NOTES FOR TAXATION BY LOCAL GOVERNMENT UNITS
COMMON LIMITATION SEC. 133
a. Income tax, except on banks and other financial institutions
b. Documentary stamp tax
c. Taxes on Estate, inheritance or gifts and other acquisitions mortis causa except as
may otherwise be provided in the code. Exception provided for is under Sec. 135 and
151 imposing a transfer tax on real properties.
d. Customs duties….
e. Taxes, fees, charges, and other imposition upon goods carried in and out …
f. Taxes, fees, and charges on agricultural and aquatic products when sold by marginal
farmers … See Sec. 131 [a]
g. Taxes on business enterprises certified by the Board of Investment …
h. Excise taxes on articles enumerated under the NIRC…
i. Percentage tax or VAT on sales barters or exchanges of goods and services….
j. Taxes on gross receipts of transportation contractors and persons engage in the
transportation of passengers…
k. Taxes on premiums paid for reinsurance or retrocession.
l. Taxes fees charges for the registration of motor vehicles
m. Taxes, fees, or other charges on Philippine products actually exported as provided in
the code. Limitation is on the export but not on the business of exporting said
products.
n. Taxes and fees on Countryside and Barangay Business Enterprises…
o. Taxes fees or charges of any kind on the national government …
Illustrative cases
Tax of five percent on gross receipts of rentals or lease of space in privately
owned markets constitutes a valid “license tax or fee” for the regulation rather than
income tax. – Progressive Development Corp. vs. Quezon City G.R. no. 36081 24 April
1999.
Tax on capital investment or purchases made during the preceding tax period is
not a sales tax and may be levied. Tatel vs. Viras, 48 SCRA 79
Tax based on the “selling distribution of refined and manufactured oils … based
on the monthly allocation actually delivered and distributed and intended for sale. The
following tax payable monthly …” was deemed to be invalid because it is directly
dependent upon which the owner or supplier of the itemized products generates every
month.
Tax on the volume of goods produced or manufactured is not a percentage tax nor
a sales tax because the tax is not based on sales and the tax imposed does not have a
direct link on production. The tax is based on criteria of volume for the tax base. (for
100,000 to 200,000 gallons a tax of P 300.00 pesos; from 200,001 to 400,000 gallons a
tax of P 600.00)
TAXES IMPOSED BY:
a. Province
1. Transfer tax
2. Printing and publications
3. Franchise tax (see “in lieu of provision in the cases given.)
4. Tax on sand gravel and quarry resources
5. Professional Tax
6. Amusement taxes
7. Annual Fixed tax per delivery truck…
b. Municipalities
A. Business Taxes
1. A fixed annual tax ranging from a minimum of P 165.00 based on the
gross sales or receipts for the preceding calendar year of manufacturers,
assemblers, repackers …
2. A fixed annual tax ranging from a minimum of P 18.00 to a maximum of
50% of 1% on the gross sales for the preceding calendar year of
wholesalers, distributors…
3. A fixed annual tax on exporter and on manufacturers, millers, producers
… Please note the tax is not on the export but on the exporter.
4. A fixed annual tax of 1% or 2% of the gross sales or receipts of the
preceding year on retailers…
5. A fixed annual tax … on contractors and various independent contractors.
6. A fixed annual tax … on the gross receipts for the preceding calendar year
of banks and financial institutions…
7. A fixed annual tax on peddlers not exceeding P 50.00
8. A tax on any business, provided, however that in the case of any business
subject to the excise, Vat, or percentage tax under the NIRC the rate shall
not exceed 2% of the gross sales or receipts for the preceding calendar
year.
The authority of municipalities to impose a tax on business subject to excise,
VAT under the NIRC is confined only to the imposition of a fixed annual tax. I.E.
whose tax base is the amount of gross sales or receipts for the preceding taxable
year of the taxpayer. Any tax imposition based on current year’s sales or
production subject to the Vat or percentage or excise tax would be in violation of
Sec. 133 of the LGC.
Municipalities in the Metro Manila area may levy taxes at rates not exceeding
50% of the maximum rates imposable under Sec. 144 LGC.
Tax Situs of the business is the place where the sale is effected if a branch or sales
office is there located; if there is no branch or sales office is located where the
sale is effected the sale shall be duly recorded in the principal office and taxable
by the local government where the principal business office and the factory,
project office, plant or plantation are located to the extent, respectively, of the
thirty percent (30%) and seventy percent (70%) of the sale. If the plantation and
the factory are located in different places, 60% of the 70% shall be allocated to
the local government where the factory is situated and 40% of the 70% to the
local government where the plantation is located. In cases of multiple factories,
the 70% shall be allocated among the factories based on their production.
B. Fees and Charges
a. Reasonable fees and charges on business and occupation or calling …
b. Reasonable fees for the sealing and licensing of weights and measures
c. Fishery rental, fees, and charges …
c. Cities
The cities may impose taxes, fees, and charges that the provinces and
municipalities may levy but not exceeding 50% of such maximum rates except the
rates of professional and amusement taxes.
d. Barangay
a. Taxes, on stores or retailers with fixed business establishment whose gross
sales or receipts for the preceding calendar year does not exceed P 50,000.00
in cities and P 30,000 in municipalities.
b. Service charge for services rendered in connection with the regulation of the
use of barangay-owned properties.
c. Reasonable fees and charges
1. On commercial breeding of fighting cocks, cockfights, and cockpits.
2. On places of recreation which charge admission fees.
3. On billboards signboards and outdoor advertisement.
No city or municipality may issue any license or permit for any business or
activity unless a clearance is first obtained from the barangay where the business
is located. (Sec. 152 LGC)
COMMUNITY TAXES
Persons liable
- inhabitant of the Philippines 18 years and above, or;
- who has been regularly employed on a wage or salary basis for at least
30 consecutive days in a calendar year; or,
- engaged in business or occupation, or,
- who owns real property with an aggregate assessed value of one
thousand pesos or more, or,
- who is required to file an income tax return
- basic tax
Five pesos and one peso for every one thousand pesos of income
regardless of source or from ownership of real property which in
no case shall exceed 5,000.00 pesos
Entities liable
- every corporation, joint stock company, partnership, joint account,
association, or insurance companies, but excluding general
professional partnerships and joint venture for construction projects…
- basic tax
P 500 pesos and P 2.00 for every five thousand pesos in real
property of the corporation where the property is situated. P 2.00
for every five thousand pesos in earnings derived from business.
Exemptions
- Diplomatic and consular services
- Transients whose stay in the Philippines does not exceed three months.
ENACTMENT AND EFFECTIVITY OF LOCAL TAX ORDINANCE
The power to impose a tax, fee or charge or to generate revenue for local
government units may be exercised by the sangguniang panlalawigan, panlungsod, bayan
or barangay concerned. A public hearing is required for such ordinance conducted for
such purpose.
The ordinance once approved by the local sanggunian is sent to the local chief
executive for signature. The local chief executive may veto such ordinance by signifying
his disapproval in writing. Sanggunian may override the veto by a vote of 2/3 of all
members which will be deemed approved even if without the signature of the local chief
executive. Failure to act on the bill by the local chief executive shall also be deemed
approval under the following periods: 15 days of inaction in cases of the province, 10
days inaction in cases of cities and municipalities.
Effectivity shall be ten days after posting.
AUTHORITY TO GRANT TAX EXEMPTIONS
Local government units may, through ordinance grant tax exemptions, incentives
or relief under such terms and conditions they may deem necessary. Sec. 192 LGC.
All previously existing tax exemptions has been withdrawn by the local
government code except for those provided therein. There is also an exception provided
for local water districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospital and educational institution.
REMEDIES OF TAXPAYERS
Remedies prior to an Assessment
1. Administrative Appeal to the Secretary of justice
An ordinance may be raised on appeal within 30 days from the
effectivity thereof with the Secretary of Justice. The Secretary shall
render a decision within 60 days from the date of receipt of appeal.
Within 30 days from the decision of the Secretary or the lapse of
the 60-day period, an action may be initiated by the taxpayer in a
court of competent jurisdiction. (Sec. 187 LGC)
2. Action for declaratory relief
Remedies After an Assessment
1. Protest an Assessment
Within 60 days from the receipt of an assessment, the taxpayer
may file a written protest with the treasurer, failure to file the said
protest shall render the assessment final and unappealable. Within
60 days from receipt of the written protest, the treasurer shall act
on the said protest. Within 30 days from the decision of the
treasurer, the taxpayer may appeal the decision of the treasurer in
the court of competent jurisdiction. (Note, normally the MTC or
RTC depending on the amount of the claim.)
2. An action for refund.
Taxpayer may pay the tax assessed, with the specification that the
tax is being paid under protest and then file a claim for refund
within the two-year period of limitation. The payment, if made
with an assessment must be paid within 60 days from the
assessment thereof otherwise it becomes final and executory.
The taxpayer is also required to file a claim for a refund with the
treasurer within the two-year period before any action can be
instituted in any court within the two-year period. (Sec. 196 LGC)
Taxing Powers
1) Prov. Of Bulacan vs. Court of Appeals G.R. 126232 Nov. 27, 1998
2) First Phil. Industrial vs. Court of Appeals G.R. 125948 Dec. 29, 1998
3) Mactan Cebu vs. Marcos, et. al. G.R. 120082 Sept. 11, 1996
4) LTO vs. City of Butuan G.R. 131512 Jan. 20, 2000
5) City Govt. of San Pablo vs. Reyes G.R. 127708 March 25, 1999
6) Meralco vs. Province of Laguna Gr. No. 131359 May 5, 1999
7) Reyes vs. CA G.R. 118233 Dec. 10, 1999
8) DOF – Bureau of Local Government Finance Opinion 03-29-1993
9) Angeles City vs Angeles City Electric G.R. No. 166134 June 29,2010
10) Ermita vs. Adecoa-Delorino G.R. No. 177130 June 7, 2011
REAL PROPERTY TAXATION
IMPOSITIONS
1. An annual ad valorem tax that may be levied by the provincial, city or
municipality on real property such as land, building, machinery and other
improvements affixed or attached to the real property.
2. Special levies by the same local government, such as
a. An additional one percent for the special education Fund
b. Additional tax on idle lands
c. Special levies.
Properties subject to tax, SEC. 145
Kindly note the definition of the following: a) real property; b) machinery; and c)
improvements. The definition of real property under the LGC is an expanded definition
of real properties under the New Civil Code. Please note that machineries embrace
machines or equipment, mechanical contrivances, instruments, appliances or apparatus
which may or may not be attached, permanently or temporarily to the real property. It
includes facilities used for production and mobile, self-powered machinery not attached
to the real property but are actually, directly and essentially used to meet the needs of the
industry, business or activity (Sec. 199 [o], LGC)
Fundamental Principles of Real Property Taxation
1) Real property shall be appraised at its current and fair market value
2) Real property shall be classified for assessment purposes on the basis of its
actual use.
3) Real property shall be assessed on the basis of a uniform classification within
each local political subdivision
4) The appraisal, assessment and levy of real property for taxation purposes and
the collection of the real property tax shall not be let to any person.
5) The appraisal and assessment of real property shall be equitable.
Classes of Real property-
1. Residential
2. Agricultural
3. Commercial
4. Industrial
5. Mineral
6. Timberland
7. Special
a. Actually, directly and exclusively used for hospitals, cultural, or
scientific purposes.
b. Those owned by local water districts
c. Government owned and controlled corporations rendering essential
public services in the supply and distribution of water and/or
generation and transmission of electric power.
Valuation of the property
The assessment or real property shall not be increased oftener that once every
three years except in cases of new improvements substantially increasing the value of
said property or change in its actual use.
Imposition of Real Property taxes
The provincial, municipal and city legislature shall fix a uniform rate of real
property tax applicable to their respective localities as follows:
1) Provinces – not exceeding one percent (1%) of the assessed value of the real
property.
2) Cities and municipalities in the metropolitan Manila area – not more than 2%
of such assessed value.
Exemptions from Real Property taxes
1) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
2) Charitable institutions, churches, parsonages, or convent appurtenant
thereto, mosques, non-profit or religious cemeteries, and all lands,
buildings and improvement actually, directly and exclusively used for
religious, charitable or educational purpose.
3) All pieces of machinery and equipment that are actually, directly and
exclusively used by local water districts and government owned or
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power
4) All real property owned by the duly registered cooperatives as provided
for under R.A. No. 6938
5) Machinery and equipment used for pollution control and environmental
protection.
All existing exemptions except as provided for above, including those granted to
government owned and controlled corporation, prior to the effectivity of the LGC
of 1991 has been withdrawn.
Remedies for the collection of real property taxes
a) extrajudicial remedy of levy
b) judicial action
The collection may be enforced through either or both of the above administrative
and judicial remedies, alternatively or simultaneously, and the use or non-use of
one remedy shall not be a bar against the availment of the other.
Demand for payment is not necessary, it is enough that a notice of delinquency is
posted and published under Section 254 of the LGC.
Levy on Real property
1. Issuance of the notice of delinquency
- Effected by posting a notice at the main entrance of the provincial
capital and in a publicly conspicuous place in each barangay of the
local government unit. (Sec. 254 LGC)
2. Warrant of Levy
- If the taxes remain unpaid, a warrant of levy is issued and mailed to
the delinquent owner or person having interest therein, the assessor,
the Registry of Deeds, for its annotation in the tax declaration and title.
(Sec. 258 LGC.)
3. Advertisement
- Within thirty days after the issuance of the warrant of levy, the
treasurer shall advertise the sale at public auction of the real property.
This shall be done by posting a notice at the main entrance of the
provincial, city or municipality building and a public and conspicuous
place in the barangay where the property is situated and by publication
once a week for two consecutive weeks in a newspaper of general
circulation. The announcement shall state the amount of taxes,
penalties and cost, the date and place of sale; name of taxpayer whom
the tax was assessed and the description of the property to be sold.
4. Auction sale
Redemption of Real Property after Sale
The delinquent taxpayer is given one year from the date of the registration of sale
to redeem the same by paying the local treasurer the total amount of taxes and penalties
due up to the date of redemption. Such payment shall invalidate the sale certificate issued
to the purchaser and shall entitle the person making the same to certificate of redemption
from the treasurer. (Sec. 261, LGC). The delinquent taxpayer shall have the right of the
possession over the property sold within the one year period of reduction.
Real Property Tax
1) Mactan Cebu vs. Marcos, et. al. G.R. 120082 Sept. 11, 1996
2) NAPOCOR vs. Province of Lanao G.R. 96700 Nov. 19, 1996
3) Raul Sesbreno vs. CBAA G.R. 106588 Mar. 24, 1997
4) Antonio Callanta vs. Ombudsman G.R. 115253-74 Jan 30, 1998
5) Belen Figuerras vs. CA G.R. 119172 Mar. 25, 1999
6) Ty vs. Trampe G.R. No. 117577, Dec. 1, 1995.
PROTEST CASES
Payment under protest
All protests of real property taxes shall first be paid prior to being entertained. It is
necessary for the taxpayer to indicate in the tax receipts that the payment was made under
protest. The taxpayer shall then submit his written protest with the grounds thereof within
30 days to the municipal, city or provincial treasurer. The treasurer is given a period of 60
days to decide the protest.
If the protest is decided in favor of the taxpayer, the amount shall either be
refunded or applied as a tax credit to any other existing or future tax liability of the
protestant. If the protest is denied, the same may be appealed to the board of assessment
appeals.
REFUND CASES
Claim for refund
The taxpayer may claim for a refund of taxes illegally or erroneously paid by
filing a written claim for refund within a two year period from the date the taxpayer is
entitled thereto. If the claim was denied or not acted or decided upon within 60 days the
taxpayer may avail himself of the remedies through the Board of Assessment appeals.
BOARD OF ASSESSMENT APPEALS
Any taxpayer or person having legal interest in the property who is not satisfied
with the action of the provincial, city or municipal assessor may within 60 days from the
date of written notice of assessment, appeal to the Local Board of Assessment Appeals.
Such appeal does not suspend the collection of the tax as assessed without prejudice to a
later adjustment.
The board shall decide on the matter within 120 days from the receipt of the
appeal. The decision of the LBAA may, within 30 days from the receipt thereof by the
taxpayer, be appealed tob the Central Board of Assessment Appeals. The decision of the
CBAA is final and executory however the same may be appealed under Rule 43 of the
Revised Rules of Civil Procedure to the Court of Appeals.
SEE THE REVISION ON THE JURISDICTION OF THE CTA
Tiu vs. Court of Appeals G.R. 127410 January 20, 1999
Situs of taxation – cases:
Philippine Match Co vs. City of Cebu L-30745 Jan. 18 1978 where the sale
was booked
Iloilo bottlers Inc. vs. City of Iloilo G.R. No. 52019 Aug 19, 1988 sale of
softdrinks under distribution
agreement: See sec 243 [d] loc govt
code.
Situs of taxation – lgc Sec 150 and Sec. 243 of the
Implementing rules of the LGC
Remedies Civil Sec. 173, 174, 175, 176
Collection through judicial action Sec. 183 regular courts not CTA
Prescriptive periods assessment Sec. 194
Collection
Protest an ordinance Sec 187
Drilon vs. lim G.R. No. 112497 Aug
4, 1994
Protest an assessment Sec. 195
Claim for refund or tax credit Sec. 196
TO THE STUDENT,
The above notes are just guides to the study of Local and Real Property taxation.
Please read the original provisions and the notes available for such like the book of Vitug
and Acosta entitled Tax Law and Jurisprudence, which has been an invaluable source for
this material. Please read also the cases assigned to you for the above topics.
Francisco B. Gonzalez V
10/1/01
