LOCAL GOVERNMENT TAXATION

LGUs DO NOT HAVE THE INHERENT POWER TO TAX: Local Government Units (LGU) do not have the inherent power to tax. This power is delegated by
Congress under Art. X, Sec. 3 of the 1987 Constitution, by virtue of which the Local Government Code (LGC) was enacted. Accordingly, the LGUs power to tax
must always yield to the LGC which is a legislative act superior to the taxing power of the LGUs. Thus, such power must be exercised within the limitations
imposed by the LGC, such as:
1. It can only be exercised through a valid ordinance;
2. Common limitations enumerated under Sec. 133;
3. It must not exceed the rates provided under the LGC, except in reference to their authority to adjust the same under Sec. 191, once every five years.

Note that under Sec. 5 of Art. X of the 1987 Constitution, it is provided that “Each local government unit shall have the power to create its own source of revenue
and to levy taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local
autonomy. xxx”

NATIONAL VS. LOCAL TAXES

NATIONAL TAXES LOCAL TAXES

TYPES Income Tax Local Business Tax
Value-Added Tax Real Property Tax
Excise Tax
Withholding Taxes
Estate and Donor’s Tax
Percentage Taxes
Documentary Stamp Tax
GOVERNING LAW 1997 National Internal Revenue Code Local Government Code of 1991

ROLE OF BUREAU OF LOCAL GOVERNMENT FINANCE: The BLGF assists the Department of Finance in the performance of its functions in overseeing local
treasury office in the implementation of the provisions of the LGC and issues rulings and opinions to interpret such. However, such rulings and interpretations
relative to the levy and administration of local taxes, fees and charges are merely directory and not mandatory.

It may extend technical assistance to LGUs in the preparation of tax ordinance and in the clarification of issues and controversies arising from the impositions
and/or collections of taxes and fees under the provisions of the LGC.

FUNDAMENTAL PRINCIPLES:

Section 130. Fundamental Principles. - The following fundamental principles shall govern the exercise of the taxing and other revenue-raising powers
of local government units:

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:
(1) be equitable and based as far as practicable on the taxpayer's ability to pay;
(2) be levied and collected only for public purposes;
(3) not be unjust, excessive, oppressive, or confiscatory;
(4) not be contrary to law, public policy, national economic policy, or in the restraint of trade;
(c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the disposition by, the local government
unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

COMMON LIMITATIONS:

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and
dues except wharfage on wharves constructed and maintained by the local government unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local
government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such
goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively
from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof,
except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;
 (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic
Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.

SCOPE OF THE TAXING POWER

Type of Tax Province Cities Municipalities

Printing and Publication ✓ ✓ x

Franchise Tax ✓ ✓ x

Sand and other Quarry ✓ ✓ x

Resources

Amusement Tax ✓ ✓ x

Delivery Van and Trucks ✓ ✓ x

Business Tax x ✓ ✓

I. PROVINCE

Imposition Rate and Base Exceptions

Tax on Transfer of On the sale, donation, barter or any other mode
Real Property of transferring ownership or title of real
Ownership property.
(Sec. 135)
It is likewise applicable even in cases of mergers
or consolidations. 1
The seller, donor, transferor, executor or
administrator shall pay the tax within sixty (60)
days from the date of the execution or from the
date of the decedent’s death. If the transfer is
subject to SEC approval, from the date of
approval
fifty percent (50%) of one percent (1%) of Transfer of real property under
the total consideration involved or the fair RA No. 6657, otherwise known
market value in case monetary as the Comprehensive Agrarian
consideration involved is not substantial. Reform Program
The fair market value, in this case, is the
one reflected in the prevailing schedule of
market values enacted by the Sanggunian
concerned and not on the BIR-prescribed
zonal value.2

Tax on Business of On the business of persons engaged in the fifty percent (50%) of one percent (1%) of Receipts from the printing
Printing and printing and/or publication of books, cards, the gross annual receipts for the preceding and/or publishing of books or
Publication posters, leaflets, handbills, certificates, receipts, calendar year. other reading materials
(Sec. 136) pamphlets, and others of similar nature prescribed by the Department of
Education, Culture and Sports
(now Department of Education)
as school texts or references.

Tax on Capital On newly started business One-twentieth (1/20) of one percent (1%)
Investment of the capital investment*
(Sec. 136 and 137,
2nd paragraph)

Franchise Tax Any business enjoying a franchise** regardless fifty percent (50%) of one percent (1%) of
(Sec. 137) of any exemption granted by any law or other the gross annual receipts for the preceding
special law.3 calendar year based on the incoming
receipt, or realized, within the territorial
jurisdiction of the province.

Tax on Sand, Gravel Imposed on the value of per cubic meter of ten percent (10%) of fair market value.
and Other Quary*** ordinary stones, sand, gravel, earth, and other
Resources quarry resources, as defined under the National
(Sec. 138) Internal Revenue Code, as amended, extracted
from public lands or from the beds of seas,
lakes, rivers, streams, creeks, and other public
waters within its territorial jurisdiction

Professional Tax Annual professional tax on each person engaged At such amount and reasonable Professionals exclusively
(Sec. 139) in the exercise or practice of his profession classification as the employed in the government.
requiring government examination. sangguniang panlalawigan may determine
but shall in no case exceed Three hundred
pesos (P300.00) payable annually on or
before the 31st of January

1
(DOF-BLGF Opinion dated May 12, 2004)
2
(DOF-BLGF Opinion dated April 21, 1997)
3
Regardless of any exemption granted by law or other special law granted prior to January 1, 1992. (DOF-BLGF Opinion date May 12, 2006)
 Amusement Tax Collected from the proprietors, lessees, or Thirty percent (30%) of the gross receipts The holding of operas, concerts,
(Sec. 140) operators of theaters, cinemas, concert halls, from admission fees. dramas, recitals, painting and
circuses, boxing stadia, and other places of art
amusement. The proceeds shall be shared equally by exhibitions, flower shows,
the province and municipality where such musical programs, literary and
amusement places are located. oratorical presentations,
except pop, rock, or similar
concerts.

Annual Fixed Tax Annual fixed tax for every truck, van or Five hundred pesos (P500) None.
For Every Delivery any vehicle used by manufacturers, producers,
Truck or Van wholesalers, dealers or retailers in the Those liable for this tax,
(Sec. 141) delivery or distribution of distilled spirits, however, are exempt from the
fermented liquors, soft drinks, cigars and tax on peddlers prescribed under
cigarettes, and other products as may be Sec. 143(g).
determined by the sangguniang panlalawigan,
to sales outlets, or consumers, whether directly
or indirectly, within the province

*“Capital Investment" is the capital which a person employs in any undertaking, or which he contributes to the capital of a partnership, corporation, or any
other juridical entity or association in a particular taxing jurisdiction. (Sec. 131[f])

**“Franchise” refers to a right or privilege, affected with public interest which is conferred upon private persons or corporations, under such terms and
conditions as the government or its political subdivisions may impose in the interest of public welfare, security and safety. (Sec. 131[m])

***Quarrying permits may only be issued by the provincial governor NOT the DENR.

The proceeds shall be distributed as follows:

1. Province — Thirty percent (30%);
2. Component City or Municipality where the sand, gravel, and other quarry resources are extracted — Thirty percent (30%); and
3. Barangay where the sand, gravel, and other quarry resources are extracted — Forty percent (40%).

Amusement Tax:

Computation of Amusement Tax:

1. If the admission ticket includes the amusement tax of thirty percent (30%), as well as other impositions such as a cultural tax, flood tax, and similar others,
the balance of the admission price would no longer be subject to another 30% amusement tax;
2. If the amount of tax, as well as other impositions, is not indicated on the face of the admission tickets, the price or amount paid for admission shall not be
deemed to include the amount of such tax impositions and, therefore, such price or amount paid for the ticket shall be the basis for computing the amount
of the amusement tax. (BLGF Opinion dated April 6, 1993)

II. MUNICIPALITY

SCOPE: Except as otherwise provided under the LGC, municipalities may levy taxes, fees and charges not otherwise levied by the provinces.

LOCAL BUSINESS TAX

TWO ASPECTS:
1. Regulatory – for the enforcement of local rules and the cost is being reimbursed by the taxpayer. (e.g., Mayor’s Permit, Garbage, Sanitary, etc.)
2. Local Revenue – for the fund raised by the Local Government Unit (municipality or city) to defray its expenses.

CHARACTERISTICS:
1. It is an excise tax on the privilege to engage in business;
2. It is an annual tax.
3. It is a tax on the current year based on the gross sales or receipts of the preceding year.
4. Cities and Municipalities within Metro Manila may impose tax on business 50% higher than that of municipalities in provinces. (Sec. 144 and 151)
5. May be graduated, fixed or percentage tax.
6. Businesses under classification (a) to (g) of Sec. 143, can no longer be taxed under (h).
7. Tax is payable on every separate or distinct establishment where business is conducted.
8. If the Company is not operated for profit, it is exempt from LBT except on activities conducted for profit. (DOF-BLGF Opinion dated March 27, 2007)
9. Two or more businesses:
a. If subject to the same rate – tax is imposed on the combined gross sales or receipts;
b. If subject to different rates – taxable gross receipts or sales are reported independently.
10. Tax period is calendar year.
11. LGUs have the authority to increase the rates by 10% of the rates fixed under the LGC once in every five (5) years. (Sec. 191)

CLUSTER TYPES (ACTIVITY/BUSINESS) AND MAXIMUM RATES:

CLUSTER TYPE MAXIMUM RATE UNDER THE LGC

Manufacturers assemblers, repackers, processors, brewers, 37 1/2% of 1% (Sec. 143[a])
distillers, rectifiers, and compounders of liquors, distilled spirits,
and wines or manufacturers of any article of commerce of
whatever kind or nature
Wholesalers, distributors, or dealers in any article of commerce 50% of 1% (Sec. 143[b])
of whatever kind or nature
 Exporters/Dealers of essential commodities Not exceeding 50% of the rates for manufacturers, et al. and
wholesalers, et al. (Sec. 143[c])
Retailers Gross sales/receipts:
P400,000 or less: 2%
More than P400,000: 1% (Sec. 143[d])
Contractors 50% of 1% (Sec. 143[e])
Banks and other financial institutions 50% of 1% on the gross receipts of the preceding calendar year
derived from interest, commissions and discounts from lending
activities, income from financial leasing, dividends, rentals on
property and profit from exchange or sale of property, insurance
premium. (Sec. 143[f])
Peddlers P50 annually (Sec. 143[g])
Others 2% (Sec. 143[h])

A. MANUFACTURERS:
1. Manufacturing involves a physical or chemical process that :
a. alters the exterior texture or form or inner substance of raw material or manufactured or partially manufactured product, or
b. alters the quality of any raw materials, or
c. combines raw materials with other materials to put to a special use to which such raw material in their original condition could not have been put.

2. For the purpose of sale or distribution to others and not for own use or consumption
3. Manufacturers who exports all of its products are only subject to tax on exporters. (DOF-BLGF Opinion dated February 16, 1994)

B. WHOLESALERS/DISTRIBUTORS:
Wholesale means a sale where the purchaser buys or imports the commodities for resale to persons other than the end user regardless of the quantity of the
transaction. (Sec. 131[z])

Distributor is the middleman between the manufacturer and retailer.

If engaged in both wholesale and retail: the taxpayer shall be liable for both taxes. (BLGF Opinion dated June 23, 1993)

C. EXPORTERS/DEALERS OF ESSENTIAL COMMODITIES

EXPORTERS shall refer to those who are principally engaged in the business of exporting goods and services, as well as manufacturers and producers whose
goods or services are both sold domestically and abroad.

The 1991 LGC does not embody any provision or classification for sale made by an “indirect exporter”. Accordingly, a business engaged in the sale of goods
may only be classified as a (direct) exporter, manufacturer, wholesaler/distributor, dealer or retailer.

However, exportation covers the Philippine F.O.B. value of export products exported directly by a BOI-registered export producer to another export producer or
to an export trader that subsequently export the same: Provided, that the sales of export products to another shall be only deemed export sales when actually
exported by the latter, as evidenced by lading certificates of similar commercial documents. (LFC No. 4-93)

PEZA-registered enterprises: PEZA-registered export enterprises are exempt from payment of local taxes while enjoying ITH [Article 78, Book VI of E.O.
226 (Omnibus Investment Code)]. Note that after the ITH, the PEZA registered entity shall be subjected to the 5% preferential tax rate, 2% of which is due to
the local government unit.

However, the local tax exemption under Art. 78 of the Omnibus Investment Code does not extend to PEZA-registered enterprises who are not export enterprises
even if entitled to ITH. (DOF-BLGF Opinion dated May 12, 2004)

Not contrary to Sec. 133(m) on limitations on the power to tax: The prohibition is only on the imposition of export taxes on the products or goods thus
exported. The business tax on exporters is a tax on the privilege to engage in a business of exporting. The former has as its reference the exported products,
while the latter, the business of exporting itself. (BLGF Opinion dated March 10, 1994)

ESSENTIAL COMMODITIES: include:

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

Manufacturers of Vinegar, Soy Sauce and Fish Sauce: Vinegar, Soy Sauce and Fish Sauce fall under the term “condiment” which means “a seasoning or relish”
to give special or additional flavor to food.

Considering condiment falls within the purview of the term “food”, manufacturers of vinegar, soy sauce and fish sauce shall likewise be subject to LBT at a rate
of one-half (1/2) of the rate prescribed under Section 143 (a) of the LGC. (DOF-BLGF Opinion dated July 8, 2004)

D. RETAILERS:

Retail is the sale where the purchaser buys the commodity for his own consumption, irrespective of the quantity of the commodity sold. (Sec. 131[w])

Test to determine if company is wholesaler or dealer:

• Wholesaler - invoices are issued to companies or business establishments for re-sale to end-users;
• Retailer – sales receipts are issued to individual consumers or end-users.

Barangays have the exclusive power to levy taxes on retailers where the gross receipts/sales is P50,000 or less (in case of cities) or P30,000 or less (in case of
municipalities), at a rate not exceeding 1%. (Sec. 152)

Car Dealer: can either be a retailer or a dealer or both and should segregate sales directly to end-users and to retailers. (BLGF Opinion dated June 25, 1998)

E. CONTRACTORS:

Contractors include persons, natural or juridical, not subject to professional tax, whose activity consists essentially of the sale of all kinds of service for a fee,
regardless of whether or not the performance of a service calls for the exercise or use of the physical or mental faculties of such contractor or of his employees.

The following are subject to contractors’ tax:

1. A company rendering management services. (DOF-BLGF Opinion dated September 18, 2002)
2. Foreign Contractors;
3. Independent Power Producers (IPP) are considered contractors not manufacturers. (BLGF Opinion dated April 5, 2004)

F. BANKS AND OTHER FINANCIAL INSTITUTIONS:

This cluster includes non-bank financial intermediaries, lending investors, finance and investment companies, pawnshops, money shops, insurance companies,
stock markets, stock brokers and dealers in securities and foreign exchange. (Sec. 131[e])

Banks and other banking institutions refer to persons or entities engaged in the lending of funds obtained from public through the receipt of deposits or the sale
of bonds, securities or obligations of any kind and all entities regularly conducting such operations.

Offshore banking units are subject to LBT. (BLGF Opinion dated Feb. 24, 1997)

G. PEDDLERS:

A Peddler means any person who, either for himself or on commission, travels from place to place and sells his goods or offers to sell and deliver the same.
(Sec. 131[t])

Note that the tax on Peddlers under Sec. 143(h) does not apply to those already subject to Sec. 141 (Annual Fixed Tax for Every Delivery Truck or Van of
Manufacturers or Producers, Wholesalers of, Dealers, or Retainers, in Certain Products) under par. (b) thereof.

H. OTHERS:

This covers any other business not specified in preceding clusters (A-G) which the Sanggunian may tax.

THE TREASURER OF MANILA and JOSEPH SANTIAGO, in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF MANILA,
petitioners, vs. COCA-COLA BOTTLERS PHILIPPINES, INC., respondent. G.R. No. 181845 August 4, 2009: Tax Ordinance No. 7794 imposes a tax on
business on manufacturers (Sec. 14) and on those entities subject to excise, VAT or Percentage Taxes under the NIRC (Sec. 21) but providing exemption if
they are already paying such taxes for their business. Tax Ordinance No. 7988 was later issued removing such exemption. Said ordinance was declared null
and void by the SC. However, before such decision, herein respondent was assessed deficiency LBT under Sec. 14 and Sec. 21.

HELD: Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment. Said exempting proviso
was precisely included in said section so as to avoid double taxation.

The Court finds that there is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since
these are being imposed: (1) on the same subject matter – the privilege of doing business in the City of Manila; (2) for the same purpose – to make persons
conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority – petitioner City of Manila; (4) within the same
taxing jurisdiction – within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods – per calendar year; and (6) of the same kind or
character – a local business tax imposed on gross sales or receipts of the business.

Based on the foregoing case, if a business is already taxed under Clusters A to G, it can no longer be taxed under H (Others) for such imposition will result in
direct double taxation.

TAX BASE: is the “gross sales/receipts” which include the total amount of money or its equivalent representing the contract price, compensation or service fee,
including the amount charged or materials supplied with the services and deposits or advance payments actually or constructively received during the taxable
quarter for the services performed or to be performed for another person. (Sec. 131[n])

Local tax passed-on to customers is included in computing gross sales/receipts. (BLGT Opinion dated May 20, 1997)

EXCLUSIONS:
1. Discounts if determinable at the time of sales;
2. Sales return;
3. Excise tax; and
4. VAT;
5. Foreign exchange profits are not among those enumerated as taxable gross receipts of banks, thus, excluded from the taxing authority of the LGU
concerned. (BLGF Opinion dated July 23, 1996)
6. Does not include nor make mention of passive income such as interest from savings and time deposits, dividends, as well as other income derived from
foreign currency variance as one of those that are considered part or form part of the “gross sales or receipts” and therefore such income are not subject
to LBT. (DOF-BLGF Opinion dated September 28, 2002)
7. Payments made by main contractors to subcontractors. (DOF Circular dated June 13, 1995)
8. Refundable deposits. (DOF-BLGF Opinion dated September 11, 2006)
COMPUTATION OF LBT:
Step 1: Classify the business
Step 2: Group different activities according to clusters. Each cluster has its own separate tax rates, hence different business activities subject to different tax
rates should be separately reported.
Step 3: Determine gross sales/receipts for all business activities within the same cluster and consolidate.
Step 4: Compute the tax due for each cluster using the tax rate imposed by the local tax ordinance

(TAX BASE) x (TAX RATE) = TAX DUE

Notes:
1. Incidental business may not be considered a separate business from the principal activity.
2. One line of business does not become exempt by being conducted with some other business for which a tax has been paid.
3. Ensure that the tax rate per local tax ordinance does exceed the maximum rate in LGC or by ordinance by virtue of adjustments authorized by the LGC.

OTHER TAXES, FEES AND CHARGES THE MUNICIPALITY MAY LEVY:

1. Fees and Charges on business and occupation and, except those reserved for the province under Sec. 139, on the practice of any profession or calling
commensurate to regulation, inspection and licensing before any person may engage in business or occupation, or such practice of profession or calling.
(Sec. 147)
2. Fees for reading and licensing of weights and measures. (Sec. 148)
3. Fishery rentals, fees and charges – municipalities have the exclusive authority to grant fishery privileges in the municipal waters and impose rentals, fees
and charges. (Sec. 149)

SITUS OF TAX:
1. Entities maintaining branches/sales outlets in places other than the head office, shall record the sale in said branch/outlet and the tax thereon shall accrue
and shall be paid to the municipality where such branch/outlet is located.
2. If there is no such branch/outlet, the sales shall be recorded in the head office and the tax due shall accrue and be paid to such city or municipality where
the head office is located.
3. Sales Allocation: shall apply if the sales are recorded in the head office and the plant/factory/plantation/project is located in a different municipality:
a. 30% of sales recorded in the head office shall be taxable in the municipality/city where the same is located;
b. 70% of sales recorded in the head office shall be taxable in the municipality/city where the factory/project office/plant/plantation is located.

In case the plantation is located in a different municipality from the factory/plant, the said 70% shall be further divided as follows:
i. 60% where the factory is located;
ii. 40% where the plantation is located.

In case there are two or more factories/project offices/plants/plantations, the 70% share shall be distributed pro rata among the localities where the said
establishments are located.

Principal Office: the head or main office of the business appearing in the pertinent documents submitted to the Securities and Exchange Commission or the
Department of Trade and Industry, or other appropriate agencies.

Branch or Sales Office: a fixed place in a locality which conducts operations of the business as an extension of the principal office.

Offices used only as display areas of the products where no stocks or items are stored for sale, although orders for the products may be received thereat, are
not branch or sales offices.

A warehouse which accepts order and/or issues sales invoices independent of a branch with sales office, shall be considered as sales office

Warehouse: buildings utilized for the storage of products for sale and from which goods or merchandise are withdrawn for delivery to customers or dealers, or
by persons acting in behalf of the business. A warehouse does not accept orders and/or issue sales invoices as aforementioned shall not be considered a branch
or sales office.

Plantation: a tract of agricultural land planted to trees or seedlings whether fruit bearing or not, uniformly spaced or seeded by broadcast methods or normally
arranged to allow highest production. For purposes of this Article, inland fishing ground shall be considered as plantation.

ACCRUAL AND PAYMENT OF TAX: Accrues every 1st of the January and may be payable:
1. Annually – not later than January 20;
2. Quarterly – within 20 days of the first month of the quarter.

RETIREMENT OF BUSINESS (Sec. 145): the business shall submit a sworn declaration of its gross receipts or sales in the year of retirement.

If the tax paid during the year be less than the tax due on said gross sales or receipts of the current year, the difference shall be paid before the business is
considered officially retired. (Mobil Philippines Inc. vs. Treasurer of Makati; GR No. 154092; July 14, 2005)

Regulatory Fees: are set only at a level that ensure full recovery of the costs of issuing permit or license and surveillance. The LGU cannot use gross receipts
or capitalization as the basis thereof.

III. CITY

Cities may levy the taxes, fees, and charges which the province or municipality may impose at a rate more than the maximum rates provided for
provinces and municipalities but not exceeding 50%. (Sec. 151)

Independent Component Cities and Highly Urbanized Cities in provinces are likewise covered by the above and such taxes, fees and charges levied and collected
by them shall accrue to them.
 IV. BARANGAYS

Taxes Stores and Retailers where the gross receipts/sales is P50,000 or less (in case of cities) or P30,000 or less (in case of municipalities), at a
(Sec. 152[a]) rate not exceeding 1%.

If the gross sales/receipts is higher than the above amounts, the retailer shall be subject to the tax on business imposed by the municipality
or city.
Service Fees or Reasonable fees or charges for services rendered in connection with the regulations or the use of barangay-owned properties or service
Charges facilities such as palay, copra, or tobacco dryers.
(Sec. 152[b])
Barangay No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay
Clearance where such business or activity is located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee.
(Sec. 152[c])
Other Fees Reasonable fees and charges on the following:
and Charges 1. On commercial breeding of fighting cocks, cockfights and
(Sec. 152[d]) cockpits;
2. On places of recreation which charge admission fees; and
3. On billboards, signboards, neon signs, and outdoor advertisements

V. COMMUNITY TAX

SECTION 156. Community Tax. — Cities or municipalities may levy a community tax in accordance with the provisions of this Article.

AMOUNTS:
1. Individual - P5.00 and an additional P1.00 for every P1,000 of income, to a maximum of P5,000; (Sec. 157)
2. Corporate – P500 and an additional tax, which in no case, shall exceed P10,000. Additional tax shall include:
a. P2.00 for every P5,000 worth of property;
b. P2.00 for every P5,000 gross receipts. (Sec. 158)

EXEMPTIONS:
1. Diplomatic and consular representatives; and
2. Transient visitors when their stay in the Philippines does not exceed 3 months. (Sec. 159)

ACCRUAL AND PAYMENT: Community Tax accrues on the 1st day of January of each year which shall be paid not later than the last day of February of each
year.

PLACE OF PAYMENT:
1. Individual – place of residence;
2. Corporation – principal place of business. (Sec. 160)

VI. COMMON REVENUE RAISING POWERS

Local government units may impose and collect:

1. Service Fees and Charges;
2. Public Utility Charges;
3. Toll Fees or Charges (but not upon members of the AFP and PNP, post office personnel delivering mail, physically-handicapped, and disabled citizens who
are 65 years or older);

VII. LGU’s REMEDIES

LIEN: local taxes, fees, charges and other revenues constitute a lien, superior to all liens, charges or encumbrances in favor of any person, enforceable by
appropriate administrative or judicial action, not only upon any property or rights therein which may be subject to the lien but also upon property used in
business, occupation, practice of profession or calling, or exercise of privilege with respect to which the lien is imposed. The lien may only be extinguished upon
full payment of the delinquent local taxes, fees and charges including related surcharges and interest. (Sec. 173)

AUDIT: the treasurer may examine the books, accounts, and other pertinent records of any person, partnership, corporation, or association subject to local
taxes, fees and charges in order to ascertain, assess, and collect the correct amount of the tax, fee, or charge.

Such examination shall be made during regular business hours, only once for every tax period, and shall be certified to by the examining official.

For this purpose, the records of the revenue district office of the Bureau of Internal Revenue shall be made available to the local treasurer, his deputy or duly
authorized representative. (Sec. 171)

CIVIL REMEDIES: of the local government unit for the collection of local taxes, fees and charges, and related surcharges and interests resulting from
delinquency are:
1. By administrative action through distraint or levy;
2. By judicial action.

Either of these remedies or all may be pursued concurrently or simultaneously at the discretion of the local government unit concerned.

The remedies of distraint or levy may be repeated if necessary until the full amount due, including all expenses, is collected. (Sec. 184)

The following are EXEMPT from distraint or levy:

(a) Tools and implements necessarily used by the delinquent taxpayer in his trade or employment;
(b) One (1) horse, cow, carabao, or other beast of burden, such as the delinquent taxpayer may select, and necessarily used by him in his ordinary occupation;
(c) His necessary clothing, and that of all his family;
(d) Household furniture and utensils necessary for housekeeping and used for that purpose by the delinquent taxpayer, such as he may select, of a value not
exceeding Ten thousand pesos (P10,000.00);
(e) Provisions, including crops, actually provided for individual or family use sufficient for four (4) months;
(f) The professional libraries of doctors, engineers, lawyers and judges;
(g) One fishing boat and net, not exceeding the total value of Ten thousand pesos (P10,000.00), by the lawful use of which a fisherman earns his livelihood;
and
(h) Any material or article forming part of a house or improvement of any real property.

CIVIL PENALTIES: Section 168 of the Local Government Code, the Sanggunian may impose:
1. Surcharge – not exceeding 25% of the amount of taxes, fees or charges not paid on time;
2. Interest – at the rate not exceeding 2% of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the
total interest on the unpaid amount or potion thereof exceed 36 months.

Note that unlike in national taxes and real property tax, the base of the interest for local business taxes is inclusive of surcharge.

VIII. TAXPAYERS’ REMEDIES

1. PRESCRIPTION

PERIOD OF ASSESSMENT: local taxes, fees or charges shall be assessed within 5 years from the date they become due. No action for the collection of such
shall be instituted after the expiration of such period. EXCEPT: in case of fraud or intent to evade payment of taxes, fees or charges, the same may be assessed
within 10 years. (Sec. 194[a] and [b])

PERIOD OF COLLECTION: 5 years from date of assessment by administrative or judicial action.

SUSPENSION OF PERIODS: during which:

a. The treasurer is legally prevented from making the assessment of collection;
b. The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect; and
c. The taxpayer is out of the country or otherwise cannot be located. (Sec. 194[d])

2. PROTEST OF ASSESSMENT (Sec. 195)

a. After receipt of the notice of assessment from the treasurer, the taxpayer may file a written protest within 60 days to contest the assessment, otherwise
the same will be final and executory;
b. The local treasurer shall decide the protest within 60 days from its filing;
• If protest is meritorious – treasurer shall issue notice cancelling wholly or partially the assessment.
• If not meritorious – treasurer shall deny the protest with notice to the taxpayer.
• The protest may likewise be considered denied if not acted upon within the 60 day period.
c. The taxpayer shall have 30 days from the receipt of denial or from the lapse of the 60 day period to appeal with the court of competent jurisdiction.
Otherwise, the assessment becomes conclusive and unappealable.

3. CLAIM FOR REFUND:

No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for
refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the
date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. (Sec. 196)

No evidence of a written claim for refund; not deemed admitted: if the taxpayer failed to prove that they have filed a written claim for refund with the
local treasurer considering that such fact – although subject of their Request for Admission which respondents did not reply to – had already been controverted
by the latter in their Motion to Dismiss and Answer, regardless if they filed the judicial claim for refund within the 2 year period, the same must be denied.

Records show that petitioners filed their Request for Admission with the RTC and also served the same on respondents, requesting that the fact that they filed
a written claim for refund with the City Treasurer of Manila be admitted. Respondents, however, did not – and in fact, need not – reply to the same considering
that they have already stated in their Motion to Dismiss and Answer that petitioners failed to file any written claim for tax refund or credit. In this regard,
respondents are not deemed to have admitted the truth and veracity of petitioners’ requested fact. (Metro Manila Shopping Mecca Corp. vs. Toledo, GR No.
190818, June 5, 2013)

If refund is granted: it shall not be refundable in cash but shall only be applied to future tax obligations of the same taxpayer for the same business.

If the taxpayer has no other tax obligations, it shall be applied in full in the first quarter of the next calendar year.

Any unapplied balance of the tax credit shall be refund in cash in the event of termination of business in the locality.

IX. MISCELLANEOUS PROVISIONS:

SECTION 186. Power To Levy Other Taxes, Fees or Charges. — Local government units may exercise the power to levy taxes, fees or charges on any
base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy:
Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose.

Residual Powers: the LGUs may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated under the
LGC, except:
1. Those taxed under the Tax Code;
2. The taxes, fees or charges shall not be unjust, excessive or oppressive, confiscatory or contrary to declared national policy;
3. There must be a valid ordinance;
4. There must be public hearing conducted prior to enactment of the ordinance.
 SECTION 191. Authority of Local Government Units to Adjust Rates of Tax Ordinances. — Local government units shall have the authority to
adjust the tax rates as prescribed herein not oftener than once every five (5) years, but in no case shall such adjustment exceed ten percent (10%) of the
rates fixed under this Code.

Section 192. Authority to Grant Tax Exemption Privileges. - Local government units may, through ordinances duly approved, grant tax exemptions,
incentives or reliefs under such terms and conditions as they may deem necessary.

PART 2: REAL PROPERTY TAX

FUNDAMENTAL PRINCIPLES:

SECTION 198. Fundamental Principles. — The appraisal, assessment, levy and collection of real property tax shall be guided by the following
fundamental principles:
(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for assessment purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a uniform classification within each local government unit;
(d) The appraisal, assessment, levy and collection of real property tax shall not be let to any private person; and
(e) The appraisal and assessment of real property shall be equitable.

REAL PROPERTY: the Local Government Code does not have a definition of what constitutes “real property”. However, the Code provides assessment levels
applicable to land, buildings, improvements and machineries.

Generally, the definition under Art. 415 of the Civil Code is applied. Accordingly, the following are considered real property:
a. Immovable by nature – those which cannot be moved from place to place, such as land, bldg., etc., mentioned in par. 1 & 8 (mines, quarries, slag
dumps) of this Article;
b. By Incorporation – essentially movables but are attached to an immovable in such manner as to be an integral part thereof, such as things (except land,
buildings and roads) mentioned in par. 1, 2, 3, 4 and 6. e.g., trees and plants.
c. By Destination – the purpose for which they have been placed in an immovable, partake the nature of the latter because of the added utility derived
therefrom. (4,5,6,7 and 9)
d. By Analogy or by law, as those mentioned in par. 10.

SUBJECT TO REAL PROPERTY TAX: The following are considered real property subject to real property tax:
1. Underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck
hoists, air compressors and tireflators in its gasoline stations - said equipment and machinery, as appurtenances to the gas station building or shed owned
by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station
would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and
machinery within the meaning of the Assessment Law and the Real Property Tax Code. (Caltex vs. CBAA)
2. While the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and
rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the
considerable quantities of oil needed by Meralco for its operations. (Manila Electric Company vs. CBAA)

Appraisal of Real Property: shall be at its current and fair market value, which is the price at which a property may be sold by a seller who is not compelled
to sell and bought by a buyer who is not compelled to buy.

The owner of the property shall initially determine the fair market value to be indicated in the Tax Declaration. However, this does not bind the assessor in
making his own determination of fair market value. (Patalinhug vs. C.A., 229 SCRA 554)

IMPROVEMENTS: An Improvement is a valuable addition made to a property or an amelioration in its condition, which is intended to enhance its value,
beauty or utility or to adapt it for new or further purposes, amounting to more than a mere repair or replacement of parts involving capital expenditures and
labor and normally requiring a building permit. (Art. 290(m), IRR)

MACHINERY: For RPT purposes, Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may
not be attached, permanently or temporarily, to the real property.

It includes the physical facilities for production, the installations and appurtenant service, facilities, those which are mobile, self-powered or self-propelled, and
those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or
activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural
purposes.

Machinery that is permanently attached to land and buildings is subject to RPT, even though this is actually, directly, and exclusively used for religious,
charitable or educational purposes. (DOF Local Finance Circular No. 1-02)

Note that the Constitutional exemption under Sec. 28(3) of Art. VI covers churches and parsonages or covenants appurtenant thereto, mosques, non-profit
cemeteries, and all “land, buildings and improvements,” actually, directly and exclusively used for religious, charitable, or educational purposes.

Machinery that is not permanently attached to real estate is:

a. Subject to the RPT if it is an essential and principal element of an industry, work or activity without such industry, work or activity cannot function
b. Not subject to RPT, if it is NOT an essential and principal element of an industry, work or activity. (DOF Local Finance Circular No. 1-02)

Machineries of General Purpose Use: including but not limited to office equipments, (e.g., telephone equipment, microcomputers, facsimile machines, telex
machines, cash dispensers), furniture and fixtures, freezers, refrigerators, display cases or racks, which are not directly and exclusively used to meet the needs
of a particular industry, business or activity shall not be considered within the definition of machinery.
In BLGF Opinion dated June 15, 2012, the Bureau opined that machineries for general purpose are not subject to RPT if they are not used directly and exclusively
for the conduct of trade or business of the Company. In this instance, the computer equipment of Eastwest Bank fall under the category of Machinery of General
Purpose.

Appraisal of Machineries: (Sec. 224)

Appraisal is the act or process of determining the value of property as of a specified date for a specific purpose. (Sec. 199[e])

1. Brand New – acquisition cost;

"Acquisition Cost" for newly-acquired machinery not yet depreciated and appraised within the year of its purchase, refers to the actual cost of the machinery
to its present owner, plus the cost of transportation, handling, and installation at the present site. (Sec. 199[a])

2. All other cases – it shall be computed as follows:

Remaining useful life Replacement

x
Economic life Cost

"Remaining Economic Life" is the period of time expressed in years from the date of appraisal to the date when the machinery becomes valueless.

“Economic Life" is the estimated period over which it is anticipated that a machinery or equipment may be profitably utilized.

"Replacement or Reproduction Cost" is the cost that would be incurred on the basis of current prices, in acquiring an equally desirable substitute property,
or the cost of reproducing a new replica of the property on the basis of current prices with the same or closely similar material.

3. If machinery is imported, the acquisition cost includes freight, insurance, bank charges, brokerage, arrastre and handling, duties and taxes, plus cost of
inland transportation, handling and installation charges at the present site.

Depreciation Allowance: a depreciation allowance shall be made for machinery at a rate not exceeding five percent (5%) of its original cost or its replacement
or reproduction cost, as the case may be, for each year of use: Provided, however, That the remaining value for all kinds of machinery shall be fixed at not less
than twenty percent (20%) of such original, replacement, or reproduction cost for so long as the machinery is useful and in operation. (Sec. 225)

Note that depreciation allowance for RPT purposes is available only against machineries and not for other assets which are generally subject to depreciation,
e.g., buildings and improvements.

ADMINISTRATION: The following shall be primarily responsible for the proper, efficient and effective administration of the real property tax:
1. Provinces;
2. Cities;
3. Municipalities within Metro Manila.

DECLARATION OF REAL PROPERTY:

Under Sec. 202, it is the duty of all persons, natural or juridical, owning or administering real property, including the improvements therein, to prepare and file
a sworn statement declaring the true value of real property, taxable or exempt, declaring the true value of the property which shall be the current and fair
market value thereof.

The declaration shall be filed with the assessor once every 3 years.

New acquisitions: it shall also be the duty of any person, natural or juridical, acquiring real property to cause the declaration of real property within 60 days
from acquisition or upon completion or occupancy of the improvement, whichever comes earlier.

Transfer of Real Property: a notice shall be submitted to the assessor 60 days from the date of transfer containing the mode of transfer, the description of the
property alienated, the name and address of the transferee.

CLASSIFICATION OF REAL PROPERTY:

Real property shall be classified, valued and assessed according to its actual use regardless of where located, whoever owns it, and whoever uses it. (Sec. 217)
It may be classified as (Sec. 215):

1. Residential: principally devoted to habitation

2. Agricultural: devoted principally to the planting of trees, raising of crops, livestock and poultry, dairying, salt making, inland fishing and similar aquacultural
activities, and other agricultural activities
3. Commercial: devoted principally for the object of profit
4. Industrial: devoted principally to industrial activity as capital investment
5. Mineral: minerals, metallic or non-metallic, exist in sufficient quantity or grade to justify the necessary expenditures to extract and utilize such materials
6. Timberland
7. Special

Special classes include all lands, buildings, and other improvements thereon actually, directly and exclusively used for: (1) hospitals; (2) cultural or (3) scientific
purposes, and (4) those owned and used by local water districts, and (5) government-owned or -controlled corporations rendering essential public services in
the supply and distribution of water and/or generation and transmission of electric power. (Sec. 216)

ASSESSMENT LEVELS (Sec. 218):

Assessment Level is the percentage applied to the fair market value to determine the taxable value of the property. (Sec. 199[g])
The sanggunian concerned may fixed the assessment levels through ordinances but shall not exceed the rates enumerated under Sec. 218, to wit:

(a) On Lands:
CLASS ASSESSMENT LEVELS

Residential 20%

Agricultural 40%

Commercial 50%

Industrial 50%

Mineral 50%

Timberland 20%

(b) On Buildings and Other Structures:

(1) Residential
Fair market Value

Over Not Over Assessment Levels

P175,000.00 0%

P175,000.00 300,000.00 10%

300,000.00 500,000.00 20%

500,000.00 750,000.00 25%

750,000.00 1,000,000.00 30%

1,000,000.00 2,000,000.00 35%

2,000,000.00 5,000,000.00 40%

5,000,000.00 10,000,000.00 50%

10,000,000.00 60%

(2) Agricultural
Fair Market Value

Over Not Over Assessment Levels

P300,000.00 25%

P300,000.00 500,000.00 30%

500,000.00 750,000.00 35%

750,000.00 1,000,000.00 40%

1,000,000.00 2,000,000.00 45%

2,000,000.00 50%

(3) Commercial / Industrial

Fair Market Value

Over Not Over Assessment Levels

P300,000.00 30%

P300,000.00 500,000.00 35%

500,000.00 750,000.00 40%

750,000.00 1,000,000.00 50%

1,000,000.00 2,000,000.00 60%

2,000,000.00 5,000,000.00 70%

5,000,000.00 10,000,000.00 75%

10,000,000.00 80%
 (4) Timberland
Fair Market Value

Over Not Over Assessment Levels

P300,000.00 45%

P300,000.00 500,000.00 50%

500,000.00 750,000.00 55%

750,000.00 1,000,000.00 60%

5,000,000.00 2,000,000.00 65%

2,000,000.00 70%

(c) On Machineries

Class Assessment Levels

Agricultural 40%

Residential 50%

Commercial 80%

Industrial 80%

(d) On Special Classes: The assessment levels for all lands buildings, machineries and other improvements;

Actual Use Assessment Level

Cultural 15%

Scientific 15%

Hospital 15%

Local water districts 10%

Government-owned or controlled 10%

corporations engaged in the supply and
distribution of water and/or generation
and transmission of electric power

Actual Assessment Levels: vary depending on the LGU since the Sanggunian may fix the assessment levels, provided they do not exceed the above rates.

General Revision of Assessments and Property Classification: the assessor concerned shall undertake a general revision of real property assessments
within 2 years after the effectivity of the LGC and every 3 years thereafter. (Sec. 219)

Valuation of Real Property: In cases where (a) real property is declared and listed for taxation purposes for the first time; (b) there is an ongoing general
revision of property classification and assessment; or (c) a request is made by the person in whose name the property is declared, the provincial, city or municipal
assessor or his duly authorized deputy shall, in accordance with the provisions of this Chapter, make a classification, appraisal and assessment or taxpayer's
valuation thereon: Provided, however, That the assessment of real property shall not be increased oftener than once every three (3) years except in case of
new improvements substantially increasing the value of said property or of any change in its actual use. (Sec. 220)

Reassessment: made after the 1st day of January of any year shall take effect on the 1 st day of January of the following year. EXCEPT: reassessment due to
partial or total destruction or to a major change of the property’s actual use, or to any great and sudden inflation or deflation of real property values, or the
gross illegality of assessment when made or to any abnormal cause, the reassessment shall be made 90 days after such cause or causes occurred and shall
take effect at the beginning of the next quarter next following the reassessment. (Sec. 221)

Real Properties Declared for the First Time: shall be assessed taxes for the period during which it would have been liable but in no case for more than 10
years prior to the date of initial assessment.

Duty of Registrar of Deeds:

a. To prepare and submit to the provincial, city or municipal assessor every year an abstract of his registry, which shall contain:
(1) Brief but sufficient description of the real properties entered therein;
(2) Their present owners;
(3) Dates of their most recent transfers or alienation accompanied by copies of the corresponding deeds of sale, donation or partition or other forms of
alienation.

Purpose: is to ascertain whether or not any real property entered in the Registry of Property has escaped discovery and listing for the purpose of taxation.
(Sec. 209[a])

b. To require every person who shall present for registration a document of transfer, alienation, or encumbrance of real property to accompany the same
with a certificate to the effect that the real property subject of the transfer, alienation, or encumbrance, as the case may be, has been fully paid of all
real property taxes due thereon.
 Failure to provide such certificate shall be a valid cause for the Registrar of Deeds to refuse the registration of the document. (Sec. 209[b])

ASSESSMENT APPEALS:

When not satisfied with the action of the assessor with regards the assessment of property, the owner or person having legal interest may appeal to the Local
Board of Assessment Appeals (LBAA) within 60 days from receipt of the notice of assessment, by filing a petition under oath, together with the copies of the tax
declarations and such affidavits or documents submitted in support of the appeal. (Sec. 226)

The LBAA shall decide the appeal within 120 days. If unsatisfied with the decision of the LBAA, the owner or person having legal interest may appeal to the
Central Board of Assessment Appeals (CBAA) within 30 days from receipt of such decision. The decision of the CBAA shall be final and executory. (Sec. 229)

EFFECT OF APPEAL ON THE PAYMENT OF RPT: Appeal on assessments of real property shall, in no case, suspend the collection of the realty taxes on the
real property involved as assessed by the provincial or city assessor, subject to adjustment depending on the outcome of the appeal. (Sec. 231)

Thus, should the taxpayer/real property owner question the excessiveness or reasonableness of the assessment, Section 252 directs that the taxpayer should
first pay the tax due before his protest can be entertained. (Olivarez vs. Marquez 438 SCRA 679)

IMPOSITION OF REAL PROPERTY TAX (RPT)

RPT is an ad valorem tax on real property such as land, building, machinery and other improvement administered by provinces, cities and municipalities within
Metro Manila.

BASIC RPT RATE: the local government unit may fix the rate of RPT applicable to their respective localities but shall not exceed:
1. 1% - Provinces;
2. 2% - Cities and Municipalities within Metro Manila. (Sec. 233)

RPT Tax Base: is the assessed/assessment value, which is the product of the assessment level and the fair market value.

Computation of RPT:

Fair Market Value xxx

Assessment Level xx%
Assessed Value xxx
RPT Rate:
Basic RPT 1 or 2%
Special Education Fund 1% 2/3%
RPT Due xxx

REAL PROPERTIES EXEMPT FROM RPT:

SECTION 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or -controlled corporations
engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

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

Proof of Exemption of Real Property: under Sec. 206, every person who claims exemption from real property tax shall file with the assessor within 30 days
from the date of declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles
of incorporation, by-laws, contracts, affidavits, certifications and mortgage deeds, and similar documents.

If the required evidence is not submitted within the period prescribed, the property shall be listed as taxable in the assessment roll. However, if the property
shall be proven to be tax exempt, the same shall be dropped from the assessment roll. (Sec. 206)

If, however, it is not dropped therefrom and the exemption is insisted after an assessment for unpaid RPT has been issued, the taxpayer may question the
validity of the assessment directly with the RTC, such assessment being considered an illegal assessment, rather than an erroneous assessment. (see Protest)
Moreover, the exemption is explicitly granted by law and need not be applied for. (Testate Estate of Concordia T. Lim vs. City of Manila, GR No. 90639, Feb. 21,
1990)

Property is leased: in case a private person (as opposed to the government) owns a land which is leased to a school and the same is used actually, directly
and exclusively for educational purposes, the same is exempt from RPT.

SPECIAL LEVIES ON REAL PROPERTY

SPECIAL LEVIES: In addition to the Basic RPT, provinces, cities or municipalities within Metro Manila may impose:
1. Special Education Fund – 1%; (Sec. 235)
2. Tax on Idle Lands – 5%; (Sec. 236)
3. Special Levy on lands benefited by public works funded by the LGU – not to exceed 60% of the actual cost of the project, payable in 5-10 years, distributed
among to various land owners benefited. (Sec. 240)

IDLE LANDS: shall include:

(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half (1/2) of which
remain uncultivated or unimproved by the owner of the property or person having legal interest therein. Agricultural lands planted to permanent or perennial
crops with at least fifty (50) trees to a hectare shall not be considered idle lands. Lands actually used for grazing purposes shall likewise not be considered idle
lands.

(b) Lands, other than agricultural, located in a city or municipality, more than one thousand (1,000) square meters in area one-half (1/2) of which remain
unutilized or unimproved by the owner of the property or person having legal interest therein.

(c) Regardless of land area, residential lots in subdivisions duly approved by proper authorities, the ownership of which has been transferred to individual
owners. (Sec. 237)

Idle Lands Exempt From Tax: by reason of force majeure, civil disturbance, natural calamity or any cause or circumstance which physically or legally prevents
the owner of the property or person having legal interest therein from improving, utilizing or cultivating the same. (Sec. 238)

Accrual: Special Levy shall accrue on the 1st day of the quarter next following the effectivity of the ordinance imposing such levy. (Sec. 245) Any owner affected
by a special levy may avail of the remedies provided under Chapter III, Title Two, Book II of the LGC on Assessment Appeals. (Sec. 244) (See Assessment
Appeals)

COLLECTION OF REAL PROPERTY TAX:

The RPT shall accrue on the 1st of January and shall constitute a lien on the property which shall be superior to any other lien, mortgage, or encumbrance of
any kind whatsoever, and shall be extinguished only upon the payment of the delinquent tax. (Sec. 246)

Duty to collect: is with the city or municipal treasurer. However, they may deputize the barangay treasurer, provided:
1. The barangay treasurer is properly bonded for the purpose; and
2. The premium for the bond shall be paid by the city or municipal treasurer. (Sec. 247)

Notice of Time for Collection: the city or municipal treasurer shall, on or before the 31st of January, in the case of the Basic RPT and SEF, post notice of the
dates when the tax may be paid without interest at a conspicuous and publicly accessible place at the city or municipal hall. Said notice shall likewise be published
in a newspaper of general circulation in the locality once a week for two (2) consecutive weeks. (Sec. 249)

PAYMENT OF REAL PROPERTY TAX: may be done through four instalments, due on the following dates:
a. March 31;
b. June 30;
c. September 30;
d. December 31. (Sec. 250)

Discounts:
a. Prompt payment – payment before due date of the quarterly RPT due; not exceeding 10%;
b. Advance payment – payment of the entire RPT in the first quarter; not exceeding 20% (Sec. 251)

PROTEST: Sec. 252

a. No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the receipts the words “paid under protest.”

The requirement of "payment under protest" is a condition sine qua non before a protest or an appeal questioning the correctness of an assessment of
real property tax may be entertained. (Camp John Hay vs. CBAA, GR No. 169234, October 2, 2013)

b. The protest in writing must be filed within 30 days from payment of the tax to the treasurer, who shall decide the protest within 60 days.
c. The tax portion shall be held in trust by the treasurer concerned.
d. If decided in favour of the taxpayer, the amount paid shall be:
b. Refunded;
c. Applied to existing or future tax liability.
e. If the protest is denied or upon the lapse of 60 days from the filing thereof, the taxpayer may appeal to the LBAA within 60 days from receipt of the
decision, who shall decide within 120 days;
f. If unsatisfied with the decision of the LBAA, appeal may be had before the CBAA within 30 days from receipt of the decision.

The above procedure applies only to erroneous assessments, not illegal assessments.

Illegal vs. Erroneous Assessment: An erroneous assessment “presupposes that the taxpayer is subject to the tax but is disputing the correctness of the
amount assessed.” With an erroneous assessment, the taxpayer claims that the local assessor erred in determining any of the items for computing the real
property tax, i.e., the value of the real property or the portion thereof subject to tax and the proper assessment levels. In case of an erroneous assessment, the
taxpayer must exhaust the administrative remedies provided under the Local Government Code before resorting to judicial action.

On the other hand, an assessment is illegal if it was made without authority under the law. In case of an illegal assessment, the taxpayer may directly resort
to judicial action without paying under protest the assessed tax and filing an appeal with the Local and Central Board of Assessment Appeals.

In NPC vs. Municipal Government of Navotas (GR No. 192300 dated November 24, 2014), a claim of exemption under Sec. 234(c) of the LGC was considered a
legal issue. Thus, direct resort to the RTC was correct and payment under protest was held as not necessary.

The Supreme Court added that the issue in this particular case is clearly legal given that it involves an interpretation of the contract between the parties vis-à-
vis the applicable laws, i.e., which entity actually, directly and exclusively uses the subject machineries and equipment. The answer to such question would then
determine whether petitioner is indeed exempt from payment of real property taxes. Since the issue is a question of law, the jurisdiction was correctly lodged
with the RTC.

Thus, the procedure for illegal assessments would be:

1. Taxpayer shall file a complaint for injunction before the Regional Trial Court to enjoin the LGU from collecting real property taxes;
2. The party unsatisfied with the decision of the RTC shall file an appeal, not a petition for certiorari, before the CTA, the complaint being a local tax case
decided by the RTC case decided by the RTC. The appeal shall be filed within 15 days (should be 30 days); and,
3. Decision of the CTA is appealable to the SC under Rule 45 raising pure questions of law.
4. Claim of exemption under a BOT contract in relation to Sec. 234(C) (NPC vs. Navotas).

Cases of Illegal Assessments:

a. If the taxpayer questions the authority of the assessor to make the assessment and collect the tax. (Ty vs. Trampe)
b. If the issue is the proper party liable for the tax (Estate of Concordia Lim)
c. Amount of protest to be paid is huge and the properties were already levied and to be auctioned-off. In this sense, appeal to the LBAA is not a plain,
adequate and speedy remedy. (Bayan Telecommunications)

Liability to pay RPT vis a vis right to institute a protest against assessment thereof:
1. Sec. 234(a): The party liable to pay the RPT is the owner or the person having legal interest in the property;

Exemption under Sec. 234(a) does not extend to a taxable person who leases the property. As such, the lessee/private person thereof is liable for the RPT
and has legal standing to sue under the beneficial use doctrine;

In a contract to sell, where the title to the property is retained by the vendor, but the possession is transferred already to the vendee, the latter shall be
liable for the RPT for the period prior to the transfer of ownership. This is because beneficial ownership has already been given. (City of Baguio vs. Busuego)

2. Sec. 234(c): Legal interest must be ACTUAL. Thus, exemption under Sec. 234(c) will not apply until the 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 has ownership or
possession/use of the property. Under A BOT arrangement, the GOCC’s right to the property remains contingent and not actual prior to the expiration of
the period.

Contractual obligation to shoulder the RPT under Sec. 234(c) binds only the parties and the LGU may still assess the RPT due on the properties held by
private taxable persons. The GOCC who shoulders such liability under a contract cannot clothe the GOCC with the personality to sue, since it is not the
owner or user/possessor thereof.

3. Between private persons: It follows that, in case of an operating lease, the party still liable to pay the RPT is the owner/lessor. A stipulation that the
lessee will shoulder the RPT cannot bind the LGU, and the LGU may still assess the RPT against the lessor/owner under the law and the latter may seek
reimbursement from the lessee under contract; nor will the lessee have personality to file a protest/refund of the RPT.

In effect, the RPT shouldered by the lessee in behalf of the lessor, may be deemed as additional rentals to the latter, which it will use to pay for the RPT;
which, in turn, may be subject to Income Tax, EWT and VAT (in appropriate cases).

The same is true with regards a contract to sell, where the vendor retains the ownership.

Note: the Beneficial Use Doctrine is applicable only under Sec. 234(a) and in all other cases, the owner or the person having legal interest
is the one liable/have legal standing to sue.

REFUND (Sec. 253):

a. When an assessment of basic real property tax, or any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly reduced
or adjusted, the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within two (2) years from
the date the taxpayer is entitled to such reduction or adjustment.
b. The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60) days from receipt thereof.
c. In case the claim for tax refund or credit is denied, the taxpayer may avail of the remedies as provided in Chapter 3, Title II, Book II of this Code. (See
Assessment Appeals)

ASSESSMENT OF DELINQUENCY RPT:

a. When the real property tax becomes delinquent, the Treasurer shall cause a notice of the delinquency to be posted at the main entrance of the provincial
capitol, or city or municipal hall and in a publicly accessible and conspicuous place in each barangay of the LGU concerned.
b. The notice shall also be published once a week for 2 weeks in a newspaper of general circulation in the locality.
c. The notice shall specify:
(2) The date upon which the tax became delinquent and shall state the personal property may be distrained to effect payment
(3) That anytime before distraint of personal property, payment of the tax with surcharges, interests and penalties may be made; and
(4) unless the tax, surcharges and penalties are paid before the expiration of the year for which the tax is due, except when the notice of assessment or
special levy is contested administratively or judicially, the delinquent real property will be sold at public auction, and the title to the property will be
vested in the purchaser, subject, however, to the right of the delinquent owner of the property or any person having legal interest therein to redeem
the property within one (1) year from the date of sale.

INTEREST ON UNPAID RPT:

In case of failure to pay the RPT when due, the taxpayer shall be subject to 2% interest per month on the unpaid amount for a maximum of 36 months. (Sec.
255) Note that non-payment of RPT, unlike any other taxes, does not result in the imposition of a surcharge, only interests.

REMEDIES FOR COLLECTION: the treasurer concerned may avail of:

a. Levy on real property; or
b. Judicial action. (Sec. 256)
Levy: real property subject to such tax may be levied upon through the issuance of a warrant on or before, or simultaneously with, the institution of the civil
action for the collection of the delinquent tax. The provincial or city treasurer shall issue a warrant of levy, which shall be mailed to or served upon the delinquent
owner of the real property or person having legal interest therein, the assessor and the Register of Deeds who shall annotate the levy on the tax declaration
and certificate of title, respectively.

The warrant shall operate with the force of a legal execution throughout the province, city or a municipality, within the Metropolitan Manila Area. (Sec. 258)

Thereafter, there shall be public advertisement for the public sale. The sale shall be made at the entrance of the provincial, city or municipal building, or on the
property to be sold, or at any other place specified at the notice of sale.

Redemption: within 1 year from the date of sale; by paying the amount of delinquent tax, including the interest due thereon, and the expenses of sale and
interest of not more than 2% per month on the purchase price from the date of sale to the date of redemption. (Sec. 261)

Purchase of Property by the LGU for Want of Bidder: In case there is no bidder, the local treasurer conducting the sale shall purchase the property in behalf of
the LGU concerned to satisfy the claim

Within one (1) year from the date of such forfeiture, the taxpayer or any of his representative, may redeem the property by paying to the local treasurer the
full amount of the real property tax and the related interest and the costs of sale.

If the property is not redeemed as provided herein, the ownership thereof shall be vested on the local government unit concerned. (Sec. 263)

Resale: The sanggunian concerned may, by ordinance duly approved, and upon notice of not less than twenty (20) days, sell and dispose of the real property
acquired under the preceding section at public auction. (Sec. 264)

Further distraint or levy: Levy may be repeated if necessary until the full amount due, including all expenses, is collected. (Sec. 265)

Actions assailing the validity of tax sale: No court shall entertain any action assailing the validity or any sale at public auction of real property or
rights therein under this Title until the taxpayer shall have deposited with the court the amount for which the real property was sold, together with interest of
two percent (2%) per month from the date of sale to the time of the institution of the action. The amount so deposited shall be paid to the purchaser at the
auction sale if the deed is declared invalid but it shall be returned to the depositor if the action fails.

Neither shall any court declare a sale at public auction invalid by reason or irregularities or informalities in the proceedings unless the substantive rights of
the delinquent owner of the real property or the person having legal interest therein have been impaired. (Sec. 267)

Tax Lien: the basic real property tax constitutes a lien on the property subject to tax, superior to all liens, charges or encumbrances in favor of any person,
irrespective of the owner or possessor thereof, enforceable by administrative or judicial action, and may only be extinguished upon payment of the tax and the
related interests and expenses. (Sec. 257)

PERIOD WITHIN WHICH TO COLLECT RPT: 5 years when they become due; 10 years, in case of fraud or intent to evade the payment of tax. These periods
are suspended upon the same ground for Tax on Business. (Sec. 270)