Local Government Taxation

- Constitutional grant for Local Government Unit

- No longer a delegated power from the Congress
- Guidelines and limitations in Local Government Code
- LGUs must also create their own Revenue Code

 Collection of local taxes cannot be assigned to private persons

Power to Tax by the Sanggunian

- Exercised by the Sanggunian, can also grant tax exemption (through an ordinance)
- Adjustment of tax rates must be every 5 years, increase not to exceed 10%
- Can impose penalties, fine or imprisonment (not applicable to barangays)

Ordinance (Municipality/City/Province)
 Enactment by the Sangguniang Bayan
 Mandates public hearing prior to its enactment (vs State – not required)
 Approved by the Mayor, has power to veto
 Reviewed by the Sangguniang Panlalawigan
 Publication/Posting

Ordinance (Barangay)
 Enactment by the Sanggunian
 Approved by Barangay Captain, no veto power

How to Question the Constitutionality of the Tax Ordinance?

 Appeal must be made within 30 days from effectivity of tax ordinance
 Date of effectivity: After publication
 To the DOJ secretary
 DOJ Secretary has 60 days to render decision
 In case of adverse decision, or no decision, the aggrieved party has 30 days to file an
appeal with competent jurisdiction (COURT OF APPEALS)
 Filing an appeal with DOJ does not suspend the effectivity of the tax ordinance

Doctrine of Exhaustion of Administrative Remedies

 Go to DOJ first before the courts
 Afterwards, appeal with CA

 LGUS can impose income tax on banks and other financial institutions, insurance, money
exchange, all other kinds of income tax – NOT ALLOWED

Provinces
 Transfer Tax on Real Property (Cities can also impose)
- EXN: Land under the CARP Law
- Business tax on printing and publication
 - Franchise Tax
- Sand Gravel and Quarry Services

Municipalities
- If already taxed by provinces, cannot be taxed by municipalities anymore
- Community Tax (Cedula)

Cities
- May levy the taxes which the province or municipality may impose
- Community Tax (Cedula)

Barangays
- Barangay Clearance
- Service Fees
- Billboards, Signboards, Outdoor Ads
- Recreation Establishments

Situs of Local Taxation

- 30% to the Office, 70% to the Factory
- Branches – allocation based on actual earnings

Collection of Tax
- Calendar Year
- Accrue on the first day of the year
- Accrue on the first day of the quarter after – new ordinance Feb, 2024 – effectivity April
1, 2024
- Period to Collect: 5 years (Sec. 194c)

Assessment of Local Taxes

- Done by the Local Treasurer
- Assessment made on the year immediately preceding the year of examination – 2024
Assessment done for Year 2023
- Prescription Period to Assess: 5 years from when the taxes are due, if with intent to
defraud: 10 years
- Prescription Period, When Suspended: When the taxpayer is out of the country, legally
prevented

Protest to Assessed Tax

- Written Protest must be filed within 60 days from receipt of Notice of Assessment, Local
Treasurer to decide within 60 days, if protest is meritorious, the Treasurer can issue a
Notice of Cancellation, if only partly correct, it will be denied.
- In case of denial or nonresponse, taxpayer has 30 days to file an appeal with court of
competent jurisdiction (MTC, RTC, CTA – dependent on the amount)
- Less than 1m – MTC
 - 1m above – CTA
- RTC only has appellate jurisdiction
- Payment of assessed tax – NOT A REQUIREMENT TO FILE PROTEST
- 2 year to claim refund

Remedies of the Government

- Same tax remedies with the National Government
- Lien over taxpayer’s property
- Administrative Remedies (distraint of personal property, levy of real property), any
excess from public action sale will be returned to taxpayer, in case of deficiency –
additional distraint and/or levy
- Levy – has redemption period, Distraint – no redemption
- If no buyer in public auction sale – the Government will buy
- Civil and criminal action – filed by the Local Treasurer (jurisdiction dependent on amount
of tax being collected)

Real Property Taxation

- Is a local tax
- Collected by the Local Government Unit

Kinds of Real Property

1. Real Property Tax Proper (all kinds of RP)
2. Special Levy on Education Funds (all kinds of RP)
3. Special Levy on Idle Lands (land only)
4. Special Levy on Public Works (land only)

2,3,4 may be imposed in addition to No. 1

Involved Offices
- Local Assessor
- Local Accountant

Assessed Value = FMV x Assessment Level

Protest of Asssessed Value

- Owner within 60 days from receipt of Notice of Assessment, file a protest with the Local
Board of Assessment Appeals
- LBAA shall decide the appeal within 120 days from receipt of appeal
- In case of adverse decision, appeal within 30 days from Central Board of Assessment
Appeals
- LBAA - > CBAA - > CTA

 Appeal shall not suspend payment of assessed tax

Real Property Tax
- 1% to 2%
- Exemption to RPT (Sec. 234)
 Owned by the National Government, instrumentality, exn: benefits enjoyed by a
taxable person (Beneficial Use Doctrine)
 Charitable institutions, churches, nonprofit educational institutions actually, directly
and exclusively used for their purposes
 Local Water Districts, GOCCs, water and electricity supplier/distributors
 Duly registered Cooperatives
 Machinery and Equipment for Environmental Protection

Special Levy on Education Fund

- Province, city, municipality in Metro Manila
- 1% on Assessed value of RP
- In addition to RPT proper

Special Levy in Idle Lands

- Province, city, municipality in Metro Manila
- Imposed on unused landss

Special Assessment / Special Levy on Public Works

- All kinds of political subdivisions allowed
- Shall not exceed 60% of the cost of improvement
- There must be a tax ordinance, there must be public hearing, notice to be sent to
owners of affected lands

Collection of RPTx
- Accrue on the 1st day of the year
- Taxable dependent on who the owner is on January 1 regardless if transferred from
nontaxable to taxable person
- Barangay Treasurers to collect
- It may be in installments
- Prescriptive Period: Within 5 years from the date they become due
- Prescription Period to Assess: 5 years from when the taxes are due, if with intent to
defraud: 10 years

Remedies of Taxpayer with Respect to RPTx

- Taxpayer should pay RPTx to file a protest (vs local tax)
- File a written protest within 30 days from payment of RPTx
- Local Treasurer has 60 days to decide from receipt of protest
- In case of denial, taxpayer has 60 days to appeal to LBAA
- LBAA to decide within 120 days
- In case of denial, appeal with CBAA within 30 days
- In case of denial, appeal with CTA en banc
 - In case of denial, appeal with SC R45

Claim for RPTx Refund

- Within 2 years

Remedy of the Government

- Notice of Delinquency
- Lien, Levy of Real Property
- No distraint of personal property (vs local tax)