EH403 TAXATION II Edited

TAXATION II - FINALS ATTY.
ARANAS EH403 2019-2020

DISCLAIMER: This material is not for sale. You are free to pass this on to anybody but the authors do not guarantee that the reviewer is 100% correct or error-free
Sources: Amores et al, Tanya Notes, PPT presentation, EH 403 transcripts.
Per inquiry, coverage is from Intro of NIRC remedies Delinquency Failure to due Section date
(discussed by KMA for prefinals and not found in this pay 249(C)
the appearing in the
notes). CMTA ppt slides not included in this file. deficiency (3),
notice and
NIRC
tax or the demand of the
Remedies of the Government: Render unto BIR what full Commissioner
properly belongs to the BIR assessed until the amount
amount is fully paid
When does an assessed tax become collectible? For delinquency, there should already be an FLD FAN
(RMC 26 2016) and you still did not pay on the deadline set.
a. Failure to file a protest within 30 days from receipt of
FAN/FLD; Prior to Filing & Date of Date of actual
b. Failure to submit all relevant documents in support of Jan. 1, Payment FAN payment Deficiency
Interest
the protest by way of request for reinvestigation within 2018
60 days from date of filing thereof; Delinquency
c. Failure to appeal to the CIR or the CTA within 30 days Interest
from date of receipt of the FDDA issued by the CIR’s Due Date of
On or
duly authorized representative; after
Filing &
-3 yment
Date of
FAN Deficiency
d. Failure to appeal to the CTA within 30 days from date Jan. 1 > Date of actual Interest
of receipt of the FDDA issued by the CIR; 2018 payment
Delinquency
e. Failure to timely file a motion for reconsideration before Interest
the CTA Division or failure to appeal to the CTA En Banc
and Supreme Court; • Surcharges
f. Failure to receive any assessment notices because it ➢ Non-fraudulent cases (no finding of fault) - 25%
was served in the address indicated in the BIR ➢ Fraudulent cases(there is finding of fault or
registration database and the BIR was not updated of falsity)- 50%
the new address or cancellation of BIR registration • Compromise penalties
Remember to update your data.
In one case, the TP updated his address, but notices BIR Form 0605
were still sent by the BIR to the old address. SC said Separate payment form must be prepared for each tax
na BIR was at fault since there was an update. type for each taxable year.
What if there was actual knowledge of the BIR of
the address but still in its database wala g
update? Still binding na there was no update.
Options when assessment becomes final 1 Fch. •

•HTT'i’nSiTS
j«rd> tint
_ _ 0605
Payment Form
|Cv«0wiM«Cmr-Y 5«*J
KWHIPCB
(
1. Pay the full amount 2 ’jyc'ae 'Mini| si ;i

* 0« I II
2. Apply for abatement of penalties and interest V
3. Apply for compromise settlement NnnfauMi

7 YW) X
I
As a rule, this applies to the basic tax assessed and Pvt I Background Information
excluding the interest and penalties 10 =sc:>u 11 12
4. Refuse to pay i~ rrr n
I] 'acunfttUi
'
may <we»haiianfi|—
N
aval— M Heron tUTO
Remedies for collection of taxes (assessment has

become final) 15=*i***«*i9t» KScÿai
1. Judicial
II IB
a. Filing of collection case with MTC/RTC/CTA
UVTW *hf**n
rsatwr
• At least P1M basic assessed tax – CTA
No Xt’Alnert
• Less than P1M basic assessed tax – RTC/MTC
jÿhmtsuwt »tir>r«ry Finl ‘ÿzasa >fvutf TU
Pan» “ajrai
b. Filing of BIR's “answer” with the CTA ’»«CwjtAa»F*ce nÿtnem * PjlPtylMfll
2. Administrative
.
intone ii store intalnrtil'tfrtiiii

a. Warrants of Distraint
b. Levy
c. Garnishment Pvt II Conpatatioa al In
1) yfe'uQatMAMnaParrt 19
Prescription of time to collect It AM Fette
mat
• GR: Within five (5) years from the time of assessment 3itr«s iwarst
• When Suspended: 2K 216 2DC 2(0
➢ The CIR is prohibited from initiating collection 21 21

such as when the taxpayer requests for Pri-«c«wt > nnsHattg Oka hoi anmO ti rwssjan; Cfcs
reinvestigation or if there is injunction by the CTA E« SM Pm Samt'TnalCapf
• Prescription of time to collect
➢ FAN and DL _ _ _ _ _ 5 years If the taxpayer wants to pay, then the he has to pay
➢ FAN…Protest…FDDA _ _ _ _ _ 5 years everything. The BIR form that the taxpayer will fill up is
➢ FAN…Protest…FDDA……CTA/SC _ _ _ _ _ 5 years the BIR Form 0605.
Components of a deficiency assessment BIR Form 0605 will be for every tax type. The total tax to
a. Basic tax be paid in the BIR Form 0605 should tally in the total
b. Increments deficiency assessment in the FLD FAN.
• Interest
➢ Deficiency interest If the taxpayer would not or could not pay the entire
➢ Delinquency cases amount and the FAN became final and executory, the
TN: 12% penalty interest (twice the legal rate as set by taxpayer then could apply for compromise or abatement.
the BSP (current legal rate is 6%). Deficiency and
delinquency interests shall not be assessed simultaneously ADMINISTRATIVE REMEDIES WARRANTS OF
DISTRAINT, LEVY, OR GARNISHMENT
Interest Legal Cause Period Upon issuance by the Commissioner or Regional Director
Basis of the final decision on the disputed assessment (FDDA)
Deficiency Section failure to Date prescribed against the taxpayer or upon issuance by the CTA in
249(B) pay tax for its payment Division or En Banc of its decision upholding the
, NIRC due until full payment assessment. (RMO 39 07 and 42 10)
thereof or upon
issuance of Distraint
notice or demand Collection of delinquent taxes is enforced on the goods,
by the CIR chattels or effects and other personal property of
whichever whatever character of the taxpayer, including stocks
comes earlier and other securities, debts, credits, and garnishment of
bank accounts and interests in and rights to personal
property. [Section 205 (A), Tax Code]
1|Page LOU|NIKA|MARLA|LOSSIE|ELMAR|KARA
TAXATION II - FINALS ATTY. ARANAS EH403 2019-2020
Not all properties maybe distrained by the BIR because and of course if there is no finding of frivolous or
there are exempt properties like family home, professional dilatory review or appeal
tools etc.
GR: Appeal to CTA will NOT suspend the collection of taxes
Types of distraint /garnishment XPN: When in the opinion of the CTA the collection may
a. Actual Distraint Procedure jeopardize the interest of the Government and/or the
• Actual taking of the property of the delinquent taxpayer
taxpayer
• Applies only where the taxpayer is delinquent "Last Opportunity to pay"
(meaning there is already an FLD FAN and despite • The Final Notice Before Seizure should be
the formal demand the taxpayer still failed to pay) considered as a denial of request for
• BIR will actually seize your personal properties reconsideration of the disputed assessment.
and then sell these properties and the proceeds Thus, deemed as commissioner's final decision.
will be applied to the tax liability. • The Notice should be deemed as the BIR's last act.
• The letter clearly stated that respondent was being
b. Constructive Distraint - this does not require the given "this LAST OPPORTUNITY" to pay; otherwise, its
issuance of the FLD Fan because this applies whether properties would be subjected to distraint and levy.
the taxpayer is delinquent or not. (CIR vs. Isabela Cultural Corp., G.R. No. 135210, July
• Taxpayer or person having possession or control is 11, 2001)
prohibited from disposing of the properties.
• Applies whether the taxpayer is delinquent or not Sale of Property Distrained
under the following instances: • Notification of the sale in at least 2 public places in the
➢ Retiring from business; municipality or city where the distraint is made.
➢ Intending to leave the Philippines; • Sale after at least 20 days after notice to the owner or
➢ Intending to conceal his properties; and possessor of the property.
➢ Intending to obstruct collection proceedings
• When you say constructive distraint meaning the Q: What is the purpose of the 20-day period?
property is not taken or seized by the BIR but just • Because if the taxpayer wants to exercise his right of
given a warrant or a notice that your personal preemption, wherein pursuant to that right, the
properties are placed in custodia legis, so you cannot taxpayer can prevent the conduct of the public auction
sell it or do anything about it. or sale of the properties and the taxpayer will instead
undertake to pay the entire tax liabilities.
Procedures in Distraint and Garnishment
a. Service of warrant of distraint or garnishment • Residual amount from the BIR's entire claim, including
Signed by the director or the RDO expenses, shall be returned to the owner.
b. Posting of notice of sale Redemption by the Owner

It must be posted in two conspicuous public places in Redemption subject to the following conditions:
the city or municipal hall where the distraint is made, • Period to Redeem: within one year from the date
specifying the date and place where the public auction of registration of the certificate of sale
will be held • Redemption Price: total claim of BIR plus 15% on
purchase price from the date of purchase to the date
c. Sale at public auction to the highest bidder of redemption
Where the property will be sold and given to the
highest bidder who is also willing to pay the total tax Compromise and Abatement
liabilities including the increments Your last option if you do not want to reach the point that
your real property will be seized but you don’t have enough
d. Disposition of the proceeds of sale money to pay the total tax liability:
In case there is excess in the proceeds, it will be
returned to the taxpayer COMPROMISE
In case the proceeds are not enough, and if there A contract whereby the parties, by making concessions,
are still properties to be distrained, then you can avoid litigation or put an end to one already commenced
still distrain other properties or properties which (Article 2028, Civil Code of the Philippines)
can be levied, then levy those properties to satisfy the
remaining tax liability Cases that can be compromised
(RR 30 02 as amended by RR 08 04 and RR 09 13)
TN: There will be a notice of garnishment, essentially the 1. Delinquent accounts;
taxpayer will still be notified. There is already FLD FAN but did not yet pay
2. Cases under administrative protest after issuance of
Levy of Real Property the FAN to the taxpayer which are still pending;
An act of seizure of real property of the taxpayer in 3. Civil tax cases being disputed before the courts;
order to enforce the payment of taxes. 4. Collection cases filed in courts;
5. Criminal violations, except:
How: By serving upon the taxpayer and the Register of • Those already filed in court; or
Deeds a written notice of levy. And then there will be an • Those involving criminal tax fraud
annotation of the claim of the BIR in the tax declaration or
in the memorandum of encumbrances in the certificate of TN: Not all criminal violations are fraudulent. Violations in
title. the NIRC is considered a criminal violation, but if you don’t
want to be criminally prosecuted, you just pay the
When: After expiration of the time required to pay the tax. compromise penalty. It does not necessarily mean evasion
already.
Handling warrants of distraint and/or levy (RMO 39
07 as amended by RMO 41 07) Exceptions
Scope: 1. Withholding tax cases, unless the applicant taxpayer
a. Disputed assessments finally decided by the invokes provisions of law that cast doubt on the
Commissioner or Regional Director taxpayer's obligation to withhold;
b. Assessments upheld by the CTA in Division/En Banc You cannot enter into compromise here due to financial
whether or not appealed. incapacity because you were only withholding it
and you were entrusted by the government to
If you want to prevent the implementation of a remit this 100% and not use it for your business.
warrant as a rule: 2. Criminal tax fraud cases confirmed as such by the CIR
a. Appeal to the CTA or his duly authorized representative;
b. File an ancillary action for injunction before the CTA There should already be a factual finding of fraud and
c. The CTA will issue the injunction if to the opinion of reflected in the FLD FAN
the CTA it will prejudice the taxpayer or the 3. Criminal violations already filed in court;
government or there is a posting of a bond which is Example of criminal violations: Failure to obey
equivalent to the double of the amount of the liability summons or Failure to obey subpoena duces tecum
4. Delinquent accounts with duly approved schedule of *In the case of an individual taxpayer, no other leviable
installment payments; properties other than his family home.
If you already asked a favor for installments, you can 4. The taxpayer is:
no longer ask another favor for compromise a. Compensation income earner
5. Final reports of reinvestigation or reconsideration have b. No other source of income
been issued; taxpayer agreed signed the agreement c. Monthly income does not exceed P10,500, or if
form for the reduced assessment; married, combined income does not exceed
6. Cases which become final and executory after final P21,000;
judgment of a court, where compromise is requested d. No other leviable or distrainable assets, other than
on the ground of doubtful validity of the assessment; his family home; or
7. Estate tax cases where compromise is requested on the 5. The taxpayer has been declared by any competent
ground of financial incapacity of the taxpayer. tribunal/ authority/ body/ government agency as
If you already applied for compromise on the bankrupt or insolvent.
ground of doubtful validity, you can’t ask for
another compromise on the ground of financial Exceptions (where you cannot ask for compromise
incapacity. on the ground of financial incapacity):
Taxpayer has:
Grounds for compromise a. TCC (tax credit cert) or pending claim for refund or
a. DOUBTFUL VALIDITY- There is reasonable doubt as credit;
to the validity of the claim against the taxpayer; b. Existing or prospective agreement with any party that
could result to an increase in the equity at a definite
When is there doubtful validity of assessment? future time.
(RR No. 30 02, as amended by RR No. 08 04)
1. Assessment is one resulting from a “jeopardy Prescribed minimum percentages of compromise
assessment”; settlement
2. The assessment seems to be arbitrary in nature; 1. For cases of financial incapacity
Usually this happens if the assessment is issued a. Individual – 10%
based on the mere suspicion of the BIR and b. Where the taxpayer is under any of the following
unfortunately it became final conditions:
3. Failure to file an administrative protest for alleged • Zero/Negative Net worth – 10%
failure to receive notice of assessment AND there is • Dissolved corporations – 20%
reason to believe that the assessment is lacking in • Non-operating companies for a period of:
legal and/or factual basis; ➢ 3 years or more as of date of application
4. Failure to file a request for reinvestigation/ – 10%
reconsideration within 30 days from FAN AND there is ➢ Less than 3 years – 20%
reason to believe that the assessment is lacking in c. Impairment in original capital by at least 50% -
legal and/or factual basis; 40%
5. Failure to appeal to the CTA within 30 days from d. Declared insolvent or bankrupt, unless classified
receipt of final decision AND there is reason to believe as any of the above - 20%
that the assessment is lacking in legal and/or factual 2. For doubtful validity of assessment - 40% of basic tax
basis; assessed (surcharges, penalties, and interests not
6. Assessment failed to comply with the formalities included)
prescribed under the Tax Code TN: Lower amount subject to approval by the NEB.
7. Assessments made based on the "Best Evidence
Obtainable Rule" AND there is reason to believe that Compromise vs. Compromise Penalty
the same can be disputed by sufficient and competent
evidence;
8. Validity or authenticity of taxpayer's execution of
Waiver of the Statute of Limitations is at issue and
there is strong reason to believe and evidence to
prove that it is not authentic.
9. The assessment involves an issue where a court made
an adverse decision against the Bureau, but for which
the Supreme Court has not decided upon with finality.
Case of Mommy D. where BIR lost in the CTA in
division, but BIR can still appeal to the En banc and to
SC but instead of wasting money to litigate up to the
SC and wait for the final resolution, what they did is Q: What is the basis of compromise penalty if there
enter into a compromise due to doubtful validity. is no record?
• If no record, usually the P1000. But take note, if
b. FINANCIAL INCAPACITY- The financial position of failure to file, that is per filing basis, so if monthly, per
the taxpayer demonstrates a clear inability to pay the month.
assessed tax.
Taxpayers availing compromise based on financial Q: Can there be no assessment and then just pay
incapacity must execute waiver of right to secrecy of compromise penalty?
bank deposit • Yes. That usually happens if taxpayer asks for
clearance or monitoring from the BIR.
Examples:
1. Corporation ceased operation or is already dissolved ABATEMENT
2. Impairment in the original capital by at least 50% Government can only abate the surcharges, compromise
based on latest Balance Sheet submitted to the BIR. penalty, and interest. As to the basic tax assessed, TP
Conditions: still has to pay.
➢ The amounts payable or due to stockholders, other
than business related transactions, are considered What items can be abated?
as part of capital and not liability; and 1. Surcharges
➢ The taxpayer has no sufficient liquid asset to 2. Compromise penalties
satisfy the tax liability 3. Interest
3. The taxpayer is suffering from a net worth deficit (total
liabilities is greater than total assets) based on the Legal basis
latest audited FS. Section 204. Authority of the Commissioner to
Compromise, Abate and Refund or Credit Taxes. The
Commissioner may
"(b) Abate or cancel a tax liability, when:
1. The tax or any portion thereof appears to be
unjustly or excessively assessed; or
2. The administration and collection costs involved
do not justify the collection of the amount due."
Exceptions in the decision of the duly authorized representative
Abatement shall not be available in the following cases: shall be entertained [denial by authorized rep]
1. Disputed assessments pursuant to the provisions of
Sec. 228 of the Tax Code and its implementing rules B. If the administrative appeal is denied by the CIR
and regulations; and i. File a motion for reconsideration with the CIR or
2. Assessments, which are void from the beginning. ii. Appeal to the CTA within 30 days from date of
receipt of decision
Instances of abatement on ground that tax being
assessed is unjust or excessive (Revenue Regulation C. If the protest is denied, in whole or in part, by the
No. 13 01) CIR
1. Filing of the return/payment of the tax at the wrong i. Appeal to the CTA within 30 days from date of
venue receipt of decision
2. Taxpayer's mistake in payment of his tax is due to ii. File an MR with the CIR (Fishwealth Canning Corp v
erroneous written official advice of a revenue officer; CIR, GR No 179343 2010)
3. Failure to file/pay on time due to substantial losses
from prolonged labor dispute, force majeure , TAXPAYER’S SUIT
legitimate business reverses (covers only the Requisites:
surcharges and compromise penalties and not the 1. The tax money is being extracted and spent in violation
interest) of specific Constitutional protections against abuses of
4. Noncompliance due to a difficult interpretation of the legislative power
law; 2. that public money is being deflected to any improper
5. Circumstances beyond the control of the taxpayer (only purpose
surcharge and compromise penalty) 3. that the petitioner seeks to restrain the respondents
6. Other similar or synonymous cases. from wasting public funds through enforcement of
invalid or unconstitutional law
Abatement under meritorious circumstances
(Revenue Regulations No. 13 01) However, the Supreme Court has discretion whether or not
Late payment under meritorious circumstances (e.g., one to entertain a taxpayer’s suit and could brush aside the
day late filing due to bank cut off-off*, use of wrong tax lack of locus standi where the issues are of transcendental
form, surcharge erroneously charged, filing of amended importance in keeping with the court’s duty to determine
return under meritorious cases, etc.) that public officers have not abused the discretion given to
*RR 04 2012 (March 28, 2012) them
REMEDIES OF THE TAXPAYER: Prohibition Against Taxpayer’s suit is valid only when you question the
Undue Taking of Property is Constitutionally dispositions from general funds. If from donations, then it
Guaranteed. will not prosper.
1. ADMINISTRATIVE
A. Before Payment
i. Protest TAX REFUND OR TAX CREDIT (Sec. 229 vs. Sec. 112)
ii. Entering into a Compromise Grounds (for 229):
B. After Payment - filing of claim for refund or tax 1. tax is collected erroneously or illegally
credit within two years from date of payment 2. penalty is collected without authority
regardless of any supervening cause 3. sum collected is excessive
2. JUDICIAL Requisites (for 229):

A. Civil Action 1. claim must be in writing
i. Appeal to CTA - within 30 days from receipt 2. it must be filed with the Commissioner within two
of decision on the protest or from the lapse years (2) after the payment of the tax or penalty;
of 180 days due to inaction of the 3. Show proof of payment because counting begins from
Commissioner the date of payment. For 112, reckoning date shall be
ii. Action to contest forfeiture of chattel the close of the taxable quarter when sales were
iii. Action for damages made.
B. Criminal Action
i. Filing of criminal complaint against erring Starting date for counting the 2-year period
BIR official and employee and GR: from the date of payment, regardless of any
ii. Injunction when the CTA in its opinion, supervening cause that may arise after payment
considers that the collection by the BIR may
jeopardize taxpayer XPNs:
1. Corporate Income tax Where a corporation paid
Protest of Assessment quarterly income taxes in any of the first 3 quarters
1. File a request for reinvestigation or reconsideration during the taxable year but incurs a net loss during the
within 30 days from receipt of the assessment taxable year, the 2-year period for the filing of the
A. Request for Reinvestigation claim for refund or credit shall be counted from the date
A plea for reevaluation of an assessment on the of the filing of the annual corporate ITR
basis of newly discovered or additional evidence 2. Income tax paid in installments taxes are deemed paid,
that a taxpayer intends to present in the for purposes of determining the commencement of the
reinvestigation. It involves a question of fact or law 2-year period for filing a written claim for the refund or
or both credit therefore on the date the last installment was
B. Request for Reconsideration paid
A plea for reevaluation of the assessment on the
basis of existing records without need of additional TAX REFUNDS (SECTION 229)
evidence. Involves a question of fact or law or Grounds: Erroneous, Illegal, or Excessive assessment
both. (RR No 12- 85) and/or collection.
2. Within 60 days from filing of protest, all relevant So nay sayop sa collection, that’s why mag refund
supporting documents should have been submitted,
otherwise, the assessment shall become FINAL (cannot Procedure
be appealed). (Sec 228 NIRC) 1. File a written claim for refund with the CIR within
2 years from the date of payment of the
tax/penalty. The 2-year period covers BOTH
REMEDY OF THE TAXPAYER IF PROTEST IS DENIED administrative AND judicial action.
A. If the protest is denied in whole or in part, by the 2. The claim filed must state a categorical demand for
CIR or his duly authorized representative reimbursement
i. Appeal to the CTA within 30 days from date of 3. The suit of proceeding for recovery must be
receipt of the decision or commenced in court within two 2 years from date of
ii. File an administrative appeal to the CIR through payment of the tax or penalty regardless of any
request for reconsideration within 30 days from supervening event that will arise after payment. (Sec
date of receipt of the decision but only issues raised 229 NIRC)
TN: The CIR may grant a refund or credit even without a inclusive of administrative inclusive of administrative
written claim thereto if the taxpayer files a tax return and judicial remedies) only)
which on its face shows OVERPAYMENT. A return filed Period to decide is 180 Pre train: 120 days (if
showing an overpayment is itself considered a written days (if naay action = naay action within 120
claim for credit or refund. (Section 76 and 204 NIRC) within and outside; if days* + 30 days to appeal
inaction = 180 +30 days) adverse decision.
Period to decide for CIR: 180 days *TRAIN: 90 days
• With action within 180 days -> file appeal to CTA For 112: There is a change under TRAIN which is the
within 30 days ENHANCED VAT REFUND SYSTEM. It’s already 90 days.
• With action beyond 180 days -> file appeal to CTA And for 112, this already presupposes action. There is no
within 30 days (basta make sure na within 2 years inaction here. But in reality, if there is inaction by the
pa ni, kay 2 years covers both admin and officer, admin punishment towards the officer nalang.
judicial)
• No action within 180 days -> file appeal to CTA within PRESCRIPTION
30 days after end of 180 days Purpose
Prescriptive periods are designed to secure the taxpayers
Summary: against unreasonable investigation after the lapse of the
If duol na ang 2-year deadline: File sa CTA even if 1 period prescribed. They are also beneficial to the
day after ka ni file sa BIR government because tax officers will be obliged to act
If layo pa ang 2-year deadline: Wait for the 180 days promptly.
to lapse then you can appeal within the 30 day period from
the 180 days. GR:
1. when the tax law itself is silent on prescription, tax is
Example 1: imprescriptible
• Date of Payment: 11/23/2019 2. when no return is required, tax is imprescriptible
• Filed to BIR for refund: 11/3/2020 (180 days after ani 3. defense of prescription is waivable and
is May 3, 2021 + 30 days, kung mulapas ka sa 30 4. provisions on prescriptions, being remedial in nature
days after, basin di n ani i-grant ni CTA) should be liberally interpreted to carry out its intent
• End of prescriptive period: 11/23/2021
Prescriptive period for the ASSESSMENT of taxes
Example 2: GR: Three years after the date the return is due or
• Date of Payment: 11/23/2019 filed, whichever is later.
• Filed to BIR for refund: 11/20/2020
• Last day to file to CTA: 11/23/2021 XPNs:
• Kung muhuwat pa ka ug 180 days pa siya, mu-lapse 1. failure to file a return ten (10) years from the date of
na ang 2 years, so pwede naka mu-file sa CTA ani. the discovery of the omission to file the return
2. false or fraudulent return with intent to evade the tax
TAX REFUNDS (SECTION 112) ten (10) years from the date of the discovery of the
This is on input VAT refund pertaining to VAT zero falsity or fraud
rated sales. There is no error here. 3. agreement in writing to the extension (not reduction)
of the period to assess between the Commissioner and
Summary of Rules on Prescriptive Periods for the taxpayer before the expiration of the three-year
Claiming Refund or Credit of Input VAT (Section 112 period
NIRC) (Silicon Philippines v CIR, G R No 173241 4. waiver or renunciation of the original three (3) year
March 25, 2015) limitation, signed by the taxpayer
A. Two Year Prescriptive Period
1. It is only the administrative claim that must be Prescriptive period for the COLLECTION of taxes:
filed within the two-year prescriptive period NIRC does not provide for prescriptive period
(Aichi) (Section 203 vis à vis Section 222)
2. The proper reckoning date for the two-year But the BIR uses 5 years as the prescriptive period to
prescriptive period is the close of the taxable collect taxes.
quarter when the relevant sales were made. (San
Roque) Grounds for suspension of the running of
3. Not relevant now: The only other rule is the Atlas prescriptive period for assessment and collection
ruling, which applied only from 8 June 2007 to 12 1. when the Commissioner is prohibited from making the
September 2008 Atlas states that the two year assessment or beginning the distraint or levy or
prescriptive period for filing a claim for tax refund or proceeding in court, and for sixty (60) days thereafter
credit of unutilized input VAT payments should be 2. when the taxpayer requests for a reconsideration which
counted from the date of filing of the VAT return and is granted by the Commissioner
payment of the tax. (San Roque) 3. when the taxpayer cannot be located in the address
given by him in the return, unless he informs the
B. 120+30 Day Period (120 DAYS BEFORE TRAIN; Commissioner of any change in his address
NOW 90 DAYS) 4. when the warrant of distraint or levy is duly served,
1. The taxpayer can file an appeal in one of two ways: (1) and no property is located and
file the judicial claim within thirty days after the 5. when the taxpayer is out of the Philippines
Commissioner denies the claim within the 120-day
period, or (2) file the judicial claim within thirty days AMENDED RETURN - Allowed when:
from the expiration of the 120 day period if the 1. the amendment is made within 3 years from the date
Commissioner does not act within the 120 day period of filing the original return; and
2. The 30-day period always applies, whether there is a 2. no notice of audit or investigation of such return has,
denial or inaction on the part of the CIR in the meantime, been actually served upon the
3. As a general rule, the 30-day period to appeal is both taxpayer.
mandatory and jurisdictional (Aichi and San Roque)
4. Not relevant now: As an exception to the general Effect on amended return on prescription
rule, premature filing is allowed only if filed between 10 • The prescriptive period starts to run from the filing of
December 2003 and 5 October 2010 when BIR Ruling the original return, if the same is sufficiently complete
No DA 489 03 was still in force (San Roque) to enable the CIR to intelligently determine the proper
5. Late filing is absolutely prohibited, even during the time amount of tax to be assessed.
when BIR Ruling No DA 489 03 was in force (San • However, where the amended return is
Roque) substantially different from the original, the
right to assess is counted from the filing of the
SECTION 229 SECTION 112 amended return.
Illegal or erroneous tax VAT input refund for 0-
collection rated transaction. Prescriptive period for the filing of CRIMINAL
2 years (accrued from 2 years (accrued from the ACTION: five (5) years from the day of the commission of
date of payment and close of quarter when the violation, and if not known, from the discovery thereof
sales were made and
and the institution of judicial proceedings for its the determination by this Court must rest on all the
investigation and punishment. evidence introduced and its ultimate determination must
find support in credible evidence.
Grounds for interruption of the period
1. When proceedings are instituted against the guilty With respect to VAT, VAT can be imposed only when it is
persons shown that the taxpayer received an amount of money or
2. It begins to run again if the proceedings are dismissed its equivalent from a taxable sale of goods or services and
for reasons not constituting jeopardy not when there are under declared purchases.
3. offender is absent from the Philippines
An assessment must be based on actual fact. The
Retroactivity of BIR Rulings presumption of correctness of assessment, being a mere
GR: Prospective. presumption, cannot be made to rest on another
XPNs: (BAR 2011 – When are BIR rulings presumption (i.e., the under declared purchases would
retroactive?) automatically result in undeclared income or additional
1. Where the taxpayer deliberately misstates or omits taxable sales, which would in turn increase petitioner’s
material facts from his return or any document required income tax and VAT liabilities.
of him by the BIR CE Luzon Geothermal Power Company, Inc. v. CIR,
2. Where the facts subsequently gathered by the BIR are G.R. No. 197526. July 26, 2017
materially different from the facts on which the ruling
is based and Principle: Excess input tax or creditable input tax is
3. Where the taxpayer acted in bad faith not an excessively, erroneously, or illegally collected
tax because the taxpayer pays the proper amount of input
JURISPRUDENCE tax at the time it is collected.
Medicard Philippines, Inc. v. CIR, G.R. No. 222743.
April 5, 2017 That a VAT registered taxpayer incurs excess input tax
Ruling: BIR Lost P220M in VAT deficiency assessment for does not mean that it was wrongfully or erroneously paid.
failure to issue a LOA It simply means that the input tax is greater than the
output tax, entitling the taxpayer to carry over the
The no contact audit approach includes the process of excess input tax to the succeeding taxable quarters.
computerized matching of sales and purchases data
contained in the Schedules of Sales and Domestic If the excess input tax is derived from zero rated or
Purchases and Schedule of Importation submitted by VAT effectively zerorated transactions, the taxpayer may
taxpayers under the RELIEF System pursuant to RR No 7- either seek a refund of the excess or apply the excess
95 as amended by RR Nos 13-97, 7-99 and 8-2002. This against its other internal revenue tax.
may also include the matching of data from other
information or returns filed by the taxpayers with the BIR
such as Alphalist of Payees subject to Final or Creditable COURT OF TAX APPEALS
Withholding Taxes. Governing Law: RA No. 1125 or otherwise known as An
Act Creating the Court of Tax Appeals
Under this policy, even without conducting a detailed
examination of taxpayer's books and records, if the Rule 2, Section 1
computerized/manual matching of sales and The Court is composed of a presiding justice and 8
purchases/expenses appears to reveal associate justices appointed by the President of the
discrepancies, the same shall be communicated to Philippines. In appropriate cases, the court shall sit en
the concerned taxpayer through the issuance of LN. banc, or in 3 Divisions of 3 justices each, including the
The LN shall serve as a discrepancy notice to presiding justice, who shall be the Chairperson of the
taxpayer similar to a Notice for Informal Conference First Division and the 2 most Senior Associate Justices
to the concerned taxpayer. Thus, under the RELIEF shall be serve as Chairpersons of the Second Division
System, a revenue officer may begin an examination of the and Third Divisions, respectively.
taxpayer even prior to the issuance of an LN or even in the
absence of an LOA with the aid of a computerized/manual
matching of taxpayers' documents/records. Composition (9)
(a) 8 Associate Justices
The Court cannot convert the LN into the LOA (b) 1 Presiding Justice
required under the law even if the same was issued
by the CIR himself. CTA can sit either:
• First, a LOA addressed to a revenue officer is 1. En banc
specifically required under the NIRC before an 2. Divisions (3 divisions)
examination of a taxpayer may be had while an
LN is not found in the NIRC and is only for the Age requirement
purpose of notifying the taxpayer that a Maximum of 70 years old
discrepancy is found based on the BIR's RELIEF
System. Office of the CTA
• Second, a LOA is valid only for 30 days from date • Metro Manila
of issue while an LN has no such limitation.
• Third, a LOA gives the revenue officer only a • The CTA is called a specialized court since it involves
period of 120 days (but currently, internal tax cases however, it has the same level as with the
deadline nalang) from receipt of LOA to conduct CA.
his examination of the taxpayer whereas an LN • It has jurisdiction on both the civil and criminal aspect
does not contain such a limitation. of tax cases.
• Both en banc and in division can take cases on appeal.
Simply put, LN is entirely different and serves a different
purpose than a LOA. Due process demands, as recognized General Powers of the CTA
under RMO No 32-2005 that after an LN has serve its 1. Power to require production of papers or documents in
purpose, the revenue officer should have properly the issuance of subpoena duces tecum
secured a LOA before proceeding with the further • Similar to what the CIR can do
examination and assessment of the petitioner. 2. Power to punish contempt in court
Unfortunately, this was not done in this case. • Since it is a judicial court
3. Power to summon witnesses by subpoena
Agrinurture , Inc. v. CIR, CTA Case 8345, May 29, 4. Power to suspend the collection of tax pending appeal
2013 through the application of an injunction
Principle: “Naked Assessment” NOT allowed 5. Power to issue order authorizing distraint of personal
property and levy of real property
The prima facie correctness of a tax assessment does not 6. Power to administer oaths of office
apply upon proof that an assessment is utterly without 7. Power to promulgate rules and regulations in the
foundation i.e., it is arbitrary and capricious Where the BIR conduct of its business
has come out with a “naked assessment,” the • That is why we have the RR CTA
determination of the tax is without rational basis hence, 8. Power to receive evidence
9. Power to assess damages against appellants if appeal by them in the exercise of their original
to CTA is found to be dilatory or frivolous jurisdiction.
10. Power to render decisions on Petitions for Review or
cases before it (4) Decisions of the Commissioner of Customs in
cases involving liability for customs duties, fees or
CTA DIVISION other money charges, seizure, detention or
3 Divisions with 3 Justices each release of property affected, fines, forfeitures of
(a) First division – headed by Presiding Justice other penalties in relation thereto, or other
(b) Second and Third divisions – headed by the most senior matters arising under the Customs Law or other
associate justice laws administered by the Bureau of Customs.
On Quorum and Voting (5) Decisions of the Secretary of Finance on customs

Section 4, Rule 2 cases elevated to him automatically for review
The Chairperson of the Division or, if absent, the most from decisions of the Commissioner of Customs
senior member shall preside over the sessions of the adverse to the Government under Section 2315 of
Court in Division. The attendance of at least 2 justices the Tariff and Customs Code; and
of the court shall be necessary to constitute a quorum
for its sessions in Divisions. (6) Decisions of the Secretary of Trade and Industry,
in the case of non-agricultural product,
The presence at the deliberation and the affirmative commodity or article, and the Secretary of
vote of at least 2 justices shall be required for the Agriculture, in the case of agricultural product,
pronouncement of a judgement or final resolution of commodity or article, involving dumping and
the Court Decision. countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and
TN: If there are only two justices present, the vote of one safeguard measures under Republic Act No. 8800,
is not enough. It has to be two. where either party may appeal the decision to
impose or not to impose said duties.
On Jurisdiction
Section 3, Rule 4 (b) Exclusive jurisdiction over cases involving
Cases within the jurisdiction of the Court in Divisions. – criminal offenses
The Court in Divisions shall exercise:
(1) Original jurisdiction over all criminal offenses
(a) Exclusive original or appellate jurisdiction to arising from violations of the National internal
review by appeal the following: Revenue Code or Tariff and Customs Code and
other laws administered by the Bureau of Internal
(1) Decisions of the Commissioner of Internal Revenue or the Bureau of Customs, where the
Revenue in cases involving disputed assessments, principal amount of taxes and fees, exclusive of
refunds of internal revenue taxes, fees or other charges and penalties, claimed is one million
charges, penalties in relation thereto, or other pesos or more; and
matters arising under the National Internal
Revenue Code or other laws administered by the (2) Appellate jurisdiction over appeals from the
Bureau of Internal Revenue. judgments, resolutions or orders of the Regional
Trial Courts in their original jurisdiction in criminal
(2) Inaction by the Commissioner of Internal Revenue offenses arising from violations of the National
in cases involving disputed assessments, Internal Revenue Code or Tariff and Customs
refunds of internal revenue taxes, fees or other Code and other laws administered by the Bureau
charges, penalties in relation thereto, or other of Internal Revenue or Bureau of Customs, where
matters arising under the NIRC or other laws the principal amount of taxes and fees, exclusive
administered by the BIR, where the NIRC or of charges and penalties, claimed is less than one
other applicable law provides a specific period for million pesos or where there is no specified
action: amount claimed;
Provided, that in case of disputed assessments, (c) Exclusive jurisdiction over tax collections
the inaction of the CIR within the 180-day period cases
under Section 228 of the NIRC shall be deemed a
denial for purposes of allowing the taxpayer to (1) Original jurisdiction in tax collection cases
appeal his case to the Court and does not involving final and executory assessments for
necessarily constitute a formal decision of the taxes, fees, charges and penalties, where the
Commissioner of Internal Revenue on the tax principal amount of taxes and fees, exclusive of
case; charges and penalties, claimed is one million
pesos or more; and
Provided, further, that should the taxpayer opt to
await the final decision of the CIR on the disputed (2) Appellate jurisdiction over appeals from the
assessments beyond the one hundred eighty day- judgments, resolutions or orders of the Regional
period abovementioned, the taxpayer may appeal Trial Courts in tax collection cases originally
such final decision to the Court under Section decided by them within their respective territorial
3(a), Rule 8 of these Rules; and jurisdiction.
Provided, still further, that in the case of claims Important: Before, the Rules of Court were not
for refund of taxes erroneously or illegally strictly followed in the CTA. But with this Revised
collected, the taxpayer must file a petition for Rules of the CTA, it expressly provides that the
review with the Court prior to the expiration of the ROC apply suppletorily and that a petition for
2-year period under Section 229 of the NIRC. review will have to be filed, the same procedures
in Rules 42, 43 and 44 under the ROC will have to
KMA: As far as the CTA is concerned, the be followed.
lapse of the CIR’s given period to decide is
deemed a denial of the protest. So, there is no A. Exclusive Original Jurisdiction (CTA In Division)
problem even if the CIR would eventually render 1. Criminal offenses arising from violations of the
a decision beyond the period because the CTA NIRC or CMTA and other laws administered by the BIR
already acquired jurisdiction. or the BOC, where the principal amount of taxes
and fees, exclusive of charges and penalties,
Important: This section affirms the rule that the claimed is one million pesos or more.
2-year period of prescription includes both
administrative and judicial action. To summarize
• At least P1,000,000 – CTA in division has
(3) Decisions, resolutions or orders of the Regional exclusive original jurisdiction
Trial Courts in local tax cases decided or resolved • Less than P1,000,000 or no amount specified –
Regular courts have the exclusive original jurisdiction;
either MTC or RTC depending on jurisdictional CTA EN BANC
amount 9 Justices
a. 1 Presiding Justice
2. Tax collection cases involving final and executory b. Associate Justices
assessments for taxes, fees, charges and
penalties, where the principal amount of taxes and On Quorum and Voting
fees, exclusive of charges and penalties, claimed Section 3, Rule 2
is one million pesos or more
The presiding justice or, if absent, the most senior
B. Exclusive Appellate Jurisdiction (CTA In Division) justice in attendance shall preside over the sessions of
1. Decisions, resolutions or orders from the RTC in the the Court en banc. The attendance of 5 justices of the
exercise of its original jurisdiction which covers: Court shall constitute a quorum for its session en banc.
a. Local tax cases
b. Tax collection cases (civil case) where the The presence at the deliberation and the affirmative
principal amount of taxes and penalties claimed vote of 5 members of the Court en banc shall be
exclusive of the increments is less than one necessary to reverse a decision of a decision of a
million pesos; Division but only a simple majority of the justices
c. Criminal offenses (criminal case) for violations present to promulgate a resolution or decision in all
of the NIRC or the CMTA and other laws cases.
administered by the BIR or BOC where principal
amount of taxes and penalties claimed exclusive of Where the necessary majority vote cannot be had, the
the increments is less than one million pesos or petition shall be dismissed; in appealed cases, the
where there is no specified amount claimed; judgement or order appealed from shall stand affirmed;
and on all incidental matters, the petition or motion
The “no specified amount” is only applicable to criminal shall be denied.
offenses because in tax collection cases, the amount of
taxes to be collected must be certain for the case to Reversal and promulgation of rulings
pursue a. Reversal or modification of CTA en banc decision
– presence and affirmative vote of the absolute
To illustrate: majority (whether absent or present)
To be included under these cases, the action must b. Decision in all cases (ordinary rulings) – simply
first be initiated with the RTC. majority of the justices present
The jurisdictional amounts for RTC is as follows: Example: There are 9 justices, 4 absent, 5 present, so
• 300,000 outside Metro Manila there is a quorum.
• 400,000 inside Metro Manila
KMA: If issue involves a reversal or modification of
2. Decisions related to the imposition of duties and previous en banc decision, vote of absolute majority
taxes of the following administrative bodies: or 5 justices is needed. In this case, all the signatures
a. CIR (Decisions and Inactions on disputed of the 5 justices present are required. If issue is not
assessment, refunds) reversal, only simple majority is required. In this
b. Commissioner of Customs (Decisions) case, only 3 signatures of the 5 present is required.
c. Secretary of Finance
d. Secretary of Trade and Industry Important: If absolute or simple majority vote is not
e. Secretary of Agriculture achieved, petition is dismissed. In appealed cases, the
court order appealed stands affirmed.
Why is the Secretary of Finance included?
• In the CMTA, there is the automatic review clause. The On Jurisdiction
purpose of the automatic review clause is to prevent Exclusive Original Jurisdiction - The action was first
corruption wherein the Commissioner of Customs will initiated with the CTA en banc or filed originally with the
render a decision favoring the importer which is why CTA en banc
if the amount involves at least P1,000,000 and
decision is favorable to the importer, then the same Section 2, Rule 2
will be automatically reviewed by the SOF.
Exercise of powers and functions – The Court shall
Why are the Secretaries of Agriculture and Trade exercise its adjudicative powers, functions and duties
and Industry included? en banc or in Divisions. The Court shall sit en banc in
• A countervailing action (more on the customs side) the exercise of its administrative, ceremonial and non-
may be initiated by the Sec. of Agriculture or the Sec. adjudicative functions.
of Trade and Industry under RA No. 8571 Two duties
are involved here – countervailing and dumping duty. These functions mean that the CTA en banc has nothing to
do with resolutions of a particular case.
Dumping Duty
• Tariff that a domestic government imposes on Exclusive Appellate Jurisdiction - The action was first
foreign imports that it believes are priced below initiated with an administrative body and there had already
fair market value and so as not to make the been a decision on the lower level and thereafter the same
Philippines as a dumpsite for something that is from was petitioner for review with the CTA.
foreign countries (e.g., ukay-ukay)
This means that in the cases below, the taxpayer is
Countervailing Duty not allowed to appeal to the CA or the
• Refers to a special duty levied for the purpose of Sandiganbayan but exclusively to the CTA.
offsetting any kind or form of specific subsidy
bestowed directly or indirectly upon the exportation or Section 2, Rule 4
manufacture of any product. The countervailing duty
shall be in addition to any ordinary duties, taxes and Cases within the jurisdiction of the Court en banc. – The
charges imposed by law on such imported product. Court en banc shall exercise exclusive appellate
jurisdiction to review by appeal the following:
Section 7 of RA No. 1125 is explicit that, except for
local taxes, appeals from the decisions of quasi- (a) Decisions or resolutions on motions for
judicial agencies (Commissioner of Internal Revenue, reconsideration or new trial of the Court in Divisions in
Commissioner of Customs, Secretary of Finance, Central the exercise of its exclusive appellate jurisdiction over:
Board of Assessment Appeals, Secretary of Trade and (1) Cases arising from administrative agencies –
Industry) on tax-related problems must be brought Bureau of Internal Revenue, Bureau of
exclusively to the Court of Tax Appeals. (2018 Warrior Customs, Department of Finance, Department
Notes) of Trade and Industry, Department of
Agriculture;
(2) Local tax cases decided by the Regional Trial 3. Decisions of the CBAA in the exercise of its
Courts in the exercise of their original appellate jurisdiction
jurisdiction; and
(3) Tax collection cases decided by the Regional In relation to real properties – before RPT can be
Trial Courts in the exercise of their original computed, it is the Assessor’s Office that will determine
jurisdiction involving final and executory and classify the real property. Based on such
assessments for taxes, fees, charges and classification, there will be an assessment level for the
penalties, where the principal amount of taxes purposes of computing the RPT.
and penalties claimed is less than one million
pesos; If the taxpayer is going to question the assessment, he
shall go to the Local Board of Assessment Appeals
(b) Decisions, resolutions or orders of the Regional Trial (LBAA) and then CBAA and not the MTC or RTC since
Courts in local tax cases decided or resolved by them in the latter have no expertise on such. If taxpayer still
the exercise of their appellate jurisdiction; loses with the CBAA, go to CTA en banc.
(c) Decisions, resolutions or orders of the Regional Trial Note: There is a maximum of 2 appeals before
Courts in tax collection cases decided or resolved by going to the SC.
them in the exercise of their appellate jurisdiction;
Q: What is the difference between tax a collection
(d) Decisions, resolutions or orders on motions for case and a criminal case?
reconsideration or new trial of the Court in Division in • The tax collection case is a civil case as opposed
the exercise of its exclusive original jurisdiction over tax to a criminal case. Further, the criminal case will have
collection cases; to be coursed through the DOJ and the DOJ will be the
one to file the criminal case against the taxpayer.
(e) Decisions of the Central Board of Assessment • If you look at it, the exclusive appellate
Appeals (CBAA) in the exercise of its appellate jurisdiction of the CTA en banc comes from
jurisdiction over cases involving the assessment and either the CTA in division, the RTC (appellate),
taxation of real property originally decided by the or CBAA.
provincial or city board of assessment appeals;
REGULAR COURTS
(f) Decisions, resolutions or orders on motions for 1. Local Tax Cases
reconsideration or new trial of the Court in Division in • Note that even if the amount exceeds
the exercise of its exclusive original jurisdiction over P1,000,000, the case can still be filed before the
cases involving criminal offenses arising from violations RTC because the law provides that the only instance
of the National Internal Revenue Code or the Tariff and where the local tax case can be initiated before
Customs Code and other laws administered by the the CTA in division is when it has something to
Bureau of Internal Revenue or Bureau of Customs; do with the NIRC and the CMTA, not the LGC
2. Tax collection cases, basic principal tax of less
(g) Decisions, resolutions or orders on motions for than P1,000,000
reconsideration or new trial of the Court in Division in 3. Criminal offenses under the NIRC and CMTA,
the exercise of its exclusive appellate jurisdiction over basic tax assessed of less than P1,000,000
criminal offenses mentioned in the preceding
subparagraph; and BASIC APPEAL PROCESS
CTA in division in the exercise of its exclusive
(h) Decisions, resolutions or orders of the Regional trial appellate jurisdiction
Courts in the exercise of their appellate jurisdiction over
criminal offenses mentioned in subparagraph.
To summarize:
The exclusive appellate jurisdiction of the CTA en
banc includes:
1. Decisions or resolutions on motions for
reconsideration or new trial of the CTA in
Divisions in the exercise of its exclusive appellate
jurisdiction
2. Decisions, resolutions or orders of the RTC in the

exercise of its appellate jurisdiction which covers:
a. Local tax cases
Involves local business taxes which are being
collected by the Local Treasurer’s Office, not the
BIR.
If the local tax case is P2,000,000, taxpayer should

go to the RTC in its original jurisdiction.
Note: Appeal shall be made by filing a petition for review
b. Tax collection cases (civil case) where the under a procedure analogous to that provided for
principal amount of taxes and penalties claimed under Rule 42 of the 1997 Rules of Civil Procedure
exclusive of the increments is less than one
million pesos; CTA en banc in the exercise of its exclusive appellate
jurisdiction
c. Criminal offenses (criminal case) for
violations of the NIRC or the CMTA and other
laws administered by the BIR or BOC where
principal amount of taxes and penalties claimed
exclusive of the increments is less than one
million pesos
To illustrate:
To be included under these cases, the action
must have first been initiated with the MTC.
The jurisdictional amounts for the MTC is as
follows:
< 300,000 outside Metro Manila
< 400,000 inside Metro Manila
MTC > if lost >RTC > if lost >CTA en banc
Criminal violations the property is situated in the Philippines at the same
Must be violation of the NIRC or the Tariff or Customs Code time such act is done or transaction had;
b. By using the web based Electronic Documentary Stamp
From the RTC in the exercise of its original Tax (eDST) System in the payment/remittance of
jurisdiction its/his/her DST liabilities and the affixture of the
prescribed documentary stamp on taxable documents;
and
c. By Revenue Collection Agent, for remittance of sold
loose documentary stamps.
Philacor Credit Corporation vs. Commissioner of

Internal Revenue, G.R. No. 169899. February 6,
2013
Under Section 173 of the National Internal Revenue Code,
the persons primarily liable for the payment of DST are the
persons (1) making (2) signing (3) issuing (4)
accepting or (5) transferring the taxable documents,
instruments or papers. Should these parties be
exempted from paying tax, the other party who is not
exempt would then be liable.
In this case, petitioner Philacor is engaged in the business

of retail financing. Through retail financing, a prospective
buyer of home appliance may purchase an appliance on
installment by executing a unilateral promissory note in
favor of the appliance dealer, and the same promissory
note is assigned by the appliance dealer to Philacor.
Thus, under this arrangement, Philacor did not make, sign,

From the RTC in the exercise of its appellate issue, accept or transfer the promissory notes. It is the
jurisdiction buyer of the appliances who made, signed and issued the
documents subject to tax while it is the appliance dealer
who transferred these documents to Philacor which
likewise indisputably received or “accepted” them.
Acceptance, however, is an act that is not even

applicable to promissory notes, but only to bills of
exchange. Under the Negotiable Instruments Law, the act
of acceptance refers solely to bills of exchange.
In a ruling adopted by the Bureau of Internal Revenue as

early as 1995, “acceptance” has been defined as
having reference to incoming foreign bills of
exchange which are accepted in the Philippines by
the drawees thereof, and not as referring to the
common usage of the word as in receiving. Thus, a
DOCUMENTARY STAMP TAX (DST) party to a taxable transaction who “accepts” any
Purpose documents or instruments in the plain and ordinary
• The untaxed document will not be recorded, nor meaning does not become primarily liable for the tax
will it or any copy thereof or any record of
transfer of the same be admitted or used in Where DST Return is filed?
evidence in court until the requisite stamp or stamps • Authorized Agent Bank (AAB) within the territorial
have been affixed thereto and cancelled jurisdiction of the RDO which has jurisdiction over the
• No notary public or other officer authorized to residence or principal place of business of the
administer oaths will add his jurat or acknowledgment taxpayer or where the property is located in case of
to any document subject to DST unless the proper sale of real property or where the Collection Agent is
documentary stamps are affixed thereto and cancelled assigned.
• TN: Only considered a public document when • In places where there is no Authorized Agent Bank:
DST has been paid. ➢ Revenue Collection Officer or
➢ Duly authorized City or Municipal Treasurer
Nature
• In general, DST is levied on the exercise by DST on various instruments
persons of certain privileges conferred by law for Before TRAIN
the creation, revision, or termination of specific legal Instrument Tax Rate Tax Rate
relationships through the execution of specific Original issuance P1.00 on each P2.00 on each
instruments. of shares of stock P200.00 of the P 200.00 of
• Examples of such privileges, the exercise of which, as par value the
effected through the issuance of particular par value
documents, are subject to the payment of DST are Sales, P0.75 on each P1.50 on each
leases of lands, mortgages, pledges and trusts, and agreements to P200.00 of the P200.00 of the
conveyances of real property. (Philippine Home sell, memoranda par value par value
Assurance Corporation vs. Court of Appeals) of sales,
• DST applies where you are creating or ending a deliveries or
legal relationship. (ex. Deed of sale, contract of transfer of shares
lease) or certificates of
stock
Who are required to file Documentary Stamp Tax Certificates of P0.50 on each P1.00 on each
Declaration Return? profits or interest P200.00 of the P200.00 of the
a. In case of constructive affixture of documentary in property or face value face value
stamps, by the persons making, signing, issuing, accumulations
accepting or transferring documents, instruments, loan Bank checks, P1.50 each P3.00
agreements and papers, acceptances, assignments, drafts, certificates
sales and conveyances of the obligation, right or of deposit
property incident thereto wherever the document is not bearing
made, signed, issued, accepted or transferred when interest, and
the obligation or right arises from Philippine sources or other instruments
10 | P a g e LOU|NIKA|MARLA|LOSSIE|ELMAR|KARA
All debt P1.00 on each P1.50 on each additional not exceed
instruments P200.00 of the P200.00 of the P10.00 on each P5,000 and
issue price issue price P5,000 in additional
All bills of P0.30 on each P0.60 on each excess of first P20.00 on
exchange or P200.00 of the P200.00 of the P5,000 each P5,000 in
drafts face value face value excess of first
Upon acceptance P0.30 on each P0.60 on each P5,000
of bills of P200.00 of the P200.00 of the Deeds of sale, P15.00 if Same rate
exchange and face value face value conveyances and amount “Transfers
others donation of received does exempt from
Foreign bills of P0.30 on each P0.60 on each real property not exceed donor’s tax
exchange and P200.00 of the P200.00 of the P1,000 and under Section
letters of face value face value additional 101(a)(b) of
credit P15.00 on each this Code shall
Life insurance P0.50 on each P1,000 in be exempt
policies P200.00 of the excess of first from this tax”
premium P1,000
collected Charter parties If tonnage does If tonnage
If the amount N/A Exempt and similar not exceed does not
of insurance does instruments 1,000 tons and exceed
not exceed duration of 1,000 tons
P100,000 charter does not and duration
If the amount N/A P20.00 exceed 6 of charter
exceeds P100,000 months P500.00 does not
but does not On each month exceed 6
exceed in excess of months
P300,000 first 6 months P1,000.00
If the amount N/A P50.00 additional tax
exceeds P300,000 of P50.00 On each
but does not month in
exceed If tonnage excess of
P500,000 exceeds 1,000 first 6 months
If the amount N/A P100.00 tons and does additional
exceeds P500,000 not exceed tax of P100.00
but does not 10,000 tons,
exceed and duration of If tonnage
P750,000 charter does not exceeds 1,000
If the amount N/A P150.00 exceed 6 tons and does
exceeds P750,000 months not exceed
but does not P1,000.00 10,000 tons,
exceed On each month and duration
P1,000,000 in excess of of charter
If the amount N/A P200.00 first 6 months does not
exceeds additional tax exceed 6
P 1,000,000 of P100.00 months
P2,000.00
Policies of P0.50 on each P1.00 on each
If tonnage
annuities P200.00 of the P200.00 of the
exceeds 10,000 On each
premium premium
tons and month in
payment payment
duration of excess of
Policies of pre- P0.20 on each P0.40 on each
charter first 6 months
need plans P200.00 of the P200.00 of the
does not exceed additional
premium premium
6 months tax of P200.00
collected collected
P1,500.00
Certificates P15.00 each P30.00 each
If tonnage
Warehouse P15.00 each P30.00 each On each month exceeds
receipts in excess of 10,000 tons
Jai alai, horse P0.10 each; P0.20 each; If first 6 months and duration
race tickets, lotto If cost exceeds cost exceeds additional tax of charter
or other P1.00, an P1.00, an of P150.00 does not
authorized additional P0.10 additional exceed 6
numbers games on every P1.00 P0.20 on months
collected every P1.00 P3,000.00
collected
Bills of lading or P1.00 each if P2.00 each if On each
receipts value exceeds value exceeds month in
P100 but does P100 but does excess of
not exceed not exceed first 6 months
P1,000 ; P1,000; additional
P10.00 if value P20.00 if tax of P300.00
exceeds P1,000 value exceeds If sale/conveyance of real property, please take note of
P1,000 asset or share swap. This is exempt from VAT,
Proxies P15.00 each P30.00 each income tax and DST. But before applying this, get a
Powers of P5.00 each P30.00 Each ruling or certification from BIR
Attorney
Leases and other P3.00 on first P6.00 on first “Debt Instrument” shall mean instruments representing
hiring agreements P2,000 and P2,000 and borrowing and lending transaction including but not limited
additional P1.00 additional to:
for every P2.00 for • Debentures, certificates of indebtedness, due bills,
P 1,000 in every P1,000 bonds
excess of first in excess of • Loan agreements, including those signed abroad
P2,000 the first wherein the object of the contract is located or used
P2,000 in the Philippines, instruments and securities issued
Mortgages, P20.00 if P40.00 if by the government or any of its instrumentalities
pledges and amount secured amount • Deposit substitute, debt instruments, certificates or
deeds of trust does not exceed secured does other evidences of deposits that are drawing
P5,000 and instrument significantly higher than the regular
savings deposit taking into consideration the size of obligation or indebtedness, if there is no change in the
the deposit and the risks involved maturity date or remaining period of coverage from
• Certificates or other evidences of deposits that are that of the original instrument
drawing interest and having a specific maturity date, • Fixed income and other securities traded in the
• promissory notes, whether negotiable or non- secondary market or through an exchange
negotiable, except bank notes issued for circulation • Derivatives Provided, That for purposes of this
exemption, repurchase agreements and reverse
M.J. Lhuillier Pawnshop v. CIR, G.R. No. 166786, repurchase agreements shall be treated similarly as
May 3, 2006 derivatives
The onus of proving that pawnshops are not subject • Interbranch or interdepartmental advances within the
to DST is thus shifted to petitioner. In establishing tax same legal entity
exemptions, it should be borne in mind that taxation is the • All forebearances arising from sales or service contracts
rule, exemption is the exception. Accordingly, statutes including credit card and trade receivables Provided,
granting tax exemptions must be construed in That the exemption be limited to those executed by the
strictissimi juris against the taxpayer and liberally in seller or service provider itself
favor of the taxing authority. One who claims an • Bank deposit accounts without a fixed term or maturity
exemption from tax payments rests the burden of • All contracts, deeds, documents and transactions
justifying the exemption by words too plain to be mistaken related to the conduct of business of the Bangko
and too categorical to be misinterpreted. Sentral ng Pilipinas
• Transfer of property pursuant to Section 40 (C) (2) of
In the instant case, there is no law specifically and the National Internal Revenue Code of 1997 as
expressly exempting pledges entered into by amended
pawnshops from the payment of DST. Section 199 of • Interbank call loans with maturity of not more than
the NIRC enumerated certain documents which are seven (7) days to cover deficiency in reserves against
not subject to stamp tax, but a pawnshop ticket is deposit liabilities, including those between or among
not one of them. Hence, petitioners nebulous claim that banks and quasi banks
it is not subject to DST is without merit. It cannot be over
emphasized that tax exemption represents a loss of What is the Electronic Documentary Stamp Tax
revenue to the government and must, therefore, not rest (eDST) System? (sec. 5 (1), RR No. 7 2009)
on vague inference. Exemption from taxation is never • The eDST is a web based application created for
presumed. For tax exemption to be recognized, the taxpayers and the BIR that is capable of affixing a
grant must be clear and express it cannot be made secured documentary stamp on the taxable documents
to rest on doubtful implications as defined under the appropriate provisions under Title
VII of the National Internal Revenue Code of 1997 as
Exempt papers/documents from DST: amended, thru the use of a computer unit, any laser
• Policies of insurance or annuities made or granted by a printer with at least 1200 dpi resolution, and Internet
fraternal or beneficiary society, order, association or Explorer 7.0. It is also capable of providing a 3-layer
cooperative company, operated on the lodge system or watermark on stamps for added security.
local cooperation plan and organized and conducted
solely by the members thereof for the exclusive benefit Is the DST Law applicable on Electronic Documents?
of each member and not for profit (sec. 10, RR No. 13 2004)
• Certificates of oaths administered by any • Yes. The DST rates as imposed under the Code, as
government official in his official capacity or amended by R A 9243 shall be applicable on all
acknowledgement by any government official in documents not otherwise expressly exempted by
performance of his official duty the said law, notwithstanding the fact that they
• Written appearance in any court by any are in electronic form.
government official in his official capacity • As provided for by RA 8792 otherwise known as the
• Certificates of the administration of oaths to any person Electronic Commerce Act, electronic documents are
as to the authenticity of any paper required to be filed the functional equivalent of a written document
in court by any person or party thereto, whether the under existing laws, and the issuance thereof is
proceedings be civil or criminal therefore tantamount to the issuance of a written
• Papers and documents filed in court by or for the document, and therefore subject to DST.
national, provincial, city or municipal governments
• Affidavits of poor persons for the purpose of Is any document, transaction or arrangement
proving poverty entered into under Financial Lease subject to
• Statements and other compulsory information required Documentary Stamp Tax? (RMC No. 46 2014)
of persons or corporations by the rules and regulations • Yes. Financial lease is akin to a debt rather than
of the national, provincial, city or municipal a lease. A nature of an obligation than a lease of
government exclusively for statistical purposes and personal property. he mere act of extending credit is
which are wholly for the use of the Bureau or office in already a means of facilitating an obligation or
which they are filed, and not at the instance or for the advancing in behalf of the lessee certain property in lieu
use or benefit of the person filing them of cash in exchange for a definitive amortization to be
• Certified copies and other certificates placed upon paid to the lessor with profit margin included Section
documents instruments and papers for the national, 179 of the NIRC, as amended, covers all debt
provincial, city or municipal governments made at the instruments.
instance and for the sole use of some other branch of • Therefore, being a nature of an obligation, any
the national, provincial, city or municipal governments document, transaction or arrangement entered
• Certificates of the assessed value of lands not into under financial lease is subject to DST under
exceeding P 200 in value assessed, furnished by the such Section of the NIRC, as amended.
provincial, city or municipal Treasurer to applicants for
registration of title to land Q: When is the deadline to file and pay the DST?
• Borrowing and lending of securities executed under the • 10 days after the close of the month when the
Securities Borrowing and Lending Program of a taxable document was executed.
registered exchange, or in accordance with regulations • Ex. Execution of sale is November 29. Deadline is on or
prescribed by the appropriate regulatory authority before December 10. That’s why the usual practice is
• Loan agreements or promissory notes the aggregate of to sign it at the first day of the month so you will have
which does not exceed Two hundred fifty thousand a longer time to pay DST.
pesos (P250,000) or any such amount as may be
determined by the Secretary of Finance, executed by
an individual for his purchase on installment for his PERCENTAGE TAX
personal use or that of his family and not for business • Percentage Tax on Domestic Carriers and Keepers of
or resale, barter or hire of a house, lot, motor vehicle, Garages
appliance or furniture • Percentage Tax on International Carrier
• Sale barter or exchange of shares of stock listed and • Franchise Taxes
traded through the local stock exchange (RA 9648) • Tax on Overseas Communication
• Assignment or transfer of any mortgage, lease or policy • Tax on Banks and Non-bank Financial Intermediaries
of insurance, or the renewal or continuance of any Performing Quasi Banking Functions
agreement, contract, charter, or any evidence of • Tax on Life Insurance Premiums
• Tax on Agents of Foreign Insurance Companies originating from the (paid by the person
• Amusement Taxes Philippines (Section availing the
• Tax on Winnings 120) service to the
• Tax on Sale, Barter or Exchange of Shares of Stock (by telephone, person rendering
Listed and Traded Through the Local Stock Exchange telegraph, the service)
or Through Initial Public Offering telewriter exchange,
• Return and Payment of Percentage Tax wireless and other
✓ 3% percentage tax on persons exempt from VAT communication
whose gross annual sales/receipts does not exceed services)
P3M (previously P1,919,500)
✓ Stock transaction tax (STT) on listed shares 0.60 XPNs from Section
of 1% (previously 0.50 of 1%) 120:
1. Government
Percentage Tax Compliance Requirement 2. Diplomatic
Before (by regulations) TRAIN Services
Monthly filing Quarterly filing/ 3. International
• 20th day after end of payment – 25th day of Organizations
month (for non EFPS month following the close 4. News Services
filers) of the taxable quarter Interest, commissions and
• 21st to 25th day after end discounts from lending
of month (filing thru Monthly filing and activities as well as income
EFPS), payment on 25th payment from finance lease on the basis
day end of month of remaining maturities of
instruments:
Short term 5%
maturity (5 years
or less
Maturity period is 1%
more than 5 years
Filing and payment of percentage tax of the following On Dividends and 0%
taxpayers shall be due on a quarterly basis on or equity shares in
before 25th day of the month following the close of net income of
the taxable quarter Subsidiaries
• VAT exempt taxpayers with annual revenues up to Banks and non-bank On royalties, 7%
P3M financing rentals of
• Domestic carriers and keepers of garages intermediaries properties, real or
• International air/shipping carriers personal, profits
• Franchisees of gas or water utilities from exchange and
• Franchisees of radio and/or TV broadcasting with all other items
revenues up to P10M treated as gross
• Banks, non-bank financial intermediaries and finance income under Sec
companies 32 of the Code
• Life insurance companies/Agent of foreign insurance On Net Trading 7%
companies Gains within the
taxable year on
Remittance of withholding VAT and other foreign currency,
percentage tax withheld shall still be on a monthly debt securities,
basis - Due on or before 10th day of the following month. derivatives and
other similar
financial
instruments
On interest, 5%
discounts and
other items of
Coverage gross income
Coverage Basis Tax paid to finance
Rate companies and
Persons exempt from Gross Sales or 3% other financial
VAT under Sec. 116 Receipts intermediaries not
Domestic carriers and Gross Receipts 3% performing quasi
Other non-bank
keepers of garages banking functions
Finance
International Carriers: Interest, commissions and
Intermediaries (Sec.
International Gross Receipts 3% discounts paid from their loan
122)
air/shipping carriers transactions from finance
doing business in the companies as well as income
Philippines from financial leasing shall be
Franchise Grantees: taxed based on the remaining
Electric, gas and Gross Receipts 2% maturities of instruments:
water utilities maturity period is 5 5%
Radio and television Gross Receipts 3% years or less
broadcasting maturity period is 1%
companies whose more than 5 years
annual gross receipts Life Insurance Total premiums 2%
of the preceding year Companies (except collected
do not exceed P purely cooperative
10,000,000 and did companies or
not opt to register as associations) (Sec
VAT Taxpayer 123)
Agents of foreign Total premiums Twice
TN: The option to insurance companies collected as the
register as VAT- (Sec. 124) (except tax
taxpayer shall be Reinsurance imposed
irrevocable premium) in
perpetually. Section
Tax on overseas Amount paid 10% 123
dispatch, message or for the service In all cases, where Premiums paid 5%
conversation owners of property
obtain insurance • The power of the LGUs to collect tax is merely
directly with foreign delegated. Delegated by this foundation of local
companies (without taxing power directly granted under Section 5,
use of any agent Article X of the 1987 Constitution which states
Proprietors, lessee or operator of the following: that:
Cockpits Gross receipts 18% “Each local government unit shall have the power to
Cabarets, Night or Gross receipts 18% create its own sources of revenues and to levy taxes,
Day Clubs fees and charges subject to such guidelines and
Boxing exhibitions Gross receipts 10% limitations as the Congress may provide, consistent
Except: World or with the basic policy of local autonomy. Such taxes,
oriental fees, and charges shall accrue exclusively to the local
championship is at governments.”
stake AND one of the • That provision is not self-executory that’s why Sec.
contenders if Filipino 129 of RA 7160 executed the particular provision and
citizen promoted by under Sec 129 it provides the fiscal power of the local
the Filipino citizen of government units.
Philippine
Corporation. Who can exercise the power of taxation?
Professional Gross receipts 15% 1. Provinces
basketball games 2. Cities
Jai alai and race track Gross receipts 30% 3. Municipalities
(operators shall 4. Barangays
withheld tax on
winnings) A region is not a local territory jurisdiction. You have
irrespective of to remember that each of these local territorial
whether or not any jurisdictions has its own executive and legislative branch.
amount is charged It may be the governor, mayor or the barangay captain.
for admission.
SCOPE:
Every stock broker Gross selling price .6 of 1%
1. Local Taxation- pertains to local taxes, levies,
who effected a sale, or gross value in
charges as enumerated under RA 7160. For provinces
barter, exchange or money of shares of
(Sec 135), Municipalities (147) and so on as
other disposition of stocks sold,
enumerated in the LGC.
shares of stock listed bartered,
2. Real Property Taxation- It’s a local tax because
and traded through exchanged or
collected by LGU but imposed in a nationwide scale.
the Local Stock otherwise disposed
The rates are the same. In local taxation there is only
Exchange (LSE) other
a ceiling, in RPT it’s the same nationwide.
than the sale by
a dealer in securities
Sources of Local Fund
A corporate GSP or gross value of in
1. Internal Source of Local Fund:
issuer/stock broker, money of shares of stocks
a. Local taxes- Local taxes levied or imposed by the
whether domestic of sold, bartered, exchanged or
LGU
foreign, engaged otherwise disposed in
b. Real Property Taxes - which is being collected by
in the sale, barter, accordance
the Government
exchange or other with the proportion of stocks
c. Non0tax revenues - These are the regulatory fees.
disposition through sold,
Revenues from regulatory fees collected by the LGU
Initial Public bartered or exchanged or after
or the exercise of its police power or in rendering
Offering(IPO)/ listing in the stock exchange
service to the public. (Garbage collection fee, Toll
secondary public Up to 25 % 4%
fee)
offering of shares of Over 25% but not 2%
2. External Source of Local Fund
stock in closely over 33 1/3%
a. Internal Revenue Allotment (IRA) received from the
held corporations Over 33 1/3 % 1% National Government
b. National Aid- given in times of calamities, disaster
Closely Held Corporations (Section 127) 3. Borrowings of the Local Government Unit
• Any corporation at least 50% in value of the
outstanding capital stock or at least 50% of the Fundamental Principles- Local Taxation (PIE-CUP-
total combined voting power of all classes of stock UP) –Must memorize
entitled to vote is owned directly or indirectly by 1. Levied for public purpose
or for not more than twenty (20) individuals. 2. The revenues collected under the code shall inure
solely to the benefit of, and subject to disposition by,
When and where to file OPT return? the LGU levying the tax or other imposition unless
• WHEN: within 25 days after the end of each otherwise specifically provided therein
taxable quarter (except cancellation of VAT The one who impose should be the one to dispose
registration OP tax accrues from the date of 3. Equitable and based as much as possible on the
cancellation) taxpayer’s ability to pay
• Persons retiring from business subject to business tax 4. Not contrary to law, public policy, national economic
must notify the nearest RDO, file his return and pay policy, or in restraint of trade
the tax within (20) days after closing the business 5. Uniform in each local sub-unit
• NOTE: Commissioner, by a revenue regulation, may 6. Collecting local taxes and other impositions shall
prescribe manner and time for filing. not be let to any private person
• WHERE: AAB’s, RDO, or duly authorized treasurer of Unlike national taxes where the BIR can delegate the
the city or municipality collection to AABs but for local taxes, it cannot be
delegated
7. Not unjust, excessive, oppressive, or confiscatory
LOCAL TAXATION 8. Each LGU shall, as far as practicable, evolve a
progressive system of taxation.
General Principles, Limitations, Taxing Power Not mandatory but directory as far as the LGUs are
Definition: concerned.
• It is a revenue raising power exercise by the local
government unit in order to raise revenue enough The list above limits the power of the LGU in collecting local
to defray necessary expenses and the manner of taxes. If it violates any of the fundamental principles,
levying and imposition of the local taxes is done then this would be a ground for the illegality of the
through the enactment or passage of what we call imposition tax by the LGU.
as an ordinance.
• The law is binding as far as the local government unit
is concerned. The revenue that it is being raised thru
the ordinance is basically the local taxes.
Nature of Local Taxing Power Guide of Sanggunians in granting of Tax Exemptions,
1. Not inherent but direct grant under the Constitution Tax reliefs and Tax incentives (art. 282[b], rules and
2. Limited regulations implementing the local government
• Constitutional Limitations code of 1991]
• Fundamental Principles (sec. 130, LGC)
• Public hearing requirements On the grant of Tax Exemptions or Tax Reliefs:
• Principle of pre-emption of exclusionary rule a. Tax exemptions or tax reliefs may be granted in cases
• The LGU can only subject tax only when the of:
national gov’t did not subject it. • natural calamities
• Common limitations on LGUs taxing Power (Sec. • civil disturbance
133, LGC) • general failure of crops, or
3. Legislative (Sec 132, LGC) • adverse economic conditions such as substantial
• Sangguniang Panlalawigan decrease in prices of agricultural or agri-based
• Sangguniang Panglungsod products
• Sangguniang Pambayan b. The grant of exemptions or relief shall be through an
• Barangay Council ordinance.
4. Territorial c. Any exemption or relief granted to a type or kind of
It may only be exercised within its territory. business shall apply to all businesses similarly
5. Accrual of Tax situated.
LGU does not remit a share to the national gov’t. d. Any exemption or relief granted shall take effect only
during the next calendar year for a period not
Powers of the Sanggunian exceeding twelve (12) months as may be provided
in the ordinance
KMA: It’s actually the Sanggunian which grants the

exemption, not the mayor, governor, etc. Example of an
incentive is a local tax holiday (the taxpayer won’t pay
local taxes for a certain period).
Abolition of tax exemption before the LGC

• Unless otherwise provided in the code, tax exemptions
or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including
government owned or controlled corporations except:
1. Local water districts
2. Cooperatives duly registered under R.A. 6938
3. Non stock and non -profit hospitals
Power to Prescribe Penalties for Tax violations and
4. Educational institutions, are hereby withdrawn
Limitations Thereon *Sec. 516, LGC)
upon the effectivity of this code.
1. The sanggunian of an LGU is authorized to prescribe
• KMA: Those enumerated are entities which retained
fines or other penalties for violation of tax ordinances
the exemption despite the abolition. Exemption for
a. In no case shall fines be less than P1,000 nor more
GOCCs is already abolished. Hence, if a GOCC is
than P5,000
acting like an ordinary corporation, it is already
b. Nor shall imprisonment be less than one (1) month
subject to tax.
nor more than six (6) months.
2. Such fine or other penalty or both shall be imposed at
The power to grant tax exemption - The one who can
the discretion of the court.
impose the tax, is also the one that can grant the tax
3. The sanggunian barangay may prescribe a fine not less
exemption.
than P100 nor more than P1,000.
The exemption should apply to all entities similarly
The imposition of fines only pertains to local taxes
situated. Not to a specific entity.
imposed thru an ordinance. For RPT, there is a separate
set of provisions for RPT.
TN: In the case of shared revenues, the exemption or relief
shall only extend to the LGU granting such exemption or
Q: May a Barangay imprison an entity for non-
relief.
payment of tax?
• No. It can only impose a fine.
On the grant of Tax Incentives:
• The tax incentives shall be granted only to new
To Adjust Local Tax Rates (Sec. 191, LGC)
investments in the locality and the ordinance shall
SEC. 191. Authority of Local Government Units to Adjust
prescribe the terms and conditions therefor.
Rates of Tax ordinances. - Local government units shall
• The grant of tax incentive shall be for a definite
have the authority to adjust the tax rates as prescribed
period not exceeding one (1) calendar year.
herein not oftener than once every five (5) years, but
• The grant of tax incentives shall be by ordinance
in no case shall such adjustment exceed ten percent
passed prior to the first (1st) day of January of
(10%) of the rates fixed under this Code.
any year.
• Any tax incentive granted to a type or kind of business
Q: Can the LGU go higher than the ceiling or the
shall apply to all business similarly situated.
maximum rate?
• Yes, because of the provision under Sec. 191 of the LGC
Shared revenues of local taxes - proceeds are being
but it is not unlimited.
shared by several divisions of local territorial jurisdiction.
KMA: It’s usually the COA which calls out the LGU.
Example: Local tax on extraction of sands, stones and
other quarrying resources in public lands. The province
A case re: Davao City. It forgot to adjust its local tax rates
generally imposes 10% on the FMV.
for the past 20 years. It then passed an ordinance
mandating a total increase of 40% to reflect the omitted
The proceeds thereof are being shared by the province,
increase for the past years. SC declared that the increase
municipality and barangays where the extraction is
for the past years is invalid. The failure to increase was
located. 30%-province, 30%-municipality, 40%-Barangay
deemed a waiver. What is only valid is the increase of 10%
for the current year.
Q: What if the city grants an incentive?
• Then only the 30% portion is affected. There will still
be payment for other portions.
• TN: Exemption tackled here only applies to local taxes,
not RPT.
For the taxes paid by PEZA companies such as the 5%

gross income, 2/5 of the 5% goes to the LGU, while 3/5 of
the 5% goes to the BIR.
Imposition of local taxes • Banks are subject not to VAT, but only to a minimal
OPT. That’s why LGU can impose taxes on them.
(b) Documentary stamp tax;

• Already covered by the NIRC
(c) Taxes on estates, inheritance, gifts, legacies and

other acquisitions mortis causa, except as otherwise
provided herein;
• Already provided by the NIRC.
• “except as otherwise provided herein;” covers local
transfer tax
• “Except those subject to taxes on transfer or real
property by provinces and cities”
Imposed thru passage of local tax ordinance ➢ For provinces, it can collect a local tax called tax
on transfers of ownership of real property.
Kinds: ➢ Estate tax, inheritance, gifts and legacies are all
1. Tax ordinance specifically enumerated in LGC (RA transferred but because it’s primarily covered by
7160) NIRC, the local government unit cannot anymore
2. Not yet imposed by the national government or not levy except the tax on transfers of ownership of
specifically enumerated in RA 7160 taking into real property.
consideration the pre-emption rule. • KMA: Local Transfer Tax - collected by province.
Applies when there is transfer of real property
Doctrine of Pre-emption or Exclusion regardless of the mode of transfer even if with
• If the national government elects to tax a particular consideration or gratuitous. This is a form of privilege
area, it impliedly withholds from the Local government tax. Form of permit fee to the province.
the local delegated power to tax the same field. • Effect: there is indirect double taxation. It was
• Stated otherwise, if it is not taxed by the national already subjected to estate tax, but when it comes to
government, then the local government can tax. LGU, there is LTT as allowed by the LGC. This is
• But not all LGUs can do that. Only a specific division; expressly allowed.
Province and Barangay cannot do it.
(d) Customs duties, registration fees of vessel and
KMA: If the national govt taxed a certain subject matter, wharfage on wharves, tonnage dues, and all other
and at the same time the LGU taxed it, there can be double kinds of customs fees, charges and dues except
taxation. But only an indirect double taxation. wharfage on wharves constructed and maintained
by the local government unit concerned;
For example, VAT and OPT are business taxes taxed by the • The exception if the wharfs are being constructed and
Natl Govt and its tax base is gross receipts. For the LGU, maintained.
it also imposes local business taxes with the same tax base • This is collected by the BOC.
(i.e., gross receipts). But this is only indirect double
taxation. (e) Taxes, fees and charges and other impositions
upon goods carried into or out of, or passing
Requisites: through, the territorial jurisdictions of local
1. Filing of a proposal of a member of the Sanggunian government units in the guise of charges for
2. After 10 days, there must be a publication or wharfage, tolls for bridges or otherwise, or other
posting for 3 consecutive weeks. If it’s posting, taxes, fees or charges in any form whatsoever upon
then it must be posted to 2 conspicuous places. such goods or merchandise;
3. There has to be notification to Treasurer and the • This is within the ambit or jurisdiction of the BOC.
entities to be subjected to the tax Otherwise, if the local government will also collect, it
4. Public Hearing will amount to double taxation.
5. There has to be a forum in the Sanggunian • KMA: What is not subjected here are the goods. But
6. It has to be approved by the local chief executive. as to the vehicle carrying or transporting the
As a rule for the province, the local chief executive is goods, may still be subject to tax by the LGU.
given 15 days, for cities the local chief executive is
given 10 days to enact the ordinance. If it is not (f) Taxes, fees or charges on agricultural and
enacted, then it is deemed passed. The local chief aquatic products when sold by marginal farmers or
executive may veto it but the sanggunian may fishermen;
override the veto by the vote of 2/3 of all the • Small operation is primarily described as for
members of the sanggunian. subsistence purposes only. It’s not primarily for
commercial or sale.
The local taxation power is limited in the sense that it’s • When we say marginal, it means only for livelihood or
subject not only to the constitutional limitations but it’s subsistence.
also subject to fundamental principles of local taxation.
(g) Taxes on business enterprises certified to by the
Common Limitations on the Taxing Powers of the Board of Investments as pioneer or non-pioneer for
LGU a period of six (6) and four (4) years, respectively
List of taxes that may not anymore be imposed by from the date of registration;
local taxing authority primarily because • They are duly registered under EO 226 or the
1. It’s a tax already imposed by the national internal Investments Code. It is primarily exempt because
revenue code; they enjoy the fiscal executive of income tax
This is still related to the doctrine of exclusion holiday.
2. It’s a tax or duties and charges which are already • Income tax holiday is where in the enterprise
imposed by the tariff and customs code or registered is not subject to any taxes, including local
3. prohibited by public policy. taxes
➢ If pioneer enterprise – 6 years
SEC. 133. Common Limitations on the Taxing Powers ➢ If non-pioneer enterprise – 4 years
of Local Government Units. - Unless otherwise • Same provision under Special Economic Zone Act
provided herein, the exercise of the taxing powers (SEZ) wherein there is also the fiscal executive of
of provinces, cities, municipalities, and barangays income tax holiday
shall not extend to the levy of the following: ➢ Pioneer enterprise - first to establish such kind of
business in the Philippines
(a) Income tax, except when levied on banks and
other financial institutions; KMA:
• These banks and other financial institutions, if we • If BOI registered, income tax holiday includes
based on the benefits-received theory, it also requires exemption from local tax. However, in recent dealings
a high degree of security as far as the local or practice, the LGU still imposes local tax over these
government is concerned. entities, although exemption is expressly provided
under the law.
• If PEZA-registered, usually you are first entitled to • Tricycles, pedicabs are still exempted because they
income tax holiday (ITH). ITH here only exempts don’t have franchise. Permits2 lang daw per Gaspar
income tax, hence local taxes may still be Phil
imposed. After the period to enjoy ITH, the PEZA
company then is subjected to 5% gross income tax
(m) Taxes, fees, or other charges on Philippine
(GIT) which is in lieu of all direct and indirect taxes.
products actually exported, except as otherwise
This is when the local taxes are already exempted. But
provided herein;
recall that 2/5 of the 5% GIT is to be remitted to the
• It’s not consumed here in Philippines this is with
LGU, while 3/5 of the 5% GIT is to be remitted to the
consonance to the cross-border destination
BIR.
principle.
• In practice, PEZA companies enjoying 5% GIT is still
• “except as otherwise provided herein;” - still the
being imposed with local taxes. Because LGU is not
business tax that is being imposed on those engaged
under PEZA, they do not honor such exemption. But
in export business. What is being subject to local tax
the PEZA companies can always enter into a MOA with
is the business itself and not the goods or products
the LGU such as in lapu-lapu, they don’t impose local
being exported.
taxes sa PEZA registered companies.
(n) Taxes, fees, or charges, on Countryside and
Q: Difference between PEZA and BOI registered
Barangay Business Enterprises and cooperatives
companies?
duly registered under R.A. No. 6810 and R.A. No.
PEZA BOI
6938 otherwise known as the "Cooperatives Code of
Export-oriented companies More on domestic the Philippines" respectively; and
dealings • Provided in Special laws. Exempted from national
So, if amusement park, you income tax and local business taxes.
can’t qualify here • This covers taxes fees and charges, not only LBT but
Initially enjoys ITH, then Initially enjoys ITH but also sanitation fees, fire department fees and garbage
subsequently 5% GIT for subsequently already fees.
registered activities subjected to income tax.
(o) Taxes, fees or charges of any kind on the
(h) Excise taxes on articles enumerated under the National Government, its agencies and
National Internal Revenue Code, as amended, and instrumentalities, and local government units.
taxes, fees or charges on petroleum products; • You can’t transfer money from your own pockets
• Articles enumerated in NIRC - tobacco, alcohol, • What is exempted here are only revenues
automobiles and non-essential goods and jewelries. pursuant to governmental functions. If pursuant
These are expressly listed under NIRC. to proprietary functions, then not exempted.
• If a particular item is not enumerated in NIRC,
the local government can still collect excess tax. REVENUE RAISING POWERS
• Petroleum products - generic exception with no 1. General or common revenue raising powers - all
qualification from local taxation. LGU can exercise this power
a. Reasonable Fees and charges for Services
Petron Corporation vs. Mayor Tobias M. Tiangco, rendered - consideration for the services rendered
et.al. by LGUs (Sec. 153)
Petron questioned the imposition of excise tax by the LGU • Parking fees, garbage collection, going to city
and the SC said that the local government is prohibited hall and ask for business permit
from imposing such excise tax because the product is b. Public utilities charges must be owned, operated
classified as petroleum products. and maintained by the LGUs within their
jurisdiction (Sec. 154)
(i) Percentage or value-added tax (VAT) on sales, c. Toll fees or charges must be funded and
barters or exchanges or similar transactions on constructed by the LGUs (Sec. 155)
goods or services except as otherwise provided • Municipal roads or barangay roads
herein; • Except:
• Already collected by the national government. ➢ Officers and enlisted men of the Armed
• “except as otherwise provided herein;” - you have the Forces of the Philippines (AFP) and
business taxes which may be collected by cities and members of the Philippine National
municipalities. Police (PNP) on mission,
➢ Post office personnel in the act of
(j) Taxes on the gross receipts of transportation delivering mail
contractors and persons engaged in the ➢ Physically handicapped, and
transportation of passengers or freight by hire and ➢ Disabled citizens who are sixty-five (65)
common carriers by air, land or water, except as years or older.
provided in this Code; May be suspended by the Sanggunian for general
• For transportation contractors and transporting welfare purposes. No further conditions, so long as the
passengers, specifically common carriers it’s already welfare requires it.
subject to carriers under Other Percentage Tax. The barangay may collect toll fees and charges
• Others, like contractors which carries goods, they may provided it was funded and constructed by the
be subject to OPT or 12% VAT as the case may be. barangay.
• “except as provided in this Code;” - tricycle operators. 2. Specific revenue raising powers - applicable only
Because the LGU can regulate the operators of the to particular division or unit of LGU
tricycle, then the LGU can collect taxes on gross
receipts. PROVINCES
What are discussed here are only taxes, and does not
(k) Taxes on premiums paid by way of reinsurance include fees and charges
or retrocession;
• Reinsurance - insurer seeks another insurer 1. Tax on Transfer of Real Property Ownership or
• Retrocession - reinsurer seeks another insurer Local transfer tax (LTT) (Sec. 135)
• The premiums can no longer be collected because it’s • On transfer (sale, donation, barter or any other mode
already the second level of your insurance and it’s of transferring ownership) of real property, and not
covered under the insurance code. ownership. But if in RPT, you pay the tax if you own
• The very policy itself was already subjected to tax the property
under the NIRC. • Even if it’s because of death, you still have to pay this
type of local tax
(l) Taxes, fees or charges for the registration of • Tax rate: not more than 50% of 1% or 0.5%.
motor vehicles and for the issuance of all kinds of ✓ May be higher, provided that not oftener than 5
licenses or permits for the driving thereof, except years to adjust and not to exceed 10% of the tax
tricycles; to be collected
• In letter (j) the exception is to the tricycle • Tax base: total consideration involved or FMV, in case
• In letter (l) - these are already under the mandate of the monetary consideration involved in the transfer is
the LTO not substantial, whichever is higher.
• Exceptions: entity or taxpayer engages in the business. They are
➢ Transfers pursuant to CARL of different nature and kind.
➢ Sale of socialized housing
➢ Transferred to transferee not subject to tax 4. Shared revenues among the LGUs - Tax on Sand,
✓ Buyer is consulate or embassy of foreign Gravel and other Quarry Resources or Sand and
country Gravel Tax (Sec. 138)
• Primarily liable to settle this type of local tax: • The sand the gravel and other quarry resources must
transferor be extracted from the public lands or beds of
➢ Transfer through sale, it’s the seller seas, lakes, rivers, creeks or streams.
➢ Donation, it’s the donor • Tax rate: not more than 10% of FMV
➢ Death, administrator of property • If the quarry happened in a private land or
• Must be paid within 60 days from the date of property, the province can’t impose the 10% of
execution or from the date of decedents death. tax. It’s already covered by the NIRC and subject
• KMA: Again, this tax does not cover personal to excise tax.
properties. LTT is on the privilege to transfer • Shared with cities, municipalities and provinces.
while RPT is on the ownership of the property. ➢ Province - Thirty percent (30%);
• The constitutional exemption on religious ➢ Component city or municipality - Thirty percent
organizations and non-stock, non-profit (30%); and
educational institutions only covers RPT, not ➢ Barangay - Forty percent (40%).
LTT.
Q: What if it’s an independent city (such as Cebu
2. Tax on Printing and Publication (Sec. 136) which is a highly urbanized city)?
• This is a business tax. • Then you don’t share with the province. Full 60%
• GR: Only cities and municipalities may collect will belong to you.
business tax
➢ Ex: Sec. 136 - so long as the business in printing Q: Why the sharing?
and publications of books, cards, posters, etc. • Because it’s a public property
• XPN: Printing and/or publishing of books or other • The province imposes the 10% and the city,
reading materials prescribed by the Department of municipality and barangay have to wait that they be
Education, CHED and TESDA as school texts or given a share by the province. The city, municipality
references. and barangay cannot impose this tax on quarrying.
• Tax rate:
➢ Existing business - not exceed 50% of 1% of the "Quarry resources" shall mean any common stone or
gross annual receipts for the preceding year other common mineral substances as the Director of the
➢ New business - not exceed 1/20 of 1% of the Bureau of Mines and Geo- Sciences may declare to be
initial capital investments since there’s no gross quarry resources such as, but not restricted to, marl,
annual receipts of previous year marble, granite, volcanic cinders, basalt, tuff and rock
phosphate: Provided, That they contain no metal or other
Q: If this year you registered as a publisher, and you valuable minerals in economically workable quantities.
paid 1/20 of 1%. Come 2020, you have no
operations, so that’s zero receipts. By 2021, you 5. Professional Tax (Sec. 139)
operated again, and you obtained business permit. • The professional must have undergone licensure
You paid for the publishing tax. How much for 2021? examination by the government. It’s either you take
Based on the capital investment? Or receipts? the bar exam or board exam (PRC).
• Based on receipts, hence zero. You cannot be taxed • Professionals who doesn’t have licensure exams
again as a new business with the capital investment (industrial engineering) - they are professionals but
as the tax base coz you already paid for this during are not covered under this tax.
your first year of operations. • Ceiling: P300. However, for cities, they impose higher
amount such as in Cebu City which is 500.
TN: Not violation of constitution of freedom of the • If you have lots of profession, then you’re mandated
press because this is a tax on business of printing to pay PT for every profession.
and publication. It would be a different story if you didn’t • Situs: In the place where you practice your
collect a business tax in other types of businesses and you profession or in the place where the principal
just imposed it to somebody who is into printing and office is located.
publication because in that sense you’re singling out that • Once you pay it, you can practice your
business who’s into press or publication. profession anywhere in the Philippines.
➢ Highly urbanized cities can collect professional
3. Franchise Tax (Sec. 137) tax.
• Tax rate: • When: must be paid annually on or before January 31
➢ Ongoing business - not exceeding 50%of 1% of or before engaging the practice of your profession.
the gross annual receipts for the preceding • Lawyers: we’re mandated by SC to indicate in the
calendar year pleading the professional tax.
➢ Newly started business - not exceed 1/20 of 1%
of the capital investment Q: How can the LGU ensure payment of this tax,
• You are subjected to franchise tax when you’re especially for professionals who don’t practice in
enjoying a franchise their own offices?
➢ Primary franchise - being granted to you by the • LGU will go after the employers of these professionals.
state for you to exist This for the renewal of let’s say the business permit of
✓ Juridical entity the employer. Employer will just mandate that their
➢ Secondary franchise - If the corporation and the professionals pay the PT, they will compile this, and
business exercises its rights and privileges within submit to the LGU.
the territory of the LGU
✓ Electricity or water Q: What if you’re a professional practicing in several
• Tax base: The franchise tax is based on gross annual provinces?
receipts. • You just pay once for the same profession. You
may pay ay the original place of business.
CTA case: It was questioned that WON the franchise tax
doesn’t amount to double taxation because the businesses 6. Amusement tax (Sec. 140)
is already paying business tax for engaging business in the • Tax rate: Not more than 30% of the gross receipts
locality and the business tax is being paid to the cities and from admission fees
municipalities and based on gross annual receipt. Thus, • It’s taxed on the operator or proprietor of the
paid based on the same taxing period, same taxing heaters, cinemas, concert halls, circuses, boxing
authority. Ruling is that it’s not double taxation in the stadia, and other places of amusement.
strict sense because the nature of the franchise tax • Only those who were not subjected as amusement tax
is different from the nature of business tax. The under NIRC. Like cockpits, cabarets, night or day
franchise tax is collected if the taxpayer enjoys its clubs, jai-alai, professional basketball games.
privilege of exercising the franchise. Whereas the • Concert may be tax provided it is a pop, rock or similar
business tax, it’s automatically collected when the concerts.
• EXEMPT: Essential commodities include:
➢ Operas • Rice and corn;
➢ Concerts • Wheat or cassava flour, meat, dairy products, locally
➢ Dramas manufactured, processed or preserved food, sugar, salt
➢ Recitals and other agricultural, marine, and freshwater
➢ Paintings and art exhibitions products, whether in their original state or not;
➢ Flower shows • Cooking oil and cooking gas;
➢ Musical programs • Laundry soap, detergents, and medicine;
➢ Literary and oratorical presentations • Agricultural implements. equipment and post-harvest
• The proceeds are shared equally by the province and facilities, fertilizers, pesticides, insecticides, herbicides
municipality and other farm inputs;
• Poultry feeds and other animal feeds;
Q: May the province impose amusement tax? • School supplies; and
(Pelizloy Realty Corporation vs. Province of • Cement.
Benguet)
Facts: Pelizloy owns Palm Grove Resort, which is designed Rate: At a rate not exceeding one-half (½) of the rates
for recreation and which has facilities like swimming pools, prescribed under subsection (a), (b) and (d) of this
a spa and function halls. The Prov. Board of the Prov. Section.
of Benguet approved Prov. Tax Ordinance No. 05-
107, otherwise known as the Benguet Revenue Code of (d) Retailers
2005 ("Tax Ordinance"). Section 59, Article X of the Tax • You are considered as a retailer when you are the
Ordinance levied a ten percent (10%) amusement seller to the end user.
tax on gross receipts from admissions to "resorts,
swimming pools, bath houses, hot springs and Rate:
tourist spots." It was Pelizloy's position that the Tax With gross sales or receipts for Rate of tax
Ordinance's imposition of a 10% amusement tax on the preceding calendar year in per annum
gross receipts from admission fees for resorts, the amount of:
swimming pools, bath houses, hot springs, and P400,000 or less 2%
tourist spots is an ultra vires act on the part of the More than P400,000 1%
Province of Benguet. Thus, it filed an appeal/petition
before the Secretary of Justice on January 27, 2006. TN: Under Section 152 of the LGC, if the gross sales of
receipts of the calendar year is Fifty thousand pesos
Held: No. Section 131 (c) of the LGC already provides a (P50,000.00) or less, in the case of cities and Thirty
clear definition of amusement places. Thus, resorts, thousand pesos (P30,000.00) or less, in the case of
swimming pools, bath houses, hot springs and municipalities, it is the Barangay, exclusively, that
tourist spots do not belong to the same category or collects the local tax on retailers. Which means that
class as theaters, cinemas, concert halls, circuses, if it is more than P50,000 or P30,000, it is the city or
and boxing stadia. It follows that they cannot be municipality that collects, respectively.
considered as among the other places of amusement
contemplated by Section 140 of the LGC and which may (e) On contractors and other independent
properly be subject to amusement taxes. contractors
• Rate: Graduated Scale of P27.50 – PP11,500 per
Professional basketball games are also not subject to annum or at a rate not exceeding fifty percent (50%)
amusement tax because it is already subject to OPT of one percent (1%) of the gross sales or gross
under the NIRC. receipts.
• Contractors - includes persons, natural or juridical,
7. Annual Fixed Tax For Every Delivery Truck or Van not subject to professional tax under Section 139
of Manufacturers or Producers, Wholesalers of, of this Code, whose activity consists essentially of the
Dealers, or Retailers in, Certain Products. (Sec. sale of all kinds of services for a fee, regardless
141) of whether or not the performance of the service
• It is the truck, the van, or the vehicle itself that is calls for the exercise or use of the physical or
being subjected to tax here. We don’t look at the mental faculties of such contractor or his
weight or the content of the said vehicle. employees.
• Rate: P500.00 (this is on an annual basis, and not on • If you are a lawyer, you are not considered a
a per trip basis) contractor and you don’t pay this tax because you are
• Example: distributors of Coke, Pepsi, SanMig already subject to Professional Tax.
• A transportation contractor (carrier passengers or
goods) are not subject to local tax because they are
MUNICIPALITIES already subject to national tax under the NIRC.
Section 143. Tax on Business. - The municipality may
impose taxes on the following businesses: (f) On banks and other financial institutions, at a
rate not exceeding fifty percent (50%) of one
(a) On manufacturers, assemblers, repackers, percent (1%) on the gross receipts of the preceding
processors, brewers, distillers, rectifiers, and calendar year derived from interest, commissions
compounders of liquors, distilled spirits, and wines and discounts from lending activities, income from
or manufacturers of any article of commerce of financial leasing, dividends, rentals on property and
whatever kind or nature profit from exchange or sale of property, insurance
• Rate: Graduated scale of P165 – P24,375 per annum premium.
or a rate not exceeding thirty-seven and half percent
(37½ %) of one percent (1%) of the gross sales or (g) On peddlers engaged in the sale of any
gross receipts merchandise or article of commerce, at a rate not
• The rates depend on the industry of the taxpayer. TN exceeding Fifty pesos (P50.00) per peddler
that LGU separated manufacturers from repackers. annually.
• Peddler - means any person who, either for himself
(b) On wholesalers, distributors, or dealers in any or on commission, travels from place to place and sells
article of commerce of whatever kind or nature his goods or offers to sell and deliver the same.
• Rate: Graduated scale of P18 – P10,000 per annum • It is a fixed tax.
or at a rate not exceeding fifty percent (50%) of one
percent (1%) of the gross sales or gross receipts (h) On any business, not otherwise specified in the
• What makes you a wholesaler is when your customer preceding paragraphs, which the Sanggunian
is not the end user or the retainer. concerned may deem proper to tax: Provided, That
• When we say dealer, you are engaged in buying and on any business subject to the excise, value-added
selling such that when you buy you don’t consume. or percentage tax under the National Internal
Revenue Code, as amended, the rate of tax shall not
(c) On exporters, and on manufacturers, millers, exceed two percent (2%) of gross sales or receipts
producers, wholesalers, distributors, dealers or of the preceding calendar year.
retailers of essential commodities
Special requirement for this catch-all provision to apply: b. On places of recreation which charge admission
1. Having a special ordinance for that purpose fees
2. With a prior public hearing Such as discoral
3. It must not be excessive, unjust, confiscatory or c. On billboards, signboards, neon signs, and outdoor
following the fundamental principles of taxation and advertisements.
4. It must not violate the common limitations found
under Sec. 133, which are:
i. The business is not subject to VAT or other SITUS OF TAXATION
national taxes as imposed in the NIRC (a) For purposes of collection of the taxes under Section
ii. If subject to VAT or OPT under the NIRC, the tax 143 of this Code, manufacturers, assemblers, repackers,
rate shall not exceed 2% of the gross sales or brewers, distillers, rectifiers and compounders of liquor,
receipts of the preceding calendar year distilled spirits and wines, millers, producers, exporters,
XPN: Any business engaged in production, manufacture, wholesalers, distributors, dealers, contractors, banks and
refining, distribution, or sale of oil, gasoline or any other other financial institutions, and other businesses,
petroleum products shall not be subject to any local tax. maintaining or operating branch or sales outlet elsewhere
shall record the sale in the branch or sales outlet
making the sale or transaction, and the tax thereon
CITIES shall accrue and shall be paid to the municipality
Section 151, LGC where such branch or sales outlet is located. In cases
The city, may levy the taxes, fees, and charges which where there is no such branch or sales outlet in the
the province or municipality may impose: Provided, city or municipality where the sale or transaction is
however, that the taxes, fees and charges levied and made, the sale shall be duly recorded in the principal
collected by highly urbanized and independent office and the taxes due shall accrue and shall be
component cities shall accrue to them and paid to such city or municipality.
distributed in accordance with the provisions of this
Code. GR: The payment of the local business tax should be
made in the locality where the branch, sales office
The rates of taxes that the city may levy may exceed the or warehouse is located.
maximum rates allowed for the province or municipality by • Presumption is that warehouse stores the available
not more than fifty percent (50%) except the rates of goods for sale, or even accepts orders for sales, that’s
professional and amusement taxes. why sale is recorded in the locality where the
warehouse is located.
Kinds of cities • But what if the principal office also generates sales?
1. Component cities – some taxes are shared with the Then you can also pay the local tax at that locality
province. where the principal office is located.
2. Independent component cities – everything • As a rule, if you generate sales at that particular
collected solely accrues to it. No sharing with the locality, you need to pay local tax there.
province. • TN there is a separate permit for the principal office,
3. Highly urbanized cities – same with independent branch, sales office, or warehouse.
component cities. • If it’s only a display store and that there are no goods
ready to be sold in that store, there is no branch, no
The rates of taxes that the city may levy may exceed the sales office, no warehouse, then the sales or receipts
maximum rates allowed for the province or municipality by will have to be recorded in the principal office. As such,
not more than fifty percent (50%) except the rates payment of the tax will be made there.
of professional and amusement taxes.
(b) The following sales allocation shall apply to
The most powerful then when it comes to revenue raising manufacturers, assemblers, contractors, producers,
activity is the city because they can collect taxes that are and exporters with factories, project offices, plants,
also collected by the province. and plantations in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded in the
principal office shall be taxable by the city or
BARANGAYS municipality where the principal office is located; and
Section 152, LGC (2) Seventy percent (70%) of all sales recorded in the
principal office shall be taxable by the city or municipality
1. Taxes where the factory, project office, plant, or plantation is
Section 152 (a) LGC located.
On stores or retailers with fixed business establishments
with gross sales of receipts of the preceding calendar year (c) In case of a plantation located at a place other
of P50k or less, in the case of cities and P30k or less, in than the place where the factory is located, said
the case of municipalities, at a rate not exceeding 1% on seventy percent (70%) mentioned in subparagraph
such gross sales or receipts. (b) of subsection (2) above shall be divided as
follows:
2. Service fees or charges (1) Sixty percent (60%) to the city or municipality where
Section 152 (b) LGC the factory is located; and
Barangays may collect reasonable fees or charges for (2) Forty percent (40%) to the city or municipality where
services rendered in connection with the regulations or the plantation is located.
the use of barangay-owned properties or service
facilities such as palay, copra, or tobacco dryers. There is no problem if the location of the factory and the
plantation in the same locality but if they belong to
3. Barangay clearance different localities
Section 152 (b) LGC
No city or municipality may issue any license or permit for
any business or activity unless a clearance is first
obtained from the barangay where such business or
activity is located or conducted. For such clearance,
the Sangguniang barangay may impose a reasonable fee.
The application for clearance shall be acted upon within
seven (7) working days from the filing thereof.
• Pay where it is located.
In the event that the clearance is not issued within the said
period, the city or municipality may issue the said license
Q: What if there’s a principal office, branch, factory
or permit.
and plantation all located in the different localities?
The branch is located in Santander.
4. Other fees and charges
• You go back to the first rule: if there is a branch then
Section 152 (b) LGC
the sale pertaining to that branch will just be recorded
The barangay may levy reasonable fees and charges:
where that branch is located. Again, no pro-rating
a. On commercial breeding of fighting cocks, cockfights
for branch since whatever sales/receipts
and cockpits.
generated by that branch, everything will go to b. 18 years or over, and at least either:
that branch. • Regularly employed on a wage or salary basis for
at least 30 consecutive working days during any
(d) In cases where a manufacturer, assembler, calendar year
producer, exporter or contractor has two (2) or • Engaged in business or occupation
more factories, project offices, plants, or plantations • Owns real property with an aggregate assessed
located in different localities, the seventy percent value of P1k or more
(70%) sales allocation mentioned in subparagraph • Is required by law to file an income tax return
(b) of subsection (2) above shall be prorated among
the localities where the factories, project offices, Community tax liability
plants, and plantations are located in proportion to • Tax rate of P5 (basic) and an additional of P1 for every
their respective volumes of production during the P1,000 of income regardless of whether from business
period for which the tax is due. or exercise of profession or from property which shall
• In the previous illustrations, assuming there is more in no case exceed P5,000
than one factory in Liloan, just prorate the P420,000
based on the volume of production of each factory. KMA: Employers before renewal of business permit, are
required to make sure that community tax of their
TN: employees are paid.
• If there are sales through routes, trucks or vans or
vehicles, these will be reported in the locality Rule in case of husband and wife
where branch, sales office, or warehouse are • For husband and wife, the additional tax imposed shall
located. be based on the total property owned by the husband
• In warehouse, we have to qualify. The warehouse and wife and the total gross receipts or earnings
must have available stocks for sale and the warehouse derived by them.
accepts orders and delivers it. It’s a different story if
it’s just a warehouse which doesn’t accept orders or JURIDICAL PERSONS
delivers. • Every corporation no matter how created or
• If there is no branch, sales office or warehouse organized, whether domestic or resident foreign,
then the gross sales or receipt will be recorded engaged in or doing business in the Philippines.
in the place where the goods were withdrawn.
• Is it possible that the place where the goods were Community tax liability
withdrawn is also a branch? Yes. • Tax rate is P500 (basic) and additional tax* which in
• Rules above will only apply only if there is no branch. no case shall exceed P10,000.
Summary: * Additional tax is equal to P2 for every P5,000 of value of

property or gross receipts or earnings derived by it in the
preceding year. Dividends received by corporations are
part of gross receipts.
PERSONS EXEMPT FROM COMMUNITY TAX

1. Diplomatic and consular representatives;
2. Transient visitors when their stay in the Philippines
does not exceed 3 months.
PLACE OF PAYMENT
• The community tax shall be paid in the place of
residence of the individual, or in the place where
the principal office of the juridical entity is
located.
TIME OF PAYMENT
Rules for individuals:
a. The community tax shall accrue on the 1st day of
January of each year which shall be paid not later
Consolidated financial statement should not be the sole than the last day of February of each year.
proof for the sales which have principal office, branches, b. If a person reaches the age of 18 years or otherwise
warehouses of sales office. You have to present a sworn loses the benefit of exemption on or before the last day
statement or sworn certification as to how much of of June, he shall be liable for the community tax on the
these sales were generated in a particular locality. day he reaches such age or upon the day the exemption
ends.
Q: Would it be safe to say that the gross receipts c. However, if a person reaches the age of 18 years or
base for LBT is the same gross receipts base per VAT loses the benefit of exemption on or before the last day
returns? of March, he shall have 20 days to pay the community
• Yes, because gross revenues found in your audited FS tax without becoming delinquent.
are usually higher than the actual generated sales in
cash. Rules for corporations:
a. Corporations established and organized on or before
Q: So in that case, if you are assessed with VAT the last day of June shall be liable for the
deficiency, is it automatic to say that you also have community tax for that year.
LBT deficiency? b. But corporations established and organized on or
• Not necessarily because it can’t be traced by the LGU. before the last day of March shall have 20 days within
Remember, it is the BIR which collects the VAT. LGU which to pay the community tax without becoming
on the other hand, collects LBT. delinquent.
c. Corporations established and organized on or after the
first day of July shall not be subject to the community
COMMUNITY TAX CERTIFICATE tax for that year
Article IV, LGC
Community Tax PENALTIES
• This tax is common to both Cities and Municipalities. • If the tax is not paid within the time prescribed above,
This was previously known as cedula. Once paid, a there shall be added to the unpaid amount an
community tax certificate is issued. interest of 24% per annum from the due date
until it is paid.
Persons liable to pay community tax:
• Individuals and Juridical Persons Q: Who may collect?
• City or Municipal Treasurer. However, they may
INDIVIDUALS deputize the Barangay Treasurer to collect in
a. Every inhabitant of the Philippines, whether their respective jurisdictions, provided the latter is
citizen or not bonded.
• TN: If barangay treasurers are deputized, the justifiable reason or cause, extend the time of payment of
proceeds of the tax collected through the barangay such taxes, fees, or charges without surcharges or
treasurers must be shared equally between the cities penalties, but only for a period not exceeding 6 months.
or municipalities and the barangay.
Q: When should you pay local tax?
Q: Why is there a need to get community tax? • Other than community tax, for other local taxes, it
• Because there are several transactions which requires must be paid within the first 20 days of January or
that an individual or corporation must present each subsequent quarter as the case may be.
community tax certificate. • However, this may be extended for justifiable reason
• For individuals, this is enumerated under Sec. 163 of or cause without surcharges or penalties for a period
the LGC. not exceeding 6 months.
PRESENTATION OF COMMUNITY TAX CERTIFICATE Surcharges and Penalties on unpaid Taxes, fees, or
Section 163, LGC Charges.
For individuals: Section 168, LGC
1. Acknowledges any document before a notary public. The Sanggunian may impose a surcharge not exceeding
Before this is strictly imposed. However now, under the 25% of the amount of taxes, fees or charges not paid
notarial law, a community tax certificate is not on time and an interest at the rate not exceeding 2%
anymore considered a sufficient proof of identification. per month of the unpaid taxes, fees or charges
2. Takes the oath of office upon election or appointment including surcharges, until such amount is fully paid but
to any position in the government service. in no case shall the total interest on the unpaid
3. Receives any license, certificate or permit from any amount or portion thereof exceed 36 months.
public authority.
4. Pays any tax or fee. TN: If your arrears for local tax have not been paid even
When you file your income tax return, you need to for 10 years, the surcharge is good only for 36 months (3
specify your updated CTC number. years)
5. Receives any money from any public fund.
6. Transacts other official business. Interests on other unpaid revenues
7. Receives any salary or wage from any person or Section 169, LGC
corporation with whom such transaction is made or Where the amount of any other revenue due a local
business done or from whom any salary or wage is government unit, except voluntary contributions or
received to require such individual to exhibit the donations, is not paid on the date fixed in the ordinance,
community tax certificate. or in the contract, expressed or implied, or upon the
That is why an employer can validly require their occurrence of the event which has given rise to its
employees to get an updated CTC. collection, there shall be collected as part of that amount
TN: The presentation of community tax certificate shall not an interest thereon at the rate not exceeding 2% per
be required in connection with the registration of a voter. month from the date it is due until it is paid, but in
no case shall the total interest on the unpaid amount
For corporations: or a portion thereof exceed 36 months.
When, through its authorized officers, any corporation
subject to the community tax receives any license, Interest:
certificate, or permit from any public authority, pays any 24% or an interest not exceeding 2% per month on the
tax or fee, receives money from public funds, or transacts date that is due or on the date it is paid but similar as in
other official business, it shall be the duty of the public surcharges the computation of the interest must not
official with whom such transaction is made or business exceed 36 months or 3 years.
done, to require such corporation to exhibit the community
tax certificate. KMA: This is a distinction from the NIRC. Because in
NIRC, there is no limit to the limit of years to get
surcharges or interests collected. In LGC, it is only
ADMINISTRATIVE MATTERS limited to 36 months.
Tax Period and Manner of Payment
Section 165, LGC Collection of local revenues by treasurer
Unless otherwise provided in this Code, the tax period of Section 165, LGC
all local taxes, fees and charges shall be the calendar year. All local taxes, fees, and charges shall be collected by the
Such taxes, fees and charges may be paid in quarterly provincial, city, municipal, or Barangay treasurer, or their
installments. duly authorized deputies. The provincial, city or municipal
treasurer may designate the Barangay treasurer as his
Calendar year deputy to collect local taxes, fees, or charges. In case a
In local taxes, we only follow calendar year. From January bond is required for the purpose, the provincial, city or
1 to December 31. There is no such thing as fiscal year municipal government shall pay the premiums thereon in
(any 12-months period but not staring with January) in addition to the premiums of bond that may be required
local taxation even if it involves corporations. under this Code.
Manner of payment Q: Who collects the taxes?

Taxes, fees and charges may be paid in quarterly • The provincial, city, municipal, or Barangay treasurer,
installments in the local treasurer’s office. or their duly authorized deputies.
Accrual of tax Periods of assessment and collection of local taxes

Section 166, LGC Section 194, LGC
Unless otherwise provided in this Code, all local taxes, (a) Local taxes, fees, or charges shall be assessed within
fees, and charges shall accrue on the 1st day of 5 years from the date they became due. No action for
January of each year. However, new taxes, fees or the collection of such taxes, fees, or charges, whether
charges, or changes in the rates thereof, shall accrue on administrative or judicial, shall be instituted after the
the 1st day of the quarter next following the effectivity of expiration of such period: Provided, That, taxes, fees or
the ordinance imposing such new levies or rates. charges which have accrued before the effectivity of this
Code may be assessed within a period of 3 years from the
GR: Accrues on the first day of January of each year. date they became due.
XPN: New taxes, fees or charges, or changes in the
rates thereof – accrue on the 1st day of the quarter (b) In case of fraud or intent to evade the payment of
next following the effectivity of the ordinance taxes, fees, or charges, the same may be assessed
imposing such new levies or rates. within 10 years from discovery of the fraud or intent
to evade payment.
Time of payment
Section 167, LGC (c) Local taxes, fees, or charges may be collected
Unless otherwise provided in this Code, all local taxes, within 5 years from the date of by or judicial action.
fees, and charges shall be paid within the first 20 days No such action shall be instituted after the expiration of
of January or of each subsequent quarter, as the said period: Provided, however, that, taxes, fees or
case may be. The Sanggunian concerned may, for a charges assessed before the effectivity of this Code may
be collected within a period of 3 years from the date of ADMINISTRATIVE REMEDIES
assessment. 1. Local government’s lien
Section 173, LGC
(d) The running of the periods of prescription provided in Local taxes, fees, charges and other revenues
the preceding paragraphs shall be for the time during constitute a lien, superior to all liens, charges or
which: encumbrances in favor of any person, enforceable by
1. The treasurer is legally prevented from making the appropriate administrative or judicial action, not only
assessment of collection. upon any property or rights therein which may be subject
2. The taxpayer requests for a reinvestigation and to the lien but also upon property used in business,
executes a waiver in writing before expiration of the occupation, practice of profession or calling, or exercise of
period within which to assess or collect; and privilege with respect to which the lien is imposed.
3. The taxpayer is out of the country or otherwise cannot
be located. The lien may only be extinguished upon full payment of
the delinquent local taxes fees and charges including
Period of assessment related surcharges and interest.
GR: Within 5 years from the date they become due.
XPN: In case of fraud or intent to evade tax – within 10 KMA: This attaches to the property (it must be
years from discovery of fraud or intent to evade annotated). Even if you transfer ownership or the tax
payment. declaration changes, so long as you have not settled the
unpaid liabilities, that lien continues to exist.
Period of collection
Within 5 years from the date of assessment by 2. Distraint of personal property
administrative or judicial action. Personal properties subject to distraint are goods, chattels
or effects and other personal property of whatever
Prescriptive period, when suspended character, including stocks and other securities, debts,
1. If the treasurer is legally prevented from the credits, bank accounts, and interest in and rights to
assessment or collection from the tax personal property.
2. If the taxpayer requests for a reinvestigation and
executes a waiver Procedure: (Sec. 175, LGC)
3. If the taxpayer is out of the country or cannot be a. Seizure of personal property
located b. Accounting of distrained goods
c. Publication of time and place of sale and the articles
KMA: If the treasurer is legally prevented from the distrained
assessment or collection from the tax – the regular courts d. Release of distrained property upon payment prior to
may issue an injunction as compared to the NIRC which sale
may only be issued by the CTA. e. Procedure of sale
f. Disposition of proceeds
REMEDIES KMA: Local treasurer shall, upon written notice, seize

TAXPAYER’S REMEDY sufficient personal property to satisfy the tax and charges.
1. Extrajudicial: Officer posts notice in office of LGU Chief Executive where
Before Assessment: the property is distrained and in at least 2 public places
a) Question constitutionality specifying the time which is not be less than 20 days after
b) Declaratory relief the notice and place of sale, and distrained goods.
• At the time and place for distraint, the officer
After Assessment: conducting the sale shall sell the distrained goods or
a) Protest effects at public auction to the highest bidder for
b) Claim for refund or credit cash.
c) redemption • Within 5 days, the LT shall report such sale to the local
chief executive. Excess of proceeds shall be
2. Judicial: returned to the owner of the property sold.
a) Court action • If property distrained is not disposed within 120 days,
b) Declaratory relief it shall be considered sold to the LGU for the amount of
c) injunction the assessment made by the Committee on Appraisal;
the tax delinquencies shall be cancelled.
LGU REMEDIES • If proceeds of the sale are insufficient, other
1.) Extrajudicial: properties may be distrained until full amount due,
a) Local government’s lien including all expenses, is collected.
b) Distraint – Personal Property
c) Levy – Real property 3. Levy of real property
d) Compromise • Levy upon real property and interest in or rights to real
property.
2.) Judicial:
a) Court action Procedure: (Sec. 176, LGC)
b) Declaratory relief a. Preparation of a duly authenticated certificate by the
c) Injunction LGU Treasurer effecting the levy on the real property
b. Service of written notice of levy to the assessor and
Register of Deeds
Remedies of the LGUs for collection of revenues c. Annotation of the levy on the tax declaration and the
Section 174, LGC certificate of title
The civil remedies for the collection of local taxes, fees, or, d. Advertisement and Sale (Sec. 178, LGC)
and surcharges and interest resulting from delinquency
shall be: 4. Compromise
a. By administrative action thru distraint of goods, • KMA: For local government taxation, there is no
chattels, or effects, and other personal of whatever minimum compromise rate. This will be left to the
character, including stocks and other securities, discretion of the local government.
debts, credits, bank accounts, and interest in and
rights to personal property, and by levy upon real JUDICIAL REMEDIES
property and interest in or rights to real property; 1. Court Action
b. By judicial action. Section 183, LGC
Either of these remedies or all may be pursued The local government unit concerned may enforce the
concurrently or at the discretion of the local collection of delinquent taxes, fees, charges or other
government unit concerned. revenues by civil action in any court of competent
jurisdiction. The civil action shall be filed by the local
treasurer within the period prescribed in Section 194 of
this Code.
2. Declaratory Relief
3. Injunction
REMEDIES OF THE TAXPAYER • If RTC decided the protest in its appellate
ADMINISTRATIVE REMEDIES jurisdiction appeal to the CTA en banc.
• If RTC decided in its original jurisdiction, then
BEFORE ASSESSMENT appeal to the CTA in division.
1. Question the constitutionality of the ordinance • What if more than 1M? then you file your protest with
imposing the local tax. the RTC still.
Section 187, LGC • TN: ang P1M above na pwede ka dtso CTA from
Any question on the constitutionality or legality of the taxing authority is kato gina collect sa NIRC
tax ordinances or revenue measures may be raised but if local tax gani dapat mu agi either MTC or
on appeal within 30 days from the effectivity thereof RTC.
to the Secretary of Justice who shall render a • KMA: I pointed out that the exclusive appellate
decision within 60 days from the date of receipt of the jurisdiction of CTA en banc, we said that it must be a
appeal. decision of the RTC in its appellate jurisdiction:
➢ Local tax case regardless of amount
Within 30 days after receipt of the decision or the lapse of ➢ Tax collection case 1M or more
the 60-day period without the Secretary of Justice acting ➢ Criminal violations 1M or more
upon the appeal, the aggrieved party may file • Mo matter ang 1M for NIRC, for local either MTC
appropriate proceedings with a court of competent or RTC.
jurisdiction.
Important: Under local taxation, it is not a requirement
KMA: Apply the principle of exhaustion of to pay when you protest.
administrative remedies. Go first to the SOJ, then to the
RTC. If you immediately go to the RTC, the case would KMA: If the local treasurer finds the protest meritorious,
most likely be dismissed. the local treasurer will just cancel the assessment. If not,
appeal to the courts. Note that the jurisdiction of the court
In summary: still depends on the amount of the tax assessed.
(a) Question on constitutionality of tax ordinances raised
to the SOJ within 30 days from effectivity thereof 2. Claim for refund or credit for erroneously or
(b) Secretary of Justice (has 60 days to decide from illegally collected tax
receipt) Section 196, LGC
(c) If decision of SOJ is adverse, file with RTC within 30 No case or proceeding shall be maintained in any court for
days from receipt of the adverse decision or from the lapse the recovery of any tax, fee, or charge erroneously or
of the 60-day period. illegally collected until a written claim for refund or
credit has been filed with the local treasurer. No case
Important: The court of competent jurisdiction here or proceeding shall be entertained in any court after the
is the RTC. expiration of 2 years from the date of the payment of
such tax, fee, or charge, or from the date the
2. Declaratory relief taxpayer is entitled to a refund or credit.
Same procedure as the Rules of Court.
KMA: The written claim for refund or credit must be
AFTER ASSESSMENT filed with the local treasurer. The case has to be filed
1. Protest within a period of 2 years from the payment of the
Section 187, LGC tax, fee, or charge or from the date the taxpayer is entitled
Within 60 days from the receipt of the notice of to a refund or credit.
assessment, the taxpayer may file a written protest
with the local treasurer contesting the assessment; TN: Unlike the NIRC, the running of the two-year period
otherwise, the assessment shall become final and may be suspended by an intervening cause.
executory.
3. Redemption of property sold
The local treasurer shall decide the protest within 60 Section 179, LGC
days from the time of its filing. If the local treasurer Within 1 year from the date of sale, the delinquent
finds the protest to be wholly or partly meritorious, he shall taxpayer or his representative shall have the right to
issue a notice cancelling wholly or partially the redeem the property upon payment to the local treasurer
assessment. of the total amount of taxes xxx. Such payment shall
invalidate the certificate of sale issued to the purchaser
However, if the local treasurer finds the assessment to be and the owner shall be entitled to a certificate of
wholly or partly correct, he shall deny the protest wholly redemption from the provincial, city or municipal treasurer
or partly with notice to the taxpayer. or his deputy.
The taxpayer shall have 30 days from the receipt of the The owner shall not, however, be deprived of the
denial of the protest or from the lapse of the 60-day period possession of said property and shall be entitled to
prescribed herein within which to appeal with the court of the rentals and other income thereof until the
competent jurisdiction otherwise the assessment becomes expiration of the time allowed for its redemption.
conclusive and unappealable.
KMA: The period given to the taxpayer to redeem his
Summary of rules: property is 1 year from the date of sale. Note that the right
A. Taxpayer has 60 days to file a protest with the local of pre-emption may still be applied.
treasurer from receipt of the notice of assessment
B. Local treasurer has 60 days to decide TN: The owner shall not be deprived of the possession or
a. If meritorious – notice of assessment is cancelled the rentals or the income until the expiration of the
b. If unmeritorious – deny the protest redemption period.
C. Taxpayer has 30 days to appeal to the court of
competent jurisdiction either from: JUDICIAL REMEDIES
a. Receipt of the denial of the protest 1. Court action
b. Lapse of 60-day period • Same as above. (Section 187)
2. Declaratory relief
The Court of competent jurisdiction: 3. Injunction
• Depends of the amount. • KMA: Under the NIRC, injunction is prohibited except
• Jurisdiction of the MTC, MTCC, MeTC if issued by the CTA for justifiable reasons. Under the
➢ principal amount of taxes, fee exclusive of LGC, there is no such prohibition. You may file
charges (25% surcharges) the is less 300,000 an injunction before the court.
or less 400,000 in Metro Manila.
• Jurisdiction of the RTC Angeles City vs. Angeles City Electric Co
➢ principal amount of taxes, fee exclusive of The LGC does not contain a provision prohibiting
charges is more than 300,000 (Metro Manila - courts from enjoining the collection of local taxes.
400,000) provided that the amount is less Such lapse may have allowed preliminary injunction under
than 1M (class discussion: bisan pa exceed Rule 58, ROC where local taxes are involved.
1M, RTC pa rin)
REAL PROPERTY TAXATION Fundamental Principles
CONCEPT Section 165, LGC
Real Property tax (RPT) The appraisal, assessment, levy and collection of real
• A direct tax on ownership of lands and buildings property tax shall be guided by the following fundamental
or other improvements thereon payable regardless of principles:
whether the property is used or not, although the
value may vary in accordance with such factors. 1. Real property shall be appraised at its current and
fair market value.
Real property • The responsible officer for the ultimate determination
• Subject to the definition given by Art 415 of the Civil of the FMV is the assessor. However, the owner
Code. initially declares the value of such property. In
the absence of the owner’s declaration, the assessor
Improvement may conduct an investigation
• Valuable addition made to a property or an
amelioration in its condition amounting to a more than 2. Real property shall be classified for assessment
a mere replacement of parts. purposes on the basis of actual use.
• The basis for classification is the actual use, not
Machinery – embraces machines, equipment, mechanical ownership. This use may vary according to the
contrivances, instruments, appliances or apparatus which classification given by the Sanggunian for the said
may or may not be attached permanently or temporarily land which is based its predominant use (ex. If
to the real property predominantly residential, then classified as
residential)
Including: Physical facilities for production, installations
and appurtenant service facilities, those which are mobile, MCIAA vS. Marcos
self-powered or self-propelled, and those not permanently • Usage means direct, immediate and actual application
attached to the real property which are actually directly of the property.
and exclusively used to meet the needs of a particular
industry or service activity 3. Real property shall be assessed on the basis of
uniform classification within each LGU.
TN: One who owns the property is the statutory taxpayer
4. The appraisal, assessment, levy and collection of
LGUs with power to levy RPT (PCM) RPT shall not be let to any private person.
1. Provinces
2. Cities 5. The appraisal and assessment of real property
3. Municipalities within Metro Manila shall be equitable.
Real property tax is:

1. It is a direct tax on ownership – Like the Civil Code Imposition of Real Property Tax
definition, it covers all real properties. The difference with Power to levy Real Property Tax
the conventional definition of real properties under the civil Section 232, LGC
code, is that the civil code did not include machineries. A province or city or a municipality within the
Metropolitan Manila Area may levy an annual ad
2. RPT under taxation law embraces machines, equipment, valorem tax on real property such as land, building,
mechanical, contrivances, instruments, or apparatus machinery, and other improvement not hereinafter
which may or may not be attached permanently, including specifically exempted.
physical facilities for production, installations and
appurtenant service facilities, those that are mobile, self- Coverage
powered, or self-propelled and those not permanently For a Province, or a City or Municipality within Metro Manila
attached to real property but which are actually, directly, (a) Land
exclusively used to meet the need of a particular industry (b) Building
or service activity. (c) Machinery
(d) Other improvements not specifically exempted
Permanently attached vs. Temporarily attached
Rates of levy
a. Province – note exceeding 1% of the assessed value of
real property
b. City– not exceeding 2% of the assessed value of real
property
c. Municipality within Metro Manila – not exceeding 2% of
the assessed value of real property
EXEMPTIONS FROM RPT

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.
• If the one using the lot is a taxable person,
whether natural or juridical, then the Republic or
any of its political subdivisions is subject to RPT.
• Beneficial use – refers to actual use by a
Characteristics of a real property tax (DAPIL) taxable person.
1. It is a direct tax on the ownership of real property. • Political subdivisions – covers government
2. It is an ad valorem tax. The value is based on the tax instrumentalities (ex. MCAA). Thus, these are not
base. taxable.
3. It is proportionate because the tax is calculated on the • Phil. Ports Authority v. Iloilo: GOCCs are not
basis of a certain percentage of the value assessed. covered by the exemption since the
The phrase “certain percentage” is provided for by law exemption only refers to instrumentalities
depending on the nature of the property. without personalities distinct from the
4. It creates a single, indivisible obligation. government.
5. It is a local tax and may be collected by the PCM within
Metro Manila (This refers to the basic RPT and basic 2. Charitable institutions, churches, parsonages or
levies) convents appurtenant thereto, mosques, non-
profit or religious cemeteries and all lands,
TN: Real property tax attaches on the property (i.e. buildings, and improvements actually, directly,
lien) and is enforceable against it. and exclusively used for religious, charitable or
educational purposes.
• There is a constitutional provision similar to this. exclusively used for public purposes consisting of the
However, they are not totally similar. In the airport terminal building, airfield, runway, taxiway and the
Constitutional provision (not under this code), lots on which they are situated, are not subject to real
what was being exempted were the assets. property tax and respondent City is not justified in
• In this article, what are being exempted are only collecting taxes from petitioner over said properties.
lands, buildings, and improvements actually,
directly, and exclusively used for religious, Petitioner’s properties that are actually, solely, and
charitable or educational purposes. (Does not exclusively used for public purpose, consisting of the
include machineries) airport terminal building, airfield, runway, taxiway
and the lots on which they are situated, exempt from
Q: If the province of Cebu leased a lot to SM, can it real property tax imposed by the City of Lapu-Lapu.
be subject to RPT?
• Yes. SM is a taxable juridical person.
Special Levies by LGUs
Q: If the province of Cebu leased a lot to USC, can it Special Levy on Idle Lands
be subject to RPT? Section 236, LGC
• No. USC is a non-stock non-profit educational Additional Ad Valorem Tax on Idle Lands. – A province or
institution. city, or a municipality the Metropolitan Manila Area, may
levy an annual tax on idle lands at the rate not
Q. If the province of Cebu leases machinery that it exceeding 5% of the assessed value of the property
owns to the Archdiocese of Cebu, is it exempt or which shall be in addition to the basic real property
taxable? tax.
• It is taxable. While it is true that the beneficial
use is given to a religious institution, the subject Lands covered by the Levy on Idle Lands
property however is a “machinery” which is not Section 237, LGC
covered under the enumeration (lands, buildings, 1. Agricultural lands
or improvements) More than 1 hectare in area suitable for cultivation,
dairying, inland fishery, and other agricultural uses, ½ of
XPN: If such machinery was permanently attached to the which remain uncultivated or unimproved.
land. Not considered idle lands:
a. Agricultural lands planted to permanent or perennial
3. All machineries and equipment actually, directly crops with at least 50 trees to a hectare
and exclusively used by local water districts b. Lands actually used for grazing purposes
GOCCs engaged in the supply and distribution of
water and/or generation and transmission of 2. Other than agricultural lands
electric power. More than 1,000 sqm in area, ½ of which remain
unutilized or unimproved.
Requisites: The purpose here is to encourage cultivation and
a. Actually, directly and exclusively used by local water improvement.
districts and GOCCs
b. Engaged in the supply and distribution of water 3. Residential lots in subdivisions
and/or generation and transmission of electric power Provided, the ownership of which has been
Example: MERALCO. transferred to individual owners, who shall be liable
for the additional tax.
4. All real property owned by duly registered
cooperatives as provided for under R. A. No. Exempt idle lands
6938. Section 238, LGC
Lands exempt by reason of force majeure, civil
5. Machinery and equipment used for pollution disturbance, natural calamity or any cause or
control and environmental protection. circumstance which physically or legally prevents
• Except as provided herein, any exemption from improving, utilizing or cultivating the same.
payment of real property tax previously granted to, or
presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or Special Levy or Assessment for Public Works
controlled corporations are hereby withdrawn upon Section 240, LGC
the effectivity of this Code. A province, city or municipality may a special levy on the
lands comprised within its territorial jurisdiction
Phil. Fisheries Development Authority (PFDA) vs. specially benefited by public works projects or
Central Boards of Assessment Appeals (CBAA) improvements funded by the local government unit
PFDA operating the Lucena Fishing Port Complex is concerned.
an instrumentality of the government. PFDA is not a
GOCC for even if it has capital stocks, it is not divided Provided, however, that the special levy shall not
into shares of stocks. It has no stockholders or exceed 60% of the actual cost of such projects and
voting shares. It also has no members so it cannot improvements, including the costs of acquiring land and
be a non-stock corporation. such other real property in connection therewith.
The SC here distinguished an instrumentality of the Provided, further, that the special levy shall not apply
government from a GOCC. The SC held that it is a to lands exempt from basic real property tax and the
GOCC if it has capital stocks, and is divided into remainder of the land portions of which have been donated
shares of stocks, has stockholders/ voting shares. to the local government unit concerned for the
construction of such projects or improvements.
Manila International Airport Authority (MIAA) vs.
CA Imposing authority of Special Levy
A GOCC must be organized as a stock or non-stock • Provinces, cities, and even municipalities located
corporation. MIAA is not organized as a stock or non- outside of Metro Manila.
stock corporation. Its charter mandates that MIAA must
remit 20% of its annual gross operating income to the When imposed
national treasury. It is a government instrumentality Requirements:
vested with corporate powers by its charter. Hence airport 1. Lands specially benefited by public works and
lands and buildings are of public dominion. projects or development (i.e. increase in the value
of the property)
TN: This served as the main argument in MCIA vs. Lapu- 2. Funded by the LGU concerned
Lapu.
KMA: Pinamungajan constructed an access road
Mactan Cebu International Airport vs. City of Lapu connecting it to another town. Because of this, the value
Lapu of your land increased. The cost is 1B. LGU can recover
Petitioner MCIA is an instrumentality of the government. 600M from the owners of the lands whose value increased
Consequently, its properties actually, solely, and, because of the development.
Important: This is the only special levy which Additional 1% Special Education Fund Tax
requires public hearing. The rest need not have. Public Section 272, LGC
hearing is necessary to ascertain how to impose or divide The proceeds of the additional 1% tax on real property
the imposable assessment. accruing to the SEF shall be automatically released to the
local school boards.
Special Levy for Special Education Fund (SEF) Provided: In case of provinces – the proceeds shall be
Section 235, LGC divided equally between the provincial and municipal
A province or city, or a municipality within the Metropolitan school boards.
Manila Area, may levy and collect an annual tax of 1%
on the assessed value of real property which shall The proceeds shall be allocated for either:
be in addition to the basic real property tax. The 1. The operation and maintenance of public schools,
proceeds thereof shall exclusively accrue to the Special 2. Construction and repair of school buildings
Education Fund. 3. Facilities and equipment
4. Educational research
Proceeds of the Special Education Fund shall be 5. Purchase of books and periodicals, and sports
released to the Local School Boards (e.g. Remote LGUs development as determined and approved by the
hiring teachers through the LCB, not under DepEd). In Local School Board.
case of provinces, the proceeds shall be divided
equally between the provincial and municipal school Tax on idle lands
boards Section 273, LGC
Province or City
Socialized Housing Tax The proceeds of the additional real property tax on idle
RA 7279 (Urban Development and Housing Act of lands shall accrue to the respective general fund of the
1992) province or city where the land is located.
0.5% of the assessed value of all lands in the urban areas
in excess of P50,000 except those lands which are Municipality within the Metro Manila
exempted from the coverage of RA 7279. The proceeds shall accrue equally to the Metropolitan
Manila Authority and the municipality where the land is
Summary of special levy rates by the LGUs located.
Special levy Rate
Special Education Additional 1% of assessed Special Assessments or Levy
Fund value Section 274, LGC
Ad valorem on idle Not exceeding 5% of The proceeds of the special levy on lands benefited by
lands assessed value public works, projects and other improvements shall
Special assessment Not exceeding 60% of the accrue to the general fund of the local government unit
actual cost of the project which financed such public works, projects or other
or improvement. improvements.
Socialized Housing Additional 0.5 %
Tax of assessed value Atty: If LGU did not finance such public work, etc, it
Strictly speaking special assessments are not taxes cannot collect.
because it depends on whether or not a particular
local government funded the improvement or not.
Procedure in the administration of Real Property Tax
Important: These are added on top of the basic real Declaration of Real Property Tax
property taxes. Section 202-203, LGC
1. Declaration by the owner or administrator
Illustration of Special rates: a. Prepare a sworn statement declaring the true
If province collects a basic rate of 1% of assessed value value of the property which shall be the current and
and it likewise collects a Special Education Fund rate of fair market value of the property.
1%, the total assessed rate will be 2%. b. It must contain a sufficient description of the property
to enable the assessor or his deputy to identify the
same for assessment purposes
Disposition of Proceeds c. The declaration must be filed with the assessor
Basic Real Property Tax once every 3 years during the period from
Section 271, LGC January 1 to June 30.
The proceeds of the basic real property tax, including
interest thereon, and proceeds from the use, lease or For newly-acquired property
disposition, sale or redemption of property acquired at a The owner or the administrator must file in the assessor’s
public auction in accordance with the provisions of this office within 60 days from the date of transfer, a
Title by the province or city or a municipality within the Sworn Statement containing the:
Metropolitan Manila Area shall be distributed as follows: 1. Fair Market Value
2. Description of the property
1. In the case of Province
a. Province – 35% For improvements of the property
b. Municipality where property is located – 40% The owner or administrator must file within 60 days
c. Barangay where property is located – 25% upon completion or occupation, whichever comes
2. In the case of Cities earlier, a Sworn Statement containing the:
a. City – 70% 1. Fair Market Value
b. Component barangays of the city where the property 2. Description of the property
is located – 30% distributed among:
➢ Barangay where property is located – 50% 2. Declaration by any person acquiring real property
➢ All other component barangays of the city – 50% or making improvements
3. In the case of Municipalities within Metro Manila The sworn statement declaring the true value of the
a. Metro Manila Authority – 35% property must be filed to the provincial, city or municipal
b. Municipality – 35% assessor within 60 days after the acquisition or upon
c. Component barangays of the municipality where the completion or occupancy of the improvement, whichever
property is located – 35% distributed among: comes earlier.
➢ Barangay where property is located – 50%
➢ All other component barangays of the 3. Declaration by the Provincial or City or Municipal
municipality – 50% Assessor
4. In the case of Barangays When the person required to file the sworn declaration
The share of each Barangay shall be released, without refuses or fails to make such declaration, the provincial,
need of any further action, directly to the Barangay city or municipal assessor shall declare the property in the
treasurer on a quarterly basis within 5 days after the end name of the defaulting owner. No oath shall be required of
of each quarter and shall not be subject to any lien or such declaration.
holdback for whatever purpose.
Proof of exemption of Real Property from taxation 4. The schedule of the FMV is published in a
Section 206, LGC newspaper of general circulation in the PCM, or
Any person by or for whom the real property is in absence thereof, shall be posted at the provincial
declared, who shall claim tax exemption, shall file capitol, city or municipal hall and two other
with the assessor together with sufficient conspicuous public places.
documentary evidence in support of such claim. This
must be done within 30 days from the date of the Public hearing not required
declaration of the property. (Section 206) • Public hearing is not a requirement before the
Sanggunian can enact an ordinance imposing this real
Assessment of property subject to back taxes property tax, provided there is publication in the
Section 222, LGC newspaper of general circulation in the locality; or
Real property declared for the first time shall be assessed the least, there is posting in two conspicuous public
for taxes for the period during which it would have places and in the provincial capitol, city or the
been liable but in no case for more than 10 years municipal hall.
prior to the date of initial assessment. • TN: This rule applies only to Basic RPT, Special
Education Fund, and Ad Valorem Tax on Idle Lands.
Such taxes shall be computed on the basis of the In Special Assessment and Special Levy on
applicable schedule of values in force during the Public Improvements, it is a requirement that a
corresponding period. public hearing must be conducted. There has to
have consultation and public hearing of the
Valuations are found in the tax declaration of the property. stakeholders to be affected.
Q: Is a Tax Declaration an evidence of ownership? Classes of real property for assessment purposes
• Yes, but it is not a conclusive evidence of ownership. Section 215, LGC
It is merely prima facie, which may be rebutted by For purposes of assessment, real property shall be
evidence to the contrary. classified as residential, agricultural, commercial,
industrial, mineral, or special. The city or municipality
Listing of Real Property in the Assessment Rolls within the Metropolitan Manila Area, through their
Section 205, LGC respective Sanggunian, have the power to classify
The local assessor must maintain an assessment roll lands as residential, agricultural, commercial, industrial,
wherein all real property, whether taxable or exempt, mineral, timberland, or special in accordance with their
located within the territorial jurisdiction of the LGU, is zoning ordinances.
listed.
It is the Sanggunian, upon the recommendation of
Real property identification system the assessor, which decides for the classification.
Section 207, LGC 1. Commercial land
All declarations of real property made under the provisions A land is considered a commercial land when it is devoted
of this Title shall be kept and filed under a uniform principally for the object of profit and is not classified as
classification system to be established by the provincial, agricultural, industrial, mineral, timber or residential land.
city or municipal assessor.
2. Agricultural Land
Appraisal and Valuation of Real Property a. A land devoted principally on planting of trees, raising
Section 201, LGC of crops, livestock or poultry, etc. including inland
All real property, whether taxable or exempt, shall be fishing and similar aquaculture activities and other
appraised at the current and fair market value agricultural activities
prevailing in the locality where the property is b. Not classified as industrial, mineral, commercial,
situated. The Department of Finance shall promulgate the timber or residential land
necessary rules and regulations for the classification,
appraisal, and assessment of real property pursuant to the 3. Residential Land
provisions of this Code. When the property is principally devoted for habitation.
Two properties involved: 4. Mineral Land

1. Land Land in which minerals, metallic or non-metallic, exist in
2. Machineries sufficient quantity or grade to justify the necessary
expenditures to extract and utilize such minerals.
FOR LAND:
Section 213, LGC 5. Industrial Land
The assessor of the city or province may summon the Land devoted principally in industrial activity, as capital
owner of the properties to be affected and may take their investment and not classified as residential, mineral,
positions concerning the property, its ownership, amount, agricultural or commercial, timber land.
nature and value.
FOR MACHINERY:
In the determination of the FMV, it’s not a “one-man-show” How FMV of machineries determined
by the assessor. The assessor may obligate other persons 1. Brand new machinery
to aid him in ascertaining the fair market value. a. Domestically purchased – acquisition cost only
b. Imported – acquisition cost includes freight,
Persons who may aid the assessor in determining insurance, bank and other duties
the FMV 2. All other cases (not brand new) – Prorated on the
1. The person transferring the real property – may remaining economic life divided by the estimated economic
be summoned by the assessor to ascertain the FMV as life multiplied by the replacement or reproduction cost.
provided in.
2. The Register of Deeds – has the duty to apprise or Formula:
advise the assessor of the possible FMV. Economic life
3. Official issuing building permit or certificate of ----------------------------- X Replacement or
registration of machinery – has the duty to also Estimated economic life Reproduction cost
advise or apprise the assessor of the fair market value
of the building and the machinery which basically KMA: When we talk of the economic life of the machinery,
apprises the improvements. we are referring to the duration of the period of time where
4. Geodetic engineers – obligated to assist the assessor you expect to have a return or to have a cash flow, the
in computing the fair market value. least, out of that particular investment [so the benefit is
greater than the cost]
Steps undertaken by the assessor and the local
government officials in determining the FMV TN: The useful life is not necessarily the economic life.
1. The owner of the property is summoned
2. The assessor prepares a schedule of FMV for different
classes of property
3. The Sanggunian enacts through an ordinance the
schedule of the FMV
Assessment of the Real Property Tax Payable the deadline of payment is not specified unlike in Real
1. Determine or compute the assessed value property tax.
Assessed value – FMV multiplied with the assessment
level. B. Special levies
Deadline of payment depends on the ordinance
Section 199 (g), LGC imposing it (but usually every January)
“Assessment level” is the percentage applied to the
FMV to determine the taxable value of the property. Interest on unpaid real property tax
The assessment levels shall be fixed by ordinances of the Section 255, LGC
Sanggunian at rates not exceeding those prescribed in In case of failure to pay the basic real property tax when
Section 218. due, shall subject the taxpayer to the payment of interest
at the rate of 2% per month on the unpaid amount
The assessment level is already provided under the until the delinquent tax shall have been fully paid.
LGC depending on the classification of the land or But the total interest on the unpaid tax shall not
property. exceed 36 months.
KMA: So it is 24% per annum.
2. Determine the real property tax payable
After getting the assessed value, multiply it with the tax Actual use of property as basis for assessment
rates: Section 217, LGC
1. Province – Not exceeding 1% of the assessed value Real property shall be classified, valued and assessed
2. Cities or municipalities within Metro Manila – Not on the basis of its actual use regardless of where
exceeding 2% of the assessed value located, whoever owns it, and whoever uses it.
3. Special Education Fund – Not exceeding 1%
4. Ad valorem tax on idle lands – Not exceeding 5% Q: Who has the responsibility to pay?
• The owner. But the basis whether the property is
General revisions of assessments and property taxable or not, is the actual usage. Meaning, for
classification example, if USC does not own the property where the
The fair market value is not on a yearly basis but the school stands but only borrowed from Ms. Ronulo, Ms.
Sanggunian may opt to revise it every 3 years as a rule. Ronulo does not have to pay the real property tax.
However, it is not automatic. She has to get a
Section 219, LGC certificate of exemption.
The local assessor shall undertake a general revision of
real property assessments every 3 years. Q: Why is the government liable for paying tax for
its beneficial use of a property?
Date of effectivity of assessment or reassessment • As a general rule, the government shall not be subject
Section 221, LGC to tax but only if it is exercising its governmental
GR: All assessments or reassessments made after the 1st function. If the government is exercising a
day of January of any year shall take effect on the 1st day proprietary function, then it can be subjected to
of the January of the succeeding year. tax (i.e. lease of land to a private entity)
XPNs: When the reassessment of real property was due
to: Tax discount for prompt payment
1. Its partial or total destruction Section 251, LGC
2. A major change in its actual use If the basic real property tax and the additional tax
3. Any great and sudden inflation or deflation of real accruing to the Special Education Fund (SEF) are paid in
property values advance in accordance with the prescribed schedule of
4. Gross illegality of the assessment when made payment as provided under Section 250, the Sanggunian
5. Any other abnormal cause concerned may grant a discount not exceeding 20%
Here, the assessment shall be made within 90 days from of the annual tax due.
the date any of such cause occurred, and shall take effect
at the beginning of the quarter next following the KMA: To encourage owners to pay on time or to pay in
reassessment. advance, there is this “promo” given by the government.
a. For advance payment – discount not exceeding 20%
Payment of Real Property Tax of the annual tax due may be granted
Date of accrual b. For prompt payment – discount not exceeding 10% of
Section 246, LGC the annual tax due may be granted.
The real property tax for any year shall accrue on the
first day of January and from that date it shall Place of payment
constitute a lien on the property which shall be Section 247, LGC
superior to any other lien, mortgage, or encumbrance The collection of the real property tax shall be the
of any kind whatsoever, and shall be extinguished only responsibility of the city or municipal treasurer
upon the payment of the delinquent tax. concerned. The city or municipal treasurer may deputize
the Barangay treasurer to collect all taxes on real property
KMA: It constitutes as a superior lien. Meaning, it located in the Barangay: Provided, that the Barangay
attaches to the res or the property and is not affected by treasurer is properly bonded for the purpose
change of ownership.
KMA: You do not pay real property tax to a bank or any
Notice of collection private individual or entity. The same must be paid to any
Section 249, LGC city or municipal treasurer concerned. If a barangay
(a) On or before the 31st of January each year or on treasurer is deputized for the purpose, a bond is required
any date prescribed, the local treasurer shall post to be posted by the latter.
the notice of the dates when the tax may be paid
without interest at a conspicuous and publicly accessible Period to collect
place at the city or municipal hall. Section 270, LGC
(b) Said notice shall likewise be published in a newspaper The basic RPT and any other tax levied shall be collected
of general circulation in the locality once a week for 2 within 5 years from the date they become due. No
consecutive weeks. action for the collection of the tax, whether
administrative or judicial, shall be instituted after
Manner of payment the expiration of such period.
A. Basic Real Property Tax
It is paid in four (4) equal installments: In case of fraud or intent to evade payment of the tax,
1. On or before March 31 such action may be instituted for the collection of the same
2. On or before June 30 within 10 years from the discovery of such fraud or
3. On or before September 30 intent to evade payment.
4. On or before December 30
KMA: The prescriptive period to collect is either 5 years or
KMA: In other local taxes, you also have the option to pay 10 years, depending if there was a fraudulent intent to
in 4 equal or quarterly installments like above. However, evade payment.
a. Within 5 years from the date they become due.
It is not 5 years from the day of assessment because JUDICIAL REMEDIES
there is no assessment to speak of here. In RPT, the Section 266, LGC
fair market values are already laid down and the The local government unit concerned may enforce the
assessed value and tax rates are already enumerated. collection of the basic real property tax or any other tax
b. Within 10 years from discovery of fraud or intent to levied under this Title by civil action in any court of
evade payment competent jurisdiction. The civil action shall be filed by
the local treasurer within the period prescribed in Section
Suspension of the prescriptive period 270 of this Code.
Section 270, LGC
The period of prescription within which to collect shall be
suspended for the time during which: TAXPAYER’S REMEDIES
1. The local treasurer is legally prevented to collect tax. ADMINISTRATIVE REMEDIES
2. The owner or property requests for reinvestigation 1. Protest as owner or with legal interest in the
and writes a waiver before expiration of period to property
collect.
Unlike in NIRC that the BIR can be prevented by an A. Protest by means of appeal directly to the
injunction order from the CTA, the local treasurer Secretary of Justice
may be prevented by the local courts or Section 187, LGC
Secretary of DOJ. Any question on the constitutionality or legality of
3. The owner of property is out of the country or cannot tax ordinances or revenue measures may be raised
be located. on appeal within 30 days from the effectivity thereof
to the Secretary of Justice (SOJ) who shall render a
decision within 60 days from the date of receipt of
REMEDIES of the LGU the appeal.
Remedies of LGUs for Collection of Real Property Tax
Section 256, LGC Such appeal shall not have the effect of suspending the
For the collection of the basic real property tax and any effectivity of the ordinance and the accrual and payment
other tax levied under this Title, the local government unit of the tax, fee, or charge levied therein.
concerned may avail of the remedies by administrative
action thru levy on real property or by judicial If within thirty 30 days after receipt of the decision or the
action. lapse of the 60-day period without the SOJ acting upon the
appeal, the aggrieved party may file appropriate
ADMINISTRATIVE REMEDIES proceedings with a court of competent jurisdiction.
1. Local Government’s Lien
Section 257, LGC KMA: This is a familiar provision. Section 187 is applicable
The basic real property tax and any other tax levied to local government taxes as well as real property taxes.
constitutes a lien on the property subject to tax, superior
to all liens, charges or encumbrances in favor of any Grounds:
person, irrespective of the owner or possessor thereof, It is grounded on the impropriety of passing the
enforceable by administrative or judicial action, and may ordinance or not following any of the mandatory
only be extinguished upon payment of the tax and the requirements or procedures set by law like
related interests and expenses. publication, posting or hearing.
2. Levy on Real Property B. Protest against the Real Property Tax Deficiency
Section 258, LGC Section 252, LGC
Upon the failure to pay the tax when due, the local a. No protest shall be entertained unless the
treasurer shall issue a warrant levying the real taxpayer first pays the tax. There shall be annotated
property subject to tax. The warrant shall include a duly on the tax receipts the words “paid under protest.”
authenticated certificate showing the name of the owner The protest in writing must be filed within 30
or person having legal interest therein, description of the days from payment of the tax to the provincial,
property, amount of the tax due and interest thereon. city treasurer or municipal treasurer, in the case
of a municipality within Metropolitan Manila Area, who
KMA: The warrant of levy may be issued on or before, or shall decide the protest within 60 days from
simultaneous with the institution of the civil action for the receipt.
collection of the delinquent tax. b. The tax or a portion thereof paid under protest, shall
a. Warrant must be mailed or served to owner or person be held in trust by the treasurer concerned.
having legal interest in the property. c. In the event that the protest is finally decided in favor
b. Written notice of levy must be mailed or served to the of the taxpayer, the amount or portion of the tax
delinquent owner, the assessor and the Register of protested shall be refunded to the protestant, or
Deeds where the property is located. applied as tax credit against his existing or future tax
c. The Register of Deeds must annotate the levy on the liability.
tax declaration and certificate of title. d. In the event that the protest is denied or upon the lapse
of the 60-day period prescribed in subparagraph (a),
3. Sale of Real Property the taxpayer may avail of the remedies as provided for
Within 30 days after service of the warrant of levy, the in Chapter 3, Title II, Book II of this Code.
local treasurer shall proceed to publicly advertise for sale
or auction the property as may be necessary to satisfy the Process under Section 252:
tax delinquency and expenses of sale. 1. Receipt of Assessment.
a. Posting a notice at the main entrance of the LGU and 2. Payment (indicate if you are paying under protest).
in a publicly accessible and conspicuous place in the 3. Within 30 days from payment, protest assessment to
barangay where the real property is located the local treasurer of province, city or municipality who is
b. Publication once a week for 2 weeks in a newspaper given 60 days to decide.
of general circulation. 4. If treasurer’s decision unfavorable or does not act
within 60 days, taxpayer has 30 days from the
The sale shall be held either at: receipt of the unfavorable decision or lapse of the
a. The main entrance of the provincial, city or municipal 60-day period of inaction by the treasurer, to appeal
building to the Local Board of Assessments Appeals (LBAA)
b. On the property to be sold which has 120 days to decide.
c. Any other place as specified in the notice of the sale. 5. If LBAA decision is unfavorable or does not act on
your appeal within 120 days, then you appeal to
KMA: Owner may exercise the right of pre-emption. If bid Central Board of Assessments Appeals (CBAA)
is not enough, the property is forfeited in favor of the LGU within 30 days from decision or lapse of the 120-day
(certificate of forfeiture), but still subject to the 1 year period. The CBAA has no mandatory period to decide.
right of redemption. 6. If CBAA decision is unfavorable, appeal to CTA en
banc (Not division) within 30 days. It is en banc
because this is reviewing the decision of the CBAA in the
exercise of CBAA’s appellate jurisdiction.
TN: BIR has nothing to do with this.
7. If CTA’s decision is unfavorable, file a motion for
reconsideration.
8. If MR still unfavorable, Certiorari Rule 45 to Supreme
Court within 15 days.
Payment before protest

• Unlike other types of protest, payment is required
before protest in Real Property Taxation.
• However, the same is applicable only if there is a valid
assessment where the taxpayer merely does not
agree with the computation or the results. It is simply
questioning the correctness of the computation.
• TN: It is different if you question the validity of
the computation, like when you question the
classification of the land as residential and not as LGU
classified commercial. Here, you can file the protest
directly. There is no need for payment first.
2. Tax Refund or Tax Credit

Section 253, LGC
When an assessment of basic real property tax, or any
other tax levied 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 2 years
from the date the taxpayer is entitled to such reduction or
adjustment.
The provincial or city treasurer shall decide the claim for

tax refund or credit within 60 days from receipt thereof. 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.
KMA: Example is when your property is classified as

commercial but later discovered that it was actually
residential. Since you paid higher tax, you may claim tax
refund or credit.
Where: To the local treasurer who has 60 days to decide.

When: 2 years from date of payment
JUDICAL REMEDIES
1. Question the validity of a tax sale at public
auction
Section 267, LGC
No court shall entertain any action assailing the validity of
any sale at public auction until the taxpayer shall have
deposited with the court the amount for which the real
property was sold, together with interest of 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 of 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.
Requirements:
(a) Deposited with the court the amount for which the real
property was sold.
(b) Together with interest of 2% per month from the date
of sale to the time of the institution of the action.
Q: In what cases can you question the validity of an

auction sale?
• Although the law says that the court cannot declare a
public auction invalid simply by reason of irregularities
or informalities on the conduct of the sale, the public
auction is invalid when a substantive right of the
real property owner has been impaired.
• KMA: When you say substantive right, it includes
irregularities such as for example in levy, there is a
need for public auction, posting of notices, warrant of
levy, certificate of sale, and more. If any of these is
violated, then you can question the validity. But then
again, if you question, you need to post a bond or
deposit.
*END*

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TAXATION II - FINALS ATTY.

ARANAS EH403 2019-2020

Options when assessment becomes final 1 Fch. •

1. Pay the full amount 2 ’jyc'ae 'Mini| si ;i

3. Apply for compromise settlement NnnfauMi

Remedies for collection of taxes (assessment has

intone ii store intalnrtil'tfrtiiii

• When Suspended: 2K 216 2DC 2(0

➢ The CIR is prohibited from initiating collection 21 21

b. Posting of notice of sale Redemption by the Owner

2. JUDICIAL Requisites (for 229):

On Quorum and Voting (5) Decisions of the Secretary of Finance on customs

2. Decisions, resolutions or orders of the RTC in the

If the local tax case is P2,000,000, taxpayer should

MTC > if lost >RTC > if lost >CTA en banc

Philacor Credit Corporation vs. Commissioner of

In this case, petitioner Philacor is engaged in the business

Thus, under this arrangement, Philacor did not make, sign,

Acceptance, however, is an act that is not even

In a ruling adopted by the Bureau of Internal Revenue as

KMA: It’s actually the Sanggunian which grants the

Abolition of tax exemption before the LGC

For the taxes paid by PEZA companies such as the 5%

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and

Summary: * Additional tax is equal to P2 for every P5,000 of value of

PERSONS EXEMPT FROM COMMUNITY TAX

Manner of payment Q: Who collects the taxes?

Accrual of tax Periods of assessment and collection of local taxes

REMEDIES KMA: Local treasurer shall, upon written notice, seize

Real property tax is:

EXEMPTIONS FROM RPT

Two properties involved: 4. Mineral Land

Payment before protest

2. Tax Refund or Tax Credit

The provincial or city treasurer shall decide the claim for

KMA: Example is when your property is classified as

Where: To the local treasurer who has 60 days to decide.

The amount so deposited shall be paid to the purchaser at

Neither shall any court declare a sale at public auction

Q: In what cases can you question the validity of an

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