TOPIC 2

LOCAL TAXATION
R.A. No.7160
 OBJECTIVE
 Definition
 Authority
 Local Taxing Authority
 Fundamental Principles
 Common Limitations on the Taxing Powers
of Local Government Units
 Three Types of Local Taxation
 R.A. No. 7160
LOCAL GOVERNMENT CODE ‘1991’

 Shall govern the exercise by provinces,

cities, municipalities and Barangays
 LOCAL TAXES

 Imposed and collected by the local

government units TO RAISE
REVENUES.
 Local Taxing Authority
 shall be exercised by the “Sanggunian” of
the local government unit through
appropriate ordinance.
LOCAL TAX ORDINANCES
• Imposing a fee or tax specifically provided
by LGC.
• Imposing a fee or tax not specifically
enumerated under LGC.
 CHARACTERISTICS
 Not Inherent
 Direct Grant from the Constitution
 Not Absolute
 Exercised by Sanggunian through
ordinance
 Applicable within its geographical limits.
 Fundamental Principles
1. Taxation shall be UNIFORM in each local
government unit.
2. Taxes, fees, charges and other impositions
shall:
2. Be equitable
3. Be levied and collected for public purposes.
4.Not be adjust, excessive, oppressive or
confiscatory
5.Not be contrary to law, public policy, national
economic policy, or in restraint of trade.
 Fundamental Principles
3. The collection of local taxes, fees, and
charges shall not be hold by any PRIVATE
PERSON.
4. The revenue collected shall INURE solely
by the local government unit levying the tax.
5. Each local government unit shall evolve a
PROGRESSIVE system of tax.
 Common Limitations
1. Income Tax
2. Documentary Tax
3. Estate, inheritance, gifts, legacies, and
mortis causa
4. Custom duties, registration fees vessels,
wharfage on wharves, tonnage dues
5. Taxes, fee and charges upon goods
carried in and out under territorial jurisdiction
6. Taxes, fee or charges on agricultural and
aquatic products
 Common Limitations
7. Taxes on business enterprises certified by the
Board of Investments as pioneer or non-pioneer
for a period of 6 and 4 years .
8. Excise Taxes on articles enumerated under
the National Internal Revenue Code
9. Percentage or Value-added tax on sales,
barters or exchanges or similar transaction on
goods and services
10. Taxes on the gross receipts of transaction
contractors and persons engaged in the
transportation of passengers or freight by hire
and common carriers by air, land or water
 Common Limitations
11. Taxes on premium paid
12. Taxes, fees or charges for the registration of motor
vehicle and for all kinds of licenses and permits
13. Taxes, fees or charges on Philippine products
exported
14. Taxes, fees or charges, on country side and
Barangay Business Enterprises and Cooperatives
15. Taxes, fees, or charges of any kind on the National
Government
 Types of Local Taxation

Community Tax
●

Real Property Tax

●

Local Business Taxes

●
COMMUNITY TAX

Local Government Code (LGC)

●

poll or capitation tax

●
 WHO ARE LIABLE?

Individuals
regularly employed
●

●
engaged in business or occupation;
owns real property
●

●
file an income tax return
Shall pay an annual community tax of five pesos (P5.00) and an annual
additional tax of one peso (P1.00) for every one thousand pesos (P1,000) of
income, which in no case shall exceed five thousand pesos(P5,000). The
source of income earned during the preceding year may be from business,
exercise of profession or pursuit of any occupation, or real property.
 SINGLE
ILLUSTRATION #1
Jay Arcenal, single, is engaged in a business in Placer, Masbate. He had a
monthly gross receipts of P80,000 for taxable year 2018. His community tax
for 2019 is computed as follows:
ACTIVITY #1
Alondra Nabi, single, is engaged in a trading business in Canjulao, LLC.
She had a monthly gross receipts of P40,000 for taxable year 2018.
Compute for her community tax for 2019:
 MARRIED

In the case of husband and wife, each of them is liable to pay the basic
tax five pesos (P5.00). However, the additional tax to be imposed on the
husband and wife shall be one peso (P1.00) for every one thousand pesos
(P1,000.00) of income from the total property owned by them and the
total gross receipts or earnings derived by them.
ILLUSTRATION #2
Mr. and Mrs. Doneil Aglipa are newly-weds residing in Cebu City. In
2017, Mr. Aglipa earned P145,000 a month as a practicing lawyer while
Mrs. Aglipa, P120,000, as a financial analyst. For the taxable year 2018,
the couple shall be liable for community tax as computed below:
ACTIVITY #2
Mr. and Mrs. Paulo Avelino are a married couple for 5 years and
currently residing in Cebu City. In 2017, Mr. Avelino earned P150,000 a
month as a film director while Mrs. Avelino P130,000, as a
neurosurgeon. For the taxable year 2018, the couple shall be liable for
how much community tax?
 Juridical Persons
●
1. For every five thousand pesos (P5,000) worth of real property in the
Philippines it owned during the preceding year based on the valuation used
for the payment of the real property tax - two pesos (P2.00); and
●
2. For every five thousand pesos (P5,000) of gross receipts or earnings it
derived from business in the Philippines during the preceding year - two
pesos (P2.00).
ILLUSTRATION #3:
For the taxable year 20018, the following data pertain to El Chico
Corporation, a resident foreign corporation doing business in the
Philippines:
Assessed Value*of Real Property in Ph P7,000,000
Monthly Gross Receipts from business 1,500,000
Dividends from a Domestic Corporation 1,000,000
*It is the valuation used for the payment of real property taxes
ACTIVITY #3:
For the taxable year 20018, the following data pertain to ABX
Corporation, a resident foreign corporation doing business in the
Philippines:
Assessed Value*of Real Property in Ph P9,000,000
Monthly Gross Receipts from business 1,700,000
Dividends from a Domestic Corporation 1,800,000
*It is the valuation used for the payment of real property taxes
Given the information above, compute for the total community tax due:
 EXEMPTION FROM
COMMUNITY TAX
The following are exempt from the community tax:
1) Diplomatic and consular representatives; and
2) Transient visitors when their stay in the Philippines does not exceed three
(3) months.

The following are exempt only for the current taxable year:
1) Corporations established and organized on or after July 1;
2) Transient visitors whose stay in the Philippines is not more than three (3)
months;
3) Persons who, on or after July 1 -
a) come to reside in the Philippines, or
b) become eighteen (18) years of age
 TIME AND PLACE OF
PAYMENT
●
first day of January of each year
●
reaches the age of 18 years
●
established and organized corporations on or before the last
day of March
●
shall be paid in the city or municipality
 PENALTY FOR
DELINQUENCY

●
not paid within the time prescribed
●
total interest on the unpaid amount
●
prescriptive period for the collection
 PRESENTATION OF THE
COMMUNITY TAX
CERTIFICATE
A community tax certificate shall be issued to every person or
corporation upon payment of the community tax. A community tax
certificate may also be issued to any person or corporation not subject to
community tax upon payment of one peso (P1.00).
An individual subject to community tax is required to present his
community tax certificate when he:
●
acknowledges any document before a notary public;
●
takes the oath of office upon election or appointment to any position in the
government service;
●
receives any license, certificate, or permit from any public authority;
●
pays any tax or fee;
●
receives any money from any public fund;
●
transacts other official business; or
●
receives any salary or wage from any person or corporation
A corporation shall exhibit its community tax certificate when,
through its authorized officers, it:

●
receives any license, certificate, or permit from any public authority;
●
pays any tax or fee;
●
receives money from public funds; or
●
transacts other official business

●
The community tax certificate required to be presented shall be
the one issued for the current year, except for the period from
January until fifteenth (15th) of April, in which case, the
previous year's certificate will suffice.
Real Property Tax
By: Argomido, Kuene
WHAT IS A REAL PROPERTY TAX?
Is a direct tax on the ownership of real property.

It is a fixed proportion of the assessed value of the

property being taxed and requires, therefore, the
intervention of assessors.
 FUNDAMENTAL PRINCIPLES
Shall be appraised at its current and fair market value.
Shall be classified for assessment purpose on the basis
of its actual use.
Shall be assessed on the basis of a uniform classification
within each local government unit.
The appraisal, assessment, levy and collection of RPT
shall not be let to any private person.
The appraisal and assessment of RPT shall be equitable.
 DECLARATION OF REAL
PROPERTY
By the owner or
administrator duty By the assessor
Whether declared or If the owner refuses or fail,
undeclared, taxable or shall assess the property for
exempt, shall be the current taxation in accordance with
and FMV of the property. the provision of this title.
Filed every 3 years during
the period of January 1st to
June 30th.
📌 Duty of a Person Acquiring Real Property or making
improvement thereon.

📌 Proof of Exemption of Real Property

📌 Classes of Real Property for Assessment Purposes

📌 Special Classes of Real Property

ASSESSMENT LEVELS
 APPRAISAL AND ASSESSMENT OF
MACHINE
A. FMV @ ACQUISITION COST

FMV = Remaining economic life X Replacement or Reproduction

Cost

Economic life

B. If the machinery is imported, the acquisition cost includes

freight, insurance, banks and other charges.
 DEPRECIATION ALLOWANCE
FOR MACHINERY

I. Rate not exceeding five (5%) percent of original cost or

replacement.

II. Remaining value shall be fixed at not less than twenty

(20%) percent of the said cost.
 RATES OF BASIC REAL
PROPERTY TAX
Taxing Authority Tax Rate
Province ≤ 1%
City and Municipalities in Metro Manila ≤ 2%
 EXEMPTIONS FROM REAL
PROPERTY TAX
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,

mosques, non-profit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes.
 (c) All machineries and equipment that are used by local water districts
and government owned or controlled corporations engaged in the supply
and distribution of water or generation and transmission of electric
power.
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938.
(e) Machinery and equipment used for pollution control and
environmental protection..

42
 ADDITIONAL LEVY FOR THE SEF

- Annual tax of one percent (1%) on the assessed value of real

property which shall be in addition to the basic real property tax.

ADDITIONAL AD VALOREM TAX ON IDLE LANDS

- Annual tax on idle lands at the rate not exceeding five percent
(5%) of the assessed value of the property which shall be in
addition to the basic real property tax.

43
 IDLE LANDS

1. AGRICULTURAL LANDS: Exemptions:

a. more than one (1) hectare
b. suitable for cultivation, dairying, inland
fishery, and other agricultural uses.
c. one-half of which remain uncultivated or
unimproved by the owner or person having
legal interest.
▪ Agricultural lands planted
to permanent or perennial
crops with at least fifty (50)
trees to a hectare.
▪ Lands actually used for
grazing purposes.
 IDLE LANDS

2. LANDS OTHER THAN AGRICULTURAL

a. Located in a city or municipality

b. More than one thousand (1,000) square meters in area

c. One-half (1/2) of which remain unutilized or unimproved by

the owner or person having legal interest.
 IDLE LANDS EXEMPT
FROM TAX
1. Force majeure

2. Civil disturbance

3. Natural calamity

4. Any cause or circumstance which physically or legally

prevents the owner or person having legal interest from
improving, utilizing or cultivating the same.
 SPECIAL LEVY BY LOCAL
GOVERNMENT UNITS
Special levy shall not exceed Exemption :

60% of the actual cost of such It shall not apply to lands exempt
from basic real property tax and
projects and improvements,
the remainder of the land, portions
including the costs of acquiring
of which have been donated to the
land and such other real
LGU concerned for the construction
property in connection of such projects or improvements.
therewith.
 PAYMENT IN INSTALLMENTS

The basic RPT and the additional SEF tax may be paid without
interest in four (4) equal installments:

1st installment – on or before March 31

2nd installment- on or before June 30
3rd installment- on or before September 30
4th installment- on or before December 31

48
 DISCOUNTS
A discount not exceeding 20 % of the annual tax
due is available to taxpayers who pay the basic
real property tax and the additional tax
accruing to the Special Education Fund (SEF)
in advance.
 PENALTIES
Failure to pay the basic real property tax or any other tax
levied upon the expiration of the periods are subject to a
two percent (2%) surcharge per month on the amount or
fraction thereof, until the delinquent tax shall have been
fully paid. Provided that in no case shall the interest on the
unpaid tax or portion thereof exceed 36 months.
 SUMMARY
TYPE OF REAL PROPERTY TAX TAXING TAX RATE
AUTHORITY
Province ≤ 1%

1. Basic Real Property Tax City and Municipalities in ≤ 2%

Metro Manila

2. Additional levy on real property for the ALL 1%

Special Education Fund

3. Additional Ad Valorem tax on Idle lands ALL ≤ 5%

4.Special levy by Local Government Units ALL ≤ 60%

(actual cost)
 EXAMPLE PROBLEM
Josephine’s residential land is located in Cebu City measuring 1 500 sq.m. , 50%
of it remain unutilized. The city also imposes additional tax for Special Education
Fund and for Idle lands with the following additional information:

Fair market value in the tax declaration - 10 000/sq.m

Zonal value - 8 000/sq.m
Assessment level – 20 %

Question 1: How much is the assessed value of the land?

Question 2: How much is the basic real property tax?
Question 3: How much is the Special Education Fund?
Question 4: How much is the Ad Valorem Tax for Idle Land?
Question 5: How much is the total Real Property Tax due?
 SOLUTIONS

Solution 1: Solution 4 :

Land area 1 500 Assessed value 3 000 000

Valuation x 10 000 Tax rate x 5%
FMV 15 000 000 Assessment Ad Valorem tax Due 150 000
level x 20 % Assessed value
3 000 000

Solution 2: Solution 5:

Assessed value 3 000 000 Basic RPT due 60 000

Tax rate x 2 % Basic RPT Add: SEF Due 30
Due 60 000 000
Ad Valorem tax Due
Solution 3: 150 000
Total RPT Due 240
Assessed value 3 000 000 000
Tax rate x 1 % SEF Due
30
 LOCAL
BUSINESS TAXES
Prepared by: Baron , Amie
 LOCAL BUSINESS TAXES

SCOPE:
• PROVINCES
• CITIES
• MUNICIPALITIES
• BARANGAYS
1.) TAXING POWER on PROVINCES

a. Taxes on Transfer of Real Property Ownership

b. Taxes on Business Printing and Publication
c. Franchise Tax
d. Tax on Sand, Gravel and other Quarry Resources
e. Professional Tax
f. Amusement Tax
g. Annual Fixed Tax for Every Delivery Truck or Van of
Manufacturers or Producers, Wholesalers of, Dealers, or
Retailers in , Certain Products.
 PROVINCES

TAX ON TRANSFER OF REAL PROPERTY OWNERSHIP

Transactions taxed Sale, donation, barter, or any other mode of transferring

ownership or title of real property.

Rate Not more than 50% of the 1% of the total consideration

FAIR VALUE or ACQUISITION COST= Whichever is HIGHER

Exemption The sale, transfer or other disposition of real property pursuant to

R.A. No. 6657(Comprehensive Agrarian Reform Law )

Administration The seller, donor ,transferor, executor or administrator to pay the

tax herein imposed within (60) days from the date of execution of
the deed or from the date of the decedent’s death.
 EXAMPLE;

Albert Diaz sold his land to Greig Olsen with the

acquisition cost of 5M and a Fair Value of 4M. If
the Province has the ordinance to tax 30% of the
1% consideration, how much tax is to be paid by
Albert Diaz?
Solution :
5M x 1%x 30%= P15,000
 PROVINCES

TAX ON BUSINESS OF PRINTING AND PUBLICATION

Transaction Business of printing and/or publication of books, cards, posters, leaflets,

taxed handbills, certificates , receipts , pamphlets, and others of similar nature.

• Not exceeding (50%) of (1%) of the GROSS Annual Receipts for the
Rate preceding calendar year.
• Newly started business, the tax shall not exceed (1/20) of (1%) of the
capital investment.

Exemption Receipts from the printing and or publishing of books or other reading
materials prescribed by the Department of Education Culture and Sports
as school texts and references.
 EXAMPLE

Gwen Garcia is the sole proprietor of a newly started

Publishing Company in her province. Her capital
investment is in the amount of P500,000. If the
Sanggunian has the ordinance to tax 1/20% of the 1%
capital investment, how much tax is to be paid by
Garcia?
Solution: 500k x 1% x 1/20 = P250
 PROVINCES

FRANCHISE TAX
Generally refers to a privilege conferred by the government on an individual
Franchise or corporation, which does not belong to the citizens by common right.
Not exceeding (50%) of (1%) of the GROSS Annual Receipts for the preceding
calendar year based on the Incoming Receipt or Realized within its territorial
Rate jurisdiction.
If newly started business the tax shall not exceed (1/20) of (1%) of the capital
investment.
Gross annual receipts of preceding calendar year based on ;

Tax Base a. Incoming receipts, or

b. Realized within territorial jurisdiction
 PROVINCES

TAX ON SAND, GRAVEL AND OTHER QUARRY RESOURCES

Province may levy tax on ordinary stones, sand ,gravel, earth , and other
Subject Matter quarry resources extracted from public lands or from the beds of seas,
lakes, rivers, streams, creeks , and other public waters within its territorial
jurisdiction.

Rate NOT MORE THAN (10%) of Fair Market Value in the locality per cubic
meter of ordinary stones, sand, gravel, earth and other quarry resources
as defined under NIRC, as amended..

Issuance of The permit to extract sand, gravel and other quarry resources shall be
permit issued exclusively by the PROVINCIAL GOVERNOR, pursuant to the
ordinance of the sangguniang panlalawigan.
 PROVINCES

PROFESSIONAL TAX
The province may levy an annual professional tax on each person
Subject of engaged in the exercise or practice of his profession requiring
matter government examination.
At such amount and reasonable classification as the sangguniang
Rate of tax panlalawigan may impose Not to exceed P300.00

At the province where he practices his profession or where he maintains

Place of his principal office.
payment
• Corporations employing a person subject to professional tax shall
Time of payment require payment by that person of the tax on his profession before
employment thereafter.
• Payable annually on or before 31st day of January.

Exemption Professionals exclusively employed in the Government.

 PROVINCES

AMUSEMENT TAX
Subject matter The proprietors, lessees, or operators of the theaters, cinemas , concert
halls, circuses, boxing stadia, and other places of amusement.

“Amusement” is a pleasurable diversion and entertainment. It is

synonymous to relaxation , avocation, pastime , or fun.

Rate of Tax NOT MORE THAN (30%) of the Gross Receipts from admission fees.

Exemption Operas, concert, dramas, recitals, painting and art exhibitions, flower
shows, musical programs , literary and oratorical presentations.

Exception to Pop, rock, or similar concerts

the exemption
 PROVINCES

TAX ON DELIVERY TRUCK/VAN

Transaction Taxed Use of track, van vehicle in the delivery or distribution of

distilled spirits, fermented liquors, soft drinks, cigar, cigarettes
and other products, determined by the Sanggunian to sales
outlets or consumers

Tax rate Not exceeding P500 for every truck, van or any vehicle used.

Exemption Exempt from tax on peddlers

 2.)Local business tax on CITIES
• The city, may levy the taxes, fees, and charges which the province or
municipality may impose, except as otherwise provided in the
LGC. 
• Cities have the broadest taxing powers, embracing both specific and
general powers as provinces and municipalities may impose.
• The rates of taxes that the city may levy may exceed the maximum
rates allowed for the province or municipality by not more than
fifty percent (50%) except the rates of professional and amusement
taxes.
 MUNICIPALITES

1. SCOPE.
may  levy  taxes,  fees,  and  charges not
otherwise levied by provinces, except  as
otherwise provided in the LGC.
 MUNICIPALITIES
II. TAXES
1.  Tax on business (Sec. 143, LGC)
2.  Fees  and  charges  on  business  and occupation (Sec. 147, LGC)
3.  Fees for sealing and licensing of weights and measures (Sec. 148,
LGC)
4.  Fishery  rentals,  fees  and  charges  (Sec. 149, LGC)
1. Tax on Business
2.  Fees  and  charges  on  business 
and occupation
 BARANGAYS

I. SCOPE
The Barangays may levy taxes, fees, and
charges, as provided in this Article, which shall
exclusively accrue to them.
END OF THE PRESENTATION!