Local and RPTaxation CGBP 2017

Local and Real Property Taxation
by:
Atty. Nicasio C. Cabaneiro, CPA
Outline of this Seminar
• Discuss General Principles pertinent to Local and Real property
Taxation pursuant to Rep. Act No. 7160 (Local Gov’t. Code)
• LGC is divided into 2 parts: Local Government Taxation and Real

Property Taxation
o Local Government Taxation covers imposition of license taxes and
other burdens of provinces, cities, municipalities and barangays
o Real Property Taxation covers a system of levy on real property
imposed on a country-wide basis
• Cite Remedies of taxpayers aggrieved by actions of Sanggunian in the

implementation of Rep. Act. No. 7160 and other jurisprudences
Objectives of this Seminar
• Understand the inhabitants’ rights and obligations with LGUs
• Be aware of the responsibilities of Local Officials in the effective

discharge of duties to inhabitants
• Determine ways to safeguard the self-sufficiency of LGUs in the

light of the taxing powers granted by the constitution
• Know how to seek redress should inhabitants be saddled with

multiple and unreasonable impositions
• Discuss pertinent cases decided by the courts related to remedies

of taxpayers against sanctions of the Sanggunian on ordinances
issued
Sec.5 Article X of the 1982 Constitution
“Each LGU shall have the power to create its own sources of revenue and
to levy taxes, fees, and charges subject to such guidelines and 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.”
• To implement this provision, Congress enacted Rep. Act No. 7160 -

Local Government Code of 1991
• Code was enacted on Oct. 10, 1991 and took effect on Jan. 01,
1992
Role of Congress
• Congress cannot abolish Local Government’s power to tax as it

cannot abrogate what is expressly granted by fundamental law
• Only authority conferred to Congress is to provide the guidelines

and limitations on the local government’s exercise of the power
to tax
• These guidelines and limitations are found in Local Government

Code of 1991
Limitations Imposed on Congress
Legislature must ensure that:
1. Taxpayer will not be overburdened with multiple and
unreasonable impositions
2. Each LGU will have its fair share of available resources
3. Resources of the National Government will not be unduly

disturbed
4. Local Taxation will be fair, uniform and just

Manila Electric Co. vs. Province of Laguna, et.al. (G.R. No. 131359, May 5, 1999);
NAPOCOR vs. City of Cabanatuan (G.R. No. 149110, April 9, 2003)
Fundamental Principles
1. Uniform in each Local Government Unit (LGU)
2. Taxes, Fees and Charges must be:

a. Equitable and based on ability to pay
b. Levied for public purpose
c. Not excessive, unjust, oppressive or confiscatory
d. Not contrary to law, public policy, national economic policy or in
restraint of trade
e. Cannot be let to any private person
f. Progressive rate of tax (as far as practicable)
Excessive & Oppressive Taxation
• In the case of First Philippine Industrial Corp. vs. CA (G.R.

No. 125948, Dec. 29, 1998)
• Petitioner assailed the validity of the ordinance that imposes a

Local Tax while it is already paying a 3% Common Carrier’s Tax
under the Tax Code
• Court ruled that to tax again the petitioner on Gross Receipts in

its transportation of petroleum business would defeat the
purpose of LGC under Sec. 130
• This section prohibits excessive and oppressive taxation

Rule of Interpretation on Taxes
“In case of doubt, any tax ordinance or revenue measure shall be
construed strictly against the LGU enacting it, and liberally in favor of
the taxpayer.
Any tax exemption, incentive or relief granted by any LGU pursuant

to the provisions of this Code shall be construed strictly against the
person claiming it.”
- Sec. 5(b) of Local Gov’t. Code

Provisions of LGC are not self-operating since local taxing
authority is limited under the ff. provisions:
• Sec. 132 – “The power to impose a tax, fee, or charge or to

generate revenue under this Code shall be exercised by the
Sanggunian of the LGU concerned through an appropriate
ordinance.”
• Sec. 54 to 59 provides for approval, review and effectivity of

ordinances
• Sec. 189 directs that there must be a public hearing prior to the
enactment of any local tax ordinance or revenue measure
“Not so Inherent” Power to Tax
• Power to Tax granted to local governments has boundary or limits
• Sec. 25 - Art. II in relation to Sec. 2 - Art. X of the Constitution

lays down the rule that taxpayers should not to be saddled with
multiple and unreasonable impositions
• Since this power is not inherent, LG’s exercise of taxing powers

must be consistent with limitations imposed by Congress
• Power of LGU to impose tax must be anchored on an ordinance

and in accordance with the LGC
Local Taxing Power and Authority
1. Cities – Sangguniang Panlungsod
2. Provinces – Sangguniang Panlalawigan
3. Municipalities – Sangguniang Pambayan
4. Barangay - Barangay Council

How does an Ordinance becomes a Law?
1. Must be made in writing accompanied by a note stating why it
should be approved
2. Must be posted simultaneously in at least 4 public places within 10

days from filing
3. Written notices must be sent to affected parties
4. Must be referred to an appropriate Sanggunian Committee
5. Must prepare copies of proposed ordinance in the form it was passed

on 2nd reading and provide a copy to each Sanggunian member
How does an Ordinance becomes a law? – cont.
6. Sanggunian holds public hearing 10 days after notices are sent or
the last day of publication of proposed ordinance, whichever is
later
7. Sanggunian passes the proposed ordinance and prepares the

Minutes
8. Must be approved by majority of members present during the

meeting for an ordinance to be valid
9. Approved ordinance must be stamped with the Seal of Sanggunian

and recorded in their books
How does an Ordinance becomes a law? – cont.
10. Must be submitted and approved by the Mayor or Governor
11. Sanggunian can override a veto with 2/3 votes
12. Must be published in a local newspaper within 10 days of its

approval before it takes effect
(Tax ordinance will be null and void if it fails to comply with publication
requirement [Coca-Cola vs. City of Manila, G.R. No. 156252, June 27,2006] )
13. Ordinance undergoes review

Common Limitations on Taxing Powers of LGUs
Sec. 133 – Unless otherwise provided herein, exercise of the taxing
powers of provinces, cities, municipalities and barangays shall not
extend to the levy of the following:
1. Income Tax (except when levied on banks and other Fis)
2. Documentary Stamp Tax
3. Tax on estate, inheritance, gift, legacy and other acquisitions mortis

causa
4. Customs duties, registration fees of vessel, wharfage on wharves,

tonnage dues, customs fees
Note: Opening phrase of Sec. 133, “Unless otherwise provided herein” means that the
limitations are ABSOLUTE unless exceptions are specifically provided
Common Limitations on Taxing Powers of LGUs –
cont.
5. Taxes, fees and charges upon goods carried into or out of territorial
jurisdictions of LGUs
6. Taxes, fees or charges on agricultural and aquatic products when

sold by marginal farmers or fishermen
7. Taxes on business enterprises certified by BOI as pioneer or non-

pioneer for a period of 6 and 4 years, respectively, from date of
registration
8. Excise taxes on articles enumerated under NIRC and taxes, fees or

charges on petroleum products
cont.
9. Percentage or VAT on sales, barters, or exchange of similar
transactions on goods or services
10. Taxes on gross receipts of transportation contractors and persons

engaged in the transportation of passengers, freight by hire and
common carriers by air, land or water, except as provided in this
Code
The phrase “Except as provided in this code” refers to authority of

LGs to levy annual fixed taxes on delivery vans of manufacturers,
producers or dealers and also on the operation and franchising of
tricycles (IRR of LGC, Art. 221[i])
cont.
Same provision is found in Rep. Act No. 7716 - Expanded VAT Law,
prohibition against taxation of common carriers by LGUs was
reinforced as follows:
“Gross receipts of common carriers derived from incoming and outgoing
freight shall not be subject to local taxes imposed under Rep. Act. No.
7160 – LGC of 1991”
“Common carriers” in the Civil Code makes no distinction as to means of
transporting whether by land, water or air. (First Phil Industrial Corp. vs CA
G.R. No. 125948, Dec. 29, 1998)
11. Taxes on premiums paid by way of reinsurance or retrocession
12. Taxes, fees or charges for the registration of motor vehicles and for
issuance of all kinds of licenses/ permits for driving except tricycles
cont.
13. Taxes, fees or charges on PH products actually exported, except as
provided
Sales of products from Export Processing Zones are not subject to
Local Tax but preferential rate under Sec. 143c not exceeding ½ of
rates prescribed under Sec. 143a, b and d
14. Taxes, fees or charges on Countryside and Barangay Business

Enterprises (CBBEs) and Cooperatives registered under RA No. 6810
and 6398
CBBEs have been replaced by Barangay Micro Business Enterprises
(BMBEs) under Rep. Act No. 9178
cont.
15. Taxes, fees or charges of any kind on the National Government, its
agencies, instrumentalities and LGUs
Property must be owned by the government or by its unincorporated
agency to be covered by the tax exemption
TAXING POWERS OF LGUs
Part I – Local Business Taxation
 PROVINCE
 Scope of its taxing power – “Except as otherwise provided in this
Code, province may levy only the taxes, fees and charges as
provided in this article.”
Clarification on Excise Tax on Petroleum
• In the case of Petron Corp. vs. Tiangco (G.R. No. 158881, April
16, 2008)
• Court ruled that since law does not distinguish, LGUs are
prohibited from imposing not only excise tax on petroleum
products but all taxes, fees and charges
• Sec. 133[h] comprehends a wider range of subjects and articles

already covered under Excise Taxation of the Tax Code
• While LGUs are authorized to burden other classes of goods with

“taxes, fees and charges”, specific prohibition is imposed barring
the levy of other types of taxes on petroleum products
Clarification on Taxes of Business Enterprises (BOI)
• LGUs are prohibited from taxing business enterprises certified by
BOI as Pioneer or Non-pioneer for a period of 6 and 4 years,
respectively, from date of registration
• Grant of Income Tax Holiday (ITH) for Registered Enterprises under

E.O. 226 (Omnibus Investment Code of 1987) is subject to the ff.
rules:
o Fully-exempt – for 6 years from commercial operation for pioneer
firms and 4 years for non-pioneer firms
o Proportionate – for a period of 3 years from commercial operation,
Registered Expanding Firms shall be entitled to ITH proportionate to
their expansion under terms provided by BOI (E.O. 226, Title III, Art.
39)
Terms on Reinsurance Premiums
• Reinsurance – Insurer procures a 3rd person to insure him
against loss or liability by reason of such original insurance
• Retrocession – Transaction where an insurer/ insurance entity

(retrocessionaire) agrees to indemnify another insurance entity
(reinsurer) against all or part of the loss that the latter sustains
under a policy of reinsurance it has issued
Clarification on Marginal Farmer
• Under Sec. 133, LGUs are prohibited to impose taxes, fees or
charges on agricultural and aquatic products when sold by
marginal farmers
• Marginal Farmer or Fisherman – individual engaged in

subsistence farming or fishing which shall be limited to sale,
barter or exchange of agricultural or marine products produced
by himself and his immediate family (LGC, Sec. 131[p])
Exceptions to Sec. 133
• Customs duties are prohibited to be imposed by LGUs except on:

o Wharfage on wharves constructed and maintained by the LGU
concerned
o Issuance of licenses for operation of fishing vessels of 3 tons or less by
municipalities (LGC, Sec. 149[b][3] and cities (LGC, Sec. 151)
• Wharfage – fee assessed against the cargo of the vessel engaged

in foreign or domestic trade based on quantity, weight or measure,
received and/or discharged by the vessel (LGC, Sec. 131[y])
Exceptions to Sec. 133 – cont.
• LGUs cannot impose taxes, fees, charges and other impositions
upon goods carried into, out of, or passing through the territorial
jurisdiction of LGUs
• Municipalities have the power to tax or impose fees on vehicles

using its roads but cannot tax the goods transported by vehicles
• LGUs may prescribe the terms and conditions for the imposition
of toll fees on use of any public road, pier or wharf funded and
constructed by them
• Service fee imposed on vehicles using municipal roads leading

to the wharf is valid
• Sec. 133[e] of LGC prohibits the imposition (in the guise of
wharfage and all other taxes) on goods or merchandise
• So, it is irrelevant if the fees imposed are actually for police

surveillance on goods because any other form of imposition
passing through territorial jurisdiction of the municipality is clearly
prohibited
• Sec. 133[e] Palma Development Corp. vs. Municipality of

Malangas (G.R. No. 152492, Oct. 16, 2003)
• LGUs are prohibited to impose Percentage or VAT on sales or

similar transactions on goods or services except:
o By Provinces/ Cities (LGC, Secs. 136 and 140) - Taxes on

Business of Printing/ Publication and Amusement Tax on
Admission Fees
o By Municipalities/ Cities (LGC, Sec. 143) - Percentage

Taxes on gross sales of manufacturers, wholesalers,
distributors, dealers, and contractors
• While LGUs are prohibited to impose taxes, fees or other charges

on PH products actually exported, municipalities may impose taxes
on exporters of essential commodities (LGC, Sec. 143[c] and Sec.
151)
• In the case of Steniel Mindanao Packaging Corp. vs. City

Treasurer of Davao (CTA AC No. 39, Nov. 27, 2008), Court said
that to be considered an “exporter”, it is necessary that the
business entity is engaged in exportation of goods
• If taxpayer does not export its packaging materials but sells them
to export-oriented enterprises, it is locally taxable as manufacturer
under Sec. 143[a] of the LGC
Exclusionary Doctrine/ Principle of Pre-emption
• Where National Government elects to tax a particular area, it
withholds from the Local government the delegated power to tax
the same field
• Doctrine of Pre-emption principally rests on the intention of

Congress
• Conversely, should Congress allow municipal corporations to cover

fields of taxation it already occupies, then Doctrine of Pre-emption
will not apply
Exclusionary Doctrine/ Principle of Pre-emption –
cont.
• This was ruled in the case of Victorias Milling Co. Inc. vs.
Municipality of Victorias, Negros Occidental, (G.R. No. L-
21183, Sept. 27, 1968)
• This is a jurisprudence under PD 231, LTC pursuant to 1973

Constitution
Taxing Powers of LGUs
1. Common Revenue-Raising Powers (Secs. 153-155)
2. Specific Powers (Secs. 135-143; 147-149; 151-152)
3. Community Tax (Sec. 156)
4. Residual Taxing Powers (Sec. 186)

Common Revenue-raising Power Terms
1. Toll – fee imposed on goods, or persons traveling public roads
or bridges
2. Charge – pecuniary liability, as rents or fees against persons or
property (LGC, Sec. 131[g])
3. Fee – charge fixed by law or ordinance for the regulation or
inspection of business (LGC, Sec. 131[l])
It includes charges fixed by law or agency for the services of a
public officer in the discharge of his official duties (IRR of LGC,
Art. 220[l])
Note: When public safety and welfare requires, the Sanggunian concerned
may discontinue tcollection of tolls and said facility shall be free and open
for public use (LGC, Sec. 155)
Common Revenue-raising Powers
• SC ruled that it is the right of each LG to collect fees and charges in
the exercise of its police power
• Respective Sanggunian of each LG may by ordinance impose fees

as long as these are commensurate with the cost of supervision of
the acts sought to be regulated
• This is pursuant to Sec. 153 and 155 of LGC of 1991 (RA 7160)
Examples of Common Revenue-raising Powers
1. Reasonable fees and charges for services rendered (LGC, Sec.
153)
2. Public utility charges for operation of public utilities owned,

operated and maintained by LGUs within their jurisdiction (LGC,
Sec. 154)
3. Toll, fees or charges for the use of any public road, pier or wharf,
waterway, bridge, ferry or telecommunication system funded and
constructed by the LGU concerned
Examples of Common Revenue-raising Powers –
cont.
• Exception on reasonable fees and charges for services rendered
(LGC, Sec. 153):
1. Officers and enlisted men of the AFP
2. Members of PNP on mission
3. Post Office personnel delivering mail
4. Physically handicapped and disabled citizens who are 65 years
or older (LGC, Sec. 155)
Specific Powers of Provinces to
Impose Taxes
a. Tax on Transfer of Real Property Ownership
• Exemption from Transfer Tax has been granted to NHA (under
RA 7279), Urban Development and Housing Act of 1997
(which later became an enactment) and prevails over LGC
• Also exempted are Sales of individual lots/ house and lots by

private sector developers of a low cost/ socialized housing
project
• Transfer Tax - based on total sale price of the property or its

FMV and not on zonal values prescribed by BIR
• Rate: Not exceeding 50% of 1% of total consideration or FMV

of property, whichever is higher
b. Tax on Business of Printing and Publication
• Imposed on business engaged in printing and/ or publication of

books, cards, posters, leaflets, handbills, certificates, receipts,
pamphlets and others of similar nature
• Receipts from printing and publication of books and other reading

materials prescribed by DECS as school text or reference are
exempted from tax
• Rate: 50% of 1% of the gross annual receipts for the preceding

calendar year.
In case of newly started business, tax shall not exceed 1/20 of 1% of
the capital investment
c. Franchise Tax
• May only be imposed on cities and provinces
• Even if it is the municipality that granted the franchise, only the

province may impose and collect tax
• Sec. 197 of LGC withdrew the exemption or incentives granted to

persons whether natural or juridical including GOCCs
c. Franchise Tax – cont.
• Eg. San Pablo City may impose a Franchise Tax on Meralco City
Gov’t of San Pablo vs. Meralco (G.R. No. 127708, March 25,
1999)
• Rate: 50% of 1% of gross annual receipts for the preceding

calendar year; 1/20 of 1% of capital investment in case of newly
started business
c. Franchise Tax - cont.
• Art. 12 - Sec. 11 of the Constitution recognizes the power of
Congress to issue franchises for the operation of a public utility… to
citizens of the PH or to corporations organized under the PH laws
• Franchise Tax is imposed on legislative franchises of state-chartered

corporations granted by the State
• Franchise tax is also imposed by LGUs on commercial franchises

such as McDonald’s, Wendy’s, Pizza Hut, Dunkin Donuts, KFC, etc.
Franchise Tax Not Levied as an Ordinary Corp.
• In the case of National Power Corp. vs. Cabanatuan City (G.R.
No. 149110, April 9, 2003)
• Franchise Tax - tax on the privilege of transacting business and

exercising a corporate franchise granted by the state
• It is not levied on a corporation simply for existing as a corporation,

but on its exercise of the exclusive rights or privileges granted to it
by the government
Franchise Tax Not Levied as an Ordinary Corp.
– cont.
• In the case of CIR vs. Philippine Airlines Inc. (G.R. No. 160528,
Oct. 9, 2006, SC stated that “franchise” is a legislative grant to
operate a public utility
• It has been ruled that to be considered a public utility, the activity

must be one of “public use”
Franchise & Local Business Tax Imposition
• In the case of Sky Cable Corporation vs. Quezon City, (CTA

AC No. 102, February 10, 2014)
• It was ruled that simultaneous imposition of Franchise and Local

Business Tax by the same taxing authority on the same subject
matter and for the same taxable period does not constitute
double taxation
• Business Tax was imposed for the privilege of engaging in the

business of contracting a system of communication
• Franchise Tax was imposed for the exercise of enjoying a

franchise
d. Tax on Sand, Gravel and Other Quarry Resources
• DENR issued guidelines in the utilization and disposition of
sand and lahar materials in the mineral reservation on lahar-
affected areas such as Pampanga, Tarlac and Zambales
• DENR also provided guidelines on power of province to levy

tax for extracted lahar material ceases
• A province may levy and collect tax on sand, gravel and

others extracted only from public lands
d. Tax on Sand, Gravel and Other Quarry Resources
– cont.
• Sale of quarry resources from private lands is subject to

Excise Tax and VAT under Sec. 106 of the NIRC
• Rate: 10% of FMV per cubic meter of sand, gravel and other
quarry resources
Sand & Gravel Fee
• In the case of Province of Cagayan vs. Joseph Lasam Lara
(G.R. No. 188500, July 24, 2013)
• It was ruled that payment of Local Tax on sand, gravel and

quarry resources and obtaining Business Permit from the LG are
prerequisites before one can engage in quarrying operations
e. Professional Tax
• Professionals who paid their Professional Tax to LGUs must
still pay the License Fee of Professional Regulation
Commission
• SGV is subject to payment of Business Tax as an independent

contractor as well as the payment of Mayor’s Permit Fee and
other regulatory fees
• General Professional Partnership (GPP) is not subject to a

Local Business Tax or other tax as a Contractor
e. Professional Tax – cont.
• Partners who compose the GPP are also not subject to Local
Business Tax since they are already subject to Professional
Tax
• Amount: Php300 per profession

f. Amusement Tax
• Amusement Places include “Places of Recreation” where one
seeks admission to entertain himself by direct participation and
admission fee must be paid
• Admission fee is 10% of the gross receipts
• Amusement Places include theaters, cinemas, concert halls,

circuses and other similar places
• These places are subject to 30% Amusement Tax and Business

Tax based on Gross Receipts
Businesses Not Subject to Amusement Tax
• In the case of Pelizloy Realty Corp. vs. Province of Benguet
(G.R. No. 183137, Apr. 10, 2013)
• It was ruled that resorts, swimming pools, bath houses, hot springs
and tourist sports are not considered among “other places of
amusement”, applying the Principle of Ejusdem generis
• Sec.140 of the LGC mentioned “proprietors, lessees, or operators

of theaters, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement” shall be taxed at a rate of not more
than 30% of the gross receipts from admission fees
No VAT on those covered by Amusement Tax
• In the case of CIR vs. SM Prime Holdings Inc. (G.R. No.

183505, Feb. 26, 2010)
• It was ruled that it is the intent of the Legislature not to impose

VAT on persons already covered by Amusement Tax
• Thus, gross receipts derived from admission tickets in showing

films or movies are subject to amusement tax and not VAT
• It was emphasized that exemption from VAT is only limited to

admission tickets
• It does not extend to purchase or lease of cinematographic films

which are subject to VAT
Places Not Subject to Amusement Tax
• Under Sec. 125 of NIRC, the ff. places upon which
provinces/cities cannot impose Amusement Tax (because the Tax
Code already imposes Amusement Tax) include:
o Cockpits
o Cabarets
o Night or Day clubs
o Boxing Exhibitions
o Professional Basketball Games
o Jai-Alai
o Racetracks
g. Annual Fixed Tax for Delivery Truck, Van,
Manufacturer/ Producer/ Wholesaler/ Dealer/ Retailer
in Certain Products
• Those who paid Annual Fixed Tax in the province may undertake
deliveries in all municipalities within that province
• Rate: Not exceeding Php500 for every delivery truck

Specific Powers of Municipalities to
Impose Taxes
CITY and MUNICIPALITY
City:
• City may levy taxes, fees and charges which the province or
municipality impose
• The rate that the city can levy may exceed the max rate (allowed for
province/ municipality) by not more than 50% except rates of
professional and amusement taxes
• Other businesses not classified in the previous slides may be subject

to Excise Tax, VAT and Percentage Tax under NIRC
• Tax Rate shall not exceed 2% of Gross Sales or Receipts of the

preceding calendar year
CITY and MUNICIPALITY
Municipality:
• A municipality may levy taxes, fees and charges not taxed by the
province
• Municipalities within Metro Manila Area may levy taxes at rates

which shall not exceed 50% of the max rates prescribed under Sec.
143
• Municipalities may impose and collect reasonable charges on

business and occupation except…
those reserved to the province under Sec. 139 on the practice of any
profession commensurate with the cost of regulation, inspection,
and licensing
Barangay
• Taxes on stores/ retailers with gross sales of Php 50K in cities
and Php30K in municipalities at a rate not exceeding 1% on such
gross sales or receipts
• Barangay Clearance– requirement before the city or municipality

can issue a license or permit
• Application for clearance must be acted within 7 days to issue the

license and Sangguniang Barangay may impose a fee
Barangay
• Service Fee – rendered in connection with the regulation or use
of barangay-owned properties
• Service Fees are also charged to:

o Commercial breeding of fighting cocks and cockpits
o In places of recreation which charge admission fees
o On billboards, signboards, neon signs and outdoor advertisements

Residual Power of Local Government
• This is the power of LGU to levy taxes, fees or charges on any
subject not specifically enumerated or taxed under NIRC
• Exercise of this power is allowed provided that taxes are not unjust,
excessive, oppressive, confiscatory or contrary to declared national
policy
• It is not against any of the Fundamental Principles of Local Taxation
• Prior Public Hearing is required before this power can be exercised

Permit and Regulatory Fees
• Power of LGUs to impose and collect fees is provided under Sec.
146 of the Code and Art. 233 of its Implementing Rules and Regs.
• Imposition of fees and charges are as follows:

o Sec. 147 Fees and Charges – LGU may impose and collect reasonable
fees on business and occupation commensurate with the cost of
regulation, inspection and licensing before any person may engage in
such business or practice of profession
o Art. 233 (IRR) Fees and Charges – LGU may impose and collect
reasonable fees on business and occupation provided that such fees
shall only be commensurate with the cost of issuing the license and
expenses incurred in the conduct of necessary inspection
o No fee shall be based on capital investment or gross sales or receipts of
the person or business liable
Receipts from Overseas Construction
Projects Exempted from Local Tax
• Bureau of Local Gov’t. – Finance in an opinion dated May 16, 2017
requested by Thermaprime Drilling Corp.
• Bureau reiterated that cities and municipalities have no authority to

impose and collect Local Business Tax on Gross receipts realized by
specialty contractor from its overseas constructive projects
• Thermaprime is a corp. engaged in well drilling work that has a

principal office in Pasig City
Receipts from Overseas Construction
Projects Exempted from Local Tax – cont.
• The co. has no branches or sales outlets but maintains project
offices in different localities in the Philippines
• It was registered as a Specialty Contractor at the Phil. Overseas

Construction Board
• The co. also offers its well drilling and construction services to
overseas clients
• This is in consonance with the opinion rendered in favor of Gulf-Asia
Int’l. Corp. on May 30, 2005 that service contract totally
consummated outside PH shall not be subject to Local Business Tax
Local Business Tax on Toll Fees
• In the case of Manila North Tollways Corp. vs. The

Municipality of Guiguinto, Bulacan (CTA AC No. 82, Dec. 3,
2012)
• The business of Manila North Tollways Corp. is to maintain and

operate NLEX for a fee so it falls within the classification of a
“contractor” under Sec. 131(h) of the LGC
• Its liability as a contractor shall be computed on the basis of

gross receipts and not on gross revenue
Holding Company Exempted from Business Tax
• In Michigan Holdings, Inc. vs. City Treasurer of Makati City
(CTA EB No.1093, June 17, 2015)
• It was ruled that a holding company is exempted from Local

Business Tax on dividend income
• While Sec.143(f) of the LGC expressly allows local taxation on

banks and other financial institutions on their dividend income, the
institutions enumerated appears exclusive and holding company is
not one of those mentioned
Holding Company Subject to Local Business Tax
• Generally, LGUs cannot levy Income Tax except on banks and FIs
• But if the Holding Company’s Art. of Incorporation shows its

primary purpose is extensive enough to cover most of the principal
functions of a financial intermediary…
it can be treated as a Non-bank Financial Intermediary for Local
Business Tax Purposes under Sec. 143 (f) of R.A. 7160 (Te Deum
Resources, Inc. vs. Davao City (CTA AC No. 150, Feb. 10,
2017)
Non-bank Financial Intermediary for Local Business
Tax Purposes
• CTA in Toda Holdings vs. Davao City (CTA AC No. 138, Feb. 09,
2017) cited the basic requirements to be considered as Financial
Intermediary:
1. Entity is authorized by BSP to perform quasi-banking activities
2. Principal functions include lending, investing or placement of funds or

evidence of indebtedness coursed through them for their own account
of for other’s account
3. Entity must perform said functions on a regular basis and not an

isolated transaction
Non-bank Financial Intermediary for Local Business
Tax Purposes – cont.
• In the previous case, Court stated that the Corp. is not authorized
by BSP
• The 2nd and 3rd requirement were not met
• While the Art. of Incorporation covers the functions of a Non-Bank

Financial Intermediary, it was not shown that these functions are
“principal” in nature as distinguished from incidental or secondary
Power to Adjust Local Tax Rate
• LGUs shall adjust the tax rates prescribed in the code, not often than
once every 5 years but in no case to exceed 10% of the rates fixed in
the code (LGC, Sec. 191)
Power to Impose Surcharges/ Interest

• Sanggunian may impose a surcharge, not exceeding 25% of the
taxes, charges, or fees not paid on time and …
an interest rate of not more than 2% per month of the unpaid tax,
charge or fee including surcharge, but in no case shall have the
same total 36 months (LGC, Sec. 168)
Illustration
• Mr. Taxpayer failed to pay Local Tax on his business for the year
2016 in a total amount of Php1,000
• He was assessed by LGU on June 20, 2017
• Sanggunian imposed a 25% surcharge and a 2% interest per
month as penalties for late payment.
• How much is his total tax liability including surcharges and
interests?
Local Tax payable ------------------------------ Php 1,000
Surcharge - Php1,000 x 25% --------------- 250
Interest - Php1,000 x 2% x 6*---------------- 120
Total Local Tax Liability ------------------------- Php1,370
* The 6-month period shall be counted after January 20, 2017

Requisites for Imposition of Fees
Rates should be:
1. Within the range of rate provided by LGC
2. Uniform throughout the political subdivision
3. Fair and Reasonable to Taxpayers

LGU’s may, by ordinance:
• Grant tax exemptions or provide relief in case of natural calamities,
civil disturbance, general failure of crops
• Exemption shall be granted in the next calendar year and only for a
period of 12 months
• Grant tax incentives to new investments and for a definite period not
exceeding one year
• Tax Exemption Certificate shall be conferred through the issuance of

a non-transferable tax exemption certificate (IRR of LGC, Art. 282)
Tax Exemptions Abolished by the LGC
• Tax Exemptions were withdrawn under Sec. 193 of the LGC
• The rule that Special Law must prevail over the provisions of a
General Law does not apply as legislative purpose to withdraw
tax privileges enjoyed under existing laws or charters
• It is apparent from the express provisions of the LGC
City of San Pablo, Laguna vs. Reyes (G.R. No. 127708, March
25, 1999)
Tax Exemptions Abolished by the LGC – cont.
• Withdrawal of tax exemptions provided in the LGC can only affect
franchises granted prior to the effectivity of the law
• Petitioner’s franchise which was granted 2 months after the

effectivity of the LGC is not covered by the said withdrawal
• “In lieu of all taxes” clause applies only to NIR Taxes and not to
Local taxes
• This clause from R.A. 7294 was rendered ineffective by the advent
of the VAT law
Smart Communications Inc. vs. City of Davao (G.R. No.

155491, Sept. 16, 2008)
List of Entities Still Enjoying Exemption
1. Local Water Districts
2. Cooperatives duly registered under R.A. 6938
3. Non-stock and Non-profit Hospitals and Educational Institutions
4. Business enterprises certified by BOI as Pioneer or Non-pioneer

for a period of 6 and 4 years from date of registration
List of Entities Still Enjoying Exemption –
cont.
5. Business entity registered under R.A. 6810 (Countryside and
Barangay Business Enterprises
6. Printer and/or publisher of books or other reading materials

prescribed by DECS as school texts or references as to receipts
from printing or publication (IRR of LGC, Art. 283)
Guidelines for Granting Tax Exemptions
• May be granted in cases of natural calamities, civil disturbance,
general failure of crops or adverse economic conditions
• Grant shall be through an ordinance
• Any exemption granted to a type of business shall apply to all

businesses similarly situated
• The same may take effect only during the calendar year not
exceeding 12 months as may be provided in the ordinance
• In case of shared revenues, exemption shall only extend to the

LGU granting such exemption
Guidelines for Granting Tax Incentives
• Granted to new investments in the locality and the ordinance shall
prescribe the terms and conditions
• Grant shall be for a period not exceeding one (1) year
• Grant shall be through an ordinance passed prior to January 1 of

any year
• Tax incentive granted to a type of business shall apply to all

Situs of Tax for Businesses
• In case a plantation is located at a place other than the place where
the factory is located, the 70% shall be divided as follows:
o 60% to the city or municipality where factory is located
o 40% to the city or municipality where plantation is located
• If there are 2 or more factories in several locations, 70% shall be

prorated based on respective volumes of production
Situs of Tax for Businesses – cont.
• Sales in Principal Office – Tax due to LG where principal office is
located
• Sales in Branches – Tax due to LG where branch office is located
• For Businesses with Factories, Project Offices, Plants and

Plantations
o 30% of Sales recorded in Principal Office – Taxable where principal

office is located
o 70% of Sales recorded in Principal Office – Taxable where factory,

project office, plant or plantation is located
Situs of Tax for Businesses- cont.
In the case of City of Makati vs. Nippon Express Philippines
Corp., (CTA AC Case No. 76, Feb. 17, 2012)
 Court ruled that for collection of Local Taxes, revenues of

branches outside Makati should not be part of the tax base in
determining of Local Business Tax paid in Makati
 Makati City maintained that it has the authority to assess Business

Taxes on revenues not properly taxed in branches
Situs of Tax for Businesses- cont.
 Assuming that there was wrong or under declaration of the total
taxable earnings in its Paranaque City branch, the tax properly
belongs to Paranaque City
 The action of the City Treasurer of Makati is impermissible

because to do so would be sanctioning upon the prerogatives of
another co-equal and autonomous local government
Civil Remedies to Enforce Collection
1. Administrative Remedy by issuance of Warrant of Distraint, Levy or
Garnishment
2. Judicial Action
• Either of these remedies may be pursued simultaneously at the
discretion of the LGU
Procedure on Distraint and Levy for Purpose
of Satisfying Local Taxes
1. Local Treasurer shall upon written notice, seize sufficient personal
property to satisfy the tax and other charges
2. Real property may be levied on or before, simultaneously, or after

distraint of personal property
• Officer posts notice in the office of LGU Chief Executive where
property is distrained and in at least 2 other public places stating the
time which is not less than 20 days after the notice and place of sale
of distrained goods
• Before the sale, goods distrained shall be reported to the owner if all
charges are paid already
Procedure on Distraint and Levy for Purpose
of Satisfying Local Taxes – cont.
3. At the time and place fixed in the notice, Officer conducting the sale
shall sell the goods distrained at public auction to the highest bidder
for cash
o Within 5 days, Officer shall report the sale to the LGU Chief
Executive
o Excess of Proceeds shall be returned to the owner of the property
sold
o If property distrained is not disposed within 120 days, it shall be
considered sold to LGU for the assessment amount made by the
committee on appraisal
o Tax Delinquencies shall be cancelled
Tax Base for Local Business Tax
• Case of Ericsson Telecommunications Inc. vs. Pasig City (Nov.
22, 2007)
o It was ruled that imposition of Local Business Tax based on gross

revenue will result in double taxation by the same jurisdiction
o Petitioner’s revenue for taxable year will include gross receipts already
reported during the previous year and for which local business tax has
already been paid
o SC said that the LG committed a palpable error when it assessed the

business tax of local taxpayer based its gross revenue as reported in its
AFS
o Sec. 143 of the LGC and Sec. 22e of Pasig Revenue Code provided
that tax should be based on gross receipts
Local Tax on Condo Dues
• Case of City Treasurer of Makati vs. BA Lepanto Condominium
Corp. (Oct. 25, 2005)
• It was ruled that a condominium corp. is generally exempt from

Local Business Tax under LGC, irrespective of any local ordinance
that seeks to declare otherwise
• City Treasurer failed to prove that the corp. is engaged in business

activities beyond the statutory purpose of a condo corp.
• Dues assessed against unit owners are to defray the expenses of

the condo project
• There is no contemplation of business and collecting tax violates

due process of law
Inaction of Treasurer on Protest of
Local Taxpayer
• A taxpayer dissatisfied with Local Treasurer’s denial or inaction on
his protest over an assessment has 30 days within which to appeal
to a Court of Competent Jurisdiction
• This period is to be reckoned from taxpayer’s receipt of denial of his

protest or lapse of the 60-day period within which Local Treasurer is
required to decide the protest from the moment of its filing
• Sec. 195 of LGC does not elaborate on how appeal is to be made

Inaction of Treasurer on Protest of
Local Taxpayer – cont.
• Remedies of reckoning from denial or inaction are considered
mutually exclusive
• Court of Competent Jurisdiction is the RTC in exercise of its original

jurisdiction and appeals therefrom must be filed with the CTA within
30 days from receipt of the decision
• Team Pacific Corporation vs. Daza as Municipal Treasurer of

Taguig, (G.R. No. 167732, July 11, 2012)
Case of Bagatsing vs. Ramirez (74 SCRA 306)
• SC ruled that exhaustion of administrative remedies before resort to
judicial bodies is not an absolute rule
• This principle is disregarded when it does not provide a plain,

speedy and adequate remedy
• This may be relaxed when the application can cause great and
irreparable damage
No Injunction Rule
• Unlike the Tax Reform Code of 1997 that provides the “No
Injunction Rule”, LTC does not prohibit an injunction against
collection of local taxes under Sec. 218
• To declare the nullity of a tax ordinance, it cannot be said that

damages caused to taxpayer would be irreparable against the
gov’t. whose lifeblood comes from taxes
• Injunction cannot be issued pending a case on tax ordinance

simply because it is alleged to be unconstitutional or invalid
No Injunction Rule – cont.
• Until so declared, presumption is that it is valid and
constitutional
• Another alternative is for taxpayer to pay the tax before an
assessment is issued by the local treasurer and then claim a
refund under the conditions expressed in Sec. 196 of the LGC
Appeal to the Secretary of Justice (Sec. 187 of
the LGC) provides:
“Any question on the constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within thirty (30) days from
effectivity thereof to the Sec. of Justice who shall render a decision
within sixty (60) days from receipt of the appeal.”
• Appeal shall not suspend effectivity of the ordinance, accrual and

payment of tax
• Within 30 days after receipt of decision or lapse of 60-day period

without Sec. of Justice acting upon the appeal, aggrieved party may
file appropriate proceedings with a Court of Competent Jurisdiction
• This refers to RTC when case is resolved in exercise of its original

jurisdiction
• Any adverse decision is appealable to CTA under Rep. Act. 9282
• LGC is explicit on grant of administrative appeal to the Sec. of

Justice on questions involving legality of a tax ordinance or revenue
measure
• Appeal is available only within 30 days from effectivity of ordinance
• When no longer available, taxpayer may not be precluded from

seeking judicial recourse such as by action for declaratory relief
• Eg. Before an assessment is made, issued on and before payment

is made by taxpayer
• If tax has already been paid, a written claim for refund or credit may
be filed with local treasurer from whose action, judicial recourse
may be within 2 years from payment of tax or from date the
taxpayer is entitled to refund or credit (Sec. 196, LGC)
• If no action is taken by Treasurer and 2-year period is about to

lapse, taxpayer can consider such inaction as denial
• Taxpayer can initiate court action so as not to foreclose this right by

prescription
Remedies of Taxpayers
1. Remedies Prior to an Assessment
• Administrative Appeal to the Secretary of Justice

• Action for Declaratory Relief as when applicable
2. Remedies After an Assessment
• Protest of the Assessment

• An Action for Refund
Declaratory Relief
• Refers to judgment of a court that determines the rights of
parties without ordering anything to be done or awarding
damages
• Theory is that an early resolution of legal rights will resolve some

or all other issues on matters being disputed
• Party seeking a declaratory judgment in effect makes a request

for an official declaration of the status of a matter in controversy
Declaratory Relief
• An action for declaratory relief under Rule 63 of the Rules of Court is
applicable if:
o Subject matter of controversy is an ordinance
o Terms and validity of ordinance is doubtful and require judicial

construction
o Must be before breach, as where Petitioner paid under protest fees

imposed in an ordinance
o There is an actual justiciable controversy
o No adequate relief through other means
o Controversy ripe for adjudication

Writ of Prohibition
• In the case of Benguet Electric Cooperative vs. Municipality
of La Trinidad, Benguet (CTA AC No. 85, June 7, 2013)
• It was ruled that taxpayer cannot seek issuance of Writ of

Prohibition to enjoin LGU from collecting assessments which
became final on account of taxpayer’s failure to appeal the
same with RTC within 30 days from denial of protest
No Injunction Rule
• In the case of Angeles City vs. Angeles City Electric Corp. (June
29, 2010)
• Citing also the Case of Valley Trading Co. vs. CFI of Isabela, SC
ruled that:
• “Unlike in NIRC, the Local Tax Code does not contain any specific
provision prohibiting injunction where local taxes are involved but
cannot negate the procedural rules under Rule 58.”
• Under this rule, applicant is entitled to relief if performance of the act

will create injustice and prevent damage to applicant until the merits
of the case can be heard
Claim for Refund or Tax Credit
• Filing of a written claim for refund with Local Treasurer is a
condition precedent for maintaining a Court action
• If Local Treasurer does not act on written claim for refund and 2-
year prescriptive period is about to expire, taxpayer should initiate
the court action for refund and consider Treasurer’s inaction as
denial of his claim for refund
• It was opined that court may entertain the appeal as long as the
case for refund is filed within the 2-year prescriptive period and
written claim for refund or credit had earlier been submitted to Local
Treasurer
When Does Local Business Tax Accrues?
• SC made a distinction between Annual Income Tax and Local
Business Tax to determine when local business tax accrues
o Income Tax - tax on income realized in 1 taxable year but payable
on the ff. year
o Local Business Tax - paid for privilege of carrying on business in
the year tax is paid
• In the year an establishment terminates its business, they would be

required to pay the difference if tax is collected
• It is based on previous year’s gross sales or receipts less than

actual tax due from current year’s gross sales or receipts as of date
of transfer or retirement
Mobil Philippines Inc. vs. City Treasurer of Makati, (G.R. No.

154902, July 14, 2005)
Time of Payment of Local Tax
• Unless provided by LGC, Local Tax, Fees and Charges shall be
paid within the first 20 days of January or of each subsequent
quarter as the case may be
• A surcharge of 25% is imposed on any unpaid taxes and interest at

rate not exceeding 2% from the date it is due until paid but in no
case to exceed 36 months
Payment under Protest
• In cases where deficiency exists between amounts of taxes
being paid by taxpayer and computation of tax liability by such
authorities…
• It has been the recurring practice of Local Gov’t. Agencies to
compel taxpayers to “Pay under Protest” whatever tax liabilities
they may have computed
• Refusal to pay will lead to consequences such as failure to secure
necessary business permits and clearances
• Is it proper? SC ruled that City Treasurer is not compelled to
accept as full compliance a tax payment that in his assessment is
deficient and incorrect since such act requires the exercise of
judgment
Romulo D. San Juan vs. Ricardo L. Castro, (G.R. 174617,
December 27, 2007)
Payment under Protest – cont.
• “Payment under Protest” can only be found under Sec. 252 of LGC
which provides that no protest shall be entertained unless taxpayer
pays the tax first. It shall be annotated on the tax receipt the words
“Paid under Protest”.
• Protest in writing must be filed within 30 days from payment of tax

to Treasurer who shall decide the protest within 60 days
• Procedure required forms part of Title 2 Chapter 6 – Collection of

Real Property Tax
• Remaining option for LGUs is to find legal support from their

respective charters, Local Revenue or Tax Ordinances
• Otherwise, LGUs are all inviting the filing of suits against them
CTA Jurisdiction on Local Tax Cases
In the case of City of Manila vs. SM Prime Holdings, et.al. (Feb. 04,
2014), SC ruled that:
• Even if CTA has exclusive appellate jurisdiction over decisions of

RTC in Local Tax Cases originally decided by them…
• There is no statement under RA 1125 nor RA 9282 which avers that

CTA has jurisdiction over Petitions for Certiorari assailing
interlocutory orders issued by RTC in Local Tax Cases filed before
it
Assailing Validity of an Ordinance
• A dissatisfied taxpayer who questions legality of a tax
ordinance is required to file his appeal to the Sec. of Justice
within 30 days from its effectivity
• In case Secretary decides the appeal, a period of 30 days is
allowed for an aggrieved party to go to court
• If Secretary does not act within 60 days, a party could already
proceed to seek relief in court
• These 3 separate periods are given for compliance as a prerequisite

before seeking redress in a competent court
Assailing Validity of an Ordinance – cont.
• Such statutory periods are set to prevent delays and enhance
the orderly and speedy discharge of judicial functions
• For this reason, Courts construe these provisions of statutes
as mandatory
Cagayan Electric Power and Light Co. Inc. vs. City of Cagayan de
Oro, (G.R. No. 191761, November 14, 2012)
Assailing Validity of an Ordinance – cont.
• When disputing an ordinance, there is no need to make written
protest
• Written protest is only needed when protesting against an

assessment
• Taxpayer may file a complaint assailing validity of an ordinance

and request for refund of its perceived overpayments even without
filing first a protest on payment of taxes due under the ordinance
Jardine Davies Insurance Brokers vs. Aliposa, (G.R. No.

118900, Feb. 27, 2003)
Case of San Miguel Corp. vs. Hon. Celso
Avelino and City of Mandaue (89 SCRA 69)
• SC ruled that RTC judge has authority to pass upon validity of a
City Tax Ordinance even if its validity has been contested before
the Sec. of Justice and a decision was rendered
• Appeal from decision of Sec. of Justice cannot be construed to

deprive Courts of jurisdiction to pass upon validity of City Tax
Ordinance
• To construe that would bar what would be a proper case cognizable

by a court in exercise of its power of judicial review
• LGC of 1991 expressly allows a party aggrieved by decision of Sec.

of Justice to file appropriate proceeding with a Court of Competent
Jurisdiction
Assailing Validity of an Ordinance (New Rule)
In the case of Michigan Holdings, Inc. vs. City Treasurer of Makati,
(CTA AC Case No. 99, Sept. 19, 2013)
• It was ruled that any question on legality and validity of a tax

ordinance or a revenue measure implemented by LGU should be
appealed to the Secretary of Justice and not before the Regional
Trial Court
Taxpayer Remedies Against Local Tax
Assessment
• Under Sec. 195 of RA 7160, Taxpayer may file a written protest
with the Treasurer within 60 days from receipt of assessment
notice
• From date of filing the protest letter, Treasurer has another 60 days
to resolve the protest
• In case of denial, Taxpayer has a 30-day period from receipt of

denial to file an appeal with the Court of Competent Jurisdiction
• Assessment becomes conclusive if a Taxpayer fails to appeal with

RTC within 30 days from lapse of 60-day period given to the
Treasurer to decide on the case
Taxpayer Remedies Against Local Tax
Assessment – cont.
• Taxpayer must remain vigilant throughout the process because if
Treasurer failed to issue a decision on the administrative appeal,
assessment would become conclusive
• Taxpayer should file an appeal to the Court within the given 30-day
period
• Taxpayer must be aware that in local tax assessment cases,

inaction of Local Treasurer is an affirmation of the validity of
assessment equaling to issuance of denial to the appeal
Taxpayer Remedies against a Local Tax
Assessment – cont.
• Taxpayer should consider that use of the word “Appeal” (referring
to remedy available to written protests) were denied by respective
Local Treasurers under Sec. 195 of LGC since it is a misnomer
• SC ruled that LGC does not expressly confer appellate jurisdiction

on RTC from the denial of a tax protest by a Local Treasurer
• Per Sec. 22 of B.P. 129, Appellate Jurisdiction applies only to cases

decided by Metropolitan and Municipal Trial Courts
Proper Venue for an Appeal
In the case of PLDT vs. Balanga City Treasurer, CTA En Banc (June
03, 2009), SC ruled that:
• Where the act of a Public Official is the object of litigation, suit must
be filed in the RTC whose territorial jurisdiction encompasses the
place where the respondent official is holding office
• Since it is outside territorial limits, Court has no power to enforce its

order
• It is important for a taxpayer to know the available remedies and

proper procedure
Liability of Local Gov’t. Officials for Damages
In the case of Ormoc Sugar Co. vs. Treasurer of Ormoc City, 22
SCRA 603, SC ruled that:
• LG Officials are liable for damages on acts of its officers such as in

interest payments when collection of local taxes is attended by
arbitrariness
• Taxpayer may direct his action against the erring public official if the
latter acted with malice or inexcusable negligence
Liability of Local Gov’t. Officials for Damages
• In the case of Philippine Match Co., Ltd. vs the City of Cebu
(G.R. No. L-30745, Jan. 18, 1978)
• The issue is whether Cebu City can tax sales of matches which
were perfected and paid for in Cebu City but were delivered to
customers outside the city
• It was ruled on appeal that Cebu City has the right to tax since
delivery to the carrier is considered delivery to the buyer
• Court also ruled that the City Treasurer should not be held liable for
damages since he acted within scope of his authority when he
interpreted the ordinance
Period for Filing Refund Claim
In the case of Allied Banking Corp. vs. Quezon City Local Gov’t.
(Sept. 15, 2006), SC ruled that:
• Entitlement to tax refund does not necessarily call for automatic

payment of the sum claimed
• It must be proven based on tax declarations, affidavits and other

documentary evidences
• Claim for refund of Realty Tax may be pursued under Sec. 253 of
LGC within 2 years from finality of the decision
Withdrawal of Tax Incentives
• Withdrawal of Tax Exemptions provided in LGC can only affect
franchises granted prior to effectivity of the law
• Considering that taxpayer’s franchise was granted 2 months after

effectivity of said law, it was not covered by the said withdrawal
• “In Lieu of All Taxes” clause applies only on NIR Taxes and not to
Local Taxes
• Moreover, this clause in the franchise under Rep. Act 7294 was
rendered ineffective by the advent of the VAT Law
Smart Communications Inc. vs. City of Davao, (G.R. No.

155491, Sept. 16, 2008)
Bureau of Local Gov’t. Finance
BLGF was created under EO No. 127 to perform the ff. functions:
• Assist in the formulation and implementation of policies on

Local Gov’t. Revenue Administration and Fund Management
• Exercise administrative, technical supervision and coordination
over the Treasury and Assessment Operation of Local Gov’t.
• Develop plans and programs for improvement of Resource Mgt.

System, Collection Enforcement Mechanisms and Credit Utilization
Schemes at local levels
Bureau of Local Gov’t. Finance – cont.
BLGF was created under EO No. 127 to perform the ff. functions:
• Provide consultative services and technical assistance to LG and

gen. public on local taxation, real property assessment and other
matters
• Exercise line supervisions over its regional offices and local

treasury, assessment and other related matters
• Perform other functions as may be assigned by the Sec. of

Finance or Undersecretary for Domestic Operations
Guidelines for Granting Tax Exemptions
• Granted in case of natural calamities, civil disturbance, gen. failure
of crops or adverse economic conditions
• Grant shall be through an ordinance
• Any exemption granted to a type of business shall apply to all

• Grant takes effect only during the calendar year not exceeding 12
months as provided in the ordinance
• In case of shared revenues, relief of exemption shall only extend to

LGU granting such exemption
Double Taxation
• Coca-Cola Bottlers, Inc. (CCBI) paid Local Business Tax to City of
Manila as a manufacturer but it is expressly exempted from
Business Tax under a different section applied to businesses
subject to Excise, VAT or Percentage Tax under the Local Tax Code
• City of Manila subsequently amended the ordinance by deleting the

provision exempting businesses under a different section in the
ordinance
• This amendment was declared null and void by SC
• CCBI filed a claim for tax refund for taxes paid under the void
ordinance
Double Taxation – cont.
• SC ruled that CCBI is entitled to refund because there was indeed
double taxation subjecting the company to both Secs. 14 and 21 of
Tax Ordinance. The ff. are being imposed:
a. Same Purpose – Contribute to the city revenues for conducting
business within the city
b. Same Subject Matter – Privilege of doing business within the city
c. Same Taxing Jurisdiction – City of Manila
d. Same Taxing Periods – Per calendar year
e. Same Kind or Character – Local Business Tax imposed on gross

sales or receipts
City of Manila vs. Coca-Cola Bottlers, Inc. (G.R. No. 181845, August
4, 2009)
Double Taxation – cont.
• In the case of Super Grocers Inc. vs. Municipality of San Pedro
(CTA AC No. 86, Feb. 25, 2013)
• Petitioner challenged reclassification from “Retailer of Essential and

Non-Essential Commodities” to “Owners or Operators of privately-
owned supermarkets, shopping centers and minimarts”
• CTA ruled that petitioner’s business activities fall under “Retailer of

Essential and Non-Essential Commodities” under Sec. 143[c] and
[d] of the LGC
• Re-classification was not allowed as it violates the limitation under

Sec. 143[h] of the LGC
CTA Jurisdiction on Local Tax Cases
• Authority to issue Writs of Certiorari involves exercise of original
jurisdiction which must be expressly conferred by constitution or by
law
• It cannot be implied from mere existence of appellate jurisdiction
• Based on Sec. 5(1) Art. VIII of 1987 Constitution, CTA’s power

includes the right to issue Writ of Certiorari if there is a grave abuse
of discretion on part of the RTC in issuing an Interlocutory Order
Remedies After an Assessment or Payment
• When correct tax is not paid, Local Treasurer issues Notice of
Assessment within the applicable prescriptive period (Sec. 194,
LGC) stating the nature of levy, amount of deficiency and
incremental penalties
• Taxpayer may contest assessment or pay tax before the lapse of 60

days from receipt of assessment to prevent it from becoming final
and executory
• Local Treasurer shall decide within 60 days from date of filing by

sustaining or denying the same wholly or partly
• If protest is denied, taxpayer may file within 30 days from receipt of

denial, an appeal with the Court of Competent Jurisdiction
Prescriptive Periods
• Assessment – Local taxes, fees or charges must be assessed
within 5 years from the date they become due
- In case of fraud, the same may be assessed within

10 years from discovery of fraud
• Collection – may be collected within 5 years from date of

assessment by administrative action or judicial action
Prescriptive Periods – cont.
• Suspension of Prescriptive Period happens when:
1. Treasurer is legally prevented from making the assessment or

collection
2. Taxpayer requests for reinvestigation and executes a waiver in

writing before expiration of the period within which to assess or
collect
3. Taxpayer is out of the country or cannot be located

DOF Dept. Circular No. 001-2015 (June 1, 2015)
• As part of govt’s effort to strengthen its overall fiscal position, all

LGUs allowed by law to retain income for operations and working
balances shall deposit in a Government Financial Institution (GFI)
with a Universal Bank License and CAMELS rating of at least “3”
• Exceptions:
1. Where no GFIs can provide necessary banking services
2. Where there are no accessible (within the 20 kilometer radius)

GFIs. DOF must be furnished a vicinity map showing the location
& distance of the GFI
3. Where security and safety are the reasons to maintain an account

(with a proposed bank)
TAXING POWERS OF LGUs
Part II – Real Property Taxation
• INTRODUCTION
• Real Property Tax - Ad Valorem Tax assessed, levied and collected

in all provinces, cities and municipalities on land, buildings,
machineries and other improvements affixed to real property and not
specifically exempted by law
• It is one of the principal sources of revenue for the LGUs

What is a Real Property?
• Art. 415 of the NCC was applied suppletorily to RA 7160 as to
Kinds of Real Property subject to Real Property Tax. These are as
follows:
a. Real Property by Nature Eg. Land
b. Real Property by Incorporation Eg. Building
c. Real Property by Destination Eg. Underground tanks of Gasoline

Stations
Fundamental Principles on Real Property
• It shall be appraised at its Current and Fair Market Value
• It shall be classified for assessment on the basis of its actual use
• It shall be assessed on the basis of a uniform classification within

each LGU
• Appraisal, assessment, levy and collection of Real Property Tax

shall not be assigned to any person
• Appraisal and assessment of property should be equitable

Definitions on Real Property
• Assessment Level – percentage applied to the FMV to determine
the taxable value of property
• Assessed Value – FMV of Real Property multiplied by its

assessment level. It is synonymous to Taxable Value
• Commercial Land – land devoted principally for the object of profit

and not classified as agricultural, industrial, mineral, timber or
residential land
• Depreciated Value – value remaining after deducting depreciation

from the acquisition cost
• Economic Life – estimated period over which it is anticipated that

a machinery or equipment may be profitably utilized
Definitions on Real Property – cont.
• Fair Market Value – price at which a property may be sold by a
seller who is not compelled to sell and bought by a buyer not
compelled to buy
• Improvement – valuable addition made to a property or an

amelioration of its condition
- amounting to more than a mere repair or
replacement of parts involving capital expenditures and labor
- intended to enhance its value, beauty or utility or
to adapt it for a new purpose
• Building – immovable, more or less of a permanent structure,
substantially adhered to the land and not mere superimposition,
and there is an intent of permanent annexation
Note: Law uses the term “adhered” and not “superimposed”
• Industrial Land – land devoted principally to industrial activity as

capital investment and not classified as agricultural, commercial,
timber, mineral or residential land
• Residential Land – land principally devoted to habitation
• Reassessment – assigning of new assessed values to real

property as the result of a general, partial or individual reappraisal
of property
• Remaining Economic Life – period of time expressed in years
from date of appraisal to date when machinery becomes valueless
• Remaining Value – corresponding to remaining useful life of

machinery
• Special Classes of Property – all lands, buildings and other

improvements directly and exclusively used for hospitals, cultural or
scientific purpose
- those owned and used by local
water districts, GOCC rendering public services in the supply and
distribution of water and/or generation and transmission of electric
power
Other Classifications not defined in RA 7160
but are assessable
• Timberland – land identified as forest or reserve area by the
government
• Memorial Park – land exclusively used as burial ground,

disposition of which is for a commercial purpose or profit
• Horticultural Land – land devoted for planting flowers and other

ornamental plants
• Marsh Land – tract of low-lying land usually under water
• Foreshore Land – strip of land along the seashore

but are assessable – cont.
• Machinery – embraces machines, equipment, mechanical
contrivances, instruments, appliances which may or may not be
attached permanently or temporarily to real property
• Physical Facilities – production, installation and appurtenant

service facilities, mobile, self-powered and not permanently
attached to real property will be classified as real property provided
that:
o Directly use to meet the needs of particular industry, business or activity
o By its nature is necessary in manufacturing, mining, logging,

commercial, industrial or agricultural purposes
• Machinery for general use – including but not limited to office
equipment, F&F and other machines not directly used to meet the
needs of a particular business
• This shall not be considered within the definition of machinery
under this rule
• Computers, air-conditioning units and generators directly used by
the bank in operation of its business are subject to assessment
and payment of RPT (DOF Opinion)
• Residential Machinery – machines, equipment, appliances or
apparatus permanently attached to residential land and its
improvements
• Machinery no longer in use – by reason of cessation of

production, the same should be transferred from taxable to exempt
roll and not subject to the payment of RPT (DOF Opinion)
Provincial Assessor of Agusan Del Sur vs.
Filipinas Palm Plantation Inc.
• In above case decided by SC on Oct. 05, 2016 (G.R. 183416), an
issue raised for resolution was about the definition of machinery
under Sec. 199 (o) of LGC and Art. 415 (5) of the NCC
• Citing Caltex Phil Inc. vs. CBAA, it was ruled that in determining
whether machinery is a real property subject to RPT, the definition
and requirements under the LGC are controlling
• The phrase pertaining to physical facilities for production under

Sec. 199 (o) includes road equipment and min haulers actually,
directly and exclusively used to meet its operations in palm oil
production
Capitol Wireless Inc. vs. Prov. Treasurer of
Batangas
• In above case decided on May 30, 2016 (G.R. 183416), main issue
is whether submarine or undersea communication cables are akin
to electric transmission lines
• The Court in the case of Meralco vs. Lucena City Treasurer ruled
that they are “not exempted” from Real Property Tax and may
qualify as “machinery” subject to this tax
• While Electric lines and communication cables do not directly

adhere to the soil but pass through posts or landing stations, these
are considered as “machinery” being real property by destination
Administration, Appraisal and Assessment of
Real Property Tax
• Provinces and cities are primarily responsible for administration of
Real Property Tax
• All Real Property (taxable or exempt) shall be appraised at Current

and FMV prevailing in the locality where property is situated
• Declaration of Real Property – all persons owning or administering

a real property shall file with Provincial/ City/ Municipal Assessor, a
Sworn Statement declaring true value of property once every 3
years during the period January 1 to June 30
Administration, Appraisal and Assessment of
Real Property Tax – cont.
• When any person required to declare real property but refuses or
fails to do so, the Provincial/ City/ Municipal Assessor shall declare
the property in the name of the default or unknown owner
• Such declaration need not be under oath
• The fact that property was declared in the name of certain parties
for taxation purposes does not constitute evidence of ownership
(SC Decision)
• Transfer or cancellation of a Tax Declaration may be affected only

after registration of document conveying the real property (DOF
Opinion)
Property Declared for the First Time
• Real property which has not been declared when discovered will
be considered “property declared for the first time”
• Under Sec. 222 of the LGC, said property shall be assessed with
Back Taxes for not more than ten (10) years prior to date of initial
assessment
• Taxes shall be computed on the basis of applicable Schedule of

Values in force during the corresponding period
Property Declared for the First Time – cont.
• If such taxes are paid on or before the end of the quarter ff. the
date the Notice of Assessment was received by the owner, no
interest for delinquency shall be imposed
• Otherwise, taxes shall be subject to 2% interest from date of

receipt of assessment until taxes are fully paid
Listing in the Assessment Roll
• Real Property (taxable or exempt) shall be listed in an assessment
roll prepared and maintained by the Provincial/ City/ Municipal
Assessor
• Real Property shall be listed, valued and assessed in the name of

the owner, administrator or anyone who has legal interest on the
property
• Undivided Real Property of a deceased may be listed, valued and

assessed in the name of estate, heirs or devisees without
designating them individually
Listing in the Assessment Roll – cont.
• Undivided Real Property other than that owned by a deceased may
be listed, valued and assessed in the name of one or more of the
co-owners provided that they shall be liable jointly or severally for
payment of tax
• Real Property of a Partnership or Corporation shall be listed in the

same manner as an individual
• Real Property owned by the Rep. of the Philippines shall be listed,

valued and assessed in the name of the possessor, grantee or
public entity if property has been acquired for resale or lease
Listing in the Assessment Roll – cont.
• Assessment of Real Property should not increase more than once
every 3 years except in new improvements
• After total/ partial destruction, major change in the use, sudden

inflation/ deflation of property values or for any abnormal cause,
Assessor may submit his assessment to Sanggunian concerned so
that Schedule of Values may be amended (DOF Opinion)
• Cancellation/ Reduction of assessment caused by total/ partial

destruction of property takes effect on the 1st day of the quarter ff.
the quarter in which total/ partial destruction occurred
Listing in the Assessment Roll- cont.
• If property is totally destroyed, only taxes due for quarters before
destruction on the basis of cancelled assessments are collectible
• Notice of Cancellation of Assessment shall be issued
• If property is partially destroyed, only taxes due for quarters before

destruction on the basis of cancelled assessments are collectible
• Reduced assessment shall start on the following quarter
• Revised Tax Declaration shall be prepared and issued to cancel

the tax declaration of the original assessment
Idle Land Tax
• A Province, City or Municipality within MMA may levy an annual tax
on idle lands at a rate not exceeding 5% of the assessed value of
property in addition to the basic RPT
• Idle Land covers:

a. Agricultural Lands – more than 1 hectare in area suitable for
cultivation and ½ of which remain uncultivated
b. Lands (Other than Agricultural) – more than 1,000 sqm in area, ½
remain unutilized; tax shall apply to residential lots
• LGU may exempt idle lands from additional levy by reason of force
majeure which prevents owner from utilizing the same
Proof of Exemption from Taxation of Real
Property
• Every person by or for whom real property is declared claiming
exemption shall file with the Assessor within 30 days from date of
declaration of real property
• He must have sufficient documentary evidence in support of such

claim
• If property shall be proven as tax-exempt, the same shall be

dropped from the assessment roll
Purpose of Tax Declaration
• Enables the assessor to identify the property for purposes of
determining the assessment levels
• Does not bind the assessor when he makes his assessment.
• Does not prove ownership. It is merely an “indicium” of a claim of

ownership. (De Vera-Cruz vs. Miguel, G.R. No. 144103, Aug.
31, 2005)
• In the case of Consolidated Rural Bank [Cagayan Valley] Inc.

vs. CA (G.R. No. 132161, Jan. 17, 2005)…
Court ruled that tax declarations are good indicia of possession

in the concept of an owner for no one in his right mind would be
paying taxes for a property not in his actual or constructive
possession
Exemption from Realty Tax
In the case of Camp John Hay Dev’t. Corp. vs. CBAA (Oct. 02, 2013),
SC ruled that:
• Claim for exemption from payment of realty tax does not actually
question the Assessor’s authority to collect tax but pertains to
correctness of his assessment
• Arguments involve Question of Facts that should have been given at

the very first instance to the Local Board of Assessment Appeals
• By providing that real property not declared as tax-exempt should be

included in the assessment roll
Exemption from Realty Tax – cont.
• Any claim for exemption shall only be allowed when there are
sufficient proofs
• If exemption is being insisted by the owner, his only recourse is to

Pay Under Protest
NAPOCOR vs. Treasurer of Benguet
• In above case decided on Nov. 14, 2016 (G.R. 209303), it was
ruled that if property taxed has not been dropped from assessment
roll, taxes must be “Paid under Protest” if exemption is insisted
• Tax must be paid first before the Taxpayer can question the
assessment
• Claim for exemption does not actually question the Assessor’s

authority to assess and collect taxes but it pertains to the
reasonableness of assessment
• Payment under Protest is mandatory under Sec. 252 of LGC

Notification of Transfer of Real Property
Ownership
• Any person who shall transfer his ownership of property must notify
the Assessor concerned within 60 days from date of transfer
• It must be noted that Tax Declarations or Realty Tax Payments are

not conclusive evidence of property ownership (SC Decision)
Preparing Schedule of Values
• Before any general revision on real property is made, one must
prepare a Schedule of Market Values for different classes of
property
• Must be situated in the form and detail prescribed by Local

Assessment Regulation No. 1-92
• Must be submitted to the Sanggunian concerned not later than the

21st of October immediately preceding the revision on assessment
prescribed in the assessment calendar
• Conduct of general revision of Real Property Assessments is

mandatory (DOF Opinion)
• Schedule of Values prepared by the City Assessor alone is null and

void
Actual Use of Real Property
• Real Property shall be classified, valued and assessed on the basis
of its actual use regardless of where located, whoever owns it, and
whoever uses it
• Appraisal and assessment are based on actual use of real property

irrespective of any previous assessments or taxpayer’s valuations
according to the taxpayer’s declaration (SC Decision)
Assessment Levels
• Assessment levels to be applied to the FMV of Real Property in
determining its assessed value shall be fixed by ordinances of the
Sanggunians concerned at a rate not exceeding the ff:
LANDS:
Class Assessment Level
Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%
Timberland 20%
Buildings and Other Structures
Residential
Based on FMV – from 0% for those not over Php175K
60% for those over Php10M
Agricultural
Commercial/ Industrial
Timberland
Assessment of Property Subject to Back
Taxes
• Real Property declared for the 1st time shall be assessed for taxes
for the period during which it would have been liable but in no case
for more than 10 years prior to date of initial assessment
• Such taxes shall be computed on the basis of applicable Schedule

of Values in force during that period
o Undeclared Real Property subject to Back Taxes shall be classified
and valued on the basis of Schedule of Base Market Values in force
during the period the property was undeclared and unassessed
o Undeclared Buildings and Other Improvements are exempted from

the foregoing rule
Assessment Appeals
• An appeal/ petition to the Local Board of Assessment Appeals may
be made within 60 days from date of receipt of the written
assessment
• If taxpayer is not satisfied with the decision of the local board, he

may appeal to Central Board of Assessment Appeals within 30 days
after receipt of the decision
Exemptions from Real Property Tax
a. Real Property owned by the Rep. of the Philippines except when
beneficial use has been granted for consideration to a taxable
person
b. Charitable Institutions, Churches, Convents, Appurtenance,

Mosques, Non-profit or Religious Cemeteries and all lands/
buildings/ improvements used for religious, charitable or
educational purposes
c. All machinery and equipment directly used by local water districts

and GOCC engaged in the supply of water and/or transmission of
electrical power
Exemptions from Real Property Tax – cont.
d. All Real Property owned by duly-registered cooperatives provided
under RA 6938
e. Machinery and Equipment for pollution control and environmental

protection
Beneficial Use by Private Person
• In the case of Unimaster Conglomeration Inc., vs. Tacloban

City Government et.al. (CTA EB No. 901, August 22, 2014)
• It was ruled that when the beneficial use of real property owned
by the Republic or any of its political subdivision is vested to a
taxable person, the real property is subject to tax
• Since Province of Leyte, Privatization & Management Office and

Philippine Tourism Authority are co-owners of the hotel, the
property is subject to real property tax
• Domestic Private Corporation is the lessee of the hotel and

beneficial user of the real property
Beneficial Use by Private Person – cont.
• In the case of GSIS vs. City Treasurer & City Assessor of
Manila, (G.R. No. 186242, Dec. 23, 2009)
• It was ruled that when tax exemption of property of a government

instrumentality ceases on the ground, that beneficial use has
been granted for a consideration to a taxable person
• Unpaid Tax attaches to the property and is chargeable against

the taxable person who has beneficial use and possession of it,
regardless if he is the owner or not
Meralco Not Exempt from Real Property Tax
• In the case of MERALCO vs. City Assessor & City Treasurer
of Lucena City (G.R. No. 166102, August 5, 2015)
• SC ruled that MERALCO can no longer claim exemption from

RPT for its transformers, electric posts, transmission lines,
insulators and electric meters based on its franchise
• MERALCO relies heavily in a 1964 case exempting these

properties from RPT
• With the passage of LGC of 1991, exemption privileges were

withdrawn pursuant to the last paragraph of Sec. 234 which
unequivocally withdrawn all exemptions from Realty Tax granted
to Natural & Juridical persons including GOCCs
Meralco Not Exempt from Real Property Tax – cont.
• Tax Exemptions must be clear and unequivocal
• Taxpayer claiming an exemption must point to a specific provision

of law conferring on the taxpayer (in clear and plain terms) the
exemption from a common burden
• Any doubt on whether a tax exemption exists is resolved against

the taxpayer
• MERALCO has failed to present any express Grant of

Exemption from RPT that is valid and binding even under the LGC
Reclaimed Properties
• In the case of Republic of the Philippines, represented by the
Philippine Reclamation Authority (PRA) (G.R. No. 191109, July
18, 2012)
• SC ruled that all reclaimed properties owned by the PRA are

exempted from real estate taxes
• Under the Administrative Code of 1987, reclaimed lands are

reserved lands for public use
• These are properties of public dominion
• Ownership of such lands remains with the State unless they are
withdrawn by law or there is a Presidential Proclamation
Realty Tax on 2 Airports
1. MANILA INTERNATIONAL AIRPORT AUTHORITY
• Exempted from Realty Tax under Sec. 234 of RA 7160 because it is a

gov’t. instrumentality and Trustee of the country
• Airport lands and buildings are of public dominion

Realty Tax on 2 Airports – cont.
2. MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY
• Exempted from Realty Tax pursuant to the SC’s decision in MCIAA vs.
City of Lapu-Lapu and Elena Pacaldo (G.R. No. 181756 June 15,
2015.)
• This ruling has overturned the 1996 MCIAA ruling that it is not
exempted from realty tax, being a GOCC
• With this 2015 decision, MIAA & MCIAA were not declared as gov’t.
instrumentalities so they are exempted from Real Estate Tax
Exemption of Charitable Institution
• Previously, the rule on tax exemption of properties used for
religious, charitable or educational purposes has been abandoned
• This is enunciated in the Case of Herrera vs. Quezon City

Assessor
• Prevailing doctrine now is that for real property to be exempted from

Realty Tax, properties must be actually, directly and exclusively
used for religious, charitable and educational purposes
• This is expressed in the Case of Lung Center of the Phil. Vs.

Quezon City Assessor (G.R. 144104, June 29,2004)
Exemption of Charitable Institution – cont.
• In doctrine established in “Lung Center of the Phils.’ Case” and in
the case of “City Assessor of Cebu vs. Association of Benevola
de Cebu”, (G.R. No. 152904, June 8, 2007)
• SC ruled that exemption in favor of property used exclusively for

charitable or educational purposes is not limited to property actually
indispensable but extends to facilities which are incidental and
necessary for accomplishment of said purposes
• Such as in the case of hospitals, schools for training nurses, home

and recreational facilities of student nurses, interns and residents
Exemption of Charitable Institution – cont.
• In the case of “Angeles University Foundation vs. Angeles City”,
(G.R. No. 189999, June 27, 2012)
• SC also applied the doctrine laid down in the Lung Center of the
Phils. case that for a real property to be exempted from RPT, it must
be used directly and exclusively for religious, charitable and
educational purposes
• It is not the use of income from real property that will determine
whether that property is tax-exempt
Payment of Realty Taxes
• Real Property Tax may be paid in 4 equal installments:
1st Installment – On or before March 31

2nd Installment – On or before June 30
3rd Installment – On or before September 30
Last Installment – On or before December 31
• If Basic Realty Tax and SEF are paid in advance, a discount not
exceeding 20% of the Annual Tax due may be availed
Payment Under Protest
• In the case of Camp John Hay Dev. Corp. vs. CBAA (G.R. No.
169234, Oct. 2, 2013)
• SC ruled that “No protest shall be entertained as to an RPT

assessment unless the taxpayer first pays the tax”
• Taxpayer is required to annotate or write on tax receipts the words

“Paid under protest”
Payment Under Protest – cont.
• Protest contemplated under Sec. 252 of the LGC of 1991 pertains to
questions on reasonableness of the amount assessed
• No protest is required when the taxpayer questions the authority of

the assessor to impose assessment and collect tax
• This challenges not the amount of assessment but the validity of

increase
Payment Under Protest – cont.
• If what is being challenged is the validity of increase, this is a
question of law and taxpayer may bring the matter to Court
• It is illustrated in the case Ty vs. Trampe, 321 Phil. 81, 1995,

where taxpayer questioned the increased real estate taxes
imposed by Pasig City effective from 1994, premised on legal
question of whether or not Pres. Dec. No. 921 was repealed by
LGC
• In some cases, determination of whether the issue involves a

question of fact or a question of law may be obscure
• Is “Payment under protest” required when the taxpayer

claims exemption from payment of RPT under a specific
provision of law or statute?
Period within which to Collect Real Property Tax
• May be collected within 5 years from the date it becomes due
• In case of fraud or evasion of tax, action to collect tax may be

instituted within 10 years from date of discovery of fraud or intent to
evade
• Period of Prescription is suspended if:

o Treasurer legally prevented the collection
o Owner of property requests for reinvestigation and signs Waiver
of Prescription
o Owner of property cannot be located or is out of the country
Remedy of Property Owner for Realty Tax
Assessment
• A property owner questioning the assessment should first pay the
tax due before his protest can be entertained
• Within the period prescribed by law, any person not satisfied with
assessment of the Assessor may file an appeal with the Local Board
of Assessment Appeals (LBAA) in the province or city concerned
• Within 30 days from receipt, owner may elevate his appeal to the
Central Board of Assessment Appeals
Camp John Hay Development Corp. vs. CBAA (G.R. No. 169234,
October 2, 2013)
Issuance of Writ of Possession
In the case of Republic of the Philippines (DOTC) vs. City of
Mandaluyong (Feb. 23, 2011), SC ruled that:
• It is premature for RTC to issue a Writ of Possession where issue

on ownership of properties derived from auction sale is still being
deliberated by CTA
• A Writ of Possession issued at this juncture has no force and effect
• It is noteworthy that Writ of Possession is a mere incident in

transfer of title
Situs of Real Property Taxation
In the case of Sta. Lucia Realty & Dev’t. Inc. vs. Pasig City (June
15, 2011), SC ruled that:
• While a local gov’t. is authorized to collect Realty Tax on properties

falling under its jurisdiction, it is imperative to first show that these
properties are unquestionably within its geographical boundaries
• Local gov’t. must confirm that subject properties are situated within
their territorial jurisdiction otherwise it would be acting beyond its
powers vested by law
Real Property to Satisfy Delinquent Tax
1. Warrant of Levy is issued by the Local Treasurer (LT) and mailed
to delinquent owner. Written Notice of Levy and Warrant are
served on the assessor and Register of Deeds
2. 30 days from service of warrant, LT shall advertise sale of property

by notice in LGU Bldg. and in a visible place in the barangay where
property is located
Publication shall be once a week for 2 weeks
3. Before date of sale, owner may stop the proceedings by payment

of delinquent tax and incremental penalties
4. Sale of property may held at the main entrance of LGU Bldg. or in

any other place specified in the notice
Real Property to Satisfy Delinquent Tax- cont.
5. The highest bidder making sufficient bid shall pay the Realty Tax
plus increments. LT reports sale to Sanggunian after 30 days
LT will deliver the COS to purchaser. Proceeds from sale in excess
of delinquent tax and increments will be remitted back to owner
6. Within 1 year from sale, owner may redeem upon payment an

additional 2% per month on purchase price from date of sale up to
date of redemption
Delinquent owner retains possession and right to the fruits
Price paid plus 2% interest per month shall be returned to buyer
7. If there is no bidder or highest bid is insufficient to pay Realty Tax

and increments, LT shall purchase the property in behalf of the LGU
Real Property to Satisfy Delinquent Tax – cont.
8. Register of Deeds shall transfer title of forfeited property to LGU
without Court Order
9. Within 1 year from forfeiture, owner may redeem property by

paying to LT the full amount of tax, interest and cost of sale
otherwise, ownership shall be vested to LGU
10.The Sanggunian concerned may sell by public auction the property

acquired through forfeiture.
It can be done through ordinance approved
Condonation of Realty Tax
• In case of general failure on crops, decrease in agri-based
products, calamity in any province, city or municipality the
Sanggunian concerned by ordinance may condone or reduce
wholly or partially the taxes and interest
• Tax removal or reduction may take effect for the succeeding years
in the city or municipality affected by calamity
Other Court Rulings and Decisions on
Local and Real Property Taxes
Batangas City Treasurer vs. Pilipinas Shell Petroleum
(G.R. 187631 - 07/08/15)
Facts:
• Batangas city assessed Shell for business taxes of around Php400m
for manufacture and distibution of petroleum products from refinery in
Tabangao, Batangas city
• It is pursuant to Sec. 143(h) of LGC that allows them to collect

Business tax not to exceed 2% of gross sales or receipts
• Shell argued that it is not liable pursuant to Sec. 133(h) that prohibits
LGC to impose tax on petroleum products and Art. 232(h) of the
implementing rules of LGC which states that:
“XXX Sale of oil, gasoline and other petroleum products shall not be
subject to any local tax imposed in this article”.
(G.R. 187631 - 07/08/15)
Issue:
Is Shell liable to pay Business Tax to Batangas city?
(G.R. 187631 - 07/08/15)
Rule:
• SC ruled that given the clear mandate under Sec. 133(h)
and Art. 232 of the IRR of the LGC of 1991, Batangas City
does not have the right to assess & collect business taxes
against Shell
Mactan- Cebu Int’l Airport Authority vs. Lapu-Lapu City
(G.R. 181756 - 06/15/15)
Issue:
Are real properties of Mactan – Cebu International Airport
Authority subject to Real Property Tax?
(G.R. 181756 - 06/15/15)
Rule:
• No. Petitioner is an instrumentality of gov’t. so its properties actually
and solely used for public purpose are exempt from Teal Property Tax
• Examples of the airport’s property include airport terminal building,

runway and lots
(G.R. 181756 - 06/15/15)
Rule – cont.:
• The decision follows the 2006 MIAA case and not 1996 MCIAA case
• Court reiterated that MIAA/ MCIAA is not a GOCC but an

instrumentality vested with corporate powers
• As properties of public dominion being for public use, properties of

MCIAA are not subject to levy, encumbrance or disposition
• This case cited the previous rulings of PFDA, GSIS and PPA
Davao City Treasurer vs. Intestate Estate of Dalisay
(G.R. 207791 - 07/01/15)
Facts:
• Involves a sale at public auction by Davao City of the estate’s
properties for non-payment of Real Estate Tax
• Since there were no bidders during the auction, the city forfeited the
properties and cause annotation of declarations of forfeiture on the
corresponding TCTs of properties
• The declaration stated “Delinquent taxpayer or his authorized

representative has within 1 year from said date of declaration of
forfeiture to redeem the property.”
(G.R. 207791 - 07/01/15)
Facts – cont.:
• Petitioner offered to redeem properties forfeited but the city refused
since the 1 year redemption period already expired
• The reckoning of said period should be from date of forfeiture in

which the properties were taken by the city to sell to bidders
• The estate countered that the reckoning date should be the one
stated in the declaration of forfeiture which incidentally was belatedly
issued by Davao City due to its inefficiency
(G.R. 207791 - 07/01/15)
Facts – cont.:
• Davao City contended that the operative act of forfeiture is an act of
the Treasurer in getting the property for lack of bidders and not the
registration of any declaration of forfeiture because said document
only facilitates transfer of ownership of property
• The city also stated the odd timing in the issuance of declaration and
its contents observably benefit the estate
(G.R. 207791 - 07/01/15) - cont.
Issue:
What is the reckoning point in counting the one (1) year
redemption period?
(G.R. 207791 - 07/01/15)
Rule:
• Period to redeem must be counted from Date of Forfeiture and not
Declaration of Forfeiture
• City would suffer injustice if it will be bound by Officer’s suspicious

action
• Contrary rule would effect an extension of statutory period due to

indiscretion of scrupulous officers
(G.R. 207791 - 07/01/15)
Rule:
• Period would become flexible because its extension would depend
not on Treasurer’s discretion but on his attitude and work ethics
• Hence, the estate cannot redeem the property anymore since the
period of redemption had already expired
Demaala vs. Commission on Audit
(G.R. 199752 - 02/17/15)
Issue:
Can an LGU impose and collect a Special Education Fund
(SEF) at less than 1%?
Demaala vs. Commission on Audit
(G.R. 199752 - 02/17/15)
Rule:
• Yes. Imposition of SEF is within the taxing power of LGU and is
consistent with the constitutional principle of local autonomy and
fiscal flexibility
• Permissive language (use of the term “may”) of the LGC provision

imposing SEF supports the authority of LGU’s to prescribe their own
rates
• The 1% is a maximum rate rather than an immutable edict

Manila Treasurer vs. China Banking Corp.
(G.R. 204117 - 07/01/15)
Facts:
• CBC filed for a refund claim in the amount of Php155K with the
Manila Treasurer for taxes and fees paid under Ordinances nos. 7988
& 8011 after these were declared unconstitutional like in the case of
Coca Cola Bottlers vs. City of Manila
• Treasurer denied the claim prompting CBC to file a Petition for

Review with RTC Manila
• Treasurer filed a Motion for Reconsideration which was denied
• Case was elevated to CTA Division by the Treasurer and contended

that petition should be filed with MeTC and not RTC
(G.R. 204117 - 07/01/15)
Facts- cont.:
• CTA did not focus on the issue of where it must be filed but noted that
Petition for Review was filed a day after the reglementary period
under Sec. 195 of LGC
• CTA ruled that assessment is final
• CBC appealed the case to CTA En Banc who affirmed the ruling of
CTA so petition was forwarded to SC
• CBC insisted on the invalidity of Treasurer’s assessment claiming that

Petition for Review with RTC was timely filed
(G.R. 204117 - 07/01/15)
Facts- cont.:
• CBC stated that the 30-day period to appeal inaction should be
reckoned on or before Mar. 27, 2007 (the day the letter reiterating
its objection to Treasurer’s imposition was made) and not Jan. 15,
2007 when it filed its letter questioning the imposition
• CBC also said that assuming they were guilty of delay since it was
only a day, they should be excused
• CBC appealed the case to CTA En Banc who affirmed the ruling of
CTA so petition was forwarded to SC
• CBC insisted on the invalidity of Treasurer’s assessment claiming

that Petition for Review with RTC was timely filed
(G.R. 204117 - 07/01/15)
Rule:
• SC ruled that refund claim should be dismissed since it was not filed
on time and before a Court of Competent Jurisdiction
• Court is not reversing its pronouncements in the case of Coca-Cola

Bottlers Phil. Inc. vs. City of Manila
• Refund claims are exception and that each claim for refund must be
proceeded in accordance with law
• In each claim, burden is on the Taxpayer to show that he has strictly

complied with the conditions for the grant of tax refund
City of Makati vs. Trans-Asia Power Generation Corp.
(CTA En Banc 1086 - 01/21/15)
Facts:
• Trans-Asia is engaged in the business of building, owning, operating,
selling and leasing power generation plants for purchasing, importing
and leasing telecommunication and other kinds of equipment
• For the years 1996 to 2005, Makati City classified the corp. as
“Manufacturer/ Producer” for Local Business Tax purpose
• In 2006, Makati City changed its classification to “Services-Other

Contractor” that resulted to increase of LBT payments which they
paid under protest and filed for refund claim
(CTA En Banc 1086 - 01/21/15)
Facts - cont.:
• RTC Makati ruled that the corp. is a “Manufacturer/ Producer” since it
is engaged in business of transforming fuel into electricity and selling
it to end-users
• This ruling was affirmed by the CTA Division prompting Makati City to
appeal to CTA En Banc
(CTA En Banc 1086 - 01/21/15)
Rule:
• Trans-Asia is a “Manufacturer/ Producer” and not a “Contractor”
• It buys Bunker fuel as its chief raw material and converts it

through chemical process producing electricity
• It sells electricity to Hi-Cement

(CTA En Banc 1086 - 01/21/15)
Rule:
• While Hi-Cement initially owned the power plant, the same was
later sold to Trans-Asia as the owner of the plant, the latter need
to operate it for a fee
• The receipt for the fee does not classify Trans-Asia as a

“Contractor”
• Additional undertaking is merely an aid to its primary function as

a Producer of electricity and not considered as rendered service
National Grid Corp. of the Phils. vs. CBAA, LBAA of
Cabanatuan (CTA En Banc 1086 - 01/21/15)
Facts:
• Taxpayer is not a GOCC but a privately-owned corp. engaged in
transmission of electricity only and not in power generation so it
should be exempted from RPT
• It alleges that use of the conjunctive word “and” under Sec. 234 of
RPT Code shows the intent of law in granting exemptions from RPT
• Taxpayer alleges that if properties are not exempted from RPT then
these must be classified as “Special Class”
National Grid Corp. of the Phils. vs. CBAA, LBAA of
Cabanatuan (CTA En Banc 1086 - 01/21/15)
Rule:
• CTA EB disagrees. To avail of special tax rate, it must be a GOCC
engaged in the generation and transmission of electric power
• This is in accordance with use of the conjunctive word “and” under

Sec. 234 of RPT Code showing that to avail of exemptions and
Special Tax Rate of 10%, it must be a GOCC engaged both in
power generation and transmission

Local and RPTaxation CGBP 2017

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Local and RPTaxation CGBP 2017

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Local and Real Property Taxation

• LGC is divided into 2 parts: Local Government Taxation and Real

• Cite Remedies of taxpayers aggrieved by actions of Sanggunian in the

• Understand the inhabitants’ rights and obligations with LGUs

• Be aware of the responsibilities of Local Officials in the effective

• Determine ways to safeguard the self-sufficiency of LGUs in the

• Know how to seek redress should inhabitants be saddled with

• Discuss pertinent cases decided by the courts related to remedies

• To implement this provision, Congress enacted Rep. Act No. 7160 -

• Congress cannot abolish Local Government’s power to tax as it

• Only authority conferred to Congress is to provide the guidelines

• These guidelines and limitations are found in Local Government

2. Each LGU will have its fair share of available resources

3. Resources of the National Government will not be unduly

4. Local Taxation will be fair, uniform and just

2. Taxes, Fees and Charges must be:

• In the case of First Philippine Industrial Corp. vs. CA (G.R.

• Petitioner assailed the validity of the ordinance that imposes a

• Court ruled that to tax again the petitioner on Gross Receipts in

• This section prohibits excessive and oppressive taxation

Any tax exemption, incentive or relief granted by any LGU pursuant

- Sec. 5(b) of Local Gov’t. Code

• Sec. 132 – “The power to impose a tax, fee, or charge or to

• Sec. 54 to 59 provides for approval, review and effectivity of

• Sec. 25 - Art. II in relation to Sec. 2 - Art. X of the Constitution

• Since this power is not inherent, LG’s exercise of taxing powers

• Power of LGU to impose tax must be anchored on an ordinance

1. Cities – Sangguniang Panlungsod

2. Provinces – Sangguniang Panlalawigan

3. Municipalities – Sangguniang Pambayan

4. Barangay - Barangay Council

2. Must be posted simultaneously in at least 4 public places within 10

3. Written notices must be sent to affected parties

4. Must be referred to an appropriate Sanggunian Committee

5. Must prepare copies of proposed ordinance in the form it was passed

7. Sanggunian passes the proposed ordinance and prepares the

8. Must be approved by majority of members present during the

9. Approved ordinance must be stamped with the Seal of Sanggunian

10. Must be submitted and approved by the Mayor or Governor

11. Sanggunian can override a veto with 2/3 votes

12. Must be published in a local newspaper within 10 days of its

13. Ordinance undergoes review

1. Income Tax (except when levied on banks and other Fis)

2. Documentary Stamp Tax

3. Tax on estate, inheritance, gift, legacy and other acquisitions mortis

4. Customs duties, registration fees of vessel, wharfage on wharves,

6. Taxes, fees or charges on agricultural and aquatic products when

7. Taxes on business enterprises certified by BOI as pioneer or non-

8. Excise taxes on articles enumerated under NIRC and taxes, fees or

10. Taxes on gross receipts of transportation contractors and persons

The phrase “Except as provided in this code” refers to authority of

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

14. Taxes, fees or charges on Countryside and Barangay Business

Part I – Local Business Taxation

• Sec. 133[h] comprehends a wider range of subjects and articles

• While LGUs are authorized to burden other classes of goods with

• Grant of Income Tax Holiday (ITH) for Registered Enterprises under

• Retrocession – Transaction where an insurer/ insurance entity

• Marginal Farmer or Fisherman – individual engaged in

• Customs duties are prohibited to be imposed by LGUs except on:

• Wharfage – fee assessed against the cargo of the vessel engaged

• Municipalities have the power to tax or impose fees on vehicles

• Service fee imposed on vehicles using municipal roads leading