Professional Documents
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Taxation Reviewer - Local Taxation
Taxation Reviewer - Local Taxation
Taxation Reviewer - Local Taxation
The power to grant tax exemptions, tax incentives and tax reliefs shall not
apply to regulatory fees which are levied under the police power of the LGU.
(Sec. 1, Malacañang Memorandum Circular No. 153, s. 1992)
2. Tax Incentives
a. Shall be granted only to new investments in the locality and the
ordinance shall prescribe the terms and conditions therefore;
b. The grant shall be for a definite period not exceeding 1 calendar year;
c. The grant shall be through an ordinance passed prior to the 1st day of
January of any year;
d. Tax incentive granted to a type or kind of business shall apply to all
businesses similarly situated.
TAX EXEMPTION is conferred through the issuance of a non-transferable tax
exemption certificate. (Art. 282, IRR of LGC)
FACTS: PLDT paid a franchise tax equal to three percent (3%) of its gross
receipts. The franchise tax was paid “in lieu of all taxes on this franchise or
earnings thereof” pursuant to RA 7082.
The City of Davao withheld PLDT’s application for a Mayors Permit pending
PLDT’s payment of the local franchise tax.
PLDT refused to pay and sought a refund of the franchise tax it had paid
before, insisting it was exempt from the payment of franchise tax based on an
opinion of the Bureau of Local Government Finance.
Davao City denied PLDT’s protest and claim for tax refund.
ISSUE: Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to
the exemption from payment of the local franchise tax in view of the grant of
tax exemption to Globe and Smart.
The Local Government Code withdrew all tax exemptions previously enjoyed
by all persons. It also authorized local government units to impose a tax on
businesses enjoying a franchise notwithstanding the grant of tax exemption to
them. Exemptions from taxation are highly disfavored, so much so that they
may almost be said to be odious to the law.
d) Withdraw of Exemptions
General rule: Unless otherwise provided, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or judicial, including
government owned or controlled corporations are withdrawn upon the
effectivity of the LGC. [Sec. 193, LGC]
Sec. 193 is an express and general repeal of all statutes granting exemptions
from local taxes. It withdrew the sweeping tax privileges previously enjoyed by
private and public corporations.
National Power Corporation vs. City of Cabanatuan (G.R. No. 149110, April 9,
2003)
NPC refused to pay, arguing that the city government did not have the
authority to impose tax on government entities, and that as a non-profit
organization, it is exempted from the payment of all forms of taxes, charges,
duties or fees in accordance with Sec. 13 of RA No. 6395.
The city government, on the other hand, claimed that NPC's exemption from
payment of tax was already repealed by Sec. 193 of the Local Government
Code.
On appeal, the CA reversed the trial court's Order on the ground that section
193, in relation to sections 137 and 151 of the LGC, expressly withdrew the
exemptions granted to the petitioner. The petitioner filed a Motion for
Reconsideration on the Court of Appeal's Decision. This was denied by the
appellate court.
ISSUE: Whether or not CA erred in reversing the trial court's Order on the
ground that section 193, in relation to sections 137 and 151 of the LGC,
expressly withdrew the exemptions granted to the petitioner.
HELD: No. In the case at bar, section 151 in relation to section 137 of the LGC
clearly authorizes the respondent city government to impose on the petitioner
the franchise tax in question.
One of the most significant provisions of the Local Government Code is the
removal of the blanket exclusion of instrumentalities and agencies of the
national government from the coverage of local taxation because exemption
privileges granted to GOCCs and all other units of government were that such
privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises.
Although as a general rule, LGUs cannot impose taxes, fees, or charges of any
kind on the National Government, its agencies and instrumentalities, this rule
now admits an exception, i.e., when specific provisions of the LGC authorize
the LGUs to impose taxes, fees or charges on the aforementioned entities. In
the instance case, Section 151 in relation to Section 137 of the LGC clearly
authorizes Cabanatuan government to impose on NPC the franchise tax in
question.
To determine whether the NPC is covered by the franchise tax in question, the
following requisites should concur: (1) that petitioner has a “franchise” in the
sense of a secondary or special franchise; and (2) that it is exercising its rights
or privileges under this franchise within the territory of the respondent city
government. NPC fulfills both requisites.
The quoted provision under the loan agreement does not purport to grant any
tax exemption in favor of any party to the contract, including the beneficiaries
thereof. The provisions simply shift the tax burden, if any, on the transactions
under the loan agreements to the borrower and/or beneficiary of the loan.
Thus, the withdrawal by the Local Government Code under Sec. 193 and 234
of the tax exemptions previously enjoyed by petitioners does not impair the
obligation of the borrower, the lender or the beneficiary under the loan
agreements as, in fact, no tax exemption is granted therein.
Guidelines for the Granting of Tax Exemptions, Tax Incentives and Tax Reliefs
(IRR of LGC, Art 282 [B])
2) LGUs may exercise the power to levy taxes, fees or charges on any base or subject not
otherwise specifically enumerated herein or taxed under the provisions of the NIRC:
Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such taxes, fees or charges
shall not be enacted without any prior public hearing conducted for the purpose.
4) The power to impose a tax, fee, or charge or to generate revenue under the LGC shall
be exercised by the sanggunian of the LGU concerned through an appropriate ordinance.
When public safety and welfare so requires, the sanggunian concerned may
discontinue the collection of the tolls, and thereafter the said facility shall be
free and open for public use.
6. Community Tax
- The community tax is a poll or capitation tax imposed upon residents of a city or
municipality.
2. Juridical persons
a. Basic: annual community tax of P500.00
b. Additional tax: in no case, shall exceed Ten thousand pesos (P10,000.00)
in accordance with the following schedule:
i. For every P5,000.00 worth of real property in the Philippines
owned by it during the preceding year based on the valuation used for the
payment of the real property tax under existing laws, found in the assessment
rolls of the city or municipality where the real property is situated - Two pesos
(P2.00); and
ii. For every P5,000.00 of gross receipts or earnings derived by it
from its business in the Philippines during the preceding year - Two pesos
(P2.00). (Sec 158, LGC)
• 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 (Sec. 160, LGC).
• Time of payment
- The community tax shall accrue on the first (1st) day of January of each year
which shall be paid not later than the last day of February of each year (Sec. 161, LGC)
FACTS: Petitioner Batangas City is a local government unit (LGU) with the
capacity to sue and be sued under its Charter and Section 22(a)(2) of the Local
Government Code (LGC) of 1991. Petitioners Teodulfo A. Deguito and
Benjamin E. Pargas are the City Legal Officer and City Treasurer, respectively,
of Batangas City.
Shell protested the assessment saying that it is not liable to pay the amount
and that the Mayor's Permit Fees are exorbitant, confiscatory, arbitrary,
unreasonable and not commensurable with the cost of issuing a license. Shell
paid under protest.
HELD: No, the Local Government Unit of Batangas does not have said power
under the Local Government Code.
Section 133 of the LGC puts a limitation on the taxing powers of LGUs. It
provides that the exercise of taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following: xxx (h) Excise taxes
on articles enumerated under the National Internal Revenue Code, as
amended, and taxes, fees or charges on petroleum products. Indisputably, the
power of LGUs to impose business taxes derives from Section 143 of the LGC.
However, the same is subject to the explicit statutory impediment provided
for under Section 133(h) of the same Code which prohibits LGUs from
imposing "taxes, fees or charges on petroleum products." It can, therefore, be
deduced that although petroleum products are subject to excise tax, the
same is specifically excluded from the broad power granted to LGUs under
Section 143(h) of the LGC to impose business taxes. Thus, the omnibus grant
of power to LGUs under Section 143(h) of the LGC cannot overcome the
specific exception or exemption in Section 133(h) of the same Code.
Q: Can LGUs validly impose business tax on the gross receipts of transportation contractors?
A: NO. It is already well-settled that although the power to tax is inherent in the State, the same is
not true for the LGUs to whom the power must be delegated by Congress and must be exercised
within the guidelines and limitations that Congress may provide.
FACTS: The City of Manila, through its City Treasurer, began imposing and
collecting the business tax under Section 21(B) of the Manila Revenue Code
(Code), as amended by Ordinance No. 7807 (Ordinance). Section 21 (B) of the
Code imposed business tax on “transportation contractors, persons who
transport passenger or freight for hire, and common carriers by land, air or
water” while the Ordinance amended such by lowering the tax rate from 3%
per annum to .5% per annum. Because they were assessed and/or compelled
to pay business taxes pursuant to Section 21(B) of the Manila Revenue Code,
as amended, before they were issued their business permits, several
corporations, with principal offices in Manila and operating as "transportation
contractors, persons who transport passenger or freight for hire, and common
carriers by land, air or water," filed their respective petitions before the
Manila RTC against the City of Manila, Mayor Lim, Vice Mayor Lito Atienza
(Atienza), the City Council of Manila and City Treasurer Acevedo and
questioned the constitutionality of Sec. 21 (B) for being contrary to the
Constitution and the Local Government Code, and asked for the refund of
what they had paid as business tax.
ISSUE: Whether or not Section 21(B) of the Manila Revenue Code, as amended
by Ordinance No. 7807 is unconstitutional
The omnibus grant of power to municipalities and cities under Section 143(h)
of the LGC cannot overcome the specific exception/exemption in Section
133(j) of the same Code. This is in accord with the rule on statutory
construction that specific provisions must prevail over general ones. A special
and specific provision prevails over a general provision irrespective of their
relative positions in the statute.
2. Public hearings are required before any local tax ordinance is enacted (Sec. 187,
LGC)
3. Within 10 days after their approval, publication in full for 3 consecutive days in a
newspaper of general circulation. In the absence of such newspaper in the province,
city or municipality, then the ordinance may be posted in at least two conspicuous
and publicly accessible places. (Sec. 188 & 189, LGC)
NOTE: The requirement of publication in full for 3 consecutive days is mandatory for a
tax ordinance to be valid. The tax ordinance will be null and void if it fails to comply with
such publication requirement. (Coca-Cola v. City of Manila, G.R. No. 156252, June 27,
2006)
FACTS: On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No.
7988, otherwise known as "Revised Revenue Code of the City of Manila" which
increased the tax rates applicable to certain establishments operating within the City of
Manila, including that of Coca Cola. Coca Cola then filed a petition before the
Department of Justice (DOJ), against the City of Manila and its Sangguniang Panlungsod,
invoking Section 1874 of the Local Government Code of 1991 and at the same time
questioning the constitutionality of Section 21 of Tax Ordinance No. 7988. Section 21 of
the Old Revenue Code states that all registered businesses in the City of Manila that are
already paying the aforementioned tax shall be exempted from payment thereof. This
was deleted in the ordinance. In effect, it now imposed additional business tax on Coca
Cola which is already subject to other business tax. It is contended that the deletion is a
palpable and manifest violation of the LGC 1991. Subsequently, DOJ issued a Resolution
declaring Tax Ordinance No. 7988 null and void and without legal effect due to failure to
comply with mandatory publication requirements as provided for in the Local
Government Code of 1991 which provides:
"Section 188. Publication of Tax Ordinances and Revenue Measures. – Within
ten (10) days after their approval, certified true copies of all provincial, city and
municipal tax ordinances or revenue measures shall be published in full for three (3)
consecutive days in a newspaper of local circulation; Provided, however, that in
provinces, cities, and municipalities where there are no newspapers or local circulations
the same may be posted in at least two (2) conspicuous and publicly accessible places."
Documentary evidence submitted by Coca Cola indubitably shows that subject
tax ordinance was published only once, i.e., on the May 22, 2000 issue of the Philippine
Post. Clearly, therefore, City of Manila failed to satisfy the requirement that said
ordinance shall be published for three (3) consecutive days as required by law. In
affirming the nullification of the ordinance as per request of another taxpayer, Singer
Sewing Maching, the BLGF Executive Director issued an Indorsement on 20 November
2000 ordering the City Treasurer of Manila to "cease and desist" from enforcing Tax
Ordinance No. 7988. However, despite the Resolution of the DOJ and the directive of the
BLGF, they still continued to assess Coca Cola business tax for the year 2001. Thus, Coca
Cola filed a Complaint with the RTC of Manila praying that the City be enjoined from
implementing the tax ordinance.
During the pendency of the said case, the City Mayor of Manila approved an
amendment of the same tax ordinance which was again challenged by Coca Cola before
the DOJ on the grounds that (1) said tax ordinance amends a tax ordinance previously
declared null and void and without legal effect by the DOJ; and (2) said tax ordinance
was likewise not published upon its approval. The amendatory ordinance was likewise
declared null and void by the DOJ, it being a mere amendatory ordinance of Ordinance
No. 7988. The omnibus motion of petitioners for reconsideration of the resolution of
April 23, 2003 which denied the motion for an extension of time to file a petition is
DENIED for lack of merit.
Meanwhile, on the basis of the enactment of Tax Ordinance No. 8011, the City
of Manila filed a Motion for Reconsideration with the RTC of Manila which the court a
quo granted stating that considering that Ordinance No. 7988 (Amended Revenue Code
of the City of Manila) has already been amended by Ordinance No. 8011 entitled "An
Ordinance Amending Certain Sections of Ordinance No. 7988" approved by the City
Mayor of Manila on February 22, 2001, the case must be DISMISSED.
ISSUE: Whether or not Tax Ordinance No. 7988 is null and void and of no legal effect.
RULING: Yes, Tax Ordinance No. 7988 is null and void and of no legal effect. It is
undisputed from the facts of the case that Tax Ordinance No. 7988 has already been
declared by the DOJ Secretary, in its Order, dated 17 August 2000, as null and void and
without legal effect due to respondents’ failure to satisfy the requirement that said
ordinance be published for three consecutive days as required by law. Neither is there
quibbling on the fact that the said Order of the DOJ was never appealed by the City of
Manila, thus, it had attained finality after the lapse of the period to appeal. Furthermore,
the RTC of Manila, Branch 21, in its Decision dated 28 November 2001, reiterated the
findings of the DOJ Secretary that respondents failed to follow the procedure in the
enactment of tax measures as mandated by Section 188 of the Local Government Code
of 1991, in that they failed to publish Tax Ordinance No. 7988 for three consecutive days
in a newspaper of local circulation. From the foregoing, it is evident that Tax Ordinance
No. 7988 is null and void as said ordinance was published only for one day in the 22 May
2000 issue of the Philippine Post in contravention of the unmistakable directive of the
Local Government Code of 1991.
9. Taxpayer’s Remedies
a) Protest
a. When the correct tax, fee, or charge is not paid, the Local Treasurer shall
issue a notice of assessment within the applicable prescriptive period, (Sec.
195, LGC) stating the nature of the levy, the amount of deficiency, the
surcharges, interests and penalties.
b. Within 60 days from receipt of the assessment, the taxpayer may file a
written protest of the assessment with the local treasurer contesting the
assessment; otherwise the assessment shall become final and executory.
c. The local treasurer shall decide the protest within 60 days from the time of
its filing. If the local treasurer finds the assessment to be wholly or partly
correct, he shall deny the protest wholly or partly with notice to the taxpayer.
d. The taxpayer shall have 30 days from the receipt of the denial of the protest
or from the lapse of the 60-day period prescribed herein within which to
appeal with the court of competent jurisdiction otherwise the assessment
becomes conclusive and unappealable. (Sec. 195, LGC)
b) Refund
a. A written claim for refund or credit is filed with the local treasurer.
c. Within 30 days after receipt of the decision or the lapse of 60-day period
without action from the Secretary of Justice, aggrieved party may file
appropriate proceedings with a court of competent jurisdiction.
NOTE: Such appeal shall not have the effect of suspending the effectivity of
the ordinance and the accrual of the payment of the tax, fee, or charge levied
therein. (Sec. 187, LGC) The three separate periods (30-30-60) are given for
compliance as a prerequisite before seeking redress in a competent court.
(Jardine Davies Insurance Brokers, Inc. vs. Aliposa, G.R. No. 118900, February
27, 2003)
FACTS: On 1993, the DOJ, on petition of the Philippine Racing Club, Inc.,
declared null and void the Makati Revenue Code, which provides, inter alia, for
the schedule of real estate, business and franchise taxes in the Municipality of
Makati at rates higher than those in the Metro Manila Revenue Code. Pending
resolution of its MR of the Resolution of the DOJ, Makati filed a petition ad
cautelam with the RTC of Makati alleging validity of the Ordinance. In the
meantime, respondent Makati continued to implement the ordinance.
Petitioner was assessed and billed by the respondents for taxes, fees and
charges under the ordinance for the second, third, and fourth quarters of
1993. Petitioner paid its quarterly business taxes without protest. On 1994,
petitioner requested Makati to compute its business tax liabilities in
accordance with the Metro Manila Revenue Code and not under the
ordinance considering that it was already declared by the DOJ null and void.
Petitioner asked that it be credited for the amount it overpaid or to refund its
overpayment. When Makati denied the request, petitioner filed a complaint.
RTC dismissed the complaint on ground of prescription, holding that petitioner
failed to file an opposition or protest within 60 days from the notice of
assessment. Petitioner moved for reconsideration alleging that it was not
required to first file a protest with Makati before instituting its action for a
refund of its overpayment or for it to be credited for said overpayments. The
MR was, however, denied by RTC. Hence, petitioner brought the matter before
the SC.
RULING: Yes, the petitioner’s failure to interpose the requisite appeal to the
Secretary of Justice is fatal to its complaint for a refund. The Court agreed with
the petitioner that as a general precept, a taxpayer may file a complaint
assailing the validity of the ordinance and praying for a refund of its perceived
overpayments without first filing a protest to the payment of taxes due under
the ordinance. However, it held that the petitioner was proscribed from filing
its complaint with the trial court for the reason that petitioner failed to appeal
to SOJ w/n 30 days from the effectivity date of the ordinance as mandated by
Sec. 187 of LGC. In Reyes v. CA, the Court ruled that failure of a taxpayer to
interpose the requisite appeal to the Secretary of Justice is fatal to its
complaint for a refund. A taxpayer may file a complaint assailing the validity
thereof and praying for are fund of its perceived overpayments without first
filing a protest. The Court, therefore, denied the petition.
The term “civil action” would preclude a criminal case as a proper remedy for
collection of delinquent local taxes (Republic vs. Patanao, 20 SCRA 712).
NOTE: The local government files an ordinary suit for the collection of sum of
money before the MTC, RTC or CTA depending upon the jurisdictional amount.
b) Prescriptive Period
GR: Within five (5) years from the date they become due.
EXCEPTION:
In case of fraud or intent to evade the payment of taxes, fees, or charges, the
assessment may be made within ten (10) years from discovery of fraud or
intent to evade payment.
1. Fundamental Principles
The appraisal, assessment, levy and collection of real property tax shall be guided by the
following fundamental principles: (Sec. 198, LGC)
a. Real property shall be appraised at its current and fair market value.
b. Real property shall be classified for assessment purposes on the basis of its
actual use.
NOTE: Actual use refers to the purpose for which the property is principally
or predominantly utilized by the person in possession of the property. (Sec.
199(b), LGC)
d. The appraisal, assessment, levy and collection of real property tax shall not be
left to any private person.
3. Imposition
a) Power to Levy
A. Has a Power to impose an Ad Valorem Tax on Real Property, levied
annually, by a province (rate is not exceeding 1% of the assessed value) or
city/municipality (rate is not exceeding 2%) within Metropolitan Manila Area.
LGC merely provides range, the LGU may enact ordinance that will fix the
rates.
(c) All machineries and equipment that are actually, directly, and exclusively
used by local water districts and GOCCs engaged in the supply and distribution
of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental
protection.
2. Real property shall be classified for assessment purposes on the basis of its
actual use;
4. The appraisal, assessment, levy, and collection of real property tax shall not be
let to any private person; and
3. Commercial land – land devoted principally for the object of profit and is not
classified as agricultural, industrial, mineral, timber or residential land [Sec.199(i),
LGC]
7. Special
a. all lands, buildings and other improvements actually, directly and exclusively
used for hospitals, cultural, or scientific purposes, and
b. those owned and used by local water districts, and GOCCs rendering
essential public services in the supply and distribution of water and/or
generation and transmission of electric power
[Sec. 216, LGC]
1. declaring the true value of the property which shall be the current and
FMV of the property; and
The declaration must be filed with the assessor once every 3 years during the
period from January 1 to June 30. [Sec. 202, LGC]
Determination of FMV
1. The assessor of the province, city or municipality or his deputy may
summon the owners or persons having legal interest therein and witnesses,
and may administer oaths, and take deposition concerning the property, its
ownership, amount, nature, and value. [Sec. 213, LGC]
2. The assessors shall prepare a schedule of FMV for the different classes
of real property situated in their respective local government units for
enactment by ordinance of the Sanggunian concerned. [Sec. 212, LGC]
“Actual Use” refers to the purpose for which the property is principally or
predominantly utilized by the person in possession thereof. [Sec. 199(b), LGC]
Note: Unpaid realty taxes attach to the property and are chargeable against the
person who had actual or beneficial use and possession of it regardless of whether
or not he is the owner. [Estate of Lim v. City of Manila, G.R. No. 90639 (1990)]
Assessment levels
It is the percentage applied to the FMV to determine the taxable value of the
property. [Sec. 199(g), LGC]
Note: Assessment levels shall be fixed by ordinances of the Sanggunian at rates not
exceeding those prescribed under Sec. 218 of the LGC.
1. real property is declared and listed for taxation purposes for the first time;
3. a request is made by the person in whose name the property is declared. [Sec.
220, LGC]
Note: The assessment shall not be increased more often than once every 3 years
except in case of new improvements substantially increasing the value of said
property or of any change in its actual use. [Sec. 220, LGC]
5. Collection
a) Date of Accrual
1. The real property tax for any year shall accrue in the first day of January
and from that date it shall constitute a lien on the property which shall
be superior to any other lien, mortgage, or encumbrance of any kind
whatsoever, and shall be extinguished only upon the payment of the
delinquent tax (Sec. 246, LGC)
b) Periods to Collect
1. The owner of the real property or the person having legal interest
therein may pay the basic real property tax and the additional tax for
Special Education Fund (SEF) due thereon without interest in four (4)
equal installments:
1. The first installment to be due and payable on or before March
31;
2. The second installment, on or before June 30;
3. The third installment, on or before September 30; and
4. The last installment, on or before December 31.
2. The basic real property tax and any other tax levied under Title II of the
Book II of the LGC shall be collected within five (5) years from the date
they become due. In case of fraud or intent to evade payment of the tax,
such action may be instituted for the collection of the same within ten
(10) years from the discovery of such fraud or intent to evade payment.
2. Tax delinquencies which are not collected within the five-year period (or
10 years as the case may be) should be automatically written off. No
action for the collection of the tax, whether administrative or judicial,
shall be instituted after the expiration of such period.
6. Taxpayer’s Remedies
a) Contesting an Assessment
1. Payment Under Protest; Exceptions
GENERAL RULE:
No protest shall be entertained unless the taxpayer first pays the tax.
There shall be annotated on the tax receipts the words “paid under
protest”.
“If the property being taxed has not been dropped from the assessment
roll, taxes must be paid under protest if the exemption from taxation is
insisted upon.”
FACTS:
National Power Corporation (NPC) is a government-owned and
controlled corporation created to undertake the development of power
generation and production from hydroelectric or other sources, and may
undertake the construction, operation and maintenance of power
plants, dams, reservoirs, and other works. It operated and maintains the
Binga Hydro-Electric Power Plant. Respondents Provincial Treasurer,
Provincial Assessor, Municipal Treasurer and Municipal Assessor of
Itogon are representatives of the province of Benguet, a local
government unit. Respondent issued the subject assessment in their
official capacities.
ISSUE:
Whether or not NPC need to pay the assessed amount under protest in
claiming for an exception from the payment of real property tax?
RULING:
Yes. Settled is the rule that should the taxpayer/real property owner
question the excessiveness or reasonableness of the assessment, LGC
directs that the taxpayer should first pay the tax due before his protest
can be entertained. A claim for exemption from the payment of real
property taxes does not actually question the assessor’s authority to
assess and collect such taxes, but pertains to the reasonableness or
correctness of the assessment by the local assessor. Every person who
shall claim exemption from payment of real property taxes imposed
upon said property shall file with the provincial, city, or municipal
assessor sufficient documentary evidence in support for such claim. The
burden of proving is upon whom the subject real property is declared. If
the property being taxed has not been dropped from the assessment
roll, taxes must be paid under protest if the exemption from taxation is
insisted upon. NPC’s failure to comply with the mandatory requirement
of payment under protest in accordance with Section 252 of the LGC
was fatal to its appeal.
EXCEPTIONS:
1. The payment of the tax prior to the protest is not necessary
where the taxpayer questions the authority and power of the assessor
to impose the assessment and of the treasurer to collect the tax.
FACTS:
Petitioner Alejandro Ty and MVR Picture Tube Inc., both registered
owners of lands and buildings in the then Municipality of Pasig, assailed
the legality of the increase of real estate taxes imposed by and being
collected in Pasig from the year 1994.
As such, petitioners filed with the Regional Trial Court of the National
Capital Judicial Region, Branch 163, presided over by respondent Judge,
a Petition for Prohibition with prayer for a restraining order and/or writ
of preliminary injunction to declare null and void the new tax
assessments and to enjoin the collection of real estate taxes based on
said assessments. In its Decision, respondent Judge denied the petition
"for lack of merit". Aggrieved, petitioners filed this present Petition for
Review directly before the Supreme Court.
ISSUE:
Whether the petitioners are required to exhaust administrative
remedies prior to seeking judicial relief?
RULING:
No. Although as rule, administrative remedies must first be exhausted
before resort to judicial action can prosper, there is a well-settled
exception in cases where the controversy does not involve questions of
fact but only of law.
The protest contemplated under Sec. 252 of R.A. 7160 is needed where
there is a question as to the reasonableness of the amount assessed.
Hence, if a taxpayer disputes the reasonableness of an increase in a real
estate tax assessment, he is required to "first pay the tax" under protest.
Otherwise, the city or municipal treasurer will not act on his protest. In
the case at bench however, the petitioners are questioning the very
authority and power of the assessor, acting solely and independently, to
impose the assessment and of the treasurer to collect the tax. These are
not questions merely of amounts of the increase in the tax but attacks
on the very validity of any increase.
FACTS:
Petitioner National Power Corp. (NPC) entered into a Build-Operate-and-
Transfer Project Agreements (BOTs) with Mirant Navotas I Corp. (MNC-I)
and Mirant Navotas II Corp. (MNC-II). The BOTs are for the construction,
operation and eventual transfer to petitioner of MNC-I and MNC-II’s
certain gas turbine power stations. Petitioner has the obligation to pay
for all taxes, except business taxes, relative to the implementation of the
agreements.
For the 1st quarter of 2003, petitioner paid respondent Mun. of Navotas
real property taxes but stopped paying thereafter claiming exemption
from payment thereon pursuant to Sec. 243 of the LGC. On May 25,
2005, respondent Mun. Treasurer Manuel Enriquez notified MNC-I and
MNC-II of their real property tax delinquencies. On November 21, 2005,
a Warrant of Levy was received from Enriquez. Consequently, petitioner
filed before the RTC a Petition for Declaratory Relief, Annulment of
Notice of Delinquency, Warrant of Levy, and Notice of Sale with prayer
for the issuance of a Writ of Preliminary Injunction and TRO. The same
was denied hence respondents proceeded with the public auction.
Petitioner sought the declaration of the same as null and void.
In denying the petition, the RTC ruled that although Section 234 of the
LGC exempts petitioner from payment of real property tax due on the
subject properties, failure to exhaust administrative remedies resulted in
the finality of the assessment. The Petition for Review filed by the
petitioner was dismissed by the CTA division which was subsequently
affirmed by CTA en banc.
ISSUE:
Whether appeals to the LBAA and CBAA are required before the petition
for declaratory relief filed by petitioner before the RTC may be given due
course.
RULING:
No. When the legality or validity of the assessment is in question, and
not its reasonableness or correctness, appeals to the LBAA, and
subsequently to the CBAA, pursuant to Sections 226 and 229 of the LGC,
are not necessary. In the event that the taxpayer questions the authority
and power of the assessor to impose the assessment and of the
treasurer to collect the real property tax, resort to judicial action may
prosper.
In the case at bar, the claim of petitioner essentially questions the very
authority and power of the Municipal Assessor to impose the
assessment and of the Municipal Treasurer to collect the real property
tax with respect to the machineries and equipment located in the
Navotas I and II power plants. Certainly, it does not pertain to the
correctness of the amounts assessed but attacks the validity of the
assessment of the taxes itself.
FILING OF PROTEST