LOCAL TAX

LOCAL GOVERNMENT TAXATION

BAR: What is the nature of the taxing power of the provinces, municipalities and cities?
1. FUNDAMENTAL PRINCIPLES How will the local government units be able to exercise their taxing powers? (2007 BAR)
A: The taxing power of the provinces, municipalities and cities is directly conferred by the
1. Taxation shall be uniform in each local government unit (LGU); Constitution by giving them the authority to create their own sources of revenue. The local
2. Taxes, fees, charges and other impositions shall: government units do not exercise the power to tax as an inherent power or by a valid
a. be equitable and based as far as practicable on the taxpayer's delegation of the power by Congress, but pursuant to a direct authority conferred by the
Constitution. (Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667,
ability to pay;
1996; NPC v. City of Cabanatuan, 401 SCRA 259, 2003) The local government units
b. be levied and collected only for public purposes;
exercise the power to tax by levying taxes, fees and charges consistent with the basic policy
c. NOT be unjust, excessive, oppressive, or confiscatory; of local autonomy, and to assess and collect all these taxes, fees and charges which will
d. NOT be Contrary to law, public policy, national exclusively accrue to them.
economic policy, or in restraint of trade; The local government units are authorized to pass tax ordinances (levy) and to pursue actions
3. The collection of local taxes, fees, charges and other impositions shall for the assessment and collection of the taxes imposed in said ordinances. (Secs. 129 & 132,
NOT be left to any private person; LGC)
4. The revenue collected shall inure solely to the benefit of, and be subject
to the disposition by, the LGU levying the tax, fee, charge or other BAR: May Congress, under the 1987 Constitution, abolish the power to tax of local
imposition, unless otherwise specifically provided herein; and, governments? (2003 BAR)
A: NO. Congress cannot abolish what is expressly granted by the fundamental law. The only
5. Each LGU shall, as far as practicable, evolve a progressive system of authority conferred to Congress is to provide the guidelines and limitations on the local
government’s exercise of the power to tax. (Sec. 5, Art X, 1987 Constitution)
taxation(Sec. 130, LGC)
BAR: KM Corporation, doing business in the City of Kalookan, has been a distributor and
retailer of clothing and household materials. It has been paying the City of Kalookan local
taxes based on Sections 15 (Tax on Wholesalers, Distributors or Dealers) and 17 (Tax on
Retailers) of the Revenue Code of Kalookan City (Code). Subsequently, the Sangguniang
2. NATURE AND SOURCE OF TAXING POWER Panlungsod enacted an ordinance amending the Code by inserting Section 21 which imposes
a tax on "Businesses Subject to Excise, Value-Added and Percentage Taxes under the
1. Not inherent – Municipal corporations, being mere creatures of law, may National Internal Revenue Code (NIRC)," at the rate of 50% of 1 % per annum on the gross
exercise the power to tax only if delegated to them by the national sales and receipts on persons "who sell goods and services in the course of trade or
legislature or conferred to them by the Constitution. The 1987 Constitution business." KM Corporation paid the taxes due under Section 21 under protest, claiming that
directly grants LGUs thepower to tax. (a) local government units could not impose a tax on businesses already taxed under the
2. Limited – The taxing power of LGUs is notabsolute because it is subject NIRC and (b) this would amount to double taxation, since its business was already taxed
under Sections 15 and 17 of the Code. May local government units impose a tax on
to such guidelines and limitations that Congress may provide(Sec. 5, Art.
businesses already subjected to tax under the NIRC? xxx (2018 BAR)
X, Constitution)
A: YES. Sec. 143 in relation to Section 151 of the Local Government Code (LGC) provides
3. Legislative in nature – The power to impose taxes is vested solely in the for the power of cities to impose a local business tax, and one of those which may be
legislative body (i.e., the Sanggunian) of each LGU. subjected to such tax are those businesses that are subject to “excise tax, value-added tax or
4. Territorial – It can only be exercised within the territorial jurisdiction of percentage tax” under the NIRC, other than those specifically enumerated by the same
each LGU. provision. The tax to be imposed by the city shall not exceed 2% of gross sales or gross
receipts of the preceding calendar year. (Sec. 143(h), in relation to Sec. 151, LGC)

a. GRANT OF LOCAL TAXING POWER UNDER THE LOCAL

GOVERNMENT CODE

1. Each LGU shall have the power to create its own sources of revenues and
to levy taxes, fees, and charges subject to such guidelines and limitations d. WITHDRAWAL OF EXEMPTIONS
as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to the Local tax exemptions, in general
local governments(Sec. 5, Art. X, 1987 Constitution) GR: Unless otherwise provided, tax exemptions or incentives granted to, or presently enjoyed
2. Each LGU shall exercise its power to create its own sources of revenue by all persons, whethernatural or judicial, including government- owned or controlled
and to levy taxes, fees, and charges subject to the provisions herein, corporations are withdrawn upon the effectivity of the LGC(Sec. 193, LGC).
consistent with the basic policy of local autonomy. Such taxes, fees, and
XPNs: Tax exemptions not withdrawn
charges shall accrue exclusively to the LGUs. (Sec. 129, LGC)
1. Local water districts
2. Cooperatives duly registered under RA6938 (Cooperative Code of
Local Taxing Authority thePhilippines),
The power to impose a tax, fee, or charge, or to generate revenue under the LGC shall 3. Non-stock and non-profit hospitals andeducational institutions (Sec. 193, LGC)
be exercised by the Sanggunian of the LGU concerned through an appropriate
ordinance(Sec. 132, LGC). NOTE: The LGC took effect on January 1, 1992.
1. Sangguniang Panlalawigan for the province; Sec. 193 is an express and general repeal of all statutes granting exemptions from local taxes. It
2. Sangguniang Panlungsod for the city; withdrew the sweeping tax privileges previously enjoyed by private and public corporations.
3. Sangguniang Bayan for the municipality;
4. Sangguniang Barangay for the barangay(Sec. 48, LGC)

4BLUE 95 NOTE: The exercise of the power to tax by the local legislative assembly
is subject to the veto power of the local chief executive(Sec. 55, LGC). e. AUTHORITY TO ADJUST LOCAL TAX RATES

2023 NOTE: LGUs shall have the authority to adjust the tax rates NOT oftener than once
every 5 years, but in no case shall the adjustment exceed 10% of the rates fixed by the
LGC(Sec. 191, LGC).

b. AUTHORITY TO PRESCRIBE PENALTIES FOR TAX VIOLATIONS

1. The sanggunian of an LGU is authorized to prescribe fines or other

penalties for violation of tax ordinances f. RESIDUAL TAXING POWER OF LOCAL GOVERNMENTS
a. in no case shall such fines be less than P1,000 nor more than
P5,000, LGUs may exercise the power to levy taxes, fees, or charges on ANY base or subject not
otherwise specifically enumerated in the LGC or taxed under the NIRC or other applicable
b. nor shall imprisonment be less than1 month nor more than 6
laws.
months.
2. Such fine or other penalty, or both, shall beimposed at the discretion of the Limitations on the taxing power of LGUs
court. 1. NOT unjust, excessive, oppressive, confiscatory, or contrary to declared
3. The Sangguniang Barangay may prescribe a fine of not less than P100 nor national policy(Sec. 186, LGC);
more thanP1,000(Sec. 516, LGC). 2. Pursuant to an ordinance enacted after a public hearing conducted for the
purpose(Sec. 186, LGC);
3. Subject to the constitutional limitations on the power to tax and the
commonlimitations on the taxing power of LGUs as provided under Section 133
of the LGC; and
4. The principle of preemption.
c. AUTHORITY TO GRANT LOCAL TAX EXEMPTIONS
Principle of preemption or exclusionary doctrine
Preemption in the matter of taxation simply refers to an instance where the national government
LGUs may, through ordinances, grant tax exemptions, incentives, or reliefs under
elects to tax a particular area, impliedly withholding from the local government the delegated
such terms and conditions as they may deem necessary(Sec. 192, LGC) power to tax the same field. This doctrine primarily rests upon the intention of Congress.
Conversely, should Congress allow municipal corporations to cover fields of taxation it already
occupies, then the doctrine of preemption will not apply.

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3. SCOPE OF TAXING POWER COMMON LIMITATIONS ON THE TAXING POWERS OF LOCAL
GOVERNMENT UNITS

LGU Scope of Taxing Power

Province Except as otherwise provided in the LGC, a province may levy only Unless otherwise provided, the following CANNOT be levied by the local governments:
the following taxes, fees, and charges(Sec. 134, LGC):
1. Transfer of real property ownership (Sec. 135, LGC) 1. Income tax, except when levied on banksand other financial institutions
2. Business of printing and publication (Sec. 136, LGC) under Sec. 143(f) of the LGC;
3. Franchise tax (Sec. 137, LGC) 2. Documentary stamp tax;
4. Tax on sand, gravel and other quarry resources (Sec.
138, LGC)
3. Taxes on Estate, inheritance, gifts, legacies and other acquisitions mortis
5. Professional tax (Sec. 139, LGC)
6. Amusement tax (Sec. 140, LGC) causa;
7. Annual fixed tax for everydelivery truck or van (Sec. XPN: Tax on transfer of real property
141, LGC)
Municipality May levy taxes, fees and charges not otherwise levied by provinces 4. Customs duties, registration fees of vessel and wharfage on wharves,
(Sec. 142, LGC) tonnage dues, and all other kinds of customs fees, charges and dues;
City May levy taxes, fees and charges which the province or municipality
may impose (Sec. 151, LGC) XPN: wharfage on wharves constructed and maintained by the LGU
Barangay May levy only: concerned
1. Taxes on stores or retailers
2. Service fees or charges 5. Taxes, fees or charges on goods carried into or out of, or passing through,
3. Barangay clearance the territorial jurisdictions of LGUs in the guise of charges for wharfage,
4. Other fees and charges (Sec. 152, LGC) tolls for bridges or otherwise, or other taxes, fees, or charges in any form;
6. Taxes, fees or charges on Agricultural and aquatic products when sold by
marginal farmers or fishermen;
7. Taxes on business enterprises certified to by the Board of Investments as
Pioneer or non-pioneer for a period of 6 and 4 years, respectively from the
date of registration;
8. Excise taxes on articles enumerated under the NIRC, as amended, and
4. SPECIFIC TAXING POWER OF LOCAL GOVERNMENT UNITS taxes, fees or charges on petroleum products;
9. Percentage or VAT on sales, barters or exchanges or similar transactions
Specific Taxes Province Municipality City Barangay on goods or services except as otherwise provided herein;
Tax on Transfer of Real / /
Property 10. Taxes on the gross receipts of:
Tax on Business of Printing and / / a. Transportation contractors and
Publication b. persons engaged in the transportationof passengers or freight
Franchise Tax / / by hire and
Tax on Sand, Gravel and other / / c. common carriers by air, land or water
Quarry Resources
d.
Professional Tax (Sec. 139, / /
11. Taxes on premiums paid by way of reinsurance or retrocession;
LGC)
Amusement Tax (Sec. 140, / /
12. Taxes, fees or charges for the registration of motor vehicles and for the
LGC) issuance of all kinds of licenses or permits for the driving thereof, except
Annual Fixed Tax for Every / / tricycles;
Delivery Truck or Van of
Manufacturers or Producers, 13. Taxes, fees, or other charges on Philippine products actually exported;
Wholesalers of, Dealers, or 14. Taxes, fees, or charges on Countryside and Barangay Business Enterprises
Retailers in, Certain Products andcooperatives duly registered under RA 6810 (Magna Carta for
(Sec. 141, LGC) Countryside and Barangay Business Enterprises) and RA 6938
Tax on Business (Sec. 143, / / (Cooperative Code of the Philippines), respectively; and
LGC) 15. Taxes, fees or charges of any kind on the National Government, its
Fees and Charges on / / agencies and instrumentalities, and LGUs(Sec. 133, LGC).
Regulation/Licensing of
Business or Occupation, or
Practice of Profession (Sec. 147,
LGC)
REQUIREMENTS FOR A VALID TAX ORDINANCE
Fees for Sealing and Licensing / /
of Weights and Measures (Sec.
148, LGC)
Local tax ordinance

Fishery Rentals, Fees and / / The power to impose a tax, fee, or charge or to generate revenue under the
Charges (Sec. 149, LGC) LGC shall be exercised by the Sanggunian concerned through an
appropriate ordinance(Sec. 132, LGC)

Tests of a valid ordinance:

Community Tax (Sec. 156, / /
LGC)
1. It must not contravene the Constitution or any statute
Tax on Small-scale / 2. It must not be unfair or oppressive;
Stores/Retailers (Sec. 152(a), 3. It must not be partial or discriminatory;
LGC) 4. It must not prohibit but may regulate trade;
Service Fees or Charges on the / 5. It must be general and consistent withpublic policy; and
Regulation or Use of Barangay- 6. It must not be unreasonable
owned Properties (Sec. 152(b),
LGC)
Barangay Clearance (Sec. /
152(c), LGC)
4BLUE 95 NOTE: An ordinance is presumed valid unless declared otherwise by a court
Other Fees and Charges (on /
in an appropriate proceeding
commercial breeding of fighting
cocks, cockfights, cockpits;
places of recreation which
charge admission fees; outside
advertisements) (Sec. 152(d), BAR: What is the proper procedural remedy and applicable time periods for challenging
LGC) a tax ordinance? (2015 BAR)
Reasonable Fees and Charges / A: Any question on the constitutionality or legality of tax ordinances may be raised on
for Services Rendered (Sec. 153, appeal within 30 days from the effectivity to the Secretary of Justice. The Secretary of
LGC) Justice shall render a decision within 60 days from the date of receipt of the appeal.
Public Utility Charges (Sec. 154, / / / / Thereafter, within 30 days after receipt of the decision or the lapse of the sixty-day
LGC) period without the Secretary of Justice acting upon the appeal, the aggrieved party may
Toll Fees or Charges (Sec. 155, / / / / file the appropriate proceedings with the Regional Trial Court. (Sec. 187, LGC).
LGC)
Real Property Tax (see separate / / /
discussion on Real Property (w/in Metro
Taxation) Manila)

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TAXING POWERS OF PROVINCES government Tax Base: At is maintained
examination (Sec such amount
Transaction Tax Rate and Exemptions Other 139, LGC) and reasonable Time of payment:
Taxed Tax Base classification
Tax on Transfer of Real Property NOTE: A person determined by Payable annually, on or
who has paid the
Imposed on the Tax Rate:Not Sale, transfer, or Person Liable: seller, the before January 31 or
professional tax
sale, donation, more than other disposition donor, transferor, executor Sangguniang before beginning the
is entitled to
barter, or any 50% of 1% of real property or administrator Panlalawigan practice of profession
practice his
other mode of pursuant to RA profession
transfer of Tax 6657 Time of Payment: Within Employers shall require
anywhere in the
ownership or title
Base:Total (Comprehensive 60 days from the date of country without payment of professional
to real property
acquisition Agrarian Reform execution of deed or being subjected tax before employment
(Sec 135, LGC)
price or fair Law) fromthe date of decedent's to similar taxes and annually thereafter.
market value death for the practice of
if monetary such profession.
consideration 2023 NOTE: Evidence of Amusement Tax
is not payment of tax must be Collected from Tax Rate: Holding of NOTE: In case of theaters
substantial, presented to the Register proprietors, Not more operas, concerts, or cinemas, tax shall first
lessees, or than 10% dramas, recitals, be deducted and withheld
whichever of Deeds before
operators of paintings, and art by their proprietors,
ishigher. registration, and to the theaters,
provincial assessor before Tax Base: exhibitions, lessees and operators
cinemas, concert
cancellation of an old tax Gross flower shows, before the gross receipts
halls, circuses,
declaration. boxing stadia, receipts from musical are divided among them.
Tax on Business of Printing and Publication and other places admission programs,
Imposed on the Tax Rate:Not Receipts from of fees literary and Distribution of proceeds:
business of exceeding printing and/or amusement(Sec oratorical Shared equally by the
persons engaged 50% of 1% publishing of 140, LGC) presentations province and the
in the printing, books and other municipality where
and/or Tax reading materials Not subject to XPN to the XPN amusement places are
publication of amusement tax (taxable): Pop, located.
Base:Gross prescribed by the
books, cards, under the LGC: rock, or similar
posters, leaflets, annual Department of 1. Resorts,
receipts for Education as concerts
handbills, swimming
certificates, the preceding school texts or pools, bath
receipts, calendar year references houses, hot
pamphlets, and springs, and
others of similar In the case of tourist spots
nature a newly 2. Professional
started basketball games
business: 3. Golf courses
1. Tax Rate: 4. Those subject
Not to amusement tax
under Sec. 125 of
exceeding
the NIRC
1/20 of 1%
Tax on Delivery Truck/ Van
2. Tax
Imposed on Tax Rate: Not Such manufacturers,
Base:Capital vehicles used by exceeding producers, wholesalers,
investment manufacturers, P500 dealers and retailers shall
Franchise Tax producers, be EXEMPT from the tax
Imposed on Tax Rate: Not No exception Franchise tax is a tax on wholesalers,
businesses Tax on peddlers.
exceeding the privilege of transacting dealers or
enjoying a Base:Every
50% of 1 Notwithstanding business in the state and retailers in the
franchise (Sec delivery or truck, van, or
any exemption exercising corporate
137, LGC) distribution of vehicle
Tax Base: granted by any franchises granted by the
Gross annual law or other state. It is not levied on the distilled spirits,
receipts for special law, the corporation simply for fermented
liquors, soft
the preceding province may existing as a corporation.
drinks, cigars and
calendar year impose a tax on cigarettes, and
based on the businesses Requisites to be covered other products, as
incoming enjoying a by franchise tax: may be
receipt, or franchise(Sec. determined by
realized, 137, LGC). 1. that one has a franchise the Sangguniang
within its in the sense of a secondary Panlalawigan, to
territorial or special franchise; and sales outlets, or
jurisdiction consumers in the
2. that it is exercising its province,
In the case of rights or privileges under whether directly
a newly this franchise within the or indirectly (Sec
141, LGC)
started territory of the concerned
business: LGU.
1. Tax Rate:
BAR: The City of Maharlika passed an ordinance imposing a tax on any sale or transfer of real
Not more
property located within the city at a rate of fifty percent (50%) of one percent (1%) of the total
than 1/20 of consideration of the transaction. Jose sold a parcel of land in the city, which he inherited from
1% his deceased parents, and refused to pay the aforesaid tax. He instead filed a case asking that the
2. Tax Base: ordinance be declared null and void since the tax it imposed can only be collected by the
Capital national government, as in fact he has paid the Bureau of Internal Revenue (BIR) the required
investment capital gains tax. If you were the City Legal Officer of Maharlika, what defenses would you
Tax on Sand, Gravel, and Other Quarry Resources raise to sustain the validity of the ordinance? (2016 BAR)
Levied on Tax Rate: Not Who issues permit to
ordinary stones, more than extract: issued exclusively A: The defenses I would raise are the following:
gravel, earth and 10% by the provincial governor 1. Cities like the City of Maharlika have the power to pass an ordinance imposing a tax on
other quarry pursuant to an ordinance the sale, donation, barter, or on any other mode of transferring ownership of title to real
resources, as property located within its territorial boundaries; (Sec. 135, in relation to Secs. 142 & 151,
Tax Base: by the
defined in the LGC)
Fair market SangguniangPanlalawigan
NIRC, extracted 2. The required capital gains tax collected by the national government is different from
from public lands value in the the tax that is imposable by the local government units such as the City of Maharlika;
or from the beds locality per Distribution of proceeds: 3. The transfer tax imposed and collected by cities are not among those included in the
of seas, lakes, cubic meter of 1. Province - 30% common limitations on the power of taxation which are reserved solely for the exercise by
rivers, streams, the extracted 2. Component the national government;
creeks, and other resources. municipality resources 4. There is no direct duplicate taxation because there are two different taxing authorities,
public waters extracted - 30% the national government and a local government unit. (Domondon)
within its 3. Barangay where
territorial resources were extracted -
jurisdiction (Sec. 40%
138, LGC)
Professional Tax
Exercise or Tax Rate: Not Professionals Place of payment: To the
practice of to exceed exclusively province where the
profession P300 employed by the profession is practiced, or
requiring government where the principal office

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TAXING POWERS OF MUNICIPALITIES sale of any merchandise or exceeding P50 per person who, either for
article of commerce (Sec. peddler annually himself or on
Scope of taxing power: Municipalities may levy taxes, fees, and charges NOT 143(g), LGC) commission, travels from
otherwise levied by provinces(Sec. 142, LGC). place to place and sells
his goods or offers to sell
Tax on Various Types of Businesses (Sec. 143, LGC) and deliver the same(Sec.
Businesses Taxed Rate/Amount and Base Other Information 131(t), LGC)
Manufacturers, Tax Rate: From P165 to Any other business which Tax Base: Gross sales or 2023 NOTE: This is a
assemblers, repackers, P24,375 per annum or at a the Sanggunian concerned receipts catch-all provision.
processors, brewers, rate not exceeding 37.5 % may deem proper to tax
distillers, rectifiers, and of 1% (Sec. 143(h), LGC) Tax Rate: The XPN: Any business
compounders of liquors, Sanggunian may engaged in the
distilled spirits, and wines Tax Base: Gross sales or prescribe a schedule of production,
or manufacturers of any receipts for the preceding graduated rates but in no manufacture, refining,
article of commerce of calendar year case to exceed the rates distribution or sale of
whatever kind or nature prescribed herein. oil, gasoline, and other
(Sec. 143(a), LGC) petroleum products
Wholesalers, distributors, Tax Rate: From P18 to “Wholesale” means a NOTE: For any business shall not be subject to
or dealers in any article of P10,000 or at a rate not sale where the purchaser subject to excise, value- any local tax imposed
commerce of whatever exceeding 50% of 1% buys or imports the added or percentage tax under Sec. 143 of the
kind or nature (Sec. 143(b), commodities for resale to under the NIRC, the rate LGC.
LGC) Tax Base: Gross sales or persons other than the end of tax shall not exceed 2%
receipts for the preceding user regardless of the of gross sales or receipts
calendar year quantity of the of the preceding calendar
transaction. year.

“Dealer” means one

whose business is to buy RULES ON PAYMENT OF BUSINESS TAX
and sell merchandise, 1. Taxes imposed under Sec. 143 of the LGC shall be paid for every separate or
goods, and chattels as a distinct establishment or place where business subject to tax is conducted.
merchant. He stands 2. One line of business is not exempted by being conducted with some other
businesses for which such tax has been paid.
immediately between the
3. The tax on a business must be paid by the person conducting it.
producer or manufacturer 4. If a person operates 2 or more businesses mentioned in Sec. 143, the tax shall be
and the consumer. computed:
Exporters and Not exceeding 1⁄2 of rates Essential Commodities: a. on the combined total gross sales or receipts, if they are subject to
manufacturers, millers, prescribed under Sec. 143 1. Rice and corn the same tax rate
producers, wholesalers, (a), (b) and (d) of the 2. Wheat or cassava flour, b. separately based on the gross sales or receipts of each business, if
distributor, dealers or LGC (on manufacturers; meat, they are subject to different tax rates (Sec. 146, LGC)
retailers of essential wholesalers, distributors dairy products, locally
commodities enumerated and dealers; and retailers, manufactured, processed 4BLUE 95 NOTE: Condominium corporations are not business entities, and are thus
below: (Sec. 143(c), LGC) respectively) or preserved food, sugar, not subject to local business tax. Even though the corporation is empowered to levy
salt, and other assessments or dues from the unit owners, these amounts are not intended for the
incurrence of profit by the corporation, but to shoulder the multitude of necessary
agricultural, marine,
expenses for maintenance of the condominium (Yamane v. BA Lepanto Condominium
andfreshwater products, Corp., G.R. No. 154993 (2005)).
whether in
their original state or not
3. Cooking oil and
cooking gas SITUS OF BUSINESS TAX
4. Cement
5. Laundry soap, Rule 1: In case of persons maintaining/operating a branch or sales outlet making the sale
detergents, and or transaction, the sale shall be recorded in said branch or sales outlet and the tax paid to
medicine the municipality/city where the branch or sales outlet is located(Sec. 150(a), LGC)
6. Agricultural
implements, Rule 2: Where there is NO branch orsales outlet in the city/municipality where thesale is
made, the sale shall be recorded in theprincipal office and the tax shall be paid to such
Equipment and post-
city/municipality. (Sec. 150(a), LGC)
harvest facilities,
fertilizers, pesticides, Rule 3: In the case of manufacturers, assemblers, contractors, producers, and
insecticides, herbicides exporters having factories, project offices, plants, and plantations, proceeds shall be
and other farm inputs allocated as follows:
7. Poultry feeds and other 1. 30% of sales recorded in the principal office shall be taxable by the
animal feeds city/municipality where the principal office is located; and
8. School supplies (Sec. 2. 70% shall be taxable by the city/municipality where the factory, project office,
143(c), LGC) plant, or plantation is located (Sec. 150(b), LGC)
Retailers(Sec. 143(d), Tax Rate: From P27.50 “Contractor” includes
LGC) to P11,500 or at a rate not persons, natural or Rule 4: In case the plantation is located in a place other than the place where the factory
is located, the 70% in Rule 3 will be divided as follows:
exceeding 50% of 1% juridical, not subject to
1. 60% to the city/municipality where the factory is located; and
professional tax under 2. 40% to the city/municipality where the plantation is located(Sec. 150(c), LGC)
Tax Base: Gross sales or Sec. 139 of the LGC,
receipts for the preceding whose activity consists Rule 5: In case of 2 or more factories, project offices, plants or plantations in different
calendar year essentially of the sale of localities, the 70% shall be prorated among the localities where they are located in
all kinds of services for a proportion to their respective volumes of production(Sec. 150(d), LGC)
fee, regardless of whether
or not the performance of
the service calls for the
exercise or use of the
physical or mental
faculties of such BAR: The Sangguniang Bayan of the Municipality of Sampaloc, Quezon, passed an
contractor or his ordinance imposing a storage fee of ten centavos (P 0.10) for every 100 kilos of copra
employees. (Sec. 131(h), deposited in any bodega within the Municipality’s jurisdiction. The Metropolitan
LGC) Manufacturing Corporation (MMC), with principal office in Makati, is engaged in the
Banks and other financial Tax Rate: Not exceeding NOTE: All other income manufacture of soap, edible oil, margarine, and other coconut oil-based products. It has a
institutions(Sec. 143(f), 50% of 1% and receipts of banks and warehouse in Sampaloc, Quezon, used as storage space for the copra purchased in
LGC) other financial institutions Sampaloc and nearby towns before the same is shipped to Makati. MMC goes to court to
Tax Base: Gross receipts not otherwise enumerated challenge the validity of the ordinance, demanding the refund of the storage fees it paid
of the preceding calendar herein shall be excluded under protest. Is the ordinance valid? Explain your answer. (2009 BAR)
year derived from from the taxing authority
interest, commissions and of the LGU concerned. A: YES. The municipality is authorized to impose reasonable fees and charges as a
discounts from lending (Art. 232(f), LGC IRR) regulatory measure in an amount commensurate with the cost of regulation, inspection
activities, income from and licensing. (Sec. 147, LGC) In the case at bar, the storage of copra in any warehouse
financial leasing, within the municipality can be the proper subject of regulation pursuant to the police
dividends, rentals on power granted to municipalities under the Revised Administrative Code or the “general
property and profit from welfare clause.” A warehouse used for keeping or storing copra is an establishment
exchange or sale of likely to endanger the public safety or likely to give rise to conflagration because the oil
property, insurance content of the copra, when ignited, is difficult to put under control by water and the use
premium of chemicals is necessary to put out the fire. It is, thus, reasonable that the Municipality
Peddlers engaged in the Tax Rate and Base: Not “Peddler” means any impose storage fees for its own surveillance and lookout.

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TAXING POWERS OF CITIES COMMUNITY TAX

Scope of taxing power: The city may levy taxes, fees, charges which the province or Who may levy Cities or municipalities
municipality may impose. (Sec. 156, LGC)
Persons Liable 1. Individuals who are:
1. Those levied and collected by highly urbanized and independent component (Sec. 157 &158, a. Inhabitants of the Philippines
cities shall accrue to them and distributed according to the provisions of the LGC) b. 18 years of age or over
LGC. c. Either:
i. Regularly employed on a wage or salary
2. Rates of taxes that the city may levy may exceed the maximum rates allowed for basis for at least 30 consecutive
the province or municipality by not more than 50%.(Sec. 151, LGC) working days during any calendar
year, or
XPN: Rates of professional and amusement taxes (Sec. 151, LGC) ii. Engaged in business or occupation, or
iii. Owns real property with an aggregate
BAR: Mr. Fermin, a resident of Quezon City, is a Certified Public Accountant-Lawyer engaged assessed value of P1,000 ormore, or
in the Practice of his two professions. He has his main office in Makati City and maintains a iv. Is required by law to file an income tax
branch office in Pasig City. Mr. Fermin pays his professional tax as a CPA in Makati City and return
his professional tax as a lawyer in Pasig City. 2. Juridical Persons
(a) May Makati City, where he has his main office, require him to pay his professional tax a. Every corporation no matter how created or
as a lawyer? Explain. organized
A: NO. Mr. Fermin is given the option to pay either in the city where he practices his b. Whether domestic or resident foreign
profession or where he maintains his principal office in case he practices his profession in c. Engaged in or doing business in the Philippines
several places. The professional tax paid as a lawyer in Pasig City, a place where he Rates 1. Individuals
practices his profession, will entitle him to practice his profession in any part of the (Sec. 157 & 158, a. Annual community tax of P5.00 PLUS annual
Philippines without being subjected to any other national or local tax, license, or fee for LGC) additional tax of P1.00per P1,000 of income
the practice of such profession. (Sec. 139 in relation to Sec. 151, LGC) regardless of whether from business, exercise
ofprofession or property, but which shall not
(b) May Quezon City, where he has his residence and where he also practices his two exceed P5,000
professions, go after him for the payment of his professional tax as a CPA and a lawyer? b. Husband and wife shall pay a basic tax of P5.00
Explain. (2005 BAR) each PLUS an additional tax of P1.00 for every
A: NO. The professional tax shall be paid only once for every taxable year and the P1,000 of income based on the total property
payment shall be made either in the city where he practices his profession or where he owned by them and/or the total gross receipts or
maintains his principal office. The city of residence cannot require him to pay his earningsderived by them (Art. 246(b)(2), LGC
professional taxes. (Sec. 139 in relation to Sec. 151, LGC) IRR)

2. Juridical Persons
a. Annual community tax of P500 PLUS annual
additional tax, which shall not exceed P10,000
according to the following schedule:
i. P2.00 for every P5,000 worth of real
TAXING POWERS OF BARANGAYS property in the Philippines owned
during the preceding year, based on
the assessed value used for the
payment of the real property tax;
The following shall accrue exclusively to the barangays:
and
ii. P2.00 for every P5,000 of gross receipts
or earnings derived from business
1. Taxes on stores or retailers with fixed business establishments with gross sales or
in the Philippines during the
receipts for the preceding calendar year of P50,000 or lessin case of cities, and
preceding year.
P30,000 or less in case of municipalities(Sec. 152(a), LGC).
b. Dividends received by a corporation from another
a. Tax Rate: not greater than 1%
corporation shall be deemed part of the gross
b. Tax Base: gross sales or receipts
receipts or earnings for purposes of computing
additional tax.
2. Service fees or charges- Barangays may collect reasonable fees or charges for
services rendered in connection with the regulation or the use of barangay-owned Persons Exempt 1. Diplomatic and consular representatives
properties or facilities(Sec. 152(a), LGC). (Sec. 159, LGC) 2. Transient visitors who stay in the Philippines for not
more than 3 months
3. Barangay clearance – A city or municipality cannot issue a permit for business Place of Payment Where individual resides, or where the principal office of the juridical
without a clearance from the barangay concerned. The sangguniang barangay (Sec. 160, LGC) entity is located
may impose a reasonable fee on the clearance(Sec. 152(c), LGC)
4BLUE 95 NOTE: In case of branch, sales office or warehouse where
4. Reasonable fees and charges: sales are made and recorded, corresponding community tax shall be
a. on commercial breeding of fighting cocks, cockfights and paid to the LGU where such branch, sales office, or warehouse is
cockpits; located(Art. 246(e)(3), LGC IRR)
b. on places of recreation which charge admission fees; and Time of Payment Accrues on January 1 of each year to be paid not later than the last day
c. on billboards, signboards, neon signs, and outdoor (Sec. 161, LGC) of February of each year
advertisements(Sec. 152(d), LGC)
1. If a person reaches 18 years of age or otherwise loses the
benefit of exemption:
a. on or before June 30 – he shall be liable on the
day he reaches such age or upon the day the
exemption ends;
b. on or before March 31 – he shall have 20 days to
COMMON REVENUE RAISING POWERS pay without being delinquent.
2. If a person comes to reside in the Philippines, or reaches
18 years old, or ceases to belong to an exempt class on or
after July 1, he shall not be subject to community tax for
Service fees and charges that year.
3. If a corporation is established and organized:
LGUs may impose and collect such reasonable fees and charges for a. on or before June 30 – it shall be liable to
services rendered(Sec. 153, LGC) community tax for that year
b. on or before March 31 – it shall have 20 days to
pay without becomingdelinquent
Public utility charges
c. on or after July 1 – it shall not be subject to
community tax for that year
LGUs may fix the rates for the operation of public utilities owned, Penalty If unpaid within the prescribed period, an interest of 24% per annum
operated and maintained by them within their jurisdiction(Sec. 154, LGC) (Sec. 161, LGC) shall be added from the due date until payment.

Toll fees or charges COMMUNITY TAX CERTIFICATE (CTC)

a. The Sanggunian may prescribe theterms and conditions and It is issued to every person or corporation upon payment of the community tax. It may also be
fix the rates for the imposition of toll fees or charges for the issued to any person or corporation not subject to the community tax upon payment of P1.00.
use of any public road, pier, or wharf, waterway, bridge, (Sec. 162, LGC)
ferry or telecommunication system funded and constructed
by the LGU concerned. Presentation of CTC is necessary when an individual subject to community tax:
b. The Sanggunian may discontinue the collection of the tolls 1. acknowledges any document before anotary public;
when public safety and welfare so requires. 2. takes the oath of office upon election or appointment to any position in
thegovernment service;
c. No toll fees or charges shall be collected from:
3. receives any license, certificate, or permit from any public authority;
i. Officers and enlisted men of the AFP and 4. pays any tax or fee;
members of the PNP on mission 5. receives any money from any public fund
ii. Post office personnel delivering mail 6. transacts other official business; or
iii. Persons who are physically handicapped 7. receives any salary or wage from anyperson or corporation (Sec. 163(a), LGC)
iv. Disabled citizens who are 65 years or
older(Sec. 155, LGC) 2023 NOTE: Presentation of CTC is not needed in the registration of a voter(Sec. 163(a), LGC)

5
ASSESSMENT & COLLECTION OF LOCAL TAX

a. REMEDIES OF LOCAL GOVERNMENT UNITS

b. PRESCRIPTIVE PERIOD
1. Local Government’s Lien
Local taxes, fees, charges and other revenues constitute a lien, superior to all liens or
encumbrances in favor of any person, enforceable by administrative or judicial action Prescriptive period for assessment
The lien may only be extinguished upon full payment of the delinquent local taxes, fees,
and charges including related surcharges and interest(Sec. 173, LGC). GR: Within 5 years from the datethey become due

2. Civil Remedies, in General XPN: In case of fraud or intent to evade tax, within 10 years from discovery of
fraud or intent to evade payment(Sec. 194(a),(b), LGC)
1. Administrative action

Distraint Of Personal Property Prescriptive period for collection

Subject of distraint: goods, chattels or effects and other personal property of
whatever character, including stocks and other securities, debts, credits, bank
accounts, and interest in and rights to personal property (Sec. 174(a), LGC) Within 5 years from the date of assessment by administrative or judicial action. No such
action shall be instituted after the expiration of said period(Sec. 194(c), LGC).
Procedure:
1. Seizure of personal property
2. Accounting of distrained goods
3. Publication of time and place of sale andthe articles distrained
4. Release of distrained property uponpayment prior to sale
5. Sale of the goods or effects distrained atpublic auction.
NOTE: If the property distrained is not disposed of within 120 days from
the date of distraint, the same shall be considered as sold to the LGU for
the amount of the assessment made(Sec. 175(e), LGC)
6. Disposition of proceeds (Sec. 175, LGC) TAXPAYER’S REMEDIES
Levy On Real Property
Subject of Levy: real property and interest in or rights to real property

Procedure a. PROTEST
1. After expiration of the time for payment of delinquent tax, fee or charge, real
property may be levied on before, simultaneously, or after the distraint of
personal property. Protest- The taxpayer may file a written protest with the local treasurer within 60
2.Preparation of a duly authenticated certificate by the local treasurer effecting daysfrom receipt of the notice of assessment; otherwise it shall become final and
the levy and showing: executory.
a. the name of the taxpayer,
b. the amount of the tax, fee orcharge, and penalty due, and o the description Decision- The local treasurer shall decide the protest within 60 daysfrom the time of
of the property. its filing.
c. Service of written notice of levy to the assessor, Register of Deeds, and the
1. If found to be wholly or partly meritorious, a notice cancelling wholly or
delinquent taxpayer (or his agent if he be absent from the Philippines, or if
none, to the occupant of the property in question) partially the assessment will be issued.
d. Annotation of the levy on the tax declaration and the certificate of title 1. If denied or when the 60-day period already lapsed, the taxpayer shall
e. Report on any levy to be submitted to the Sanggunian within 10 days after have 30 days thereafter to appeal with the court of competent
receipt of warrant (Sec. 176, LGC) jurisdiction; otherwise, the assessment becomes conclusive and
f. Advertisement of the sale or auction shall be held within 30 days after the unappealable (Sec. 195, LGC)
levy.
g. Before the date of sale, the taxpayer may stay the proceedings by paying Court of competent jurisdiction
the taxes, fees, charges, penalties and interests. 1. Depending on the amount involved, the taxpayer may appeal the decision
h. Sale of the subject property (Sec. 178, LGC) of the local treasurer to the MTC, MeTC, MCTC or the RTC in the
i. Redemption of property sold within 1 year from date of sale (Sec. 179, exercise of its original jurisdiction.
LGC) 2. Local tax cases decided by the MTC, MeTC and MCTC may be appealed
j. If not redeemed, the local treasurer shall execute a deed conveying the
to the RTC in the exercise of its appellate jurisdiction.
property to the purchaser (Sec. 180, LGC)
3. Said cases decided by the RTC in its original or appellate jurisdiction may
Further distraint or levy be elevated to the CTA.
The remedies of distraint or levy may be repeated if necessary until the full
amount due, including all expenses, is collected(Sec. 184, LGC)

4BLUE 95: In case the levy is not issued before or simultaneously with the
warrant of distraint, and the personal property of the taxpayer is not sufficient to b. REFUND
satisfy his delinquency, the local treasurer shall within 30 days after execution of
the distraint, proceed with the levy on the taxpayer's real property(Sec. 176, Requisites:
LGC). 1. A written claim for refund or credit must be filed with the local
treasurer; and
Property exempt from distraint or levy
2. The case or proceeding must be filed in court within 2 years from the
1. Tools and implements necessarily used by the taxpayer in his trade or
employment payment of tax or from the date the taxpayer became entitled to refund or
2. One horse, cow, carabao, or other Beast of burden, such as the delinquent credit(Sec. 196, LGC)
taxpayer may select and necessarily used by him in his ordinary
occupation
3. His necessary clothing, and that of all his family
4. Household furniture and Utensils necessary for housekeeping and used
for that purpose by the delinquent taxpayer, such as he may select, of a
value not exceeding P10,000
5. Provisions, including crops, actually provided for individual or family c. ACTION BEFORE THE SECRETARY OF JUSTICE
use sufficient for 4 months
6. The professional Libraries of doctors, engineers, lawyers and judges
7. One Fishing boat and net, not exceeding the total value of P10,000 by the
Any question on the constitutionality or legality of tax ordinances or revenue
lawful use of which a fisherman earns his livelihood
8. Any material or Article forming part of a house or improvement of any measures may be raised on appeal to the Secretary of Justice(Sec. 187, LGC)
real property (Sec. 185, LGC)
Procedure:
Penalty on local treasurer for failure to issue and execute warrant of distraint or levy 1. Appeal must be made to the Secretary of Justice within 30 days from
Automatic dismissal from service after due notice and hearing(Sec. 177, LGC) effectivity of the ordinance.
2. The Secretary must render a decision within 60 days from receipt of the
2. Judicial Action appeal.
The LGU may enforce the collection of delinquent taxes, fees, charges or other
revenues by civil action in any court of competent jurisdiction within 5 years NOTE: The appeal shall not suspend the effectivity of the ordinance and
from the date they became due(Secs. 183 and 194, LGC). the accrual and payment of the tax, fee or charge levied therein.
3. Within 30 days after receipt of the decision or the lapse of the 60-day
4BLUE 95 NOTE: Either of these remedies (administrative or judicial action) or
period without any action from the Secretary of Justice, the aggrieved
all may be pursued concurrently or simultaneously at the discretion of the LGU
concerned(Sec. 174, LGC). party may file appropriate proceedings with a court of competent
jurisdiction(Sec. 187, LGC).
Injunction against collection of local taxes
The LGC does not contain a provision prohibiting courts from enjoining the 2023 NOTE: The Secretary of Justice can only review the constitutionality or legality
collection of local taxes. Such lapse may have allowed preliminary injunction of the tax ordinance, and, if warranted, to revoke it on either or both of these grounds.
under Rule 58 of the Rules of Court where local taxes are involved(Angeles There is no need for a written protest when disputing an ordinance.
City v. Angeles City Electric Corporation, G.R. No. 166134 (2010))

6
BAR: In 2018, City X amended its Revenue Code to include a new provision imposing a
tax on every sale of merchandise by a wholesaler based on the total selling price of the
goods, inclusive of value-added taxes (VAT). ABC Corp., a wholesaler operating within
City X, challenged the new provision based on the following contentions: xxx 2. since
the tax being imposed is akin to VAT, it is beyond the power of City X to levy the same
Rule on each of ABC Corp.'s contentions. (2019 BAR)
A: ABC’s second contention is meritorious. One of the common limitations of the local
government unit’s (such as City X) taxing power under Sec. 133 of the LGC is that it
may not levy VAT on sales, barters or exchanges on goods or services. Hence, ABC
Corp. is correct in saying that the local tax, which is imposed on every sale transaction,
is akin to VAT; and necessarily, it may not be imposed by City X.
Levy upon goods carried into, leaving or passing through and LGU’s territorial
boundaries (1987, 2015 BAR)
BAR: In 2014, M City approved an ordinance levying customs duties and fees on goods
coming into the territorial jurisdiction of the city. Said city ordinance was duly published
on February 15, 2014 with effectivity date on March 1, 2014. Is there a ground for
opposing said ordinance? (2015 BAR)
A: YES, on the ground that the ordinance is ultra vires. The taxing powers of local
government units such as M City, cannot extend to the levy of taxes, fees and charges
already imposed by the national government, and this includes, among others, the levy
of customs duties under the Tariff and Customs Code. (Sec. 133(e), LGC)
BAR: The Roman Catholic Church owns a 2- hectare lot in a town in Tarlac province.
The southern side and middle part are occupied by the Church and a convent, the eastern
side by a school run by the Church itself, the southeastern side by some commercial
establishments, while the rest of the property, in particular the northwestern side, is idle
or unoccupied. May the Church claim tax exemption on the entire land? Decide with
reasons. (2005 BAR)
A: NO. The portions of the land occupied and used by the church, convent and school
run by the church are exempt from real property taxes while the portion of the land
occupied by commercial establishments and the portion, which is idle, are subject to real
property taxes. The “usage” of the property and not the “ownership" is the determining
factor whether or not the property is taxable. (Lung Center of the Philippines v. Q.C.,
433 SCRA 119, 2004)
Payment under protest (1988, 1991, 1993, 2014, 2018 BAR)
BAR: Madam X owns real property in Caloocan City. On July 1, 2014, she received a
notice of assessment from the City Assessor, informing her of a deficiency tax on her
property. She wants to contest the assessment.
(a) What are the administrative remedies available to Madam X in order to contest 54
Taxation Law the assessment and their respective prescriptive periods?
A: The administrative remedies available to Madam X to contest the assessment and
their respective prescriptive periods are as follows:
1. Pay the deficiency real property tax under protest (Sec 252, LGC);
2. File the protest with the local treasurer – The protest in writing must be filed
within 30 days from payment of the tax to the provincial, city or municipal
treasurer, in the case of municipality within Metro Manila Area, who shall decide
the protest within 60 days from receipt (Sec. 252, LGC);
3. Appeal to the LBAA – If the protest is denied or upon the lapse of the 60-day
period for the treasurer to decide, the taxpayer may appeal to the LBAA within 60
days and the case decided within 120 days (Sec. 226 and 229);
4. Appeal to the CBAA – If not satisfied with the decision of the LBAA, appeal to
the CBAA within 30 days from receipt of a copy of the decision. (Sec. 229 (c),
LGC)
(b) May Madam X refuse to pay the deficiency tax assessment during the pendency of
her appeal? (2014 BAR)
A: NO. The payment of the deficiency tax is a condition before she can protest the
deficiency assessment. It is the decision on the protest or inaction thereon that gives her
the right to appeal. This means that she cannot refuse to pay the deficiency tax
assessment during the pendency of the appeal because it is the payment itself which
gives rise to the remedy. The law provides that no protest (which is the beginning of the
disputation process) shall be entertained unless the taxpayer first pays the tax. (Sec. 252,
LGC)
BAR: In 2015, Kerwin bought a three-story house and lot in Kidapawan, North
Cotabato. The property has a floor area of 600 sq.m. and is located inside a gated
subdivision. Kerwin initially declared the property as residential for real property tax
purposes. In 2016, Kerwin started using the property in his business of manufacturing
garments for export. The entire ground floor is now occupied by state-of-the-art sewing
machines and other equipment, while the second floor is used as offices. The third floor
is retained by Kerwin as his family's residence. Kerwin's neighbors became suspicious
of the activities going on inside the house, and they decided to report it to the
Kidapawan City Hall. Upon inspection, the local government discovered that the
property was being utilized for commercial use. Immediately, the Kidapawan Assessor
reclassified the property as commercial with an assessment level of 50% effective
January 2017 and assessed Kerwin back taxes and interest. Kerwin claims that only 2/3
of the building was used for commercial purposes since the third floor remained as
family residence. He argues that the property should have been classified as partly
commercial and partly residential. If Kerwin wants to file an administrative protest
against the assessment, is he required to pay the assessment taxes first? With whom shall
the protest be filed and within what period? (2018 BAR)
A: YES. No protest shall be entertained unless Kerwin first pays the tax. The words
“paid under protest” must be annotated on the tax receipts issued by the treasurer. The
protest in writing must be filed with the treasurer within 30 days from payment of the
tax. (Sec. 252, LGC)
7
Real Property Taxation:
BAR: In 2015, Kerwin bought a three-story house and lot in Kidapawan, North Cotabato. The
property has a floor area of 600 sq.m. and is located inside a gated subdivision. Kerwin initially
declared the property as residential for real property tax purposes. In 2016, Kerwin started using
the property in his business of manufacturing garments for export. The entire ground floor is
now occupied by state-of-the-art sewing machines and other equipment, while the second floor
is used as offices. The third floor is retained by Kerwin as his family's residence. Kerwin's
neighbors became suspicious of the activities going on inside the house, and they decided to
report it to the Kidapawan City Hall. Upon inspection, the local government discovered that the
property was being utilized for commercial use. Immediately, the Kidapawan Assessor
reclassified the property as commercial with an assessment level of 50% effective January 2017,
and assessed Kerwin back taxes and interest. Kerwin claims that only 2/3 of the building was
used for commercial purposes since the third floor remained as family residence. He argues that
the property should have been classified as partly commercial and partly residential.
(a) Is the Kidapawan assessor correct in assessing back taxes and interest?
A: NO. The assessor cannot assess back taxes and interest. Since this involves a
reassessment of real property due to a major change in its actual use, the same cannot be
given a retroactive effect. The reassessment shall only be effective at the beginning of the
quarter next following the reassessment. (Sec. 221, LGC)
(b) Is Kerwin correct that only 2/3 of the property should be considered commercial? xxx
(2018 BAR)
A: YES. The property must be classified, valued and assessed on the basis of its actual use
regardless of where located, whoever owns it, and whoever uses it. (Sec. 217, LGC)
Real Properties for Purposes of Taxation (2001, 2003, 2009 BAR)
BAR: Under Article 415 of the Civil Code, in order for machinery and equipment to be
considered real property, the pieces must be placed by the owner of the land and, in addition,
must tend to directly meet the needs of the industry or works carried on by the owner. Oil
companies install underground tanks in the gasoline stations located on land leased by the oil
companies from the owners of the land where the gasoline stations (are) located. Are those
underground tanks, which were not placed there by the owner of the land but which were
instead placed there by the lessee of the land, considered real property for purposes of real
property taxation under the local Government Code? Explain. (2003 BAR)
A: YES. The properties are considered as necessary fixtures of the gasoline station, without
which the gasoline station would be useless. Machinery and equipment installed by the lessee of
leased land is not real property for purposes of execution of a final judgment only. They are
considered as real property for real property tax purposes as “other improvements to affixed or
attached real property under the Assessment Law and the Real Property Tax Code. (Caltex v.
Central Board of Assessment Appeals, 114 SCRA 296, 1982)
BAR: Republic Power Corporation (RPC) is a government – owned and controlled corporation
engaged in the supply, generation and transmission of electric power. In 2005, in order to
provide electricity to Southern Tagalog provinces, RPC entered into an agreement with Jethro
Energy Corporation (JEC), for the lease of JEC’s power barges which shall be berthed at the
port of Batangas City. The contract provides that JEC shall own the power barges and the
fixtures, fittings, machinery, and equipment therein, all of which JEC shall supply at its own
cost, and that JEC shall operate, manage and maintain the power barges for the purpose of
converting the fuel of RPC into electricity. The contract also stipulates that all real estate taxes
and assessments, rates and other charges, in respect of the power barges, shall be for the account
of RPC. In 2007, JEC received an assessment of real property taxes on the power barges from
the Assessor of Batangas City. JEC sought reconsideration of the assessment on the ground that
the power barges are exempt from real estate taxes under Section 234 (c) of R.A. No. 7160 as
they are actually, directly and exclusively used by RPC, a government- owned and controlled
corporation. Furthermore, even assuming that the power barges are subject to real property tax,
RPC should be held liable therefore, in accordance with the terms of the lease agreement. Is the
contention of JEC correct? Explain your answer. (2009 BAR)
A: The contention of JEC is not correct. The owner of the power barges is JEC which is
required to operate, manage and maintain the power barges for the purpose the claim that RPC,
a governmentowned and controlled corporation engaged in the supply, generation and
transmission of electric power, is the actual, direct and exclusive user of the barge, hence, does
not fall within the purview of the exempting provision of Section 234(c) of R.A. No. 7160.
Likewise, the argument that RPC should be liable to the real property taxes consonant with the
contract is devoid of merit. The liability for the payment of the real estate taxes is determined by
law and not by the agreement of the parties. (FELS Energy Inc. v. The Province of Batangas,
516 SCRA 186, 2007)
REAL PROPERTY TAXATION
TYPES OF REAL PROPERTY TAX

1. Basic RPT
1. FUNDAMENTAL PRINCIPLES
a. Province: not exceeding 1% of the assessed value of real
property; and
1. Real property shall be appraised at its current and fair market value.
b. City or municipality within Metro Manila: not exceeding 2%
2. Real property shall be classified for assessment purposes on the basis of its
of the assessed value of real property(Sec. 233, LGC)
actual use.
3. Real property shall be assessed based on a uniform classification within
2. Special levies on real property
each LGU.
a. Special Education Fund (SEF) – annual tax of 1% on the
4. The appraisal, assessment, levy and collection of real property tax shall not
assessed value of real property which shall be in addition to
be left to any private person.
the basic RPT (Sec. 235, LGC)
5. The appraisal and assessment of real property shall be equitable(Sec. 198,
b. Special Levy on Idle Lands – annual tax on idle lands at the
LGC)
rate not exceeding 5% of the assessed value of the property
in addition to the basic RPT (Sec. 236, LGC)
2. NATURE

1. It is a direct tax on the use of real property. Idle lands covered

4BLUE 95 NOTE: Real property shall be classified, valued and assessed 1. Agricultural lands more than 1 hectare in area,
suitable for cultivation, dairying, inland fishery, and
on the basis of its actual use regardless of where located, whoever owns it,
and whoever uses it(Sec. 217, LGC) other agricultural uses, 1/2 of which remain
uncultivated or unimproved
2. It is an ad valorem tax where the tax base is a fixed proportion of the
2. Non-agricultural lands more than 1,000 square meters
value of the property(Sec. 199(c), LGC)
in area 1/2 of which remain unutilized or unimproved
3. It is proportionate because the tax is calculated on the basis of a certain
3. Residential lots in subdivisions regardless of land area
percentage of the value assessed.
(Sec. 237, LGC)
4. It creates a single, indivisible obligation.
5. It attaches on the property (i.e., a lien) and is enforceable against it.
Lands not considered idle
1. Agricultural lands planted to permanent or perennial
crops with at least 50 trees to a hectare
2. Lands actually used for grazing purposes (Sec.
237(a), LGC)

Idle lands may be exempted by reason of:

3. IMPOSITION
1. Force majeure,
2. Civil disturbance,
3. Natural calamity, or
a. POWER TO LEVY
4. Any cause or circumstance whichphysically or legally
prevents the owner from improving, utilizing or
Extent of taxing power
A province or city or a municipality within Metro Manila may: cultivating the same(Sec. 238, LGC)
1. levy an annual ad valorem tax on realproperty such as land, building,
machinery, and other improvement not hereinafter specifically exempted; c. Special Levy for Public Works – a special levy on lands
and (Sec. 232, LGC) specially benefited by public works projects or
improvements funded by the LGU concerned, but which
2. fix a uniform rate of basic real property tax applicable to their respective
shall not exceed 60% of the actual cost of such projects and
localities. (Sec. 233, LGC)
improvements, including the costs of acquiring land and
such other real property in connection therewith (Sec. 240,
The following may levy real property tax:
LGC)
1. Province
2. City
XPN: The special levy shall not apply to:
3. Municipality within Metro Manila (Sec. 232, LGC)
1. lands exempt from basic RPT; and
2. the remainder of the land, portions ofwhich
were donated to the LGU for the construction
2023 NOTE: A special levy on lands benefited by public works may be imposed by
municipalities outside Metro Manila. of such projects or improvements(Sec. 240,
LGC)

NOTE: Municipalities outside Metro Manila may impose a

special levy on lands benefited by public works.

b. EXEMPTION FROM REAL PROPERTY TAX

PROPERTIES SUBJECT TO RPT
1. Real property owned by the Republic of the Philippines or any of its
1. Land
political subdivisions
2. Building
2023 NOTE: when beneficial use is granted for a consideration or to a
3. Machinery
taxable person.
2. Charitable institutions, churches, parsonages, or convents
appurtenant thereto, mosques, non-profit or religious cemeteries, and
Summary of rules on machinery
all lands, buildings, and improvements actually, directly and exclusively
used for religious, charitable, or educational purposes
1. Machinery that is permanently attached to land and buildings is subject
3. Machinery and equipment actually, directly and exclusively used by local
to RPT.
water districts and GOCCs engaged in the supply and distribution of
water and/or generation and transmission of electric power
2. Machinery that is NOTpermanently attached:
4. Real property owned by duly registered cooperatives as provided for under
a. Subject to the RPT if it is an essential and principal element
RA 6938 (Cooperative Code of the Philippines)
of an industry, work or activity without which such industry,
5. Machinery and equipment used for pollution control and environmental
work or activity cannot function; and
protection(Sec. 234, LGC)
b. NOT SUBJECT TO RPT if it is not an essential and
principal element of an industry, work or activity.
Withdrawal of exemption

Except as provided herein, any exemption from payment of RPT previously granted to,
or presently enjoyed by, all persons, whether natural or juridical, including all
4. Other improvements not specificallyexempted (Sec. 232, LGC)
government- owned or controlled corporations (GOCCs) are hereby withdrawn upon the
effectivity of the LGC(Sec. 234, LGC)
It is a valuable addition made to a property or an amelioration in its condition,
amounting to more than a mere repair or replacement of parts involving capital
4BLUE 95 NOTE: Section 234 of the LGC applies specifically to RPT exemptions,
expenditures and labor, which is intended to enhance its value, beauty or utility or
while Section 193 of the LGC applies to exemptions from all other local taxes.
to adapt it for new or further purposes (Sec. 199(m), LGC)

2023 NOTE: The LGC contains no definition of the term “real property”. Therefore,
reference should be made to the enumeration of immovable property under Art. 415 of
the Civil Code.
Proof of exemption
Every person who shall claim tax exemption shall file with the local assessor within 30
days from the date of declaration of real property sufficient documentary evidence in
support of such claim (e.g., corporate charters, title of ownership, affidavits, by-laws,
contract, articles of incorporation). Otherwise, the property will be listed as taxable in
the assessment roll. (Sec. 206, LGC)

8
Constitutional Exemptions (1987, 1988, 1990, 1996, 2000, 2005, 2006, 2017, 2018
BAR)
BAR: The Constitution exempts from taxation charitable institutions, churches,
parsonages or convents appurtenant thereto, mosques and non-profit cemeteries and
lands, buildings and improvements actually, directly and exclusively used for religious,
charitable and educational purposes. Mercy Hospital is a 100-bed hospital organized for
charity patients. Can said hospital claim exemption from taxation under the above-
quoted constitutional provision? Explain. (1996 BAR)
A: Yes. Mercy Hospital can claim exemption from taxation under the provision of the
Constitution, but only with respect to real property taxes provided that such real
properties are used actually, directly and exclusively for charitable purposes.
BAR: Kilusang Krus, Inc. (KKI) is a non-stock, non-profit religious organization which
owns a vast tract of land in Kalinga. KKI has devoted 1 /2 of the land for various uses: a
church with a cemetery exclusive for deceased priests and nuns, a school providing K to
12 education, and a hospital which admits both paying and charity patients. The
remaining 1/2 portion has remained idle. The KKI Board of Trustees decided to lease the
remaining 1 /2 portion to a real estate developer which constructed a community mall
over the property. Since the rental income from the lease of the property was substantial,
the KKI decided to use the amount to finance (1) the medical expenses of the charity
patients in the KKI Hospital and (2) the purchase of books and other educational
materials for the students of KKI School. Is KKI liable for real property taxes on the
land? xxx (2018 BAR)
A: YES, but only on the leased portion. Article VI, Section 28(3) of the 1987
Constitution provides that “charitable institutions, churches and personages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and
improvements, actually, directly, and exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation”. The test of exemption from
taxation is the use of the property for purposes mentioned in the Constitution. The leased
portion of the land may be subject to real property tax since such lease is for commercial
purposes, thereby, removing the asset from the property tax exemption granted under the
Constitution. (CIR v. De La Salle University, Inc., GR. Nos, 196596, 198841, 198941,
November 9, 2016)
BAR: San Juan University is a non-stock, nonprofit educational institution. It owns a
piece of land in Caloocan City on which its three 2- storey school buildings stood. Two
of the buildings are devoted to classrooms, laboratories, a canteen, a bookstore and
administrative offices. The third building is reserved as dormitory for student athletes
who are granted scholarships for a given academic year. In 2017, San Juan University
earned income from tuition fees and from leasing a portion of its premises to various
concessionaires of food, books, and school supplies.
(a) Can the City Treasurer of Caloocan City collect real property taxes on the land and
building of San Juan University? Explain your answer. (2017 BAR)
A: YES but only on the leased portion. Article XIV, Section 4(3) of the 1987
Constitution provides that the assets of a non-stock, non-profit educational institution
shall be exempt from taxes and duties only if the same are used actually, directly, and
exclusively for educational purposes. The test of exemption from taxation is the use of
the property for purposes mentioned in the Constitution. The leased portion of the
building may be subject to real property tax since such lease is for commercial purposes,
thereby, it removes the asset from the property tax exemption granted under the
Constitution. (CIR v. De La Salle University, Inc., G.R. Nos. 196596, 198841, 198941,
2016)
9
Exemptions under the LGC (1987, 1990, 2002, 2006, 2009, 2015, 2016, 2019 BAR)
BAR: Philippine National Railways (PNR) operates the rail transport of passengers and
goods by providing train stations and freight customer facilities from Tutuban, Manila to
the Bicol Province. As the operator of the railroad transit, PNR administers the land,
improvements and equipment within its main station in Tutuban, Manila. Invoking
Section 193 of the Local Government Code (LGC) expressly withdrawing the tax
exemption privileges of government-owned and controlled corporations upon the
effectivity of the Code in 1992, the City Government of Manila issued Final Notices of
Real Estate Tax Deficiency in the amount of P624,000,000.00 for the taxable years 2006
to 2010. On the other hand, PNR, seeking refuge under the principle that the government
cannot tax itself, insisted that the PNR lands and buildings are owned by the Republic. Is
the PNR exempt from real property tax? Explain your answer. (2016 BAR)
A: YES. The Philippine National Railways (PNR) was created as a corporation to serve
as an instrumentality of the Government of the Philippines (R.A. No. 10638, amending
Sec. 1 of R.A. No. 4156) upon which the local governments are not allowed to levy
taxes, fees or other charges including real property taxes. (Manila International Airport
Authority v. Court of Appeals, et al., G. R. No. 155650, July 20, 2006; Manila
International Airport Authority v. City of Pasay, G. R. No. 163072, April 2, 2009, 583
SCRA 234, 2009 citing Philippine Fisheries Development Authority v. Court of
Appeals, G.R. No. 150301, 2 October 2007, 534 SCRA 490)
PNR is not a government and controlled corporation but an instrumentality of the
government hence it is not included in the withdrawal of exemptions. Finally, under the
common limitations on local government units’ power of taxation, it shall not extend to
the levy of “taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities, and local government units.” (Sec. 133 (o), LGC, paraphrasing
supplied) The railroad tracks, train stations, freight customer facilities, land
improvements, and equipment within its main station in Tutuban, Manila are properties
of public dominion intended for public use, and as such are exempt from real property
tax under Section 234(a) of the LGC. (Manila International Airport Authority v. City of
Pasay, supra)
BAR: LLL is a government instrumentality created by Executive Order to be primarily
responsible for integrating and directing all reclamation projects for the National
Government. It was not organized as a stock corporation, nor was it intended to operate
commercially and compete in the private market. By virtue of its mandate, LLL in 2008
reclaimed several portions of the foreshore and offshore areas of the Manila Bay, some
of which were within the territorial jurisdiction of Q City. Certificates of titles to the
reclaimed properties in Q City were issued in the name of LLL in 2008. In 2014, Q City
issued warrants of Levy on said reclaimed properties of LLL based on the assessment
for delinquent property taxes for the years 2010 to 2013.
(a) Are the reclaimed properties registered in the name of LLL subject to real
property tax?
A: The reclaimed properties are not subject to real property tax because LLL is a
government instrumentality. Under the law, real property owned by the Republic
of the Philippines is exempt from real property tax unless the beneficial use thereof
has been granted to a taxable person. (Sec 234, LGC)
When the title of the real property is transferred to LLL, the Republic remains the
owner of the real property. Thus, such arrangement does not result in the loss of
the tax exemption. (Republic of the Philippines, represented by The Philippine
Reclamation Authority v. City of Paranaque)
(b) Will your answer be the same in (a) if from 2010 to the present time, LLL is
leasing portions of the reclaimed properties for the establishment and use of
popular fastfood restaurants J Burgers, G Pizza, and K Chicken? (2015 BAR)
A: NO. As a rule, properties owned by the Republic of the Philippines are exempt
from real property tax except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person. When LLL leased out portions of
the reclaimed properties to taxable entities, such as the popular fast food
restaurants, the reclaimed properties are subject to real property tax. (Sec. 234(a),
LGC; GSIS v. City Treasurer and City Assessor of the City of Manila)
BAR: The Philippine-British Association, Inc. (Association) is a non-stock, non-profit
organization which owns the St. Michael's Hospital (Hospital). Sec. 216 in relation to
Sec. 215 of the LGC classifies all lands, buildings and other improvements thereon
actually, directly, and exclusively used for hospitals as "special." A special classification
prescribes a lower assessment than a commercial classification. Within the premises of
the Hospital, the Association constructed the St. Michael's Medical Arts Center (Center)
which will house medical practitioners who will lease the spaces therein for their clinics
at prescribed rental rates. The doctors who treat the patients confined in the Hospital are
accredited by the Association. The City Assessor classified the Center as "commercial"
instead of "special" on the ground that the Hospital owner gets income from the lease of
its spaces to doctors who also entertain out-patients. Is the City Assessor correct in
classifying the Center as "commercial?" Explain. (2016 BAR)
A: NO. The City Assessor is not correct in classifying the Center as “commercial.” The
fact alone that the separate St. Michael’s Medical Arts Center will house medical
practitioners who shall treat the patients confined in the Hospital and are accredited by
the Association takes away the said Medical Arts Center from being categorized as
“commercial” since a tertiary hospital is required by law to have a pool of physicians
who comprise the required medical departments in various medical fields. (City
Assessor of Cebu City v Association of Benevola de Cebu, Inc., 524 SCRA 128, 2007;
Domondon)
4. APPRAISAL AND ASSESSMENT
Appraisal is the act or process of determining the value of property as of a specified
date for a specific purpose. (Sec. 199(e), LGC)
Assessment is the act or process of determining the value of a property, or proportion
thereof subject to tax, including the discovery, listing, classification, and appraisal of
properties. (Sec. 199(f), LGC)
a. CLASSES OF REAL PROPERTY
For purposes of assessment, real property shall be classified as residential,
agricultural, commercial, industrial, mineral, timberland or special(Sec. 215, LGC)
1. Residential land – land principally devoted to habitation (Sec. 199(u),
LGC)
2. Agricultural land – land devoted principally to the planting of trees,
raising of crops, livestock and poultry, dairying, salt making, inland
fishing and similar aquaculture activities and other agricultural activities
and is not classified as mineral, timber, residential, commercial or
industrial land (Sec. 199(d), LGC)
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)
4. Industrial land – land devoted principally to industrial activity as capital
investment and is not classified as agricultural, commercial, timber,
mineral or residential land (Sec. 199(n), LGC)
5. Mineral land – land in which minerals exist in sufficient quantity or grade
to justify the necessary expenditures to extract and utilize such minerals
(Sec. 199(p), LGC)
6. Timberland – land identified as forest or reserved area by the
government, which may or may not be granted to a concessionaire,
licensee, lessee orpermitee
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)
Declaration of real property by owner or administrator
All persons owning or administering real property, including improvements
therein, shall prepare a sworn statement:
1. declaring the true value of the property which shall be the current and
FMV of the property; and
2. containing a sufficient description of the property for assessment purposes.
The declaration must be filed with the assessor once every 3 years during the
period from January 1 to June 30(Sec. 202, LGC)
Declaration by person acquiring real property or making improvements
A sworn statement declaring the true value of the property must be filed with the
provincial, city or municipal assessor within 60 days after the acquisition of a real
property or upon completion or occupancy of the improvement, whichever comes
earlier(Sec. 203, LGC)
Declaration by the local assessor
4BLUE 95: When the person required to file the sworn declaration under Sec. 202
of the LGC refuses or fails to make such declaration, the provincial, city or
municipal assessor shall declare the property in the name of the defaulting owner,
and shall assess the property for taxation(Sec. 204, LGC)
10
b. ASSESSMENT BASED ON ACTUAL USE
Basis of assessment
Real property shall be classified, valued, and assessed on the basis of actual
useregardless of where located, whoever owns it, and whoever uses it. (Sec. 217, 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)
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.
Assessed or Taxable Value
It is the FMV of the real property multiplied by the assessment level. (Sec. 199(h), LGC)
1. Assessed Value = FMV × Assessment Level
2. RPT = Assessed Value × Tax Rate
General revisions of assessments and property classification
The local assessor shall undertake a general revision of real property assessments every
3 years. (Sec. 219, LGC)
Valuation of real property by assessor
The local assessor shall make a classification, appraisal, and assessment of the real
property irrespective of any previous assessment or taxpayer’s valuation thereon in the
following cases:
1. real property is declared and listed for taxation purposes for the first time;
2. there is an ongoing general revision of property classification and
assessment; or
3. a request is made by the person in whose name the property is declared.
(Sec. 220, LGC)
2023 NOTE: The assessment shall not be increased more often than once every 3 years
except in case of new improvements substantiallyincreasing the value of said property or
of any change in its actual use. (Sec. 220, LGC)
Date of effectivity of assessment or reassessment
GR: All assessments or reassessments made after January 1 of any year shall take effect
on January 1 of the succeeding year (Sec. 221, LGC)
XPNs: Reassessments due to the following causes shall be made within 90 days from
the date of any cause and shall take effect at the beginning of the quarter subsequent to
the reassessment:
1. partial or total destruction
2. major change in actual use;
3. any great and sudden inflation or deflationof real property values;
4. gross illegality of the assessment whenmade; or
5. any other abnormal cause. (Sec. 221, LGC)
Assessment of property subject to back taxes
Property declared for the first time shall be assessed for taxes for the period during
which it would have been liable but in no case for more than 10 years prior to the date of
initial assessment (Sec. 222, LGC)
Notification of new or revised assessment
When real property is assessed for the first time or when an existing assessment is
increased or decreased, the local assessor shall within 30 days give written notice of the
new or revised assessment to the person in whose name the property is being declared.
Notice may be given personally or by registered mail or through the assistance of the
Punong Barangay to the last known address of the person to be served. (Sec. 223, LGC)
5. COLLECTION

Collecting authority
The collection of RPT shall be the responsibility of the city or municipal treasurer
concerned. He may deputize the barangay treasurer to collect all taxes on real
property located in the barangay provided the latter is bonded(Sec. 247, LGC).
Duty of assessor to furnish local treasurer with assessment rolls
c. REMEDIES OF LOCAL GOVERNMENT UNITS
Issuance of notice of delinquency
When the real property tax becomes delinquent, the local treasurer shall post a notice
of delinquency at the main hall and in a publicly accessible and conspicuous place in
each barangay of the LGU concerned. (Sec. 254, LGC)

The provincial, city or municipal assessor shall prepare and submit to the local treasurer,
on or before December 31 of each year, an assessment roll containing a list of all
persons whose real properties have been newly assessed or reassessed and the values of
such properties. (Sec. 248, LGC)
Notice of time for collection of tax
1. Local Government’s Lien
The RPT shall constitute a lien on the property subject to tax, superior to all liens,
charges or encumbrances in favor of any person, irrespective of the owner or possessor
thereof, enforceable by administrative or judicial action and may only be extinguished
upon payment of the tax and the related interests and expenses. (Sec. 257, LGC)

The local treasurer shall post the notice of the dates when the tax may be paid without It constitutes a lien on the property from the date of accrual (i.e., January 1) (Sec. 246,
interest at a conspicuous and publicly accessible place at the city or municipal hall: LGC).
1. on or before January 31 of each year in the case of basic RPT and
additional tax for SEF; or
2. on any other date in the case of any other tax.

The notice shall also be published in a newspaper of general circulation in the locality 2. Administrative Action
once a week for 2 consecutive weeks(Sec. 249, LGC)
1. Levy on real property

a. After expiration of the time required to pay the tax when

due, the local treasurer shall issue a warrant of levy on or
before, or simultaneously with, the institution of the civil
a. DATE OF ACRRUAL action for the collection of the delinquent tax.
b. The warrant shall include a duly authenticated certificate
Real property tax for any year shall accrue on the 1st day of January.(Sec. 246, LGC) showing:
i. the name of the owner or person having legal
interest therein,
ii. description of the property, and
iii. amount of the tax due and interestthereon.
c. Warrant must be mailed to or served upon the delinquent
owner or person having legal interest in the property.
b. PERIODS TO COLLECT d. Written notice of levy with the attached warrant must be
mailed to or served uponthe assessor and the Register of
GR: Within 5 years from the date the taxes become due Deeds where the property is located.
e. The Register of Deeds must annotate the levy on the tax
XPN: In case there is fraud or intent to evade payment of tax, within 10 years from declaration and certificate of title.
discovery of fraud or intent to evade payment (Sec. 270, LGC) f. The levying officer shall submit a report on the levy to the
Sanggunian within 10 days after receipt of warrant by the
Grounds for suspension of prescriptive period owner. (Sec. 258, LGC)
1. The local treasurer is legally prevented from collecting the tax; g. Advertisement of the sale or auction shall be made within 30
2. The owner of the property or the person having legal interest therein days after service of warrant.
requests for reinvestigation and executes a waiver in writing before the h. Before the date of sale, the proceedings may be stayed by
expiration of the period to collect; and paying the delinquent tax.
3. The owner of the property or the person having legal interest therein is out i. Sale of the real property (Sec. 260, LGC)
of the country or cannot be located. (Sec. 270, LGC) j. Redemption of property sold within 1 year from date of sale
upon payment of the delinquent tax (Sec. 261, LGC)
k. If not redeemed, the local treasurer shall execute a deed
conveying the property to the purchaser. (Sec. 262, LGC)
l. Purchase of property by local treasurer in case there is no
Rules On Payment bidder for the real property or if the highest bid is
insufficient to pay the RPT and other costs; resale of such
Payment of RPT property may be made at a public auction (Sec. 263 and 264,
LGC)
1. Payment of RPT and the additional tax forSEF, without interest, may be
made in 4 equal installments: Further levy until full payment
a. 1st: March 31
b. 2nd: June 30 Levy may be repeated if necessary until the full due, including all
c. 3rd: September 30 expenses, is collected. (Sec. 265, LGC)
d. 4th: December 31
2. Any special levies shall be governed by ordinance of the Sanggunian
concerned. (Sec. 250, LGC)
2. Distraint of personal property
2023 NOTE: Payments of RPT shall first be applied to prior years’ delinquencies,
interests and penalties, if any, and only after the delinquencies are settled may tax The notice of delinquency shall state that personal property may be
payments be credited for the current period. (Sec. 250, LGC) distrained to effect payment. It shall likewise state that any time before the
distraint of personal property, payment of the tax with surcharges, interests
and penalties may be made. (Sec. 254, LGC)

Interests on unpaid RPT

Interest at the rate of 2% per month on the unpaid amount or a fraction thereof until the
delinquent tax shall have been fully paid, but the total interest shall not exceed 36
months(Sec. 255, LGC)
3. Judicial Action

The LGU concerned may enforce the collection of the basic RPT or any other related tax
Discount for advance or prompt payment by civil action in any court of competent jurisdiction. The civil action shall be filed by
the local treasurer within the period prescribed forcollection (i.e., 5 years or 10 years)
a. Advance payment – not exceeding 20% of annual tax due (Sec. 251, under Sec. 270 of the LGC. (Sec. 266, LGC)
LGC)
b. Prompt payment – not exceeding 10% of annual tax due (Art. 342, LGC
IRR)

11
6. TAXPAYER’S REMEDIES
a. CONTESTING AN ASSESSMENT
i. PAYMENT UNDER PROTEST; EXCEPTION
GR: 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". (Sec. 252,
LGC)
When the taxpayer questions the excessiveness or reasonableness of the
assessment, the taxpayer is required to first pay the tax due before his protest can
be entertained(NPC v. Provincial Treasurer of Benguet, G.R. No. 209303 (2016))
XPN: “Payment under protest” is not a prerequisite when the issue is the legality
or validity of the assessment. Certainly, it would be unjust to require the realty
owner to first pay the tax, the validity of which he precisely questions, before he
can lodge a complaint to the court.(NPC v. Municipal Government of Navotas,
G.R. 192300 (2014))
ii. FILE PROTEST WITH TREASURER
Period to file protest
The protest in writing must be filed within 30 days from payment of the tax to the
provincial, city or municipal treasurer.(Sec. 252(a), LGC)
4BLUE 95 NOTE: The tax or a portion thereof paid under protest, shall be held in
trust by the treasurer. (Sec. 252(b), LGC)
Period to decide
The local treasurer shall decide the protest within 60 days from receipt. (Sec.
252(a), LGC)
Decision on the protest
1. If the protest is decided in favor of the taxpayer, the amount or portion
of the tax protested shall be refunded to the protestant, or applied as tax
credit against his existing or future tax liability. (Sec. 252(c), LGC)
2. If the protest is denied or the 60-day period expired, the taxpayer may
appeal to the LBAA and subsequently to the CBAA pursuant to Secs. 226
and 229 as in the case of assessment appeals. (Sec. 252(d), LGC)
Erroneous assessment vs. Illegal assessment
Erroneous assessment- An erroneous assessment presupposes that the taxpayer is
subject to the tax but is disputing the correctness of the amount assessed. The
taxpayer claims that the local assessor erred in determining any of the items for
computing the RPT.
Taxpayer must exhaust the administrative remedies provided under the LGC.
Illegal assessment- An assessment is illegal if it was made without the authority
under the law.
The taxpayer may directly resort to judicial action without paying under protest the
assessed tax and filing an appeal with the LBAA and CBAA (City of Lapu-Lapu v.
PEZA, G.R. Nos. 184203 and 187583 (2014))
2023 NOTE: A claim for exemption from the payment of RPT pertains to the
reasonableness or correctness of the assessment by the local assessor, a question
of fact which should be resolved, at the very first instance, by the LBAA. (NPC v.
Provincial Treasurer of Benguet, G.R. No. 209303 (2016))
iii. REFUNDS OR CREDITS OF REAL PROPERTY TAXES
Repayment of excessive collections
When an assessment of RPT 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. (Sec. 253, LGC)
Remedy in case of denial by the local treasurer
In case the claim for tax refund or credit is denied, the taxpayer may follow the
procedure in questioning an assessment (i.e., appeal to the LBAA, then to the
CBAA, and subsequently to the CTA En Banc). (Sec. 253, LGC)
12
b. CONTESTING A VALUATION OF REAL PROPERTY
i. APPEAL TO THE LOCAL BOARD OF ASSESSMENT APPEALS (LBAA)
Who may appeal
Any owner or person having legal interest in the property who is not satisfied
with the action of the local assessor in the assessment of his property may appeal to
the LBAA by filing a petition under oath, together with copies of the tax
declarations and such affidavits or documents submitted in support of the appeal.
(Sec. 226, LGC)
When to appeal
The appeal must be filed within 60 days from the date of receipt of the written
notice of assessment. (Sec. 226, LGC)
Period to decide on the appeal
The LBAA shall decide the appeal within 120 days from the date of receipt of such
appeal. (Sec. 229(a), LGC)
NOTE: The LBAA shall have the power to summon witnesses, administer oaths,
conduct ocular inspection, take depositions, and issue subpoena and subpoena
duces tecum. (Sec. 229(b), LGC)
Motion for reconsideration with local assessor NOT allowed
The procedure likewise does not permit the property owner the remedy of filing a
motion for reconsideration before the local assessor.
When appeal to LBAA not required
An exception to the rule on exhaustion of administrative remedies is where
thecontroversy does not involve questions of fact but only of law. Under Sec.
229(b) of the LGC "the proceedings of the Board shall be conducted solely for the
purpose of ascertaining the facts." It follows that appeals to the LBAA may be
fruitful only where questions of fact are involved.
ii. APPEAL TO THE CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA)
Who may and when to appeal
The owner of the property or the person having legal interest therein or the assessor
who is not satisfied with the decision of the LBAA, may, within 30 days after
receipt of the decision of said LBAA, appeal to the CBAA. (Sec. 229, LGC)
Period to decide and finality of decision
The CBAA shall decide cases on appeal within 12 months from the date of receipt
thereof, which shall become final and executory 15 days after receipt thereof by the
appellant or appellee, as the case may be.
iii. EFFECT OF PAYMENT OF TAXES
Appeal on assessments of real property shall not suspend the collection of the
corresponding realty taxes on the property involved as assessed by the provincial
or city assessor without prejudice to subsequent readjustment depending upon the
final outcome of the appeal. (Sec. 231, LGC)
c. COMPROMISING REAL PROPERTY TAX ASSESSMENT
Condonation or reduction of RPT
1. The Sanggunian:, in case of general failure of crops or substantial
decrease in the price of agricultural or agri-based products or calamity,
may, by ordinance, condone or reduce taxes and interest for the succeeding
year/s in the city or municipality affected by the calamity. (Sec. 276, LGC)
2. The President of the Philippines may, when public interest so requires,
condone or reduce the real property tax and interest for any year in any
province or city or municipality within Metro Manila. (Sec. 277, LGC)
 JUDICIAL REMEDIES

COURT OF TAX APPEAL JURISDICTION

A.1. EXCLUSIVE ORIGINAL AND APPELLATE JURISDICTION OVER

A.2. EXCLUSIVE ORIGINAL AND APPELLATE JURISDICTION OVER
CIVIL CASES CRIMINAL CASES
1. EXCLUSIVE ORIGINAL JURISDICTION OF THE COURT IN DIVISIONS
The Court in Divisions shall exercise exclusive original jurisdiction in tax
collection cases involving final and executory assessments for taxes, fees, charges 1. EXCLUSIVE ORIGINAL JURISDICTION OF THE COURT IN DIVISIONS
and penalties, where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is P1,000,000 or more(Sec. 3(c)(1), Rule 4, RRCTA)
The Court in Divisions shall exercise exclusive original jurisdiction over all
criminal offenses arising from violations of the NIRC or Tariff and Customs Code
2. EXCLUSIVE APPELLATE JURISDICTION IN CIVIL CASES and other laws administered by the BIR or the Bureau of Customs, where the
The Court in Divisions shall exercise exclusive appellate jurisdiction over appeals
principal amount of taxes and fees, exclusive of charges and penalties, claimed is
from the judgments, resolutions or orders of the RTCs in tax collection P1,000,000 or more(Sec. 3(b)(1), Rule 4, RRCTA).
casesoriginally decided by them within their respective territorial jurisdiction(Sec.
3(c)(2), Rule 4, RRCTA)

The Court in Divisions shall exercise exclusive original or appellate

jurisdiction to review by appeal the following:
2. EXCLUSIVE APPELLATE JURISDICTION IN CRIMINAL CASES
1. Decisions of the CIR in cases involving disputed assessments, refunds of
internal revenue taxes, fees, or other charges, penalties in relation thereto, The Court in Divisions shall exercise exclusive appellate jurisdiction over appeals
or other matters arising under the NIRC or other laws administered by the from the judgments, resolutions, or orders of the RTC in their original
BIR;
jurisdiction in criminal offenses arising from violations of the NIRC or Tariff and
2. Inaction by the CIR in cases involving disputed assessments, refunds of Customs Code and other laws administered by the BIR or Bureau of Customs,
internal revenue taxes, fees or other charges, penalties in relation thereto, where the principal amount of taxes and fees, exclusive of charges and penalties,
or other matters arising under the NIRC or other laws administered by the claimed is less than P1,000,000 or where there is no specified amount
BIR, where the NIRC or other applicable law provides a specific period
claimed(Sec. 3(b)(2), Rule 4, RRCTA).
for action:
a. Provided, that in case of disputed assessments, the inaction
of the CIR within the 180-period under Section 228 of the
NIRC shall be deemed a denial for purposes of allowing the
taxpayer to appeal his case to the Court and does not
necessarily constitute a formal decision of the CIR on the tax
case;
b. Provided, further, that should the taxpayer opt to await the
final decision of the CIR on the disputed assessments beyond
3. CRIMINAL CASES WITHIN THE JURISDICTION OF THE COURT EN
the 180-period above mentioned, the taxpayer may appeal
BANC(SEC. 2(F-H), RULE 4, RRCTA)
such final decision to the Court under Section 3(a), Rule 8 of
these Rules; and
The Court en banc shall exercise exclusive appellate jurisdiction to review by
c. Provided, still further, that in the case of claims for refund
appeal the following:
of taxes erroneously or illegally collected, the taxpayer
must file a petition for review with the Court prior to the
1. Decisions, resolutions, or orders on motions for reconsideration (MR)
expiration of the 2-year period under Section 229 of the or new trial (MNT) of the Court in Division in the exercise of its
NIRC; exclusive original jurisdiction over cases involvingcriminal offenses
arising from violations of the NIRC or the Tariff and Customs Code and
3. Decisions, resolutions or orders of the RTC in local tax cases decided other laws administered by the BIR or Bureau of Customs;
or resolved by them in the exercise of their original jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability
2. Decisions, resolutions or orders on motions for reconsideration or new
for customs duties, fees or other money charges, seizure, detention or trial of the Court in Division in the exercise of its exclusive appellate
release of property affected, fines, forfeitures of other penalties in relation jurisdiction over criminal offenses mentioned in the preceding
thereto, or other matters arising under the Customs Law or other laws
subparagraph; and
administered by the Bureau of Customs;
5. Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs
3. Decisions, resolutions or orders of the RTC in the exercise of their
adverse to the Government under Section 2315 of the Tariff and Customs
appellate jurisdiction over criminal offenses arising from violations of the
Code; and NIRC or the Tariff and Customs Code and other laws administered by the
6. Decisions of the Secretary of Trade and Industry, in the case of BIR or Bureau of Customs.
nonagricultural product, commodity or article, and the Secretary of
Agriculture, in the case of agricultural product, commodity or article,
involving dumping and countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and safeguard measures
under Republic Act No. 8800, where either party may appeal the decision
to impose or not to impose said duties(Sec. 3(a), Rule 4, RRCTA).
BAR: Does the CTA have jurisdiction over a special civil action for certiorari
3. CIVIL CASES WITHIN THE JURISDICTION OF THE COURT EN
assailing an interlocutory order issued by the RTC in a local tax case?
BANC(SEC. 2(A-E), RULE 4, RRCTA)
YES.While there is no express grant of such power, with respect to the CTA,
The Court en banc shall exercise exclusive appellate jurisdiction to review by Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial
appeal the following:
power shall be vested in one Supreme Court and in such lower courts as may be
1. Decisions or resolutions on motions for reconsideration (MR) or new established by law and that judicial power includes the duty of the courts of justice
trial (MNT) of the Court in Divisions in the exercise of its exclusive to settle actual controversies involving rights which are legally demandable and
appellate jurisdiction over:
enforceable, and to determine whether or not there has been a grave abuse of
a. Cases arising from administrative agencies – Bureau of
discretion amounting to lack or excess of jurisdiction on the part of any branch or
Internal Revenue, Bureau of Customs, Department of instrumentality of the Government.
Finance, Department of Trade and Industry, Department of
Agriculture;
On the strength of the above constitutional provisions, it can be fairly interpreted
b. Local tax cases decided by the Regional Trial Courts in that the power of the CTA includes that of determining whether or not there has
the exercise of their original jurisdiction; and been grave abuse of discretion amounting to lack or excess of jurisdiction on the
c. Tax collection cases decided by the Regional Trial Courts part of the RTC in issuing an interlocutory order in cases falling within the
in the exercise of their original jurisdiction involving final
exclusive appellate jurisdiction of the tax court(City of Manila v. Grecia-Cuerdo,
and executory assessments for taxes, fees, charges and G.R. No. 175723 (2014)).
penalties, where the principal amount of taxes and
penalties claimed is less than P1,000,000.

2. Decisions, resolutions or orders of the RTC in local tax cases and in tax
collection cases decided or resolved by them in the exercise of their
appellate jurisdiction;
3. Decisions, resolutions or orders on motions for reconsideration or new
trial of the Court in Division in the exercise of its exclusive original
jurisdiction over tax collection cases; and
4. Decisions of the Central Board of Assessment Appeals (CBAA) in the
exercise of its appellate jurisdiction over cases involving the assessment
and taxation of real property originally decided by the provincial or city
board of assessment appeals.

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COURT OF TAX APPEAL PROCEDURE
c. INJUNCTION NOT AVAILABLE TO RETRAIN COLLECTION

1. FILING OF AN ACTION FOR COLLECTION OF TAXES No court shall have authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the Code(Sec. 217, NIRC)
a. INTERNAL REVENUE TAXES
XPN: Sec. 11, R.A. 1125, supra.
The remedies for the collection of internal revenue taxes, fees or charges, and any The CTA has ample authority to dispense with the deposit of the amount claimed or the
increment thereto resulting from delinquency can be through the institution of a civil or filing of the required bond, whenever the method employed by the BIR in the collection
criminal action. (Sec. 205, NIRC). of tax jeopardizes the interest of the taxpayer for being patently in violation of law(Sps.
Pacquiao v. CTA First Division, G.R. No. 213394 (2016))
When this remedy is resorted to:
The tax assessment becomes final and executory because of the failure to appeal.

Even pending decision of the administrative protest.

3. CRIMINAL CASES
b. LOCAL TAXES
a. INSTITUTION AND PROSECUTION OF CRIMINAL ACTION
The LGU concerned may enforce the collection of delinquent taxes, fees, charges or
other revenues by civil action in any court of competent jurisdiction. The civil action Institution of criminal action
shall be filed by the local treasurer(Sec. 183, LGC) Instituted by the filing an information in the name of the People of the Philippines

MTC/ RTC depending on jurisdictional threshold amount. Those involving violations of the NIRC and other laws enforced by the BIR: Must
be approved by the CIR
Prescriptive period
Local taxes, fees, or charges shall be assessed within 5 yearsfrom the date they Those involving violations of the tariff and Customs Code and other laws enforced
became due. by the Bureau of Customs: Must be approved by the Commissioner of Customs

No action for the collection of such taxes, fees, or charges, whether administrative or
judicial, shall be instituted after the expiration of such period.
In case of fraud or intent to evade the payment of taxes, fees, or charges, the same
may be assessed within 10 yearsfrom discovery of the fraud or intent to evade payment.
Local taxes, fees, or charges may be collected within 5 yearsfrom the date of
assessment by administrative or judicial action.
No judicial or administrative action for collection can be instituted after lapse of the
period for assessment except when there is fraud or intent to evade tax(Sec. 194 LGC)
Institution shall interrupt the running of the period of prescription.
Prosecution of criminal action
Conducted and prosecuted under the direction and control of the public prosecutor
Those involving violations of the NIRC and other laws enforced by the BIR or
violations of the tariff and Customs Code and other laws enforced by the Bureau of
Customs – Theprosecution may be conducted by their respective duly deputized legal
officers.
b. INSTITUTION OF CIVIL ACTION IN CRIMINAL ACTION

The running of the periods of prescription shall be suspended for the time during In cases within the jurisdiction of the Court, the criminal action and the corresponding
which: civil action for the recovery of civil liability for taxes and penalties shall be deemed
1. The treasurer is legally prevented from making the assessment of jointly instituted in the same proceeding. The filing of the criminal action shall
collection; necessarily carry with it the filing of the civil action. No right to reserve the filing of
2. The taxpayer requests for a reinvestigation and executes a waiver in such civil action separately from the criminal action shall be allowed or recognized.
writing before expiration of the period within which to assess or collect;
and c. PERIOD TO APPEAL
3. The taxpayer is out of the country or otherwise cannot be located(Sec. 194,
LGC) Deciding Body Period to Appeal Mode of Appeal
RTC in the exercise of its 15 days from receipt of Appeal pursuant to Sec.
original jurisdiction (to decision 3(a) and 6, Rule 122 of
CTA Division) the RRC
2. CIVIL CASES CTA Division (to CTA En 15 days from receipt of Petition for review as
Banc) decision provided in Rule 43 of the
a. WHO MAY APPEAL, MODE OF APPEAL, AND EFFECT OF APPEAL Rules of Court
May be extended for good
Appeal to CTA Division cause for not more than The Court En Banc shall
1. A party aggrieved or adversely affected by the decision or ruling or 15 days. act on the appeal.
inaction of RTC in the exercise of its 15 days from receipt of Petition for review as
a. CIR; appellate jurisdiction (to decision provided in Rule 43 of the
b. Commissioner of Customs; CTA division) Rules of Court.
c. Secretary of Finance;
d. Secretary of Trade and Industry;
e. Secretary of Agriculture; or
f. RTC exercising original jurisdiction
2. May appeal within 30 days from the receipt of the copy of the decision or 4. APPEAL TO THE COURT OF TAX APPEALS EN BANC
ruling, or the expiration of the period fixed by law for the Commissioner
to decide, to the Court of Tax Appeals Division. No civil proceeding involving matters arising under the National Internal Revenue Code,
the Tariff and Customs Code or the Local Government Code shall be maintained, except
Mode of Appeal: Rule 42 as herein provided, until and unless an appeal has been previously filed with the CTA
Aggrieved party may file a motion for reconsideration (MR) or new trial (MNT) and disposed of in accordance with the provisions of this Act.
within 15 days from receipt of the copy of the decision.
A party adversely affected by a resolution of a Division of the CTA on a motion for
Effect: The filing of a motion for reconsideration or new trial shall suspend the running reconsideration or new trial, may file a petition for review with the CTA en banc(Sec.
of the period within which an appeal may be perfected. 18, RA No. 1125 as amended).

Appeal to CTA en Banc
A party adversely affected by a decision or resolution of a Division of the Court on a
motion for reconsideration or new trial may appeal within 15 days from receipt of the
copy of the decision.
Mode of Appeal: Rule 43
A party adversely affected by a decision or ruling of the Central Board of Assessment
Appeals and the Regional Trial Court in the exercise of their appellate jurisdiction
may appeal within 30 days from the receipt of the copy of the decision.
b. SUSPENSION OF COLLECTION OF TAXES
GR: No appeal taken to the Court shall suspend the payment, levy, distraint, or sale of
any property of the taxpayer for the satisfaction of his tax liability as provided under
existing laws.
The CTA En BancCANNOT annul a final and executory judgment of a division of the
court. The laws creating the CTA and expanding its jurisdiction, and the CTA’s own
rules of procedure do not provide for a scenario where the CTA sitting en banc is asked
to annul a decision of one of its divisions. Annulment by a collegial court, sitting En
Banc is tantamount toallowing a court to annul its own judgment and acknowledging
that a hierarchy exists within such court. A proper remedy would have been an original
action for Certiorari under Rule 65(CIR v. KepcoIlijan Corp., G.R. No. 199422 (2016))
5. PETITION FOR REVIEW ON CERTIORARI TO THE SUPREME
COURT(Rule 16, A.M. No. 05-11-07)
A party adversely affected by a decision or ruling of the Court en bancmay appeal by
filing with the Supreme Court a verified petition for review on certiorari within 15
days from receipt of a copy of the decision or resolution, as provided in Rule 45 of the
Rules of Court.

XPN: Where the collection of the amount of the taxpayer’s liability, sought by means of The motion for reconsideration or for new trial filed before the Court shall be deemed
a demand for payment, by levy, distraint or sale of any property of the taxpayer, or by abandoned if, during its pendency, the movant shall appeal to the Supreme Court.
whatever means, as provided under existing laws, may jeopardize the interest of the
Government or the taxpayer, an interested party may file a motion for the suspension of
the collection of the tax liability (Sec. 11, RA 1125, as amended)

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