectively; and
15. Taxes, fees or charges of any kind on the
National Government, its agencies and
instrumentalities, and local government units.
Taxes imposable by the province
The following taxes may be imposed by the province:
1. Transfer tax on transfer of real property
ownership
Subject: Sale, donation, barter, or on any other
mode of transferring ownership or title of real
property. Exemption: Sale, transfer or other
disposition of real property pursuant to R.A.
6657(Comprehensive Agrarian Reform Law).
Time of payment: Seller, donor, transferor,
executor or administrator shall pay this tax within
60 days from the date of the execution of the
deed or from the date of the decedent’s death.
2. Tax on business of printing and publications
Subject: Persons engaged in the printing and/or
publication of books, cards, posters, leaflets,
handbills, certificates, receipts, pamphlet, and
other of similar nature. Exemption: Receipts from
the printing and/or publishing of books or other
reading materials prescribed by the DepEd as
school references shall be exempt from this tax.
3. Franchise tax
Subject: Businesses enjoying a franchise.
4. Tax on sand, gravel and other quarry
resources
Subject: Ordinary stones, sand, gravel, earth and
other quarry resources, as defined under the
NlRC, as amended, extracted from public lands or
3
from the beds of seas, lakes, rivers, streams,
creeks, and other public waters within its
territorial jurisdiction.
5. Professional tax
Subject: Each person engaged in the exercise or
practice of his profession requiring government
examination.
Place of payment: Province or city where he
practices his profession or where he maintains his
principal office in case he practices his profession
in several places.
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.
Time of payment: Annually, on or before January
31.
A line of profession does not become exempt even
if conducted with some other profession for which
the tax has been paid.
Exemption: Professionals exclusively employed in
the government.
6. Amusement tax
Subject: Proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing
stadia, and other places of amusement.
Exempt: Holding of operas, concerts, dramas,
recitals, painting and art exhibitions, flower
shows, musical programs, literary and oratorical
presentations, except pop, rock, or similar
concerts.
7. Annual fixed tax for every delivery truck or
van of manufacturers or producers,
wholesalers of, dealers, or retailers in,
certain products.
Subject: Every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or
retailers in the delivery or distribution of distilled
spirits, fermented liquors, soft drinks, cigars and
cigarettes, and other products as may be
determined by the Sangguniang Panlalawigan, to
sales outlets, or consumers, whether directly or
indirectly, within the province.
The manufacturers, producers, wholesalers,
dealers, and retailers referred to in the
immediately foregoing paragraph shall be exempt
from the tax on peddlers.

Tax base and tax rates:

Taxes imposable
Tax Base Tax Rate
by province

Selling price or fair market value,

1. Transfer tax Not more than ½%
whichever is higher

2. Tax on business of printing and Annual gross receipts for the Not more than ½%; on newly started
publication preceding calendar year business, not exceeding 1/20 of 1% of
capital investment

Annual gross receipts for the

3. Franchise tax Same with #2 above
preceding calendar year within its
territorial jurisdiction

4. Sand and gravel tax FMV per cubic meter Not more than 10%

5. Professional tax - Not exceeding P300

6. Amusement tax on admission Gross receipts from admission

Not more than 10%
fees

7. Fixed tax on delivery vehicles of
producers, manufacturers,
wholesalers, dealers or retailers
in certain products
Illustration
The Sangguniang Panlalawigan upon motion of Board
Member M enacted a provincial ordinance imposing
sand and gravel tax on stones, sand, gravel, earth
and other quarry resources.
A municipality within the province enacted similar tax
ordinance. Which local government unit should collect
the tax?
Tax on sand, gravel and other quarry resources may
be imposed by a province or city, but not by a
municipality or barangay.
The permit to extract sand, gravel and other quarry
resources shall be issued exclusively by the
provincial governor, pursuant to the ordinance of the
Sangguniang Panlalawigan.
Taxes by municipalities
Municipalities may levy taxes, fees and charges not
otherwise levied by provinces.
The municipality may impose taxes on the following
business:
1. On manufacturers, assemblers, repackers,
processors, brewers, distillers, rectifiers, and
compounders or liquors, distilled spirits, and wines
or manufacturers of any article of commerce of
whatever kind or nature;
2. On wholesalers, distributors, or dealers in any
article of commerce of whatever kind or nature;
3. Exporters and/or manufacturers, millers,
producers, wholesalers, distributors, dealers or
retailers of essential commodities such as:
a. Rice and corn;
b. 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;
c. Cooking oil and cooking gas;
d. Laundry soap, detergents, and medicine;
e. Agricultural implements, equipment and post-
harvest facilities, fertilizers, pesticides,
insecticides, herbicides, and other farm inputs;
f. Poultry feeds and other animal feeds
g. School supplies; and
h. Cement
4. Retailers
5. Contractors
6. Banks and other financial institutions
7. Peddlers in the sale of any merchandise or article
or commerce
8. Fees for sealing and licensing of weights and
measures.
9. Fishery rentals, fees and charges.
Payment of Business Taxes: The above taxes shall
be payable for every separate or distinct
establishment or place where the business subject
to the tax is conducted and one line of business
does not become exempt by being conducted with
some other business for which such tax has been
paid.
If a person conducts or operates two or more
businesses which are subject to -
a. the same tax rate – tax shall be computed on the
combined total gross sales or gross receipts;
4
Not exceeding P500 per delivery vehicle
-
b. different tax rates – gross sales or receipts of
each business shall be separately reported for the
purpose of computing the tax due from each
business.
Situs of the tax
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 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.
Illustration
The Municipality of Sta. Purificacion enacted an
ordinance imposing transfer tax on any transfer of
ownership of real property which is located within the
territorial jurisdiction of said municipality.
Is the ordinance valid?
The ordinance is not valid. Municipalities are not
authorized to levy taxes on transfers of real
properties. Such tax is allowed only on cities and
provinces.
Taxes imposable by cities
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 50% except the rates of
professional and amusement taxes.
A city may impose a maximum transfer tax of ¾ of
1% (0.75%) of the selling price or fair market value
of the property sold.
The barangays may levy taxes, fees and charges
which shall exclusively accrue to them:
1. Taxes – On stores or retailers with fixed business
establishments with gross sales or receipts of the
preceding calendar year of P50,000 or less, in the
case of cities and P30,000 or less, in the case of
municipalities, at a rate of not exceeding 1% on
such gross sales or receipts.
2. 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.
3. Barangay Clearance – No city or municipality
may issue any license or permit for any business
or activity unless a clearance is first obtained from
the barangay where such business or activity is
located or conducted. For such clearance, the
Sangguniang Barangay may impose a reasonable
fee. The application for clearance shall be acted
upon within seven (7) working days from the filing
thereof.
In the event that the clearance is not issued within
the said period, the city or municipality may issue
the said license or permit.
 5
4. Other Fees and Charges – The barangay may
levy reasonable fees and charges:
a. On commercial breeding of fighting cocks,
cockfights and cockpits;
b. On places of recreation which charge admission
fees; and
c. On billboards, signboards, neon signs, and
outdoor advertisements.

Common revenue raising powers of the local

government units
Provinces, cities, municipalities and barangays are
authorized to impose and collect the following fees
and charges:
1. Service fees and charges for any service rendered;
2. Public utility charges for the operation of public
utilities owned, operated and maintained by them
within their jurisdiction;
3. Tool fees or charges for the use of any public
road, pier or wharf, waterway, bridge, ferry or
telecommunication system funded and constructed
by the local government unit concerned.
The amounts, rates and terms and conditions shall
be fixed by the Sanggunian concerned.
The following are exempt from the payment of toll
fees and charges:
a. Officers and enlisted men of the Armed Forces
of the Philippines and Philippine National Police
on mission;
b. Post office personnel delivering mail;
c. Physically handicapped and disabled citizens
who are 65 years or older.
When public safety and welfare so requires, the
Sanggunian concerned may discontinue the
collection of the tolls, and thereafter the said
facility shall be free and open for public use.
Community tax
Cities or municipalities may levy a community tax.

END OF LOCAL TAXES