P a r t XII

Local Taxation

1222. Distinguish local taxation f r o m internal r e v e n u e tax a n d

real p r o p e r t y tax:

Answer.
Internal Revenue Tax Local T a x Real Property Tax
All types of imposts
which local g o v e r n m e n t
units are e m p o w e r e d to Taxes levied by
All types of national enact on businesses, provinces, cities and
taxes levied by the occupations, regulated municipalities on real
national government privileges and activities, properties and their
utility charges carried improvements
and within their
respective territorial
jurisdiction
Collected by the Collected by provinces, Collected by provinces
Bureau of Internal cities, municipalities or cities w h e r e the
Revenue through and barangays property is located
accredited banks
Self-assessing Not self assessing
Exercise by the national
government under its Exercise by the local g o v e r n m e n t units under its
inherent power of delegated power of taxation
taxation

1223. W h a t are the fundamental principles governing local

taxation?

Answer.
a) T h e imposition should be within the taxing authority of t h e local
government.

b) Collection of local taxes shall not be let to a n y private person or

entity;

c) Should not be in restraint of trade

716
 d) S h o u l d not be oppressive, excessive, discriminatory, unjust,
confiscatory a n d contrary to the declared national economic
policy of the g o v e r n m e n t ;

"oppressive" - u n r e a s o n a b l y b u r d e n s o m e , unjustly severe or

harsh.

"excessive" - characterized by w h a t e v e r is notably greater than

w h a t is m o d e r a t e , reasonable, proper, usual, necessary
and just.

"confiscatory" - a m o u n t s to u n d u e seizure or forfeiture of

private property in favor of the public treasury.

"unjust" - deficient in justice a n d fairness.

e) S h o u l d be based on t h e ability-to-pay principle;

f) S h o u l d evolve a progressive s c h e m e of taxation in the exercise

of their power of taxation as m a n d a t e d by the Constitution.

g) Should be uniform in all local political sub-units;

h) Levied for a public purpose

i) Collections shall inure and redound to local welfare, interest

and benefits.

1224. W h a t are t h e objectives local taxation?

Answer.
a) To enjoin the e n a c t m e n t of a Local Government Code which
shall allocate a m o n g the different local government units their
power and resources.

b) To ensure the viability and self-sufficiency of local government

unit by directly granting t h e m general taxing powers consistent
with the basic policy of local autonomy.

c) To allocate and define the taxing and other revenue raising

powers of local governments;

d) To develop local governments thru the exercise of their taxing

and other revenue-raising powers into viable, financially stable
and self-sufficient communities without over-burdening the
taxpayer with multiple and unreasonable impositions;

717
 e) To insure that each local government will have its fair share of
available resources and that the resources of the national
government will not be unduly disturbed; and

f) To insure that local taxation shall be fair, uniform and just.

1225. W h a t are the s o u r c e s of the taxing p o w e r s of the local

governments?

Answer.
a) The 1935 Constitution did not itself provide for any such
delegation of tax powers to the local g o v e r n m e n t s , the source
of their taxing powers w e r e derived from a limited statutory
authority. The power of the local g o v e r n m e n t to tax w a s not
inherent (then and now) b e c a u s e it could be exercised only
w h e n authorized to do so by legislation of the C o n g r e s s .

b) Under the 1973 Constitution, the power of taxation of the local

government is not plenary and absolute b e c a u s e the National
A s s e m b l y m a y still provide for s u c h limitations, as it may desire
on the exercise of said power.

c) W h e r e a s , under Art. X, Sec. 3; Sec. 5; a n d Sec. 6. of the 1987

Philippine Constitution, the local g o v e r n m e n t s w e r e broadly
conferred with such powers subject only to specific exceptions
that the law m a y prescribe. T h u s , w h e r e there is neither grant
nor prohibition by statute the tax power must n o w be d e e m e d
to exist.

Previous to t h e effectivity of the Local G o v e r n m e n t

C o d e of 1 9 9 1 , P. D. 231 (The Local T a x C o d e ) w a s the law
governing the exercise by provinces, cities, municipalities and
barangays of their taxing and other revenue-raising powers.

3 C o n g r e s s cannot enact laws depriving local g o v e r n m e n t

units ( L G U ) from exercising s u c h p o w e r to tax but it may by
law merely subject the exercise of that p o w e r to limitations
and guidelines.

O Such local taxes, fees and c h a r g e s i m p o s e d by the L G U

shall accrue exclusively to t h e m .

718
1226. W h o exercises the p o w e r of taxation in the local level?

A n s w e r . T h e local legislative body or the S a n g g u n i a n of the local

g o v e r n m e n t units through the e n a c t m e n t of tax ordinance. (Sec
132, L G C )

1227. Do the local g o v e r n m e n t units have the inherent power

to tax?

A n s w e r . Local g o v e r n m e n t units (province, city, municipality and

barangay) do not have t h e inherent p o w e r to tax, because they are
mere creatures of law, except s u c h p o w e r as m a y be delegated to
t h e m by the national legislature or conferred by the Constitution
itself. By virtue thereof, local g o v e r n m e n t units have the power,
independently of legislation, to create their o w n sources of revenue
and to levy taxes to finance g o v e r n m e n t a l activities in their
respective localities.

Thus, unlike a sovereign state, municipal corporations

(province/city/municipality/barangay) have no inherent power to
tax. T h e y m a y exercise the power only if delegated to them by the
national legislature or conferred by the Constitution itself.

1228. W h a t is the nature of the taxing power of local

governments?

Answer.
a) It is not inherent

b) C a n be exercised only if delegated to t h e m by law or by the

Constitution; and

c) Not absolute; subject to limitations provided by law.

1229. H o w is the local p o w e r of taxation exercised?

Answer. It is exercised by the legislative body of each local

government units via the enactment of a tax ordinance.

1230. W h a t are the requisites of local tax ordinance:

Answer.
a) It should satisfy the procedural and substantive due process;

719
 b) Public hearing prior to enactment is required with quorum,
voting and approval and/or veto requirements complied with;

c) Publication of ordinance within 10 days from approval for three

(3) consecutive days in a newspaper of general circulation
and/or posting in at least two (2) conspicuous and publicly
accessible places.

1 2 3 1 . W h a t is the s c o p e of local taxation?

Answer.
a) The Local G o v e r n m e n t taxation covering the imposition of
license taxes, fees and other impositions, including C o m m u n i t y
Development Tax (Cedula). [R.A. 7 1 6 0 , the Local G o v e r n m e n t
Code of 1991]

b) Real Property Taxation that is a system of levy on real property

imposed on a countrywide basis.

1232. W h a t are the aspects of local taxation?

Answer.
The two aspects of local taxation are -

a) Local taxation that levies t a x e s , fees, and charges under the

Local G o v e r n m e n t C o d e of 1 9 9 1 , (RA 7160) w h i c h repealed
the Local Tax C o d e enacted under P.D. No. 231 (June 2 8 ,
1973).

b) Real property taxation, w h i c h is g o v e r n e d by -

1. T h e Real Property T a x C o d e enacted under P.D. No. 4 6 4

as a m e n d e d , (May 2 0 , 1974)

2. T h e Special Education Fund Law (R.A. 5 4 4 7 a p p r o v e d on

Sept. 25, 1968).

Provincial, city, municipal and barangay ordinances

imposing taxes are subject to the limitations provided in the
Local G o v e r n m e n t C o d e , Local Tax C o d e a n d the Real
Property Tax C o d e .

720
1 2 3 3 . T w o (2) a c c e p t e d p r i n c i p l e o f a p p o r t i o n i n g t h e b u r d e n o f
taxation:

Answer.
a) Principle of Benefits Received - Persons w h o benefit from a
g o v e r n m e n t service must pay tax.

b) Principle of Ability-to-pay - P e r s o n s w h o possess more wealth

or income should pay more tax t h a n those w h o have less.

1234. W h a t are the general rules/provisions on the authority of

the local g o v e r n m e n t units to tax?

Answer.
a) Each local g o v e r n m e n t unit m a y create its o w n sources of
r e v e n u e a n d levy taxes, f e e s and charges, and other forms of
r e v e n u e m e a s u r e s s u c h as tolls, license, fees, rentals and
service charges, through the Sangguniang Panlalawigan,
Panlungsod, Bayan or Barangay, respectively, consistent with
t h e basic policy of local a u t o n o m y , which shall exclusively
accrue to it.

T h e exercise of the power to tax by the local legislative

a s s e m b l y is subject to the veto power of the local chief
executive. (Sec. 55, L G C )

b) Local taxation, like national taxation, is legislative in nature and

shall be exercised through an appropriate tax ordinance and
requires public hearing prior to its enactment. (Approval by the
Secretary of Finance on the said enactment is not necessary)

c) Local g o v e r n m e n t s are not authorized to condone or remit

regulatory taxes. (Reyes vs. Cornista, 92 Phil. 838) but they
may grant tax incentives to n e w industries, persons or entities.

d) Local governments cannot e x e m p t persons or entities from real

property taxes but they may condone liabilities on real property
taxes. ( N O T E : properties exempt from property taxes are
specifically identified and enumerated)

e) Municipalities may levy taxes not otherwise levied by

provinces, and the latter, would be prohibited from levying
taxes that municipalities may impose under certain instances.

721
 f) Cities have the broadest tax powers, embracing both such
specific and general tax powers as provinces and
municipalities may impose.

g) Barangays may under certain conditions (1) levy taxes on store

and retailers, (2) fees and charges o n , billboards and
signboards, and cockpits, gamecocks and cockfights, and (3)
impose service charges.

h) The interpretations of laws on the grant of tax powers to local

governments is to be liberally construed but doubts on the
liability of a taxpayer under a valid tax ordinance is construed
strictly against the local g o v e r n m e n t unit except, as regards tax
exemptions, incentives and reliefs.

1235. C a n the local g o v e r n m e n t units exercise t h e p o w e r of

taxation without a legislative grant?

Answer. Y e s , because of Art. X. Sec. 5 of the 1987 Constitution.

However, the C o n g r e s s m a y issue guidelines and limitations
consistent with the policy of local a u t o n o m y .

1236. Can congress by legislation deprive local g o v e r n m e n t s

of their taxing p o w e r ?

A n s w e r . No. T h e power of the local g o v e r n m e n t s to tax is

constitutionally granted and it exists independently of legislation.
T h u s , being a constitutional provision it c a n be abolished only by
constitutional a m e n d m e n t s a n d not be a m e r e legislative act. T h e
Congress can only impose reasonable limitations on s u c h power to
tax.

1237. C a n c o n g r e s s limit t h e p o w e r o f t h e local g o v e r n m e n t t o

tax?

A n s w e r . Y e s , b e c a u s e the C o n g r e s s is e m p o w e r e d to impose
guidelines and limitations in t h e taxing power of the local
governments units.

1 2 3 8 . C a n c o n g r e s s still e n a c t local t a x l a w s n o t w i t h s t a n d i n g
an expressed grant of such power to the local
governments?
 A n s w e r . Y e s . W h e n C o n g r e s s delegated the power to tax to the
local g o v e r n m e n t s , it did not divest itself of its inherent power to
enact local tax laws.

1239. C a n c o n g r e s s e x e m p t t h o s e that are t a x e d b y the local

government?

A n s w e r . Y e s . C o n g r e s s has the power to control over local

g o v e r n m e n t s , it c a n grant the local g o v e r n m e n t the power to tax
certain matters, it c a n provide for e x e m p t i o n s or even take back
such power. (Basco vs. PAGCOR, GR 91649, May 14, 1991)

1240. C a n t h e national g o v e r n m e n t tax the local g o v e r n m e n t ?

H o w about the local g o v e r n m e n t units taxing the
national government?

A n s w e r . Y e s , the national can tax the local government units, but

the local g o v e r n m e n t units c a n n o t tax the national government
b e c a u s e t h e spring c a n n o t rise higher than its source.

1 2 4 1 . C a n t h e l o c a l g o v e r n m e n t t a x all k i n d s o f b u s i n e s s
e n t i t i e s o p e r a t i n g w i t h i n its t e r r i t o r i a l j u r i s d i c t i o n ?

A n s w e r . T h e taxing powers of the local government are not as

extensive as that of the national government. There are some
identified businesses that cannot be subject to local taxation.

1242. Is the p o w e r of the local g o v e r n m e n t to tax absolute?

A n s w e r . T h e taxing power of the local government is not absolute

as it is subject to s u c h limitations as m a y be provided by law,
particularly those imposed under the Local Government Code.
(Basco vs. Pagcor, -197 SCRA 52) Likewise, the exercise of the
power to tax by the local legislative (Sanggunians) is subject to the
veto power of the local chief executive. (Mayor)

1243. W h a t are the limitations and restrictions on the power of

the local g o v e r n m e n t to tax?

Answer. Yes. The constitutional, inherent, statutory and

contractual limitations on national taxation are also applied to local
taxation.

a) Constitutional limitations - (a) due process and equal

protection clauses, (b) non-impairment of obligations of

723
 contracts, (c) non-imprisonment for non-payment of poll tax,
(d) rule on uniformity in taxation, and (e) tax exemptions of
religious and charitable institutions.

b) Inherent restrictions - (a) public purpose, (b) territoriality, (c)

direct double taxation, (d) exemption of government or
instrumentalities from taxation.

c) Statutory limitations - those expressly provided by law and

applicable to all levels of local government - denominated as
"common limitations on the taxing powers of local government
units"

d) Tax privilege granted by the g o v e r n m e n t under a valid

contract limits the exercise of the power of taxation within the
terms and conditions of the said contract.

A tax ordinance that imposes a tax b e y o n d any of the

limitations is VOID, it being ultra vires.

1244. W h a t are the limitations on the taxing p o w e r s of the local

government units? (In relation to the welfare of the
constituents of the local bodies)

Answer.
a) That the taxpayers will not be o v e r - b u r d e n e d or saddled with
multiple and unreasonable impositions;

b) That the resources of the national g o v e r n m e n t will not be

unduly disturbed;

c) That e a c h local g o v e r n m e n t unit will h a v e its fair share of

available resource; and

d) That local taxation will be fair, uniform and just.

1245. Territorial uniformity defined:

A n s w e r . Uniformity of taxation within the territorial limits of the
taxing jurisdiction. H e n c e , if it is a city tax it m u s t be uniform
throughout the city, province, municipality or barangay. It is not
required that the s a m e rate of tax be applied to all cities, provinces
or municipalities, but only that such rate be uniformly applied to all
of the s a m e class of taxable subjects within e a c h city, province or
municipality.

724
1246. W h e n is a tax m e a s u r e equitable?

A n s w e r . T h e w o r d "equitable" in taxation refers to the distribution

of the tax b u r d e n itself. T h e most equitable tax system is that which
is most closely in conformity with the standards of equity in the
distribution of real i n c o m e .

1 2 4 7 . Is a t a x o r d i n a n c e o p p r e s s i v e b e c a u s e it carries a penal
clause of fine or imprisonment?

A n s w e r . No. In the c a s e of Villanueva vs. City of lloilo, Dec. 28,

1968, the high court ruled that a tax ordinance does not become
oppressive simply b e c a u s e it carries a penal clause of fine or
imprisonment; neither d o e s it b e c o m e unconstitutional because it
subjects the t a x p a y e r to criminal prosecution for non-payment of
the tax validly i m p o s e d .

1248. H o w m u c h is t h e s h a r e of t h e local g o v e r n m e n t units in

the internal revenue allotment?

A n s w e r . Local g o v e r n m e n t units shall receive:

a) 3 0 % on the first y e a r of the effectivity of the Local Government

Code

b) 3 5 % o n the s e c o n d year;

c) 4 0 % on t h e third year and thereafter.

1. 2 3 % thereof t o the provinces

2. 2 3 % thereof to the cities

3. 3 4 % thereof to municipalities, and

4. 2 0 % thereof to barangays.

The share of each province, city and municipality shall be

determined on the basis of the following formula:

Population - 5 0 % ; Land area - 2 5 % and Equal sharing - 2 5 %

O 2 0 % of the 2 3 % of cities' share in its internal revenue allotment

shall be allotted for development projects and appropriated in

725
 accordance with the approved local development plans of the
city.

O The share of the city in the internal revenue allotment shall be

released directly to the City treasurer on a quarterly basis
within 5 days after the end of each quarter and shall not be
subject to any lien or holdback that may be imposed by the
national government for whatever purpose.

1249. H o w m u c h is the share of local g o v e r n m e n t s in the

proceeds from the development and utilization of
national wealth?

Answer. Local government units shall have the share of 4 0 % of

the gross collection derived by the national g o v e r n m e n t from excise
taxes on mineral products, royalties, taxes, fees, charges,
surcharges, interests, fines, share from any co-production, joint
venture or production a g r e e m e n t (referred to as the proceeds on
the development of national wealth), - c o m p o n e n t s cities get 4 5 %
from that share. For natural resources located in highly urbanized
cities or independent cities, 4 0 % of its share shall be automatically
apportioned in the following manner: City - 6 5 % and Barangay -
35%.

1250. What do you understand by the residual taxing powers

of the local g o v e r n m e n t s ? (Sec. 186, L G C )

A n s w e r . Like the National g o v e r n m e n t the local g o v e r n m e n t units

do have this residual power of taxation w h i c h is t h e power to
impose taxes, f e e s , and c h a r g e s w h i c h do not fall within the scope
of taxes e n u m e r a t e d under the Local G o v e r n m e n t C o d e as well as
those which are levied on subjects or bases w h i c h a r e not taxed
under the N I R C , as a m e n d e d or other applicable laws.

T h u s , local g o v e r n m e n t s may, under their residual taxing

powers, raise revenue t h r o u g h other sources, s u c h as the
imposition and collection of market stall f e e s ; slaughterhouse fees
or charges for holding benefit s h o w s , public utility charges
rendered in the operation of public utilities o w n e d , operated and
maintained by t h e m ; tolls for m a i n t e n a n c e of any road, canal,
bridges or ferry within its territory or for repaying borrowings for
their construction; and service charges.

726
1251. Elements of residual power of taxation:

Answer.
a) T h e tax b a s e or subject are not t a x e d under the National
Internal R e v e n u e C o d e or other applicable laws,

b) T h e t a x e s , fees, or c h a r g e s are not unjust, excessive,

confiscatory, o p p r e s s i v e or contrary to the declared national
e c o n o m i c policy of the g o v e r n m e n t ;

c) A public hearing have b e e n c o n d u c t e d prior to the enactment

of the ordinance levying t h e t a x e s , fees or charges, and

d) T h e procedures for the a p p r o v a l , effectivity and publication of

tax ordinance have b e e n complied with.

1252. W h a t are the restrictions or limitations on the exercise of

residual taxing p o w e r of the local g o v e r n m e n t units:

Answer.
a) Constitutional limitations as provided.

b) C o m m o n limitations on the taxing powers of local government

units as prescribed.

c) F u n d a m e n t a l principles governing local taxation particularly

that requirement that they must not be "unjust, excessive,
oppressive, confiscatory, or contrary to declared national
policy".

d) T h e requirement prescribed which directs that the ordinance

levying such residual taxes shall not be enacted without any
prior public hearing conducted for the purpose; and

e) The Principle of Preemption or Exclusionary Rule is applicable

under the premises.

1253. Define the Principle of Preemption or the Exclusionary

Rule:

Answer. Principle of Preemption refers to an instance where the

National Government elects to tax a particular area, impliedly
withholding from the local government the delegated power to tax

727
 the same field. This doctrine principally rests upon the intention of
the Congress.

Where the National Government elects to tax a particular area,

it impliedly withholds from the local government the delegated
power to tax the same field.

Illustration:

Under the V A T law, persons w h o are e x e m p t from the 1 2 %

VAT are subject to the 3% percentage tax which is in lieu of the
1 2 % VAT. This arises w h e n the aggregate gross taxable
sales/receipts derived by the taxpayer from all lines of businesses
and every separate and distinct establishment or place w h e r e the
business is conducted d o e s not exceed Php 1,919,500.00 (RR 16-
2 0 1 1 , which took effect January 1, 2012) during any 12-month
period. Preemption here would m e a n that the imposition of the 3%
percentage tax on sales would impliedly preclude the imposition of
that same kind of tax by local g o v e r n m e n t units. However, so long
as the business tax being levied by the L G U s is not a sales tax,
they may proceed with the levy, (e.g., a graduated fixed tax which
is not a sales tax but a tax on the privilege of engaging in a
particular business.)

When this Doctrine does not apply? (Excluded

impositions pursuant to this Doctrine):

a) T a x e s w h i c h are levied under t h e N I R C , unless otherwise

provided by the L G U ,

b) Taxes, fees, etc. w h i c h are i m p o s e d under the Tariff and

Customs Code;

c) Taxes, fees, etc. the imposition of w h i c h contravenes existing

governmental policies or w h i c h violates the f u n d a m e n t a l
principles of taxation,
d) T a x e s , fees and other c h a r g e s i m p o s e d under special laws.

e) W h e n C o n g r e s s allows municipal corporations to cover fields of

taxation it already occupies.

f) It does not apply b e y o n d a certain level of sales or receipts for

the preceding year. ( E x a m p l e : P e r s o n s selling more than Php
1,919,500 in any 12-month period shall be liable to 1 2 % V A T

728
 and also to any sales tax i m p o s e d by the local government
unit.)

g) If the subjects of the taxes levied by the national and local

g o v e r n m e n t s are different from e a c h other.

1254. Is there d o u b l e or multiple taxation in the local level?

A n s w e r . D o u b l e taxation has not b e e n prohibited except implicitly

against:

a) provinces a n d municipalities that either of said governments

m a y not impose a tax w h i c h the other may impose under the
municipalities' specific tax p o w e r s

b) provinces, municipalities, a n d cities m a y not impose taxes

w h i c h the b a r a n g a y s are specifically e m p o w e r e d to impose
being to the exclusion of all other local g o v e r n m e n t units.

N O T E : T h e r e is no constitutional prohibition against double

taxation in the Philippines. It is something not favored but
permissible, provided s o m e other constitutional requirement is
not thereby violated, such as the uniformity clause on taxation.

T h e r e is no double taxation in case one tax is imposed by the

State a n d the other by the City or Municipality because there
are t w o (2) different taxing authorizes. (Pepsi-Cola Bottling Co.
of the Phils., Inc. vs. Mun. of Tanauan, Leyte, 69 SCRA 460)

1255. P o w e r of the local g o v e r n m e n t s to prescribe penalties

for tax violations a n d limitation t h e r e o n : (Sec. 516, LGC)

A n s w e r . This power, is limited to the fixing of imposable fines and

length of time of imprisonment, particularly:

a) The Sangguniang is authorized to prescribe fines and other

penalties for violation of local tax ordinances - in no case shall
fines be less than Php 1,000 or more than Php 5,000, neither
shall the imprisonment be less than one (1) month nor more
than six (6) months.

b) Such fines or other penalty shall be imposed at the discretion

of the court.

729
 c) The Sanggunian Barangay may prescribe a fine of not less
than Php 100 or more than Php 1,000.

1256. P o w e r of the local g o v e r n m e n t to adjust tax rates: (Sec.

191, LGC)

Answer. Local governments are authorized to adjust tax rates as

prescribed under the LGC but should not do so oftener than once
every five (5) years and in no case shall such adjustment exceed
ten percent (10%) of the fixed rates under the C o d e .

1257. Power of the local g o v e r n m e n t to grant local tax

exemptions: (Sec. 192, LGC)

Answer. The power to e x e m p t is not as broad as the power to tax.

Local government units may, through ordinances duly approved
grant tax exemptions, incentives or reliefs under s u c h terms and
conditions, as they may d e e m necessary subject to limitations
provided by law.

1258. Guidelines on the grant of tax e x e m p t i o n s or tax reliefs:

Answer.
a) The s a m e shall be granted in c a s e s of natural calamities, civil
disturbance, general failure of crops or adverse e c o n o m i c
conditions such as substantial d e c r e a s e in prices of agricultural
or agri-based products,

b) T h e grant of tax e x e m p t i o n shall be through a valid tax

ordinance;

c) A n y e x e m p t i o n or relief g r a n t e d to a type or kind of business

shall apply to all business similarly situated;

d) T h e e x e m p t i o n shall take effect only during the next calendar

year for a period of not more t h a n one (1) year as m a y be
provided in the tax o r d i n a n c e .

e) In case of shared r e v e n u e s , t h e e x e m p t i o n or relief shall only

extend to the L G U granting such e x e m p t i o n or relief.

730
1259. W h o s e exemptions were not withdrawn upon the
effectivity of the L G C ?

Answer.
a) Local water districts

b) C o o p e r a t i v e s duly registered under RA 6 9 3 8 (The Cooperative

C o d e of the Philippines)

c) Non-stock a n d non-profit hospitals, a n d

d) Non-stock, non-profit educational institutions

O T h e p o w e r of the local g o v e r n m e n t to grant tax exemption,

tax incentives and tax reliefs shall not apply to regulatory
fees w h i c h are levied under the police power of the L G U .

O T h e tax e x e m p t i o n shall be conferred through the issuance of

a non-transferrable tax e x e m p t i o n certificate.

1260. Guidelines on the grant of tax incentives:

Answer.
a) It shall be granted only to n e w investments in the locality and
the tax ordinance shall prescribe the terms and conditions
therefore;

b) T h e grant shall be for a period not exceeding one (1) year;

s t
c) T h e grant shall be by tax ordinance passed prior to the 1 day
of January of any year, and

d) A n y grant to a type or kind of business shall apply to all

businesses similarly situated.

1261. What are the common revenue-raising powers of the

local government units (province, municipal, city a n d
barangay)?

Answer. All local government units are authorized to impose and

collect the following fees and charges:

a) Service fees a n d charges - for any service rendered by local

governments in an amount reasonably commensurate to such
service;

731
 b) Public utility charges - for services rendered in connection
with the operation of public utilities o w n e d , operated, and
maintained by local governments within their territorial
jurisdiction;

"Wharfage" is the compensation or fee or charge for tying

vessels to a wharf and for loading goods or shipping them
therefrom. Local government may impose the s a m e provided
that such wharves are constructed and maintained by t h e m .
But, the collection may be declared null and void, if the
imposition partakes of a specific tax, or a tax upon goods and
merchandise carried into the municipalities. (Tan vs. Mun. of
Pagbilao, 7 SCRA 887)

c) Toll fees or c h a r g e s for roads, bridges, canals, pier or wharf,

waterway, ferries and telecommunication system f u n d e d and
constructed by the local g o v e r n m e n t c o n c e r n e d ;

The amount, rates, terms and conditions relative thereto

shall be determined and fix by the local s a n g g u n i a n c o n c e r n e d .

The officers and enlisted m e n of the A F P a n d m e m b e r s of

the P N P on mission, post office personnel delivering mail,
physically handicapped and disabled citizens and senior
citizens are e x e m p t f r o m these toll fees and c h a r g e s .

W h e n public safety a n d welfare dictates, the local

g o v e r n m e n t unit c o n c e r n e d m a y discontinue the collection of
the tolls, fees and charges and thereafter, the said facility shall
be free and o p e n for public use.

d) Market fees - for the o c c u p a n c y or use of public markets and

premises of the s a m e ;

e) Slaughter fees - for the slaughter of any animal for public

consumption;

f) Corral fees - for the animals to be slaughtered w h i c h are

deposited and kept in a corral o w n e d by the local g o v e r n m e n t ;

g) Tuition fees - for instruction in schools w h i c h the local

g o v e r n m e n t operates, except in the elementary g r a d e s ;

732
 h) C h a r g e s for h o l d i n g benefits - those collected from benefits
held by local g o v e r n m e n t s to raise funds for s o m e specific
purpose; a n d

i) L i c e n s e or P e r m i t f e e s - a m o u n t sufficient to cover the cost of

regulation, inspection, and surveillance relative to the issuance
of a permit to e n g a g e in any business or occupation.

1262. W h a t are t h e t a x e s that c a n n o t be i m p o s e d by the local

g o v e r n m e n t units? ( C o m m o n limitations on the taxing
powers of the LGU)

Answer.
a) D o c u m e n t a r y S t a m p tax;

b) T a x e s on forest c o n c e s s i o n s ; and forest products (not its sale)

w h e n sold domestically by the concessionaire himself;

c) T a x e s on estates, gifts, inheritance, legacies and other

acquisitions mortis c a u s a , except the 1/2 of 1% tax on transfers
of real property o w n e r s h i p that m a y be imposed by provinces
and cities;

d) T a x e s on income of any kind w h a t s o e v e r except w h e n levied

on b a n k s and other financial institutions; including non-bank
intermediaries, lending investors, finance and investment
companies, m o n e y shops, insurance companies, stock
markets, stock brokers, p a w n s h o p s and dealers in securities
and foreign e x c h a n g e .

T h e Local G o v e r n m e n t C o d e categorically authorizes the

L G U s to impose two (2) types of taxes on banks and financial
institutions, the .first being the income tax under Sec. 133(a)
and the second the business tax under Sec. 143(f) of the same
Code.

Currently, these entities are already subject to gross

receipts tax by the National Government up to 3 0 % of their
lending activities, 5% on the amount of royalties of their real or
personal properties, 3 0 % corporate income tax and 2 0 %
withholding tax on their Philippine currency deposit interest
income and yields from deposit substitutes. So that, the local
government units in formulating the revenue ordinance must
consider the s a m e in imposing additional tax burden on them. .

733
 e) Taxes on businesses inside the export processing zones
because the power of taxation is coterminous with the territorial
boundaries and therefore local government units cannot
lawfully impose taxes beyond such boundaries. The zone is
"outside" the territorial jurisdiction of the locality.

f) Taxes on the business of transportation contractors and

persons engaged in the transportation of passengers or freight
by hire and c o m m o n carriers by air, land or water except as
otherwise provided by the LTC;

g) Local governments may tax tricycle operation. Under the L G C

of 1 9 9 1 , they may impose a business tax on transportation
contractors, except taxes that w o u l d use gross receipts as a
tax base.

h) Taxes or fees for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving
thereof except tricycles;

i) Customs duties, registration fees of vessels except as

otherwise provided in the L T C , and w h a r f a g e on w h a r v e s ,
tonnage dues, and all other kinds of c u s t o m s fees, charges and
dues except w h a r f a g e on w h a r v e s constructed a n d maintained
by the local g o v e r n m e n t c o n c e r n e d at rates not e x c e e d i n g
those fixed by the T C C ; (including berthing fees)

j) T a x e s on p r e m i u m s paid by o w n e r s of property w h o obtain

insurance directly with foreign insurance c o m p a n i e s ; or for
reinsurance or retrocession ( p r e m i u m s refunded on account of
rejection of risk);

k) Export taxes, fees or other levies on Philippine finished,

manufactured or processed products, a n d products of
Philippine cottage industries;

T h e prohibition is on t a x i n g the p r o d u c t s e x p o r t e d
a b r o a d . T h e business of exporting Philippine finished,
manufactured or p r o c e s s e d products is T A X A B L E by
municipalities or cities. Likewise, export t a x e s , fees and other
levies m a y be i m p o s e d by local g o v e r n m e n t units on raw
materials E X P O R T E D T O F O R E I G N C O U N T R I E S .

I) T a x e s and other impositions u p o n g o o d s carried into or out of,

or passing t h r o u g h , the territorial jurisdictions of local

734
 g o v e r n m e n t s in the guise of unreasonable charges for
w h a r f a g e , use of bridges, or otherwise, or other taxes in any
f o r m w h a t e v e r u p o n such g o o d s or merchandise;

O An ordinance imposing a tax on the inspection of meat

c o m i n g f r o m outside city limits by a veterinarian and
charging fees therefore w a s declared invalid.

3 An export tax i m p o s e d on the inspection fee on every head

of h o g , cattle and c a r a b a o transported to other places w a s
forbidden.

O An o r d i n a n c e imposing a tax regulating the exit of food

supply and labor animals by prescribing a license permit
and requiring t h e p a y m e n t of certain fee therefor w a s held
to be invalid.

O A business tax on copra dealers on every hundred kilos of

copra exported a b r o a d w a s declared v o i d .

O An ordinance charging outgoing fee in the transport of rice

and corn f r o m o n e municipality to another is violative to
Sec. 5(j) PD 2 3 1 , being in restraint of trade.

m ) T a x e s or fees on agricultural or aquatic products w h e n sold by

the marginal farmer, f i s h e r m a n , poultry or animal-raiser himself
or his immediate family;

3 T h e s e are likewise taxable w h e n sold by persons other

t h a n t h e farmer or producer, even without being processed.
(Oriental Kapok Industries vs. CIR, 7 SCRA 132)

O T h e s e products b e c o m e taxable w h e n sold by agri-

business enterprises in c o m m e r c i a l quantities or when
these are transformed into manufactured articles such as
salted duck eggs, charcoal or sugar. (Bermejo vs.
Collector, 87 Phil. 96)

n) Percentage tax or value-added tax on sales or exchanges of

goods and services or similar transactions thereon;

o) Taxes on mines; mining operations; and minerals, mineral

products, and their by-products when sold domestically by the
operators;

735
 p) Taxes on countryside and barangay business enterprises and
on registered cooperatives duly organized and registered with
the proper government office under RA 6938, the Cooperative
Code of the Philippines.

O The exemption does not include payment of service

charges or rentals for the use of property and equipment or
public utilities o w n e d by the local government, such as on
consumption of water, electricity, toll fees a m o n g others.

q) Taxes, fees or charges of any kind on the national government,

its agencies and instrumentalities and other local government
units;

N O T E : LGUs are authorized to tax G O C C s . But, L G U s may

not tax local water districts, duly registered cooperatives, non-
stock and non-profit hospitals and educational institutions
because the Local G o v e r n m e n t C o d e expressly provided for
their e x e m p t i o n .

Light Rail Transit Authority vs. Board of Assessment

Appeals of Mia. & City Assessor of Manila (CBAA case No.
L-06, resolved July 6, 1995)

Carriageways and terminals o w n e d by the L R T A are

subject to realty taxes of the L G U s , e v e n t h o u g h built or
attached to the national road w h i c h is the property of the
national government. T h e L R T w a s created to serve the needs
of the riding public w h o pays the required rates for the use of
the L R T system from w h i c h the Authority derived material
gains. It is not e n g a g e d in purely g o v e r n m e n t a l service entitled
to the tax e x e m p t i o n .

r) T a x e s on the business of persons e n g a g e d in t h e printing and

publication of any n e w s p a p e r , m a g a z i n e , review or bulletin
appearing at regular intervals primarily for t h e purpose of
public advertisement except books and materials prescribed by
the D E C S as school texts.

s) Excise taxes on articles or g o o d s e n u m e r a t e d under the

NIRC and taxes, fees, a n d c h a r g e s on petroleum products, but
not a business tax on the businesses of importing,
manufacturing or producing said products subject to excise tax,
V A T , or percentage tax. T h u s , municipalities a n d cities are

736
 authorized to i m p o s e business taxes of not more than 2% of
the gross receipts for the preceding year on said entities.

t) T a x e s on business enterprises certified by the Board of

Investments as pioneer or non-pioneer for a period of 6 and 4
y e a r s , respectively, f r o m s u c h date of registration and
countryside and barangay business enterprises registered
pursuant to RA 6 8 1 0 ;

O O n c e the 4 - 6 years have expired the local government

m a y t h e n after exercise its power of taxation on these
businesses.

3 BOI-registered c o m p a n i e s are N O T e x e m p t from Major's

permits, regulatory fees and service charges that local
g o v e r n m e n t m a y have i m p o s e d under a duly-enacted tax
o r d i n a n c e , their e x e m p t i o n being applicable to national
taxes only.

Art. 48 of PD 1789
S e c . 1 9 ( A - 2 ) o f P D 231 ( O m n i b u s Investment Code)
T h e e x e m p t i o n is on t h e The exemption is on the
business of exporting products being exported.

3 Producers of agricultural, marine and fresh water products are

taxable b e c a u s e w h a t is prohibited is for the local
g o v e r n m e n t s to i m p o s e taxes or fees on agricultural products,
but N O T those levied on the business of producing t h e m .

3 Local g o v e r n m e n t s m a y levy taxes on sugar centrals on the

basis of gross sales for the preceding calendar year. Even if
the sugar central itself produces the sugar cane because
under the definition of "agricultural product" the yield of the
soil is considered only as such for purposes of taxation w h e n
it is in its original f o r m , or w h e n preserved in a more
convenient and marketable form through the simple
processes of freezing, drying, salting and stripping. The
conversion of sugar cane into sugar is NOT included in the
simple processes contemplated under the definition.

1263. Distinguish between "accrual of tax" and "time for

payment":

Answer. Accrual means when liability for the tax has attached or
begun. Local taxes, fees and charges shall accrue on the 1st day

737
 of January of each year. However, new taxes, fees and charges, or
changes in the rates shall accrue on the 1st day of the quarter next
following the effectivity of the ordinance imposing such new levies
or rates.

Local taxes, fees and charges shall be paid within the first 20
days of January or of each subsequent quarter, as the case may
be. This time of payment may be extended by the Sanggunian
concerned for a justifiable reason or cause, for a period not
exceeding 6 months without surcharge or penalties.

"Accrual of tax" " T i m e of p a y m e n t "

It refers to the date the tax is payable
It refers to the time the tax b e c o m e s without penalty. For late payment
due and collectible thereof surcharge, interest and other
penalties are imposable.

1264. Distinctions: Tax vs. Fees vs. C h a r g e s :

Answer.
Tax Fee Service Charge
Imposed for purposes of Imposed in payment of
Imposed for purposes regulations, T h e a m o u n t services rendered by the
to raising revenues is more or less equivalent local g o v e r n m e n t , or for
to t h e cost of regulating the convenience
the activity or privilege. furnished.
Imposed under the Imposed under t h e police Imposed under the
taxing power of the power of the g o v e r n m e n t principle of equity
government

1265. Scope of the taxing power of the P r o v i n c e :

A n s w e r . A province m a y levy the following -

A) T a x on Transfer of Real P r o p e r t y O w n e r s h i p (Sec. 135)

Rate of tax - Not more than 5 0 % of 1% of the total

consideration involved in the acquisition of the property or of
the fair market value, w h i c h e v e r is higher.

W h e n p a y a b l e ? - Within 60 d a y s f r o m the date of the

execution of the d e e d , or f r o m the date of t h e decedent's death
in the case of transfer by s u c c e s s i o n .

738
 W h o p a y s ? - T h e seller, donor, transferor, executor or
administrator of the property.

T a x S i t u s ? - At the place w h e r e the property is located

3 Foreclosed properties (by banks) are subject to the transfer

tax a n d c o m p u t e d b a s e d on the registration of the
certificate of sale with the Register of Deeds.

3 S a l e of land for socialized housing projects is exempt from

the transfer tax.

3 Agricultural land, if t h e transfer is f r o m landlords to tenant-

f a r m e r under the C o m p r e h e n s i v e Agrarian Reform Law is
taxable.

9 Transfer of o w n e r s h i p o v e r a land pending issuance of a

Free Patent under t h e Public Land Act (CA 141) by the
B u r e a u of Lands, is subject to transfer tax.

3 Real properties o w n e d by t h e traditional exemptees to

private parties are subject to transfer taxes. (In case the
" R E C " d o n a t e s properties, they shall likewise be subject to
d o n o r ' s tax)

B) T a x on b u s i n e s s of printing or publication (Sec. 136) -

Tax on business of printing and publication except books

and materials prescribed by the D E C S as school texts,

Rate of tax - For old business, not exceeding 5 0 % of 1 % of the

gross annual receipts for the preceding calendar year. In case
of newly started business, the tax shall not exceed 1/20 of 1 %
of the capital investment.

C) Franchise tax notwithstanding any exemption granted by any

law or other special law (Sec. 137).

Rate of tax - For old business not exceeding 5 0 % of 1 % of the

gross annual receipts for the preceding calendar year based on
the incoming receipts, or realized, within its territorial
jurisdiction. For newly started business, not exceeding 1/20 of
1% of the capital investment.

739
3 The power of the local government units to levy taxes is
expressly made subject to the limitations provided by law,
such as the provisions contained in franchise grants.

3 The province shall not impose the franchise tax on

business enjoying franchise operating within the territorial
jurisdiction of any city located within the province.

3 Municipalities may grant franchises but has no authority to

impose franchise tax.

3 N P C , a government corporation is liable for franchise tax

despite exemption granted under its Charter. R e a s o n :
While admittedly the established jurisprudence is that if a
general law is enacted after the special law, the special law
remains, but this admits exceptions. Such as in the case of
NPC w h e r e the D O J opines that the Local G o v e r n m e n t
Code is a general law, w h e r e a s , the N P C Charter is a
special law, but w h e r e there is a clear, necessary and
irreconcilable conflict, the general law prevails. (Compania
General vs. Collector of Customs, 46 Phil. 8)

3 L G U are without power to tax electric p o w e r c o m p a n i e s

already subject to franchise tax unless their franchise
allows the imposition of additional tax.

3 W h e r e the franchise t e r m provides that it "shall be in lieu of

all other taxes and assessments of whatever nature and by
whatever authority upon the privilege, earnings, income,
and franchise" - s u c h privilege is not subject to the local
franchise tax.

3 W h e r e the franchise provides that "such annual payments

shall be in lieu of all taxes of every name and nature -
municipal, province or city upon the capital stock,
franchises, right of way, earnings and all other property
owned or operated by the grantee" - s u c h privilege m a y not
be subject to the additional provincial franchise tax.

3 Business establishments ( R C P I , M e r a l c o , P L D T ) with

franchises containing the "in lieu of all taxes" proviso are
N O T subject to the said local franchise tax.

3 Transportation c o m p a n i e s are not holders of franchises

being only grantees of certificates of public c o n v e n i e n c e ,

740
 w h i c h are neither franchises nor contracts but simply
privilege licenses.

D) T a x on s a n d , gravel a n d other quarry r e s o u r c e s (Sec. 138V

Rate of tax - Not more than 1 0 % of fair market value in the

locality per cubic meter of ordinary stones, s a n d , gravel, earth,
and other quarry resources extracted f r o m public lands or from
the beds of s e a s , lakes, rivers, s t r e a m s , creeks, and other
public w a t e r s within the territorial jurisdiction.

3 T h e proceeds of the tax on s a n d , gravel and other quarry

resources shall be distributed as follows: a) Province -
3 0 % ; (b) C o m p o n e n t city or municipality w h e r e the
products are extracted - 3 0 % ; and (c) Barangay w h e r e the
s a m e is extracted - 4 0 % .

3 Contractors of g o v e r n m e n t infrastructure projects are

subject to sand a n d gravel tax.

3 T h e s a n d and gravel tax imposed under local tax ordinance

from contractors extracting materials within private
c o n c e s s i o n s or lands, regardless of whether the said
contractors are engaged in the construction of
infrastructure projects or not.

3 O w n e r s or lessees of private lands shall have the

preferential right to extract and remove sand and gravel
materials that m a y be found in their land. Lands with
imperfect titles (Tax Declarations) shall be recognized if
supported by up-to-date payment of realty taxes.

3 T h e power Jo impose sand and gravel fee belongs to the

province and N O T to the municipality.

E) Professional T a x (Sec. 139) (sometimes referred to as

occupation tax)

Rate of tax - not exceeding Php 300.00 ( N O T E : cities may

impose professional taxes higher than Php 300.00)

W h e n payable? - on or before the 31st of January of each

year.

W h e r e payable? at the province where the professional

exercises his profession or where he maintains his principal

741
 office. If the person exercises several professions at the same
time, he is required to pay as many professional taxes as the
case may be, and payment thereof entitles him to practice his
profession anywhere in the Philippines without being further
made subject to any other national or local tax, license or fee
for the practice of such profession.

Professionals exclusively employed in the government

shall be e x e m p t from the payment of the tax. ( N O T E : A Judge
or a prosecutor w h o teaches after his/her official time with the
government is required to pay the professional tax.)

3 A person beginning a profession after t h e month of

January is required to pay the professional tax for the
whole year.

3 Local g o v e r n m e n t may not impose mayor's permits in the

exercise of a profession but m a y properly impose
regulatory fee by ordinance on those e n g a g e in business.

O General professional partnership is e n g a g e d in rendering

services for a fee, for that it is considered a contractor
within the m e a n i n g of Sec. 13 (h) L G C . H e n c e , it is subject
to the business tax as contractors [Sec. 143 (e) L G C ] and
major's permit fees and other regulatory fees of the local
g o v e r n m e n t s , w h e r e a s , the professional partners shall also
pay their professional taxes respectively.

F) A m u s e m e n t tax on a d m i s s i o n (Sec. 140)

Rate of tax - Not more than 3 0 % of the gross receipts from

admission fees.

W h o pays? T h e proprietor or operators or lessees of places of

a m u s e m e n t . Except t h o s e that operate operas, concerts
( E X C E P T pop, rock or similar concerts w h i c h shall be subject
to a m u s e m e n t tax), d r a m a , recitals, painting and art
exhibitions, flower s h o w s , musical p r o g r a m s , and literary and
oratorical presentations.

W h o i m p o s e s this t a x ? T h e city or province m a y impose the

a m u s e m e n t taxes on a d m i s s i o n , w h e r e a s the municipal
government may impose business tax on a m u s e m e n t places
which is a tax on the privilege of operating an a m u s e m e n t
place paid by its operator, or proprietor or lessees.

742
 3 A m u s e m e n t tax is levied as a percentage of the admission
fee and actually paid by the customers of the a m u s e m e n t
place.

3 T h e a m u s e m e n t tax is shared equally between the

province a n d the municipality w h e r e t h e a m u s e m e n t places
are located.

3 "Other a m u s e m e n t places" m a y include bath houses,

s t e a m and s a u n a baths, resorts, s w i m m i n g pools, skating
rinks, g y m s if any a m o u n t is c h a r g e d as entrance fee to the
patrons.

3 Athletic meets, school p r o g r a m s and exhibitions and other

educational activities of public schools to which admission
fees are c h a r g e d is e x e m p t f r o m the a m u s e m e n t tax
provided t h e net proceeds realized therefrom accrue to the
athletic funds or library fund of t h e s c h o o l .

3 Philippine National Red Cross is exempted from

a m u s e m e n t tax.

3 P e r f o r m a n c e s of non-professional musicians to promote

Filipino folk music, classical or semi-classical music to
arouse organ music c o n s c i o u s n e s s and promote Filipino
culture a m o n g the public is e x e m p t from a m u s e m e n t tax.

3 W h e n no admission fee is collected or paid for admission

to an a m u s e m e n t place, no a m u s e m e n t tax should be
a s s e s s e d and collected. ( N O T E : if income is realized
therefrom, income tax is due)

Distinctions between A m u s e m e n t taxes collected by the

Local Governments and BIR:

Answer.
A m u s e m e n t tax of the L G U A m u s e m e n t tax of the BIR
Collected by the city or provincial Collected by the national
government government
The basis of the tax is the price The basis of the tax is the gross
indicated on the ticket receipts of the proprietor, operator or
lessee.
The tax is paid by those seeking This percentage tax the direct liability
admission to the amusement of the proprietor, operator, lessee of
places the amusement place.

743
 Phil. Basketball Association vs. CA, 337 SCRA 358:

The amusement tax on gross receipts or from the sale of

admission tickets are considered national tax and not a local
tax. The gross receipt shall include all income from the cession,
streamers and advertising spaces of the entity sponsoring the
activity. The a m u s e m e n t tax collectible by the province is a tax
on admission fees paid by the viewers and collected by the
proprietors, lessees or operators of theaters, cinematographs,
concert halls, circuses and other places of amusement.

Can an L G U impose an a m u s e m e n t tax on admission

tickets to P B A g a m e s ?

Answer. The tax provision (Sec. 13 of the LTC) indicates that

the province can only impose a tax on admission f r o m the
proprietors, lessees, or operators of theaters,
cinematographers, concert halls, circuses and other places of
a m u s e m e n t but it does not include the authority to tax
professional basketball g a m e s .

Is the cession of advertising a n d s t r e a m e r s p a c e s to

vintage enterprises subject to the p a y m e n t of a m u s e m e n t
tax under the N I R C ?

A n s w e r . Sec. 1 of PD 1456 (for the purpose of a m u s e m e n t

tax, the term gross receipts e m b r a c e s all t h e receipts of the
proprietors, lessees, or operators of the a m u s e m e n t place) is
broad e n o u g h to e m b r a c e t h e cession of advertising and
streamer spaces as the s a m e e m b r a c e s all the receipts of the
proprietors, lessees or operators of t h e a m u s e m e n t place

G) Fixed annual tax on delivery t r u c k s a n d v a n s of

manufacturers, producers, wholesalers, dealers or
retailers in certain p r o d u c t s . (Sec. 141)

A n n u a l Fixed Tax is on every truck, v a n or any vehicle

used in delivering products to sales outlets or customers,
whether directly or indirectly, thus e x e m p t i n g the manufacturers
or producers, wholesalers of, dealers, or retailers in certain
products of peddler's tax.

Rate of tax - not e x c e e d i n g P 5 0 0 . 0 0 for every delivery van or

other vehicle used in t h e delivery or distribution of the

744
 products to sales outlets or c o n s u m e r s , either directly or
indirectly within the province.

3 T r u c k i n g , freight services and cargo forwarding businesses

a r e not subject to this imposition.

H) A n n u a l ad v a l o r e m tax on real property s u c h as land,

building, machinery and other improvement not
specifically e x e m p t e d a t the rate not e x c e e d i n g 1 % o f the
a s s e s s e d v a l u e of the real property. (Sec. 232)

I) Special levies on real property such as t h o s e on the

following:

1. additional levy on real property for the special education

f u n d at a rate of not more than 1 % of its a s s e s s e d value;
(Sec. 235)

2. additional ad v a l o r e m tax on idle lands at the rate not

e x c e e d i n g 5% of the a s s e s s e d value of real property;
(Sec. 2 3 6 )

3. special levy on lands benefited by public works projects

f u n d e d by the provincial government. (Sec. 240)

J) Toll f e e s or c h a r g e s for the use of any public road, pier or

wharf, w a t e r w a y , bridge, ferry or telecommunication
system funded and constructed by the provincial
g o v e r n m e n t . (Sec. 155)

K) R e a s o n a b l e fees a n d c h a r g e s for services rendered. (Sec.

153)

L) C h a r g e s for the operation of public utilities o w n e d ,

operated a n d maintained by the provincial government.
(Sec. 154)

The taxes authorized to be levied by a province are in

addition to the taxes imposed by the NIRC.

M) Slaughter fees, corral fees, market fees, charges for

holding benefits, and

N) Tuition fees from the operation of the provincial high

school, except in the public elementary grades, and

745
 O) Those are that are allowed under the c o m m o n taxing
powers of the local government in addition to the above
enumeration.

1266. Can the m u n i c i p a l g o v e r n m e n t exercise the power to

c r e a t e its o w n s o u r c e s o f r e v e n u e i n d e p e n d e n t o f t h e
province or city?

Answer. Yes. Consistent with local autonomy, municipal

government can exercise the power to create revenue sources,
levy taxes, fees and charges which shall exclusively accrue to the
municipality.

1267. T w o (2) types of taxes on banks and financial

institutions that local g o v e r n m e n t s (municipal and/or
city ) are a u t h o r i z e d to i m p o s e :

Answer.
a) Income tax on t h e m [Sec. 133(a)] - w h i c h is a tax on their
income realized during the year, (not necessarily 3 0 % as
imposed under the NIRC)

b) Business taxes [Sec. 143(f)] - w h i c h is a tax for the business of

operating a bank or other financial institution, at t h e rate of 1/2
of 1 % base on their preceding year's gross receipt derived from
interest, c o m m i s s i o n s and discounts f r o m lending activities,
income from financial leasing, dividends, rentals on property
and profits from e x c h a n g e or sale of property a n d insurance
premiums.

1268. What is the composition of the gross receipts of banks?

A n s w e r . It shall include:

a) Interest from loans and discounts:

1. discounts e a r n e d a n d actually collected in a d v a n c e on

bills d i s c o u n t e d ;

2. interest e a r n e d a n d actually collected in a d v a n c e on bills

discounted;

3. interest e a r n e d and actually collected on t i m e loans,

including those collected in a d v a n c e or partially
collected;

746
 4. interest e a r n e d a n d actually collected on mortgage
contracts receivables.

b) Interest e a r n e d and actually collected on inter-bank loans;

c) Rental income on properties - (1) f r o m lessees of safe deposit

b o x e s (2) f r o m lessees of bank premises and equipment.

d) Income e a r n e d and actually collected f r o m acquired assets;

e) Income f r o m sale or e x c h a n g e of assets and property;

f) C a s h dividends e a r n e d and received on equity investments;

g) Bank c o m m i s s i o n s f r o m lending activities;

h) I n c o m e c o m p o n e n t of rentals f r o m financing leasing.

1269. W h a t bank i n c o m e are not subject to local taxation:

Answer.
a) Interest e a r n e d under the e x p a n d e d foreign currency deposit
system;

b) Interest a c c u m u l a t e d by lending institutions on mortgages

insured under RA 4 8 0 , as a m e n d e d ( H o m e Financing Act)

c) Receipts from filing fees, service and other administrative

charges.

1270. W h a t is the situs of business tax on banks?

Answer.
a) All transactions filed with or negotiated in the branch shall be
taxable in the said branch;

b) Transactions filed and negotiated with branch but being beyond

the approving authority of the branch manager and forwarded
to the Head Office for final approval are subject to local
taxation in the branch office;

1 2 7 1 . "X", a d o m e s t i c banking institution is also e n g a g e d in

f i n a n c i n g activities, or if there is non-separability of the
businesses of the banking, financial intermediaries and

747
 insurance c o m p a n i e s , h o w s h o u l d the local g o v e r n m e n t
tax the entities?

Answer. If the activities are inherent, necessary or incidental to

either the business of banking, financing or insurance, the business
shall be treated as O N E business activity subject to one business
tax under Sec. 143 (f) of the L G C .

The Principle of "Non-Separability of B u s i n e s s " also applies to

(a) exporting, whenever it conducts an integrated operation
consisting of manufacturing, wholesaling and retailing, (b)
Enterprises registered with the B O I ; and (c) Construction
contractors.

1272. May the municipal or city government collect both

wholesaler a n d retailer's tax on b u s i n e s s m e n e n g a g e d in
both activities of wholesaling and retailing within the
s a m e tax period?

Answer. Wholesalers w h o are at the s a m e time retailers shall be

taxed on both activities but m a y avail of the concession or the
reduced tax. (Sec. 143)

1273. W h a t is the situs of business tax on manufacturers,

assembler, contractor, producer or exporter (MACPE)
with factory, project office, plant, and plantation or
3
branch offices? (FP B)

A n s w e r . T h e tax situs of the business tax is the place w h e r e the

sale is effected if a branch or sales office is there located. If no
such branch or sales office is located w h e r e the sale is effected the
sale shall be duly recorded in the principal office a n d taxable by the
local g o v e r n m e n t s w h e r e the principal business office and the
factory, project office, plant or plantation are located. T a x "situs"
refers to the place w h e r e p a y m e n t of tax is m a d e according to law.

In the case of a sales tax, t h e tax is u p o n the p e r f o r m a n c e of

an act, enjoyment of a privilege or the e n g a g i n g of an occupation,
not d e p e n d e n t on the domicile of the taxpayer but on the place in
which the act is performed or occupation is e n g a g e d in and N O T
upon the location of the office but the place w h e r e the sale is
perfected.

Tax situs of excise taxes, such as on restaurants, service

shops, a m u s e m e n t , hotel, billboards, etc. is the place w h e r e the

748
privilege is being exercised. W h e r e the law is silent on the matter,
tax situs follows t h e Principle of Territoriality of taxation.

N O T E : Do not forget that income (subject to internal revenue tax)

earned by different branches is consolidated at the principal office
and filed at the place where the principal office is located.

a) On export sales m a d e by its branch office - the gross

sales/receipts derived by said branch shall be taxable by the
city or municipality w h e r e it is operating.

b) T h e gross sales or receipts of the principal office from export

transactions a r e taxable excluding the sales or receipts
recorded in the b r a n c h e s .

c) A w a r e h o u s e that a c c e p t s orders and or issues invoices

independent of the branch with sales office is taxable.

d) Offices that are used for display area of the products

m a n u f a c t u r e d w h e r e no stock or items are stored for sale,
although orders for displayed products may be received are not
branch or sales offices a n d therefore not subject to tax.

e) In c a s e there is no branch or sales office in the locality where

the sale is m a d e - t h e sale shall be recorded in the principal
office.

f) In case t h e factory also sells the g o o d s it produces - 3 0 % of all

sales recorded in the principal office shall be taxable by the city
or municipality w h e r e the principal office is located and the
7 0 % of the gross sales/receipts shall be taxed where the
factory is located.

g) In case there are 2 or more factories or plants located in

different areas - the 7 0 % sales allocation for factories that are
also selling shall be pro rated in proportion to their respective
volumes of production during the period for which the tax is
due.

h) In case the manufacturer engages the services of an

independent contractor to produce or manufacture some of
their products - s a m e rule applies based on sales.

749
 j) If plantation is located is some place other than where the
factory is located, the foregoing 7 0 % shall be subdivided as
follows -

1. 6 0 % to the city or municipality where the factory is located,

2. 4 0 % to the city or municipality where the plantation is

located.

1274. Is the PDIC, a g o v e r n m e n t o w n e d and controlled

corporation subject to business taxes?

Answer. Yes. T h e exemption privileges granted to it under its

Charter [RA 1467(1978)] w e r e withdrawn by the L G C (1991). Thus,
the PDIC is liable to pay the business tax imposed by the local
governments. The 5% tax on the total p r e m i u m s paid under the
NIRC is independent of the taxes due to the local government.

1275. Are insurance companies included in the term "other

financial institutions" and therefore subject to local
business taxes?

A n s w e r . Y e s . Insurance c o m p a n i e s shall include all individuals,

partnerships, associations, corporations or G O C C s e n g a g e d as
principals in the insurance business, including their branches.
EXCEPT MUTUAL BENEFIT ASSOCIATIONS A N D PURELY
C O O P E R A T I V E S insurance associations organized under the laws
on cooperatives.

1276. What is the situs of business tax on insurance

companies?

Answer.
a) Insurance contracts or policies issued by the h e a d office or
branch office shall be recorded in said offices as the c a s e m a y
be and the p r e m i u m s and/or gross receipts due thereon shall
be subject to local business taxes;

b) All insurance p r e m i u m s and/or gross receipts f r o m transactions

not recorded in the branch office of the insurance c o m p a n y
shall be recorded in t h e head office and taxable there.

750
1277. Are insurance agents, brokers and sales representatives
subject to local business taxes?

A n s w e r . C o m m i s s i o n s and other m e a n s of earnings of insurance

agents, brokers and sale representatives are not subject to
business taxes but they are liable to the occupation tax under Sec.
147 of the C o d e , aside from the V A T of t h e N I R C .

1278. Surigao City passed on ordinance imposing an annual

tax on all business operating therein based on gross
receipts. "X" merely b u y s copra in the City, it neither
sells, e x p o r t s c o p r a f r o m said city a n d it d o e s not earn
gross receipts. Is "X" subject to the tax imposed by the
Local G o v e r n m e n t (City)?

A n s w e r . "X" is not required to pay the tax because the business

taxes that m a y be i m p o s e d by the municipal g o v e r n m e n t are those
businesses e n g a g e d in manufacturing, importing, exporting,
producing, w h o l e s a l i n g or retailing of any article of c o m m e r c e and
t h o s e dealing in s u c h article. W h i l e "X" is dealing in an article of
c o m m e r c e (copra), the act of selling the copra purchased which is
an indispensable e l e m e n t of dealing is w a n t i n g . To be considered a
dealer, both activities of buying and selling must have taken place
in the city.

1279. Can the municipal government impose a b u s i n e s s tax

based on "output" or "Production"?

A n s w e r . No. It is only authorized to impose business tax based on

gross sales and/or receipts for the preceding calendar year.

Municipalities ineluding cities may impose a tax on persons

e n g a g e d in the business of producing agricultural, marine and
fresh-water products on the commercial scale. The tax shall be
based on the gross receipts of the producers. However, backyard
fishermen, poultry and animal raisers w h o do not engage in
business on a commercial scale are exempt.

1280. May municipalities impose business taxes on gasoline

stations?

Answer. Municipalities may not impose "business taxes" on any

business engaged in the production, manufacture, refining,

751
 distribution or sale of oil, gasoline and other petroleum products in
line with the existing national policy of the government.

1281. Are contractors of government infrastructure projects

subject to local b u s i n e s s t a x e s ?

Answer. Yes. There is no distinction between contractors of

government and non-government projects. Both are subject to local
and national business taxes.

1282. X, a domestic construction firm with principal office in

La Trinidad, Benguet, w a s engaged to do an overseas
construction project. May the municipal government
impose a business tax on said project outside of the
Philippines?

Answer. No. in the case of overseas construction project outside

the territorial boundaries of the Philippines, the power of taxation is
unavailing. T h e construction contractors shall declare separately
the gross receipts realized t h e r e f r o m , w h i c h shall not be subject to
the local business tax.

Granting that "X" pre-fabricated the works locally and

installed t h e m overseas, m a y the local g o v e r n m e n t of La
Trinidad, Benguet imposed a business tax thereon?

A n s w e r . Yes. T h e municipal g o v e r n m e n t of La Trinidad, Benguet

may impose a business tax on the gross receipt of "X" realized
therefrom which shall be subject to not m o r e than 14 of t h e rate
prescribed under Sec. 143(e) of t h e C o d e .

1283. M a y the local legislative b o d y lower tax rates in g e n e r a l ?

A n s w e r . As a rule, local legislative bodies m a y impose tax rates

lower than the ceiling fixed in t h e C o d e , except w h e n otherwise
expressly indicated or prohibited in t h e law itself.

1284. H o w is local b u s i n e s s taxes paid?

Answer.
3 A business tax is due and payable on every separate and
distinct establishment or place w h e r e business is c o n d u c t e d ,
and on e a c h line of business. A line of business d o e s not

752
 b e c o m e e x e m p t by being conducted with another business for
w h i c h the tax is paid.

2 W h e r e a p e r s o n is e n g a g e d in a distinct business, as a feature

thereof, in an activity merely incidental which serves no other
p e r s o n or business, the incidental and restricted activity is not
to be c o n s i d e r e d as intended to be separate or additionally
taxed.

O T h e b u s i n e s s tax is paid by the person conducting the

business. In c a s e he operates two (2) or more businesses that
are subject to the s a m e rate of tax, the tax shall be computed
on t h e c o m b i n e d total gross sales or receipts of said two (2) or
more related businesses otherwise the tax liabilities accrue and
shall be reported separately.

1285. Tax period and manner of payment of taxes imposed by

the local g o v e r n m e n t units:

A n s w e r . T h e local t a x e s , fees and charges are on the calendar

year basis, unless otherwise provided by the Tax C o d e (e.g., tax on
transfer of real property o w n e r s h i p w h i c h is payable within 60 days
f r o m date of execution of the d e e d or from date of decedent's
death).

T h e basis thereof shall be the "gross sales/receipts for the

preceding calendar year" w h i c h need not be the gross sale for one
complete year of 12 m o n t h s . T h u s , w h e r e a business operated on
a date other than J a n u a r y of the year, its "gross sales" is on what
w a s realized from date of operation to the end of the calendar year.

Generally, local taxes, fees or charges are payable in quarterly

installments.

1286. May the local government impose surcharge and

penalties on unpaid local t a x e s , fees a n d c h a r g e s ?

Answer. Surcharge of not more than 2 5 % of the amount of taxes,

fees and charges not paid on time and an interest of 2% per month
from time of delinquency until fully paid may be imposed but in no
case shall the total interest on the unpaid amount or portion thereof
exceed 36 months or 7 2 % .

The execution of a promissory note by a taxpayer from its

liability to pay and its acceptance by the City Treasurer will not

753
 relieve the taxpayer from the imposition of surcharges and
interests.

1287. What is the scope of the taxing powers of CITIES:

Answer. Cities have the broadest tax powers, embracing both

such specific and general tax powers as provinces and
municipalities may impose. Therefore, it may levy the taxes, fees
and charges which the province or municipality may impose. The
rate of taxes that the city may levy may exceed the m a x i m u m rates
allowed for the province or municipality by not more than 5 0 %
except the rates of professional and a m u s e m e n t taxes.

A city can validly tax the sales to customers outside the city as
long as the orders w e r e b o o k e d and paid for in the company's
branch office in the city.

1288. W h a t are the specific limitations on the taxing power of

the City?

Answer. Except as otherwise provided, a city shall not levy the

taxes and other impositions e n u m e r a t e d under the " C o m m o n
limitations on the taxing powers of local g o v e r n m e n t s " which
exceptions refer to -

a) Tax that m a y be levied by cities on the transfer of real property

ownership; and

b) W h a r f a g e on w h a r v e s constructed a n d maintained by t h e city;

c) It cannot also impose additional taxes on articles subject to

specific taxes under the provisions of t h e N I R C .

1289. W h a t are the non-business taxes, fees a n d charges that

may be imposed by Cities?

Answer.
a) Fees and charges on business and o c c u p a t i o n , and on the
practice of profession;

b) Fees for the sealing and licensing of w e i g h t s and m e a s u r e s ;

c) Fees and charges for services r e n d e r e d .

754
 d) C h a r g e s for t h e operation of public utilities owned and
maintained by the city.

e) Toll f e e s and c h a r g e s for t h e use of any public road, pier or

wharf, w a t e r w a y , bridge, ferry or t e l e c o m m u n i c a t i o n system
that are f u n d e d and constructed by t h e city.

f) Fishery rentals, f e e s and c h a r g e s including licensing for the

operation of fishing vessels of three (3) tons or less.

1290. W h a t are fishery privileges and to whom are they

granted?

A n s w e r . T h e city through the S a n g g u n i a n Panlunsod shall have

the exclusive authority to grant t h e m fishery privileges:

a) To erect fish corrals, oyster, mussels or other aquatic beds or

b a n g u s fry areas within a definite area that will determine
giving preferential rights to duly registered cooperatives or
organizations of marginal f i s h e r m e n .

b) To gather, take or catch b a n g u s fry, or k a w a g - k a w a g or fry of

other species f r o m city waters to marginal fishermen free of
any rental, fee or c h a r g e or any other imposition.

1291. May the city government impose business taxes on

gasoline stations?

A n s w e r . Cities may collect business taxes on manufacturers,

wholesalers, retailers or dealers in petroleum products, but the rate
of tax thereon shall not exceed 2% of the gross sales or receipts of
the preceding year. (Sec. 143 (h), L G C )

N O T E : Sec. 133(h) prohibits the taxing of products already tax

under the N I R C , w h e r e a s , Sec. 143(h) allows the imposition on the
privilege of engaging in the "business" of manufacturing or dealing
in said products.

1292. A r e c o m m o n carriers required to pay local taxes based

on gross receipts under the Local Government Code?

Answer. No. Under Sec. 133 (I) LGC, the taxing powers of
province, municipality, city or barangay shall not extend to the levy
of taxes on the gross receipts of transportation contractors
engaged in the transportation of passengers or freight by hire and

755
 common carriers by air, land or water. {First Philippine Industrial
Corp. vs. CA, 300 SCRA 661)

1293. W h a t c a n the city g o v e r n m e n t do in c a s e of d e l i n q u e n t

taxes?

Answer. The city government can make legal claim to personal

property of delinquent taxpayers, as well as property used in
business or occupation. This is enforceable by appropriate
administrative and judicial actions and can only be extinguished if
all delinquent revenue, including surcharges and interests, is fully
paid.

1294. W h a t civil r e m e d i e s c a n the city g o v e r n m e n t t a k e for

collecting delinquent taxes?

Answer.
a) Administrative action -

1. Distraint of personal property

2. Levy upon real property

b) Judicial action

If the taxpayer pays the delinquent taxes before the date of

sale, the distraint property shall be returned to h i m . He can also
redeem his real property e v e n after it has b e e n sold. He or his
authorized representative can exercise this right of redemption
within one year from the date of sale. If the taxpayer fails to
redeem the real property within t h e prescribed period after the
levy, the City Treasurer shall publicly advertise that the
property is now for sale or auction. A d v e r t i s e m e n t shall run for
at least 30 days.

1295. S c o p e of the taxing p o w e r s of Barangays:

Answer. B a r a n g a y s m a y levy the following t a x e s , fees and

charges to the e x c l u s i o n of the other local g o v e r n m e n t units that
shall exclusively a c c r u e to t h e m -

(a) Taxes, on stores of retailers with fixed b u s i n e s s establishment,

w h o s e gross sales or receipts for the preceding calendar year
does not e x c e e d P h p 50K in cities and Php 30K in
municipalities, at a rate not e x c e e d i n g 1 % on such gross sales
or receipt.

756
 (b) Service c h a r g e s for services rendered in connection with the
regulation of the use of b a r a n g a y - o w n e d properties or service
facilities s u c h as palay, copra or t o b a c c o dryer and the like;

(c) R e a s o n a b l e fees and c h a r g e s (a) on c o m m e r c i a l breeding of

fighting c o c k s , cockfights a n d cockpits; (b) on places of
recreation w h i c h charge a d m i s s i o n fees; and (3) on billboards,
s i g n b o a r d s a n d outdoor advertisements.

(d) B a r a n g a y C l e a r a n c e - No city or municipality m a y issue any

license or permit for any business or activity unless a clearance
is first obtained f r o m the b a r a n g a y w h e r e s u c h business or
activity is located or c o n d u c t e d . A reasonable fee may be
i m p o s e d by the b a r a n g a y unit for the issuance of the s a m e .

T h e application for clearance shall be acted upon within

s e v e n (7) d a y s f r o m the filing thereof. In the event that the
clearance is not issued within the said period, the city or
municipality m a y issue t h e said license or permit.

1296. H o w often c a n the local g o v e r n m e n t units adjust and/or

change tax rates?

A n s w e r . Local g o v e r n m e n t units except cities are authorized to

adjust tax rate not oftener than o n c e every five (5) years but such
adjustment shall not e x c e e d 1 0 % of the rates fixed in the LTC.

1297. Ordinance defined:

A n s w e r . It is a law passed or enacted by the legislative body of the

local g o v e r n m e n t in the exercise of its law-making authority.

1298. W h a t is t h e nature'of a local tax o r d i n a n c e ?

A n s w e r . It is a legislative act passed by the local board or council

in the exercise of its lawmaking authority.

1 2 9 9 . Distinctions between an ordinance and a resolution:

Answer.
Ordinance
It is intended to permanently direct
and control matters applying to
persons or things in general.
Resolution
It is used whenever the legislature
wishes to express an opinion that is
to have temporary effect only.

757
 Ordinance Resolution
It prescribes a permanent rule of It is temporary in nature.
conduct of government.
It is binding not only on the
inhabitants of the municipality but Not necessarily so
also on strangers or non-residents
coming into its territorial jurisdiction
It cannot be a m e n d e d by mere Can be recalled, revoked,
resolution but only by another w i t h d r a w n , modified, cancelled and
ordinance enacted with the s a m e revised without the formalities of
formalities as the original ordinance. law anytime.
Once duly enacted remains in force As it pertains temporarily to
until repealed, either expressly or ministerial duties, they may be
by necessary implication. implemented until cancelled or
replaced.

1300. W h a t are the pre-requisites before local tax ordinance

and revenue measures are enacted by the local
government?

Answer.
a) Prior to the e n a c t m e n t of any tax ordinance or revenue
measure, public hearing shall be conducted for the purpose,
which shall be in the following manner:
b)
1. Within t e n (10) d a y s f r o m filing of any p r o p o s e d tax
ordinance or r e v e n u e m e a s u r e , t h e s a m e must first be
published for three (3) consecutive d a y s in a n e w s p a p e r of
local circulation or shall be posted simultaneously in at
least two (2) c o n s p i c u o u s public places within t h e territorial
jurisdiction of t h e local g o v e r n m e n t unit c o n c e r n e d .

2. The S a n g g u n i a n c o n c e r n e d shall c a u s e the sending of a

written notice of the p r o p o s e d ordinance, enclosing a copy
thereof, to interested or affected parties operating or doing
business within the territorial jurisdiction of t h e local
g o v e r n m e n t unit c o n c e r n e d .

3. The notice shall specify the date a n d v e n u e of t h e public

hearing. The initial public hearing shall be held not earlier
than ten (10) d a y s f r o m the sending out of t h e notice, or
the last day of publication, or date of posting thereof,
whichever is later.

758
 4. During t h e public hearing, all affected or interested parties
shall be a c c o r d e d an opportunity to a p p e a r a n d present or
e x p r e s s their v i e w s , c o m m e n t s and r e c o m m e n d a t i o n s , and
s u c h public hearing shall continue until all issues shall
have b e e n presented and fully deliberated u p o n and a
c o n s e n s u s shall have b e e n o b t a i n e d , w h e t h e r for or
against the e n a c t m e n t of the proposed tax ordinance or
revenue measure.

5. T h e Secretary of the S a n g g u n i a n c o n c e r n e d shall prepare

t h e minutes of s u c h public hearing and shall attach to the
minutes t h e position papers, m e m o r a n d a , and the like,
s u b m i t t e d by t h o s e w h o participated.

c) No tax ordinance or revenue m e a s u r e shall be enacted or

a p p r o v e d in the a b s e n c e of a public hearing duly conducted in
the m a n n e r herein provided.

d) E x e m p t e d f r o m the m a n d a t o r y public hearing requirement is

the city or municipal ordinance levying a c o m m u n i t y tax in view
of the urgency of issuing s u c h ordinance for official purposes.

e) If the tax ordinance or revenue m e a s u r e contains penal

provisions as authorized under the Local Tax C o d e , the gist of
such tax ordinance or revenue m e a s u r e shall be published in a
n e w s p a p e r of general circulation within the province where the
S a n g g u n i a n c o n c e r n e d belongs. In the a b s e n c e of such
newspaper, posting of the tax ordinance or revenue measure
shall be m a d e in all municipalities and cities of the province
w h e r e the S a n g g u n i a n of origin is situated.

1301. W h a t is the test applied in determining the validity of an

ordinance? '

Answer.
a) It must not contravene the Constitution or statute;

b) It must not prohibit but may regulate trade;

c) It must not be discriminatory, unfair, unjust, confiscatory;

unreasonable and oppressive;

d) It must be general and consistent with the national or public

policy of the government.

759
1302. What are the procedural requirements in the e n a c t m e n t
of local tax o r d i n a n c e s ?

Answer. The power to impose a local tax, fee or charge or to

generate revenue may be exercised only by the Sanggunian
Panlalawigan, Panlungsod, Bayan or Barangay concerned through
an appropriate ordinance.

1. The procedure applicable to local government ordinances in

general such as q u o r u m , submission for approval of the
ordinance to the local chief executive, the matter of veto and
overriding the s a m e , publication and effectivity shall also apply
to tax ordinances.

a) A tax ordinance passed by the local board or council

shall be approved and signed by the local chief executive
concerned;

b) If he considers any such tax ordinance prejudicial to the

public welfare or ultra vires, he m a y veto it by signifying
to the proper l a w m a k i n g body his disapproval thereon in
writing;

c) T h e lawmaking body may, by a 2/3 vote of all its

m e m b e r s , pass the ordinance over the veto, in w h i c h
case it shall be d e e m e d a p p r o v e d without t h e chief
executive's approval or signature;

d) If said chief executive fails to approve or veto a tax

ordinance within 10 d a y s after its p a s s a g e , it shall
likewise be d e e m e d a p p r o v e d .

2. Within ten (10) days after approval by the S a n g g u n i a n , certified

copies of all provincial, city and municipal tax o r d i n a n c e s or
revenue m e a s u r e s shall be published in full for three (3)
consecutive d a y s in a n e w s p a p e r of local circulation. W h e r e
there are no n e w s p a p e r s of local circulations the s a m e m a y be
posted in at least two (2) c o n s p i c u o u s and publicly accessible
places.

Ordinances p a s s e d by the s a n g g u n i a n barangay shall,

upon approval by the majority of all its m e m b e r s , be signed
by the punong barangay.

An o r d i n a n c e , unless o t h e r w i s e p r o v i d e d by it shall go
into effect after ten (10) d a v s f r o m t h e date of its posting.

760
 3. Copies of all provincial, city, municipal a n d barangay tax
o r d i n a n c e s and revenue m e a s u r e s shall be furnished to the
respective local treasurers for public dissemination.

4. A tax ordinance shall go into effect on the 10th day after its
approval by the local chief executive.

N O T E : Fixing of a m o u n t and rate of local tax cannot be

delegated to administrative officials.

1303. W h e n does a tax ordinance take effect?

A n s w e r . In c a s e the effectivity of any tax ordinance or revenue

m e a s u r e falls on any date other t h a n the beginning of the quarter,
t h e s a m e shall be considered as falling at the beginning of the next
ensuing quarter a n d t h e t a x e s , fees or charges d u e shall begin to
accrue t h e r e f r o m .

1 3 0 4 . T h e r e q u i r e m e n t o f r e v i e w o f t h e t a x o r d i n a n c e a f t e r its
approval:

A n s w e r . Within 15 d a y s after its a p p r o v a l , a certified true copy of a

tax ordinance shall be furnished the Secretary of Finance for
review:

a) by t h e provincial b o a r d , or city council - for provincial or city tax

ordinances;

b) by the municipal board or barrio council - for municipal or barrio

tax ordinances; or

Within three (3) days after its approval, copies of the

approved tax ordinance of the municipality or a component city
shall be furnished to the provincial Sanggunian; and, in the
case of barangay ordinances, within 10 days from enactment
copies shall be forwarded to the municipal Sanggunian, or the
City Sanggunian as the case may be, for the review of the
ordinance.

The provincial or the city or municipal sanggunian, as the

case may be, shall review the tax ordinance within 30 days
after receipt of a copy thereof.

761
 If, within 120 days after receipt of a copy thereof, the
Secretary of Finance or the provincial or city treasurer, as the
case may be, takes no action as authorized, the tax ordinance
shall remain in force.

1305. G r o u n d s for review or s u s p e n s i o n of tax ordinance by

the Secretary of Finance:

Answer. The Secretary of Finance, the provincial treasurer, or the

city treasurer, as the case may be, shall review and have the
authority to suspend the effectivity of any tax ordinance within 120
days after receipt of a copy thereof, if in his opinion, the tax or fee
therein levied or imposed is:

a) prohibited of a local g o v e r n m e n t to impose and collect;

b) unreasonable, unjust, excessive, oppressive and confiscatory;

c) contrary to the national e c o n o m i c policy, and

d) discriminatory in the conduct of business or calling or

e) in restraint of trade.

N o t e : The authority of the Secretary of Finance is no m o r e than to

suspend the effectivity of a tax ordinance in w h o l e or in part and is
limited to the grounds e n u m e r a t e d .

1306. H o w to question the legality of a tax ordinance or

revenue measures?

Answer. A n y question on the constitutionality or legality of tax

ordinances or revenue m e a s u r e s m a y be raised on appeal within
thirty (30) days from the effectivity thereof to the Secretary of
Justice w h o shall render a decision within sixty (60) d a y s f r o m date
of receipt of the a p p e a l .

A n y question or issue raised against the legality of any tax

ordinance, or portion thereof, on g r o u n d s other t h a n those
m e n t i o n e d a b o v e TNo. 1270 (a) to ( e l l , shall be referred for
opinion to the Provincial Fiscal, in t h e c a s e of provincial, municipal
or barangay tax ordinances, or to the City Fiscal, in the c a s e of tax
ordinance of the city a n d b a r a n g a y s within t h e city, w h o s e opinion
shall be rendered within a period of thirty (30) days after receipt by
him of the query or protest.

762
 T h e opinion of the Provincial or City Fiscal, as the case may
be, m a y be raised on appeal within thirty (30) d a y s from the
effectivity thereof to the Secretary of Justice w h o shall render an
opinion on the matter within sixty (60) d a y s after receipt of the
appeal.

T h e decision of the Secretary of Justice shall be final and

executory unless, within thirty (30) days u p o n receipt of the
decision or the lapse of t h e sixty (60) days period without the
Secretary of Justice acting u p o n the a p p e a l , the aggrieved party
m a y contests the s a m e in a court of c o m p e t e n t jurisdiction.
(Callanta vs. Office of the Ombudsman)

T h e special civil action of certiorari is proper in questioning the

decision of a g e n c i e s exercising quasi-judicial powers. Courts can
scrutinize the acts of a g e n c i e s on question of law and jurisdiction
e v e n w h e r e no review is given by statute. (Meralco Securities Corp.
vs. Central Board of Assessment Appeals May 31, 1982, Caltex vs.
Central Board of Assessment Appeals May 31, 1982)

T h e Principle on Primacy of Administrative Remedies and

Doctrine on Tax Refund are also applicable to local taxation.
However, e x h a u s t i o n of administrative remedies before resort to
judicial bodies is not an absolute rule.

W h e n o b t a i n i n g ? ( w h e n e x h a u s t i o n o f administrative remedies
need not be c o m p l i e d with?)

1. W h e n the application of the "Primacy" does not provide a

plain, speedy and adequate remedy; or

2. W h e n its application may cause great and irreparable

d a m a g e . (Bagatsing vs. Ramirez, 74 SCRA 306, Mun. of
Trinidad vs. CFI, June 28, 1983)

C o n s e q u e n c e of failure to e x h a u s t administrative remedies:

1. It does not affect the jurisdiction of the court over the case,
as it merely implies absence of a cause of action. (Pineda
vs. CFI ofDavao, 50 O.G. 5266)

2. The failure to raise in the trial court the issue of non-

exhaustion of administrative remedies prevents a party
from invoking it on appeal.

763
1307. W h a t is the effect of an appeal questioning the
constitutionality or legality of a tax o r d i n a n c e or r e v e n u e
measure upon the accrual and payment of the s a m e ?

Answer. Such appeal shall N O T HAVE the effect of suspending

the effectivity of the ordinance and the accrual and payment of the
tax, fee, or charge levied nor does it authorize the local legislative
body to re-impose the s a m e tax or fee levied under a suspended
ordinance until such time as the ground for the suspension thereof
shall have ceased to exist or the appeal has been resolve in its
favor.

1308. Effect of declaration of invalidity or s u s p e n s i o n of tax

ordinance:

Answer. The Secretary of Finance, the provincial or the city or

municipal treasurer, as the c a s e m a y be, shall review the tax
ordinance within 30 days after receipt of a copy thereof.

The provincial S a n g g u n i a n , in its c a s e , may e x a m i n e the

ordinance by itself or require the provincial attorney or prosecutor
to provide it with his written c o m m e n t s or r e c o m m e n d a t i o n that
may be considered by the S a n g g u n i a n in making its decision. It
may declare the ordinance invalid, in w h o l e or in part, if it finds
such ordinance to be b e y o n d the power conferred u p o n the city or
municipal S a n g g u n i a n to i m p o s e . W h e r e a s , in t h e case of
barangay ordinances, t h e city or municipal S a n g g u n i a n , if it finds
the tax ordinance inconsistent with law, shall return the s a m e for
adjustment, a m e n d m e n t or notification that w o u l d thereby render
the ordinance s u s p e n d e d until s u c h time or after the revision
thereof called for is effected.

Failure on the part of the provincial, municipal or city treasurer

as the case m a y be, to take action within 30 d a y s , the tax
ordinance shall be d e e m e d consistent with law and therefore valid.

T h e local legislative body, within 30 d a y s after receipt of the

notice of suspension, m a y either (a) modify t h e tax ordinance to
meet the objections thereto or (b) file an a p p e a l with t h e proper
court, otherwise, the tax ordinance or the part(s) thereof declared
suspended shall be considered as r e v o k e d .

3 A n y tax or fee paid pursuant to a s u s p e n d e d tax ordinance or

pursuant to a protested ordinance or any part thereof shall be

764
 considered as having b e e n paid under protest until final
resolution of the issues raised.

3 If the decision of the treasurer or the Secretary of Finance is

adverse to the taxpayer, the issue can be raised before a
competent court in as much as decision of administrative
bodies exercising quasi-judicial functions are subject to review
by the courts.

1309. W h o has the p o w e r to s u s p e n d a tax ordinance under

the LGC?

Answer.

a. Provincial treasurer; or

b. City treasurer; or

c. Secretary of Finance
1310. W h a t are the r e m e d i e s of t h e local g o v e r n m e n t in the
collection of local taxes

Answer.
/. Persuasive devices and safeguards -

a) A T a x Lien is a legal claim or charge on property (whether

real or personal) established by law as a sort of security for
the p a y m e n t of tax obligations

Lien for taxes and other revenues due to the local

g o v e r n m e n t on all property or rights of the business. This
lien is s u p e r i o r , t o all liens, charges, or encumbrances in
favor of any person enforceable by appropriate
administrative or judicial action. T h e lien may only be
extinguished upon full payment of the delinquent local
taxes, fees and charges inclusive of all increments thereto.

The tax lien does not extend to other revenues, such

as those arising from contracts or from laws of general
application.

b) Imposition or threat of (1) surcharges and interest, (2)

criminal penalties imposed under the Local Tax Code or by
ordinances.

765
 c) Examination of books by Provincial or City treasurer, or
their deputies who should be authorized in writing.

d) Cooperative functions of other offices, such as, (1) the

Register of Deeds requiring evidences of payment of
transfer taxes to provinces and cities for registration or
other dealings on real properties; (2) employers to require
employees to show payment of occupation taxes; (3) to
require professional to show proof of payment of
occupation tax; (4) requiring community tax certificate to be
exhibited in s o m e instances.

II. Coercive Means to Collect Delinquent Taxes:

1. Administrative remedies - (a) by distraint of personal

properties of w h a t e v e r character to enforce collection of
delinquent taxes, and (b) by judicial action.

N O T E : T h e r e is no provision in the Local Tax C o d e on

"levy" or sale of real property, but a lien m a y include real
properties enforceable by legal action.

T h e s e remedies may either be pursued concurrently or

simultaneously at t h e discretion of t h e local g o v e r n m e n t
unit c o n c e r n e d .

2. Legal action in ordinary courts to enforce p a y m e n t of

delinquent taxes and other revenues d u e to the local
g o v e r n m e n t units, including the e n f o r c e m e n t of lien.

T h e local g o v e r n m e n t unit c o n c e r n e d m a y enforce the

collection of delinquent t a x e s , f e e s , and c h a r g e s or other
revenue by civil action in any court of c o m p e t e n t
jurisdiction. T h e civil action shall be filed by the local
treasurer within the period prescribed.

Z> Judicial action to enforce collection is filed in the regular

courts.

O Under RA 1125, the C T A has no jurisdiction to take

cognizance of collection of local taxes and cases of
protest of a s s e s s m e n t of local taxes, Under RA 9 2 8 2 .
E x p a n d e d Jurisdiction of t h e C T A (April 2 0 0 4 ) - T h e
C T A has jurisdiction o v e r local t a x e s a n d real
property t a x e s .

766
1311. H o w are delinquent local taxes, fees, c h a r g e s and other
r e v e n u e s collected by the local g o v e r n m e n t s ?

Answer.
a) By distraint of personal property, or

b) By levy u p o n real property or any interest therein; or

c) By judicial action - T h e local g o v e r n m e n t m a y institute an

ordinary civil action with the regular courts of proper jurisdiction
for the collection of delinquent taxes, fees, charges or
r e v e n u e s . T h e civil action w o u l d preclude a criminal case as a
proper r e m e d y for collection of delinquent local taxes. (
Republic vs. Patanao, 20 SCRA 712 * People vs. Arnault, 92
Phil. 252)

T h e a b o v e remedies may be pursued alternatively or

simultaneously.

NOTES:

3 Unless otherwise provided under the L T C , the tax period of all

local taxes, f e e s , and charges shall be the calendar year. Such
taxes, f e e s , and charges m a y be paid in quarterly installments.

O Unless otherwise provided under the LTC, all local taxes, fees,
and charges shall accrue on the first day of January of each
year. N e w taxes or fees or charges shall accrue on the first day
of the quarter next following the effectivity of the ordinance
imposing such new taxes or rates.

O Unless otherwise prqvided in the LTC, all local taxes, fees, and
charges shall be paid within the first 20 days of January or of
e a c h subsequent quarter as the case may be. The Sanggunian
concerned may for a justifiable reason or cause extend the
time for payment of such taxes, fees, or charges without
surcharges or penalties but only for a period not exceeding 6
months.

1312. Can the local sanggunian of the local government

condone taxes?

Answer. In the case of De Mesa vs. Collector of Internal Revenue,

53 Phil. 342, it w a s held that a municipal license (regulatory) tax
already in existence shall be subject to change only by ordinance

767
 and no authority is anywhere given to the municipal legislative body
to condone taxes previously accrued. The ordinance imposing
license (regulatory) tax is prospective in character and application.

1313. A r e the local g o v e r n m e n t s a l l o w e d to tax businesses

operating within the 'EPZA or the ecozone?

Answer. Businesses within the "export processing zone" are

beyond the taxing powers of the local governments because it is a
fundamental principle of law that the taxing power of the state is
coterminous with its territorial boundaries. T h e s e areas are under
the jurisdiction and control of the Export Processing Zone Authority.
Thus, local governments cannot impose taxes upon persons,
property residing or situated beyond such boundaries. (Dep'f. of
Justice Opinion No. 104, s. 1974, Dep't. of Finance, letter dated
June 8, 1987, to S. U. Salvador, Jr. Manila.)

However, any operation or production of a zone-registered

business d o n e or conducted "outside" the subject z o n e shall be
taxable by the concerned local units w h e r e such operation or
production is carried out.

In the case of PHILPHOS, an EPZA-registered entity:

P H I L P R O S has a plant inside the Leyte Industrial D e v e l o p m e n t

estate a special export processing z o n e administered by EPZA. It
maintains an office in M a k a t i , w h e r e it pays business taxes
corresponding to 3 0 % of its gross annual sales. T h e Municipality of
Isabel of Leyte claims that P H I L P R O S should likewise pay
business taxes therein based on the remaining 7 0 % of its yearly
gross sales. H E L D : T h e tax e x e m p t i o n privileges of P H I L P R O S
under Sec. 18, PD 66, as a business enterprise operating within
the export processing z o n e administered by EPZA, still applies in
so far as its activities u n d e r t a k e n within the z o n e . S u c h e x e m p t i o n
does not extend to t h e p a y m e n t of fees a n d service charges for
rental or use of public utilities o w n e d and operated by the
Municipality of Isabel, and for services actually rendered by it
based on duly a p p r o v e d local ordinance.

1314. Distinction b e t w e e n tax lien a n d distraint of p r o p e r t y :

A n s w e r . A tax lien is distinguished f r o m distraint in that in distraint

the property must be that of the taxpayer, although it need not be
the property in respect to w h i c h the tax is a s s e s s e d ; w h e r e a s , tax
lien is generally directed to the property subject to the tax
regardless of the owner.

768
1315. C O M P A R I S O N OF TAX LIENS UNDER THE LTC AND THE
RPTC:

Answer.

BASIS L T C (Sec. 61) R P T C (Sec. 56)

What amounts due Local taxes and other

the local g o v e r n m e n t revenues Only the real property tax
are e n f o r c e d ?

Property subject of the

W h a t properties are
subject to the lien?
tax, and all those used in
the o c c u p a t i o n , business
Only the real property
in respect of w h i c h t h e
c h a r g e is i m p o s e d ; and subject to the tax
property rights therein.

H o w d o e s the lien Superior to all liens or Superior to all other liens,

rank in relation to charges in favor of mortgages, or
other claims against private parties encumbrances
the t a x p a y e r ?

By appropriate Law silent. (It may be by

H o w m a y the lien be administrative or judicial seizure and sale under
enforced? action Sees. 73-83, RPTC; or by
legal action)

L a w is silent, (rules on Only by payment of the

H o w m a y the lien be liens in general, including delinquent taxes and
removed? payment of the a m o u n t penalties.
due will apply

1316. Mechanics and procedure on distraint of personal

property to e n f o r c e collection of delinquent local taxes:
(Sec. 175)

Answer. T h e procedure is s u m m a r y in nature which includes

requirements on the seizure or confiscation of the taxpayer's assets
in sufficient quantity to satisfy the tax liability, accounting of distraint
goods, publication of the sale of distraint properties for 30 days,
report of the sale to the Sanggunian, delivery to the purchaser of
the certificate of sale, procedure of sale and disposition of the
proceeds of the sale by application thereof to the delinquent tax
and expenses of sale and the return of the balance to the owner of
the property, redemption of property within one year from date of

769
sale, non-deprivation of the possession of said property by the
owner with the right to receive the rentals/income during the period
of redemption, and final deed to purchaser in case there is failure
to redeem. Where the proceeds of the sale are insufficient to
satisfy the claim, other property belonging to the taxpayer may
again be distraint until the full amount due inclusive of surcharges,
interests and expenses are collected.

Specifically -

a) Seizure - Upon failure of the person owing any local tax, fee or
charge, to pay the s a m e at the time required, the treasurer
or his deputy may, upon written notice, seize or confiscate
any personal property subject to the tax lien in sufficient
quantity to satisfy the tax, fee or charge in question,
together with any or all increments thereto incident to
delinquency and e x p e n s e s of seizure. To this e n d , the
treasurer or his deputy shall issue a duly authenticated
certificate based upon the records of his office showing the
fact of delinquency and the a m o u n t of the tax and penalty
due. This shall serve as sufficient warrant for the distraint
of personal property. Thereafter, the distraint personal
property shall be sold at public auction.

b) Accounting of distraint goods T h e officer executing the

distraint shall m a k e or c a u s e to be m a d e an accounting of
the g o o d s or effects distraint, a copy of w h i c h is signed by
himself shall be left either with the o w n e r or person from
w h o s e possession the g o o d s or effects w e r e taken or at
the dwelling or place of business of that person and with
s o m e o n e of suitable a g e and discretion, to w h i c h list shall
be a d d e d a statement of the a m o u n t d e m a n d e d and a note
of the time and place of sale.

c) Publication - Thereafter, t h e officer shall c a u s e a notification

to be exhibited in not less than three (3) public places in
the territory of the local g o v e r n m e n t w h e r e the distraint is
m a d e . O n e place for the posting of the notice shall be at
the office of the chief executive of the local g o v e r n m e n t in
which the property is distraint, specifying t h e time and
place of sale and the articles distraint. T h e time of sale
shall not be less t h a n 20 d a y s after notice to t h e o w n e r or
possessor of the property as specified a n d t h e publication
or posting of the notice.

770
 d) Release of the distraint property upon payment prior to
sale (Right of Pre-emption) - If at any time prior to the
c o n s u m m a t i o n of the sale all proper charges are paid to
the officer conducting the sale, the g o o d s or effects
distraint shall be restored to the owner.

e) Procedure of sale At the time and place fixed in the notice

t h e officer shall sell the g o o d s or effects so distraint at
public auction to the highest bidder for c a s h . Within five (5)
d a y s after the sale, t h e treasurer shall m a k e a report of the
proceedings in writing to t h e chief executive of the local
government concerned.

S h o u l d the property distraint be not disposed of

within 120 d a y s f r o m the date of distraint, the s a m e shall
be consider as sold to the local g o v e r n m e n t for the amount
of the a s s e s s m e n t m a d e t h e r e o n by the C o m m i t t e e on
Appraisal and to the extent of the s a m e amount, the tax
delinquency shall be cancelled. (Referred to as forfeiture)

Said C o m m i t t e e on Appraisal is c o m p o s e d of the city

or municipal treasurer as chairperson with a representative
of the C o m m i s s i o n on Audit and the city or municipal
assessor as members.

f) Disposition of proceeds T h e proceeds of the sale shall be

applied to satisfy the tax, together with the increments
thereto incident to delinquency, and the e x p e n s e of the
distraint and sale. A n y residue over and above what is
required to pay the claim shall be returned to the owner of
the property sold. T h e e x p e n s e s chargeable upon the
seizure and sale shall be equivalent to the actual expense of
seizure and preservation of the property pending the sale.
No charge for the services shall be imposed. W h e n the
proceeds of t h e sale are insufficient to satisfy the claim,
other property may, in like manner be distraint until the full
a m o u n t due, including all expenses and costs, is collected.

1317. P e r s o n a l property e x e m p t f r o m distraint a n d levy:

Answer.
a. Tools and the implements necessarily used by the delinquent
taxpayer in his trade or employment;
 b. One horse, cow, carabao, or other beast of burden, such as the
delinquent taxpayer may select, and necessarily used by him in
his ordinary occupation;

c. His necessary clothing, and that of all his family;

d. 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 Php 10,000.00;

e. Provisions, including crops, actually provided for individual or

family use sufficient for 4 months;

f. The professional libraries of doctors, engineers, lawyers and

judges;

g. O n e fishing boat and net, not e x c e e d i n g the total value of Php

10,000.00, by the lawful use of which a fisherman earns his
livelihood, and

h. A n y material or article forming part of a house or improvement

of any real property.

1318. Prescriptive period to a s s e s s local t a x e s :

A n s w e r . Local taxes, fees or charges shall be a s s e s s e d within five

(5) years from the date they b e c o m e d u e . In c a s e of fraud or intent
to evade the p a y m e n t of t a x e s , fees or c h a r g e s , the s a m e m a y be
assessed within ten (10) years f r o m discovery of the fraud or intent
to evade payment.

1319. Prescriptive period on collection of local taxes:

A n s w e r . Local taxes, fees, or c h a r g e s m a y be collected within five

(5) years from the date of a s s e s s m e n t by administrative or judicial
action.

No action for the collection of s u c h taxes, fees, or charges

whether administrative or judicial shall be instituted after the
expiration of such period without said a s s e s s m e n t having been
made.
1320. May the prescriptive period to assess and/or collect
local taxes be s u s p e n d e d ?

A n s w e r . T h e running of the periods of prescription to assess

and/or collect local taxes shall be s u s p e n d e d for the time during
which -

a) the treasurer is legally prevented from the a s s e s s m e n t or

collection of the tax;

b) the t a x p a y e r requests for a reinvestigation and executes a

w a i v e r in writing before the expiration of the period within which
to a s s e s s or collect;

c) the taxpayer is out of t h e country; and

d) the t a x p a y e r c a n n o t be located in his given address.

1 3 2 1 . P r o t e s t a g a i n s t a n a s s e s s m e n t - Within 6 0 days from receipt

of notice of a s s e s s m e n t , the t a x p a y e r m a y file a written protest with
the local treasurer contesting the a s s e s s m e n t ; otherwise, the
a s s e s s m e n t shall b e c o m e final and executory.

N O T E : T h e appeal (a) from the decision of the Secretary of Justice

or (b) involving disputing a s s e s s m e n t s of local treasurer is filed
w i t h the regular court a n d now appealable to the Court of Tax
Appeals.

1322. Is a petition for injunction against collection of local

t a x e s a r e m e d y a v a i l a b l e to a t a x p a y e r ?

A n s w e r . Unlike the N I R C , the Local Tax Code does not specifically

prohibit injunction agamst the collection of local taxes. The
procedural rules m a y thus apply. This ancillary remedy may be
resorted to if irreparable d a m a g e would be caused to the taxpayer
by the collection of the tax and no other adequate remedy is
available to him. (Physical Therapy Asso. vs. Manila, 101 Phil.
1142; Zaragoza vs. Alfonso, 46 Phil. 159) Injunction cannot be
issued pending a case on the tax ordinance simply because it is
alleged to be unconstitutional or invalid. Until so declared, the
presumption is that it is valid and constitutional. (Valley Trading vs.
CFI, March 4, 1989).

R e m e d y - For taxpayer to pay the tax and thereafter claim a

refund within the prescribed period.

773
1 3 2 3 . C l a i m f o r t a x r e f u n d or t a x c r e d i t - The taxpayer may file a
written claim for refund or credit with the local treasurer within 2
years from the date of payment of the tax, fee or charge or from the
date the taxpayer is entitled to a refund or credit.

1324. X files a c o m p l a i n t a s s a i l i n g t h e validity of t h e tax

o r d i n a n c e a n d p r a y i n g f o r a t a x r e f u n d o f its p e r c e i v e d
o v e r p a y m e n t s without protest. Will his claim prosper?

Answer. Yes. X may file a complaint assailing the validity of the

ordinance and praying for tax refund of its perceived overpayments
without first filing a protest to the payment of taxes due under the
ordinance. However, failure of X to interpose the requisite appeal to
the Secretary of Justice is F A T A L to his complaint for a tax refund.
(2003 case)

N O T E : The local tax has to be contra-distinguished f r o m a real

property tax which cannot he protested without payment.

1325. R e m e d i e s available to a t a x p a y e r under the Local Tax

Code:

Answer.

A. Administrative r e m e d i e s :

1. Prior to Assessment -

a) Administrative appeal to the Secretary of Justice, and

b) Action for declaratory relief w h e n applicable

Declaratory relief is a r e m e d y o p e n to determine any
question of construction or validity of a tax law a n d for the
declaration of the taxpayer's liability thereunder. This
remedy is available before the b r e a c h or violation of such
tax law.

2. After Assessment-

Within 60 d a y s f r o m receipt of the a s s e s s m e n t , the

taxpayer m a y contest the a s s e s s m e n t by a written protest
before the local treasurer, w h o shall d e c i d e the s a m e
within 60 days f r o m date of filing of the dispute. If the
decision is adverse to the interest of t h e taxpayer, the
taxpayer may within 30 d a y s f r o m receipt thereof or from
 t h e lapse of the 60-day period prescribed within which to
a p p e a l with t h e court of c o m p e t e n t jurisdiction; otherwise
t h e a s s e s s m e n t b e c o m e s conclusive and unappealable.

W h e n an a s s e s s m e n t is seasonably disputed, the

collection of the tax, fee or charge, subject matter of the
a s s e s s m e n t , should be held in a b e y a n c e pending final
determination thereof.

3. Before payment of the tax:

a) S u s p e n s i o n of the tax by Provincial or City Treasurer and

by t h e Secretary of Finance.

b) Formal protest a d d r e s s e d to the Secretary of Finance on

four g r o u n d s (Sec. 4 5 , LTC)

c) Formal query a d d r e s s e d to the Provincial or City Fiscal -

on g r o u n d s other t h a n the four.

d) Judicial action in ordinary courts for (1) declaratory relief

before breach or violation of the law or regulation, or (2)
ask for injunction as an ancillary remedy.

4. After payment of the tax

Written claim for refund or credit addressed to the

collecting officer - p a y m e n t need not be under protest
(application of t h e principle of "Exhaustion of Administrative
remedies" prior to court action)

T h e taxpayer may, instead of filing a written protest, opt to

pay the tax, fee or charge and then seek a refund thereof within
the 2-year statute of limitation. T h e payment, if an assessment
is issued, must be made before the lapse of the 60-day period
from receipt thereof otherwise the assessment becomes final
and executory and it may no longer thus be disputed.

The written claim for refund itself may be filed with the
court of competent jurisdiction within 2 years from payment of
the amount due or from the time the taxpayer is entitled to a
refund or credit. The filing of a written claim for refund with the
local treasurer is a condition precedent for maintaining a court
action. If the local treasurer does not act on the written claim
for refund and the 2-year statute of limitation is about to expire,
the taxpayer should forthwith initiate the court action for refund

775
 and consider the treasurer's inaction as a denial of his claim for
refund.

Note that the Tax Code failed to specifically provide for a

period of appeal in the event a decision is made by local
treasurer concerned on the claim for refund, similar to that
obtaining in the case of a denial on a written protest of an
assessment. Thus, the Court may entertain the appeal so long
as the case of refund is filed within the 2-year period and a
written claim for refund or credit had earlier been submitted to
the local treasurer.

Under the Local Tax Code, the applicable statute of

limitations for claims for refund, not having been
specifically provided for by that law. COULD BE FILED
WITHIN SIX (6) YEARS FROM THE PAYMENT THEREOF AS
A CASE OF SOLUTIO IN DEBIT I. (Puyat & Sons vs. City of
Manila, 7 SCRA 970, Proctor & Gamble vs. Mun. of Jagna,
Dec. 28, 1979; Mun. ofOpon vs. Caltex Phil, 22 SCRA 755)

The judicial action must be directed against the municipal

corporation (local g o v e r n m e n t ) and not against the municipal
officials, a j u d g m e n t against w h o m w o u l d not be enforceable
against the local g o v e r n m e n t . (Tan vs. Dela Fuente, 90 Phil.
519)

5. An action against erring local officials w h o acted with

malice or i n e x c u s a b l e n e g l i g e n c e .

B. Judicial r e m e d i e s :

1. Declaratory relief - M a y be filed by the t a x p a y e r with the

ordinary court before liability under the ordinance has
attached. This relief shall not lie if the provisions of the
ordinance are not doubtful or a m b i g u o u s and that payment
of the tax during the p e n d e n c y of the c a s e has no effect on
said case.

After liability has attached under t h e tax ordinance, the

only remedy is to pay the tax and after exhausting
administrative remedies, sue for recovery in the ordinary
court. (Santos vs. Aquino, 94 Phil. 65; Shell Co. vs. Mun. of
Sipocot, 105 Phil. 1263)

2. Injunction - As a general rule, injunction will not lie to

restrain the collection of taxes, E X C E P T in cases of

776
 irreparable injury. (Rafael vs. Kaminer, 25 Phil. 344; Zamora
vs. Alfonso, 46 Phil. 159) This m a y be resorted to AS AN
A N C I L L A R Y R E M E D Y in an action for (a) declaratory relief,
or (b) for a n n u l m e n t of a tax ordinance, provided it be
s h o w n that the collection of the tax pending the final
resolution of the c a s e w o u l d c a u s e irreparable injury to the
t a x p a y e r w h o has no other a d e q u a t e remedy in the ordinary
c o u r s e of law. (Physical Therapy Org. vs. Mun. Board of
Manila, 101 Phil. 1143; Pacific Com'l. Co. vs. Prov'l.
Treasurer 52 Phil. 190.)

Unlike the N I R C , the L T C d o e s not contain any specific

provision prohibiting courts f r o m enjoining the collection of
local t a x e s . (Valley Trading Co. vs. CFI of Isabela, March
31, 1989)

3. Mandamus;

4. Action for tax refund (If action is based on solutio

indebiti, protest is not needed); and

5. Action for annulment of tax ordinance.

In a judicial action before the ordinary court the action

should be directed against the local government unit
c o n c e r n e d and N O T t h e collection officer, unless it is a case
for d a m a g e s or a criminal action for the illegal acts of such
officers w h e n they are the o n e s intended to be held
personally a n s w e r a b l e for such acts. (Tan vs. Dela Fuente,
90 Phil. 519)

C. Special r e m e d i e s such as personal appeal to a n d

p e r s u a d i n g the authorities c o n c e r n e d or thru mass action or
"people's people" m a y be resorted to.

1326. R e m e d i e s of a taxpayer under Sec. 187, L G C : (Appeal to

the Secretary of Justice)

Answer. Said provision requires that the dissatisfied taxpayer who

questions the validity or legality of a tax ordinance must file his
appeal to the Secretary of Justice within 30 days from the effectivity
thereof. In case the Secretary decides the appeal, a period of 30
days is allowed for the aggrieved party to go to court. However, if
the Secretary does not act thereon, after the lapse of 60 days, a
party could already proceed to seek relief in court.

777
 NOTE: These three (3) separate periods ("30-30-60") are given for
compliance as a pre-requisite before seeking redress in a
competent court. (Jardine Davies Insurance Brokers, Inc. vs.
Aliposa)

1327. Define a tax period as u s e d in local t a x a t i o n :

Answer. It is the time span within which a current tax obligation is

in effect and collectible, usually coinciding with the calendar year
and payable in quarterly installments.

NOTE: Tax period does not apply to permit fees and public utility
charges.

1328. W h e n are p e r m i t f e e s a n d utility c h a r g e s p a y a b l e ?

Answer. Permit fees and utility charges are in the nature of

payments to defray the e x p e n s e s incurred by the local unit for
services rendered in the inspection or regulation of a particular
business or activity, generally they have no time s p a n s but are
payable immediately, after the rendition of t h e service.

1329. C a n the local legislative b o d y validly grant e x t e n s i o n of

time of p a y m e n t of local taxes without penalty?

A n s w e r . It may, for justifiable reason or c a u s e , extend the time for

the payment of a tax, fee or c h a r g e without penalty for a period not
exceeding six (6) m o n t h s . S u c h as the o c c u r r e n c e of flood,
t y p h o o n , earthquake, volcano eruption or other calamity w h i c h may
have recently ravaged t h e locality.

1330. W h o may examine books of accounts and records of

b u s i n e s s m e n for p u r p o s e s of local t a x e s ?

A n s w e r . Under Sec. 171 of t h e L G C , only the treasurer of the local

government unit imposing the tax, fee or c h a r g e , m a y e x a m i n e the
books of accounts and pertinent records of b u s i n e s s m e n in order to
ascertain, assess and collect the correct a m o u n t thereof.
Consequently, no personnel in t h e Offices of the Provincial
Governor or City or Municipal M a y o r m a y inspect records of
businessmen unless duly deputized in writing by the local treasurer
concerned.

778
1 3 3 1 . Is n o n - p a y m e n t of lease of public m a r k e t stall a criminal
offense?

A n s w e r . T h e n o n - p a y m e n t of monthly rentals by a lessee of a

public market stall of a city or municipality is not a criminal offense.
T h e s u r c h a r g e i m p o s e d for late or n o n - p a y m e n t thereof is not a
penalty under criminal law but an additional a m o u n t a d d e d to the
usual c h a r g e . It is more of an administrative sanction which should
be collection only by a civil action. (Conde vs. Mamenta, Jr., 142
SCRA 500)

1332. Are public market vendors required to issue invoices or

sales receipts?

A n s w e r . Public market v e n d o r s selling exclusively domestic meat,

fruits, v e g e t a b l e s , g a m e , poultry, fish and other domestic food
products are e x e m p t f r o m t h e requirement of issuing sales invoices
or receipts. H o w e v e r , the m o m e n t they sell products in addition to
those mentioned they lose the benefit of t h e e x e m p t i o n .

T h e y are required to k e e p books of accounts because they are,

in proper c a s e s , subject to income tax and c o m m u n i t y development
tax (cedula).

TICKERS:

3 Each local g o v e r n m e n t unit m a y create its o w n sources of

revenue and levy taxes, fees and charges, or other forms of
revenue m e a s u r e s such as tolls, licenses fees, rentals and
service charges consistent with the basic policy of local
a u t o n o m y , which shall exclusively accrue to it.

3 Local g o v e r n m e n t units have a share in the proceeds of national

internal revenue taxes.

3 Tax exemption privileges existing prior to 1 9 9 1 , except those

provided in the Local C o d e itself, have been withdrawn.

3 Local taxation is legislative in nature, the power of taxation shall

be exercised by the Sanggunian of the local government unit
concerned through appropriate ordinance. (Bagatsing vs.
Ramirez, 74 SCRA 306, Villegas vs. Hiu Chiong Tsai, 86 SCRA
270)

779
3 The tax powers of local government units are to be liberally
construed but a DOUBT on the application of a tax ordinance
shall be construed strictly against the Local government unit.

o Exception: - Tax exemptions, incentive or relief that shall

be construed strictly against the grantee or taxpayer.

O Doubts on the liability of a taxpayer under a valid tax ordinance

are construed strictly against the local government unit.

O Local government units and their officials are not exempt from
liability for death or injury to person or persons or d a m a g e to
property.

C Unlike ordinary local ordinances or resolutions, the enactment of

tax ordinances and revenue m e a s u r e s requires public hearings to
be first conducted. T h e power to review and declare inconsistent
with law, in w h o l e or in part, barangay ordinances by the
Sanggunian B a y a n or Panlungsod and municipal ordinances by
the Sanggunian Panlalawigan (whose decisions are final) is also
applicable to tax ordinances. However, the law has withdrawn the
review and suspension powers of local treasurers and the
Secretary of Finance under the Local T a x C o d e .

O All tax ordinances or revenue m e a s u r e s of local g o v e r n m e n t units

existing upon the effectivity of t h e Local G o v e r n m e n t C o d e shall
continue to be in force and effect unless a m e n d e d by the
S a n g g u n i a n c o n c e r n e d , or inconsistent w i t h , or in violation of, the
provisions of the Local G o v e r n m e n t C o d e .

3 It appears that it is the legislative intention to limit provinces and

municipalities, respectively, to t h e imposition of taxes that the
other may levy under its specific authority. Municipalities m a y levy
taxes not otherwise levied by provinces, w h e r e a s , provinces are
prohibited from levying taxes that municipalities m a y impose
under the e n u m e r a t i o n of its specific authority.

3 L G U s are prohibited f r o m imposing taxes on the sale, barter or

e x c h a n g e of agricultural and aquatic/marine products produced
by farmer or f i s h e r m a n himself and his immediate family.

However, the L G U s m a y impose a tax on persons e n g a g e d in the

business or producing agricultural, marine and fresh-water
products on a c o m m e r c i a l scale.

780
3 L G U is prohibited f r o m imposing taxes on the gross receipts of
transportation contractors and persons engaged in the
transportation of p a s s e n g e r s or freight by c o m m o n carriers but
not on the operation or franchising of tricycles, the issuance of
licenses or permits for the driving thereof.

3 Transfer of rights over mining claims is not subject to transfer

taxes by the province or city.

3 T h e L G U s are without p o w e r to tax electric power c o m p a n i e s

already subject to franchise tax unless their franchise allows the
imposition of additional tax.

781
 P A R T XIII

COMMUNITY
DEVELOPMENT TAX

This is a tax for being a resident and m e m b e r of a community. It

used to be known as Residence tax or "Cedula". This tax is collectible
by the city or municipal treasurer w h o can deputize the barangay
treasurers in the collection thereof in their respective territorial
jurisdiction.

The cedula tax was the first individual tax imposed in the
Philippines during the Spanish regime. It w a s abolished in 1937 but
restored under C.A. No. 4 6 5 in the form of residence tax, now k n o w n
as community development tax.

1333. Governing law on C o m m u n i t y Tax:

Answer. Sec. 38 of the Local T a x C o d e g o v e r n s the levy,

collection, and administration of the residence tax by the national
government through the BIR as well as the rates and accrual of the
proceeds thereof.

1334. Nature of C o m m u n i t y Tax:

Answer. T h e c o m m u n i t y tax is essentially a poll or capitation tax. It

is of a fixed a m o u n t i m p o s e d u p o n certain inhabitants of the
Philippines "without regard to their property or on the occupation in
which they may be e n g a g e d . "

1335. W h o are authorized to levy c o m m u n i t y tax?

A n s w e r . Cities and Municipalities.

1336. C o m p o s i t i o n of a c o m m u n i t y tax:

A n s w e r . Tax proper or the basic tax (Class A) a n d additional tax

(Class B).

782
1337. W h o are the persons liable?

Answer.
(a) Every inhabitant of the Philippines 18 years of age or over w h o :
(Class A and/or Class B)

1. has b e e n regularly e m p l o y e d on a w a g e or salary basis for

at least 30 consecutive w o r k i n g days during any calendar
year; or

2. is e n g a g e d in b u s i n e s s or o c c u p a t i o n ; or

T h e business or o c c u p a t i o n need not be taxable under

the N I R C .

3. o w n s real property with an a g g r e g a t e a s s e s s e d value of

Php 1,000.00 or m o r e ; or

T h e o w n e r is the one liable although the property is

held in usufruct by another.

4. is required by law to file an income tax return.

A non-resident alien is not an inhabitant. He is

therefore, not subject to t h e tax w h e t h e r or not required by
law to file an income tax return.

Inhabitant - m e a n s any p e r s o n , irrespective of his or her

citizenship or nationality, w h o dwells or resides in the
Philippines for a period exceeding three (3) months.

In the case of h u s b a n d a n d wife, the additional tax imposed

shall be based upon the total property owned by them
and the total gross receipts or earnings derived by
t h e m . (Sec. 157, LGC)

(b) Corporations no matter how created or organized, whether

domestic or resident foreign, engaged in or doing business
in the Philippines, including joint stock company, partnership,
joint account, association, or insurance companies, but
excluding general professional partnerships and joint ventures
for undertaking construction projects or engaging in energy
operations under service contract with the government. (Class
C of basic and C-1 for additional)

783
 NOTE: Estates of deceased persons, being neither
corporations nor individuals, A R E NOT subject to the tax, but
the heirs must declare their proportionate shares of the income.

3 If the corporation has sales offices, branches or

warehouses of establishments, the Community tax is
imposed on its principal office.

(c) Optional (Class D) - is issued to any person or corporation not

liable to the payment of the community tax but desiring to have
a residence certificate upon payment of the basic tax.

1338. W h e n payable?

Answer. It accrues on the first day of January of e a c h year that

shall be paid on or before the last day of February of e a c h year.

3 If a person reaches the age of 18 years or otherwise loses the

benefit of exemption on or before the last day of J u n e , he shall
be liable for the c o m m u n i t y tax on the day he reaches 18 years
of age or upon the day the e x e m p t i o n ends.

3 If a person reaches 18 years of a g e or loses the benefit of

exemption on or before the last day of M a r c h , he shall have 20
days to pay the c o m m u n i t y tax without b e c o m i n g delinquent.

3 Persons w h o c o m e to reside in t h e Philippine or reach 18 years

of age on or after July 1st of any year or w h o c e a s e to be
e x e m p t e d on or after the s a m e date shall not be subject to the
c o m m u n i t y tax for that year.

3 Corporations established a n d organized on or before t h e last

day of J u n e shall be liable for the c o m m u n i t y tax for that year.
W h e r e a s , corporations established a n d organized on or before
the last day of M a r c h shall h a v e 20 d a y s within w h i c h to pay
the community tax without becoming delinquent and
corporations established a n d organized on or after July 1 shall
not be subject to the c o m m u n i t y tax for that year.

3 If the tax is not paid within the time prescribed a b o v e , there

shall be a d d e d to the unpaid a m o u n t an interest of 2 4 % per
a n n u m from the d u e date until it is paid.

784
1339. A m o u n t or rate of c o m m u n i t y tax:

Answer.
3 Individual - A basic tax of P h p 5.00 and an annual additional
tax of Php 1.00 for every Php 1,000.00 of income regardless of
w h e t h e r f r o m business, exercise of profession or from property
that in no c a s e shall e x c e e d Php 5,000.00.

T h e additional tax shall be based u p o n the total property

o w n e d by both h u s b a n d and wife and the total gross receipts or
earnings derived by t h e m .

3 Corporation - W h e t h e r d o m e s t i c or foreign, e n g a g e d in or doing

business in t h e Philippines. Basic tax of P h p 500.00 and an
a n n u a l additional tax which in no case shall exceed Php
10,000.00, in a c c o r d a n c e with -

Php 2.00 for every Php 5,000.00 worth of real property in

the Philippines o w n e d by it during t h e preceding year based on
the a s s e s s e d v a l u e of the real property and Php 2.00 for every
Php 5,000.00 of gross receipts or earnings derived by it from its
business in the Philippines during the preceding year.

3 Dividends received by a corporation f r o m another corporation

shall be considered as part of the gross receipts or earnings of
said corporation.

3 If the tax is not paid within the time prescribed, there shall be
added to the unpaid a m o u n t an interest of 2 4 % per a n n u m
from the d u e date until it is paid.

1340. Situs of community tax:

A n s w e r . T h e community tax shall be paid in the place of residence

of the individual, or in the place w h e r e the principal office of the
juridical entity is located.

1341. Nature of c o m m u n i t y tax:

Answer. It is a local tax for the following reasons -

3 The participation by the BIR is only for the printing of the

certificates and distribution thereof to municipal and city
treasurers;

785
 O Only a small portion is remitted to the National Government
merely to cover cost of printing and distribution of the
community tax certificates

3 Collection is done by the city or municipal treasurer w h o can

deputize barangay treasurers in collecting the tax;

3 Proceeds are allocated to the cities, municipalities and

barangays in the 5 0 % - 5 0 % proportion; and

3 The provisions on community tax are located in Sees. 156 -

164 of the Local Government C o d e of 1 9 9 1 .

1342. W h o is e x e m p t from c o m m u n i t y tax?

Answer.
a) Individuals below 18 years of age w h o do not have real property

or are not e n g a g e d in business;

b) Individuals less than 18 years of age although e m p l o y e d ;

c) Non-profit corporations

e) Diplomatic and consular representatives;

e) Transient visitors w h e n their stay in t h e Philippines does not
exceed three (3) m o n t h s .

1343. Community tax Certificate defined:

A n s w e r . A c o m m u n i t y tax certificate shall be issued to every

person or corporation u p o n p a y m e n t of the c o m m u n i t y tax. A
community tax certificate m a y also be issued to any person or
corporation not subject to the c o m m u n i t y tax u p o n p a y m e n t of the
basic tax.

1344. Instances w h e n c o m m u n i t y tax certificate is required:

Answer.
a) W h e n an individual subject to t h e c o m m u n i t y tax a c k n o w l e d g e s
any d o c u m e n t before a notary public.

b) W h e n he takes the oath of office upon election or appointment

to any position in t h e g o v e r n m e n t service.

786
c) W h e n he receives any license, certificate, or permit from any
public authority.

d) W h e n h e receives any m o n e y f r o m the public f u n d .

e) W h e n he transacts other official business.

f) W h e n he pays any tax or fee.

g) W h e n he receives any salary or w a g e f r o m any person or

corporation.

T h e c o m m u n i t y tax certificate required shall be the one

issued for t h e current year, e x c e p t for t h e period from January to
April 15 e a c h year, in w h i c h c a s e , the certificate issued for the
preceding years shall suffice.

787
 PART XIV

REAL PROPERTY TAXATION

1345. State the f u n d a m e n t a l principles g o v e r n i n g real property

taxation:

Answer.
a) Real property, whether taxable or exempt, shall be appraised at
its current and fair market value.

b) Real property shall be classified for a s s e s s m e n t purposes on the

basis of its actual use.

Actual use - Refers to the purpose for w h i c h the property is

principally or predominantly utilized by the person in
possession of the property.

Illustration:

"A" is a lessee of a real property belonging to the

government. He uses it as mineral land; he can be
a s s e s s e d real property tax e v e n if he is not the owner of
said land or even if he does not have mining rights thereon
b e c a u s e the rule for a s s e s s m e n t under the R P T C is "actual
use".

A private property o w n e r w h o leases his real property

to a traditional e x e m p t e e is not e x e m p t f r o m real property
tax even if said property is actually, directly or exclusively
used by the " R E C " for its m a i n p u r p o s e , b e c a u s e the
owner uses the property for c o m m e r c i a l purposes. Real
property shall be a s s e s s e d on the basis of its actual use
regardless of w h e r e located and w h o e v e r uses it.

c) The appraisal, a s s e s s m e n t , levy and collection of real property

tax shall not be let to any private p e r s o n ; a n d

d) The appraisal and assessment of real property shall be

equitable.

e) The goal of real property a s s e s s m e n t shall be the equitable

distribution of the tax b u r d e n .

788
 f) T h e appraisal of real property shall be uniform in each local
political subdivision.

g) Real property shall be a s s e s s e d on the basis of a uniform

standard of value within e a c h local political subdivision.

1346. H o w are real properties t a x e d ?

A n s w e r . Real properties shall be classified, valued and assessed

o n t h e basis o f its A C T U A L U S E R E G A R D L E S S O F W H E R E
THEY ARE LOCATED, WHOEVER OWNS IT AND WHOEVER
U S E S IT, IS IN P O S E S S I O N , a n d O C C U P A T I O N OF IT.

3 A building actually u s e d for residential purposes by persons

other t h a n the o w n e r on rented basis shall be classified and
a s s e s s e d as residential based on its current level of
assessment.

3 A purely residential building erected in a c o m m e r c i a l area - the

land shall be a s s e s s e d on its c o m m e r c i a l value and the
i m p r o v e m e n t on its a s s e s s e d value fixed on the basis of the
a s s e s s m e n t level for residential land and vice-versa.

3 In c a s e the residential or purely c o m m e r c i a l building stands in

a mixed residential-commercial area, the more predominant
use of such land shall govern its classification and assessment
level.

3 V a c a n t or idle land located in a purely residential or mixed

residential-commercial area shall be classified as residential.
However, if located in a purely commercial area, the same shall
be classified as c o m m e r c i a l .

1347. Doctrine of Usage defined:

Answer. Doctrine of Usage is the gauge used in determining

taxability of real properties. Real properties are taxed according to
how they are used and not on ownership.

City ofBaauio vs. Busueao (1980)

The taxpayer resisted the assessment on the real property

which he acquired from the GSIS under a contract to sell on
the theory that the property is still not fully paid and is still
registered in the name of the GSIS (an entity with a statutory

789
 real property tax exemption in its charter). The Supreme Court
applied the Doctrine of Usage and held that since the property
was already being used by a non-exempt taxpayer, it cannot be
exempted from real property tax. The beneficial user of said
property is liable.

LRT Authority vs. Central Board of Assessment Appeals.

(Oct. 12. 12000)

LRT resisted the assessment on the carriageways and

terminal stations for real taxes upon the theory that such real
properties are for public use similar in nature to public roads.
The Supreme Court held that it w a s not for public use because
only those w h o are riding the L R T use t h e m , hence, its
carriageways and terminal stations are not exclusively for
public use and in addition, there is no grant of real property tax
exemption in the Charter of the LRT.

1348. H o w are real properties a p p r a i s e d ?

Answer. All real properties, w h e t h e r taxable or exempt, shall be

appraised at the current fair market v a l u e prevailing in the city
w h e r e they are located. To establish the fair market value of real
property, the City A s s e s s o r may s u m m o n the o w n e r s of real
properties affected, as well as other w i t n e s s e s , for t h e purpose of
getting information to base u p o n the real property's market value.

1349. Distinctions between "FAIR MARKET VALUE" and

" A S S E S S E D V A L U E " for p u r p o s e s of the real property
tax:

Answer. Market value - "Is the highest price estimated in terms of

money which the property will buy if e x p o s e d for sale in the o p e n
market allowing a r e a s o n a b l e time to find a purchaser w h o buys
with knowledge of all the uses to w h i c h it is a d o p t e d a n d for which
it is capable of being u s e d . "

"The price at w h i c h a willing seller w o u l d sell a n d a willing

buyer would buy, neither being under a b n o r m a l pressure."

"Fair market v a l u e " is d e t e r m i n e d by the declarant of the real

property or by the Assessor, while the "assessed value" is
determined by the application of the a s s e s s m e n t level to t h e "fair
market value".

790
 T h e "fair market value" is s u p p o s e d to be the actual value
of the real property in the o p e n market; while the "assessed
v a l u e " is merely a certain percentage of the "fair market value"
d e p e n d i n g on the a s s e s s m e n t level of the real property in
question.

Assessment level - Is t h e percentage applied to t h e market value

to determine t h e taxable or a s s e s s e d value of the property.

1350. What are the objectives of the Real Property Code?

Answer.

a) To increase local g o v e r n m e n t revenues f r o m the realty tax;

b) To u p g r a d e a s s e s s m e n t procedures and processes;

c) To bring about an equitable distribution of the tax burden.

1351. What is the scope of the Real Property Tax Code?

A n s w e r . T h e C o d e ( P . D . N o . 4 6 4 , effective J u n e 1, 1974) governs

the appraisal and a s s e s s m e n t of real property for purposes of
taxation by provinces, cities and municipalities, inclusive of the
levy, collection and administration the real property tax.

1352. Coverage of the Real Property Tax Code:

Answer.
a) A n n u a l ad v a l o r e m tax on real property;

b) Special levies on said property such as:

1. An additional 1% tax for the Special Educational Fund;

(R.A. No. 5447) [Referred to as the "SEF" Tax] - the levy is
made on an ad valorem basis as in the case of the basic
tax. (RA 5447)

2. An additional 5% tax on idle lands (Referred to the "IL" Tax],

likewise imposed on an ad valorem basis;

Idle land shall include (a) agricultural lands suitable for

cultivation, dairying, inland fishery, and other agricultural
uses, 1/2 of which remain uncultivated or unimproved by
the owner(s) thereof; (b) lands other than agricultural,
located in the City or Municipality, more than 2,000 sq. m.

791
 in area 1/2 of which remain unutilized or unimproved by the
owner(s) thereof; and (c) residential lots in subdivisions
duly approved by proper authorities, the ownership of
which has been transferred to individual owners.

3. Special levy or assessment imposed by local or national

governments on property especially benefited by certain
infrastructure development to help defray a part, not
exceeding 6 0 % of the cost thereof, including the cost of
acquiring land and other real property in connection
therewith.

Special levy or special a s s e s s m e n t which is not

actually a tax.

In No. (3) a b o v e , the special levy shall not exceed 6 0 %

of the actual cost of such projects and improvements,
including the costs of acquiring the land and such other
real property f r o m basic real property tax and the
remainder of the land portions of which have b e e n donated
to the local g o v e r n m e n t unit c o n c e r n e d for the construction
of such projects or i m p r o v e m e n t s .

In Nos. (1) a n d (2) a b o v e , it can only be levied by

provinces, cities a n d municipalities within Metro Manila.
Municipalities outside Metro Manila cannot impose the
aforementioned taxes and levies, for No. (3), t h e s a m e
may be i m p o s e d by provinces, cities, Metro Manila
municipalities including municipalities outside the Metro
Manila area. B a r a n g a y s c a n n o t i m p o s e real property taxes
or special a s s e s s m e n t .

N O T E : (a) Real property granted e x e m p t i o n f r o m real property

tax shall also be e x e m p t e d f r o m the imposition of the Special
Education Fund T a x of 1 % , but (b) E x e m p t i o n from real
property tax does not include e x e m p t i o n f r o m special
assessment.

1353. W h a t law g o v e r n s the real property t a x ?

A n s w e r . T h e Real Property Tax is g o v e r n e d by the Real Property

Tax C o d e enacted under P.D. 4 6 4 that took effect on J u n e 1, 1974.

792
1354. Is t h e i m p o s i t i o n of real p r o p e r t y tax a national tax or a
local tax?

A n s w e r . In the c a s e of Meralco Securities Industrial Corporation

vs. Central Board of A s s e s s m e n t Appeals, it w a s held by the
S u p r e m e Court that the imposition of real property tax is national
based on t w o (2) g r o u n d s :

a) the imposition has b e e n m a d e by the law-making body and later

by t h e President of the Philippines;

b) the imposition is m a d e t h r o u g h o u t t h e Philippines and not only

in a particular political subdivision.

1355. W h a t is real property t a x a t i o n ?

A n s w e r . It is taxation of real property. "Real Property" may include

things that should generally be regarded as personal property.

1356. Real property tax defined:

A n s w e r . It is a direct tax on the o w n e r s h i p of lands and buildings

or other i m p r o v e m e n t s thereon not specially exempted and is
payable regardless of w h e t h e r the property is used or not, although
the value may vary in a c c o r d a n c e with such factor.

T h e tax is usually single or indivisible although the land and

building or i m p r o v e m e n t s erected thereon are assessed separately
except w h e n the land and building or improvement belongs to
separate o w n e r s . (Eusebio Villanueva, et. al., vs. City of lloilo,
December 28, 1968)

3 This is a local tax.

3 It is a tax on property of a certain class located within a certain

territory on a specified date in proportion to its value or in
accordance with some other reasonable method of
apportionment.

3 It is a fixed proportion of the assessed value of the property

being taxed and requires the intervention of assessors.

3 It is collected or payable at appointed times and constitutes a

superior lien on and is enforceable against the property subject
to such taxation and not by imprisonment of the owner.

793
 3 The policy of taxing real property is on the basis of actual use
even if the user is not the owner.

* Province of Nueva Ecija vs. Imperial Mining Co., Nov. 19,

1982

3 It is a tax in rem against the real property without personal

liability therefore on the part of the owner thereof.

3 While properties o w n e d by the Republic of the Philippines or

any of its political subdivision are exempt from real property
taxes, said government o w n e d properties b e c o m e s taxable if
the beneficial or actual use thereof is transferred for a
consideration or otherwise to a taxable person. T h e law makes
no distinction b e t w e e n property held in g o v e r n m e n t capacity
and those possessed in a proprietary character, such as those
acquired by the g o v e r n m e n t in execution sales, tax sales and
escheats. (Board of A s s e s s m e n t A p p e a l s of Laguna vs. CTA,
May 2 1 , 1963)

1357. W h a t is the p u r p o s e of the real property t a x ?

A n s w e r . T h e function of real property tax is to raise revenue. It is

levied by the province or city. Exceptions to this are the special
levies on real property.

1358. Give the characteristics of real p r o p e r t y tax:

Answer.
a) It is a direct tax on the o w n e r s h i p of real property. T h e impact
and incidence of taxation d e v o l v e s on t h e s a m e person.

b) It is an ad valorem tax. V a l u e is the tax b a s e .

Ad valorem tax - is a levy on real property d e t e r m i n e d on the

basis of a fixed proportion of the value of t h e property.

c) It is proportionate b e c a u s e the tax is calculated on the basis of a

certain percentage of the value a s s e s s e d .

d) It creates a single indivisible obligation.

e) It is a local tax.

794
1359. DEFINITION OF TERMS:

Acquisition cost - For newly-acquired machinery not yet

depreciated a n d appraised within the year of its purchase,
refers to t h e actual cost of the machinery to its present owner
plus the cost of transportation, handling and installation at the
present site.

Actual use - This refers to t h e purpose for w h i c h the real

property is principally or predominantly utilized by the person in
possession thereof.

Ad Valorem tax - Is a levy on real property determined on the

basis of a fixed proportion of the value of the property.

Agricultural land - A land d e v o t e d principally to the planting

of trees, raising of crops, livestock and poultry, dairying, salt
m a k i n g , inland fishing and similar aqua-cultural activities and
other agricultural activities.

Appraisal - It is the act or process of determining the value of

property as of a specific date for a specific purpose.

Assessment - It is t h e act or process of determining the value

of property, or proportion thereof subject to tax, including the
discovery, listing, classification and appraisal of properties.

Assessment level - It is the percentage applied to the fair

market value to determine the taxation value of the property.

Assessed value - It is the fair market value of the real

property multiplied by the a s s e s s m e n t level. It is synonymous
to taxable value.

Commercial land - Land devoted primarily for the object of

profit and is not classified as agricultural, industrial, mineral,
timber, or residential land.

Depreciated value - Is t h e value remaining after deducting

depreciations from the acquisition cost.

Economic life - Is the estimated period over which it is

anticipated that a machinery or equipment may be profitably
utilized.

795
 Fair Market Value - It is the price at which a property may be
sold by a seller w h o is not compelled to sell and bought by a
buyer who is not compelled to buy.

Improvement - Is a valuable addition made to a property or an

amelioration in its condition, which is intended to enhance its
value, beauty or utility or to adapt it for new or further purposes,
amounting to more than a mere repair or replacement of parts
involving capital expenditures and labor and normally requiring
a building permit from the local government c o n c e r n e d .

Industrial land - It refers to land devoted to industry as capital

investment.

> Levy - It means (a) an imposition of a tax, fee or charge; or (b)

the seizure of property to satisfy a tax obligation.

Machinery - E m b r a c e s m a c h i n e s , equipment, mechanical

contrivances, instruments, appliances or apparatus, w h i c h may
or may not be attached, permanently or temporarily to the real
property.

Mineral land - Is a land in w h i c h minerals, metallic or non-

metallic exist in sufficient quantity or g r a d e to justify the
necessary expenditures to extract and utilize s u c h materials.

Reassessment - Is the assigning of new a s s e s s e d value to

property, particularly real estate, as the result of a general,
partial, or individual reappraisal of t h e property.

Remaining economic life - Is the period of time expressed in

years f r o m the date of appraisal to t h e d a t e w h e n the
machinery b e c o m e s valueless.

Residential land - L a n d principally d e v o t e d to habitation.

Tax assessed - T h e a n n u a l real estate tax imposable on the

taxable real property without the penalties accruing thereto.

> Timber land - It refers to land with trees g r o w i n g on it.

1360. Give the nature a n d s c o p e of the local taxing p o w e r in

real property t a x a t i o n :

A n s w e r . T h e taxing power of local g o v e r n m e n t s in real property

taxation is a delegated power.

796
 3 Provinces, cities, and municipalities in the Metro Manila area
do not only have the power to levy real estate taxes but they
also fix real estate tax rates.

3 Municipalities a n d b a r a n g a y s are devoid of the power to levy

real property taxes.

3 Provinces shall fix a uniform rate of basic real property tax

applicable to their respective localities at the rate not exceeding
1 % of t h e a s s e s s e d value of real property; and in the case of a
city or a municipality within t h e M e t r o Manila area at t h e rate
not e x c e e d i n g 2% of the a s s e s s e d value of real property.

3 No public hearing shall be required before the enactment of a

local tax ordinance levying the basic real property tax.

3 T a x e s on property are taxes a s s e s s e d on all property or on all

property of a certain class located within a certain territory on a
specified date in proportion to its value or in accordance with
s o m e other r e a s o n a b l e m e t h o d of apportionment.

1 3 6 1 . P o w e r of the local g o v e r n m e n t to prescribe penalties for

tax violation under the Real Property Tax Code:

A n s w e r . Local g o v e r n m e n t s have the power to impose penalties

for tax violations and that t h e penalty should not be less than Php
1,000.00 or more t h a n Php 5,000.00 if a fine and not less than 1
month or more t h a n 6 months if it is imprisonment. Barangays may
prescribe as fine not less t h a n Php 100.00 or more than Php
1,000.00

T h e power to fix penalties applies only to province, cities, and

municipalities in Metro Manila because it is only the Sanggunians
of these local g o v e r n m e n t units that can levy real property taxes.
Municipal and barangay Sanggunians are not e m p o w e r e d to levy
said taxes and these units do not have anything to do with the
imposition of penalties for realty tax violations.

1362. Is a real p r o p e r t y tax i m p o s a b l e u p o n e a c h of the co-

heirs on their undivided share of the property inherited
from their parents?

A n s w e r . Unless partition is effected, each co-heir cannot yet claim

ownership over a definite portion of the inherited property, hence,

797
 the undivided real property shall be declared for taxation purposes
only as one property in the name of all the heirs.

The affidavit of the heirs, could not be used as basis for issuing
to each of them separate tax declarations covering their respective
shares of the undivided real property inherited.

1363. W h a t kind of properties are subject to real property tax?

A n s w e r . Only real property is subject to tax within the meaning of

the Code, particularly:

3 Land, building, roads and constructions of all kinds adhered to

the soil;

3 Trees, plants, and growing fruits, while they are attached to the
land or form an integral part of an immovable;

3 Everything attached to an i m m o v a b l e in a fixed manner, in

such a w a y that it cannot be separated therefrom without
breaking the material or deterioration of the object;

3 Statutes, relics, paintings or other objects for use or

ornamentation, placed in buildings or on land by the owner of
the i m m o v a b l e in such a m a n n e r that it reveals the intention to
attach t h e m permanently to the t e n e m e n t s ;

3 Machinery, receptacles, instrument or i m p l e m e n t s intended by

the owner of the t e n e m e n t for an industry or for w o r k s which
may be carried on in a building or on a piece of land, and which
tend directly to meet the n e e d s of the said industry or works;

3 Machineries and industrial e q u i p m e n t a n d t h e like that are

immobilized by destination.

3 A n i m a l h o u s e s , p i g e o n - h o u s e s , beehives, fish ponds or

breeding places of similar nature, in c a s e their o w n e r has
placed t h e m permanently attached to t h e land, and forming a
permanent part of it; the a n i m a l s in these places are included;

3 Fertilizer actually used on a piece of land;

3 Mines, quarries, and slag d u m p s , while the matter thereof

forms part of the b e d , a n d waters either running or stagnant;

798
 3 D o c k s a n d structures w h i c h , t h o u g h floating, are intended by
their nature and object to remain at fixed place on a river, lake,
or coast.

3 Contracts for public w o r k s , and servitudes a n d other real rights

over i m m o v a b l e property.

1364. W h a t kind of real properties are exempt from real

property tax?

A n s w e r . Real property o w n e d by the Republic of the Philippines or

any of its political subdivisions and any g o v e r n m e n t - o w n e d
corporation so e x e m p t by its charter. This e x e m p t i o n , however,
shall not apply to real property of t h e a b o v e - n a m e d entities the
beneficial use of w h i c h has b e e n granted, for consideration or
otherwise, to a taxable p e r s o n . (Testate Estate ofC.T. Lim vs. City
of Manila, 182 SCRA 482)

3 Real properties o w n e d by G O C C acquired for resale to

qualified persons are N O T e x e m p t f r o m realty taxes because
they are not d e v o t e d for public use.

3 Real property o w n e d by the S S S is e x e m p t from realty taxes

albeit the s a m e being devoted to private or proprietary
purpose. R E A S O N : In e x e m p t i n g property o w n e d by the
Republic of the Philippines or any of its political subdivision, the
Real Property T a x C o d e m a k e s no distinction between property
held in sovereign, g o v e r n m e n t a l or political capacity and those
possessed in a private, proprietary or patrimonial character and
w h e r e the law d o e s not distinguish, neither may the Court
unless there are facts and circumstances clearly showing that
the l a w m a k e r s intend the contrary. It is axiomatic that when
public property is involved, exemption is the rule and taxation
the exception. ( S S S vs. City ofBacolod, et. al., 7 SCRA 407)

3 Non-profit or religious cemeteries or public burial grounds;

3 Charitable institutions, churches, parsonages or convents

appurtenant thereto, mosques, and all lands, buildings, and
improvements, actually, directly and exclusively used for
religious or charitable purposes;

3 Real property in any one city or municipality belonging to a

single owner the entire assessed valuation of which is not in
excess of Php 1,000. The property so exempt, however, shall

799
 be assessed and records thereof kept as in other cases; (As
amended by P.D. No. 1621)

3 Land acquired by grant, purchase or lease from the public

domain for conversion into dairy farms for a period of 5 years
from the time of such conversion;

3 Pasture and/or grazing land acquired by grant, purchase, or

lease from the public d o m a i n , actually used for livestock
production, for a period of 5 years beginning with the calendar
year 1977; and acquisitions m a d e thereafter, the exemption will
begin with the year of such acquisition. (Sec. 4 0 , P.D. No. 464
as a m e n d e d )

Under P.D. No. 1913, the a b o v e exemption shall include

exemption from the additional 1% tax for Special Education
Fund.

3 Machinery of a pioneer and preferred industry as certified by

the Board of Investments used or operated for industry,
agriculture, manufacturing or mining purposes, during the first 3
years of the operation of the machinery. (As a m e n d e d by P.D.
No. 1383)

Machinery shall embrace machines, equipment,

mechanical contrivances, instruments, appliances and
apparatuses, attached to the real estate. It shall include the
physical facilities available for production, as well as the
installation and appurtenant service facilities, together with all
those not permanently attached to the real estate but are
actually, directly a n d essentially u s e d to meet the needs of the
particular industry, business, or w o r k s , w h i c h by their very
nature and purpose are d e s i g n e d for or essential to
manufacturing, c o m m e r c i a l , m i n i n g , industry or agricultural
purposes. (Sec. 3-m, P.D. No. 4 6 4 as a m e n d e d by P.D. No.
1383)

3 Perennial trees and plants of e c o n o m i c value except w h e r e the

land u p o n w h i c h they g r o w is planted principally to such
growth.

3 The real property e x e m p t under other laws;

3 Properties o w n e d by non-stock or non-profit educational

institutions, the total a s s e s s e d value of w h i c h d o e s not exceed
Php 3,000, including those o w n e d by Educational Foundations

800
 organized under R.A. No. 6 0 5 5 . T h e s e institutions are now
e x e m p t f r o m realty tax a n d " e v e n I N C O M E T A X a n d
C U S T O M S D U T I E S under t h e 1987 Constitution.

3 Property o w n e d by a franchise holder used solely in the

business c o v e r e d by the franchise, the e x e m p t i o n does not
extend to real property of the franchise holder that is being
rented out.

3 All machineries a n d e q u i p m e n t that are actually, directly and

exclusively u s e d by local w a t e r districts and G O C C e n g a g e d in
the supply and distribution of water and/or generation and
transmission of electric power.

3 All real property o w n e d by duly registered cooperatives as

provided under RA 6 9 3 8 ;

3 M a c h i n e r y and e q u i p m e n t used for pollution control and

environmental protection.

Except for the a b o v e e n u m e r a t i o n s , any exemption from

p a y m e n t of real property tax previously granted to, or presently
enjoyed by, all persons, w h e t h e r natural or juridical, including
all g o v e r n m e n t - o w n e d - o r - c o n t r o l l e d corporations are hereby
w i t h d r a w n upon the effectivity of the Local Government Code.

1365. Do local governments have the p o w e r t o e x e m p t real

properties from taxation?

A n s w e r . There is no provision in the Local G o v e r n m e n t Code that

expressly e m p o w e r s local g o v e r n m e n t s to exempt real property
from taxes. Sec. 234 e n u m e r a t e d the particular properties that are
e x e m p t e d . T h u s , it follows by clear implication that the law has
withheld from the L G U s the power to exempt. However, while
L G U s do not have such power to e x e m p t properties from realty tax.
they may e x e m p t idle lands from the additional 5% tax by reason of
force majeure, civil disturbance, natural calamity or any cause or
circumstances which physically or legally prevents the owner of the
property or person having legal interest therein from utilizing,
improving or cultivating the same.

Furthermore, LGUs may grant condonation that actually

partake the nature of tax exemptions, such as when there is a case
of general failure of crops or substantial decrease in the price of
agricultural or agri-based products or calamity within its respective
area.

801
 The local governments are bereft of this authority insofar as
real taxes are concerned, unlike in the case of local taxes where
the Local Government Code (LGC) expressly authorizes them to
"grant tax exemptions, incentives, or reliefs under such terms and
conditions as they may d e e m necessary". Thus, in real property
taxation, exemption is limited only to those properties that are
enumerated under the LGC.

1366. W h o exercises the p o w e r of r e m i s s i o n on real property

taxes? W h e n is this power obtaining?

A n s w e r . Under the R P T C , remission of real property tax may be

done by:

(a) the Sanggunian Panlalawigan or Panlungsod in case of:

1) general failure of crops, or

2) great decrease in the price of products, or

3) similar w i d e s p r e a d disaster in any city or municipality or

municipalities of a province.

b) the President of the Philippines if public interest so requires;

c) the Secretary of Finance is granted special authority to

formulate and prescribe s c h e m e of g r a d u a t e d p a y m e n t s of
realty tax, and/or remedial m e a s u r e s that w o u l d e a s e the tax
burden of property o w n e r s in special cases of e c o n o m i c
dislocation or imbalance arising f r o m natural calamities. T h e
exercise of this authority shall be u p o n direction or approval of
the President.

1367. Classifications of real properties for assessment

purposes:

Answer.
a) Residential
b) Agricultural
c) Commercial
d) Industrial
e) Mineral
f) Timber and forest land; a n d
g) Special (church, hospital, o r p h a n a g e , etc.)

802
1368. W h a t are the special classes of real properties under the
RPTC?

Answer.
a) All kinds of lands, buildings and other improvements thereon,
actually, directly and exclusively u s e d for religious, educational,
cultural, recreational or scientific purposes,

b) Hospitals not o w n e d and operated by the g o v e r n m e n t or by

any of its instrumentalities.

c) T h o s e o w n e d and used by local w a t e r districts; and

d) Real properties o w n e d by g o v e r n m e n t o w n e d or controlled

corporations rendering essential public services in the supply
a n d distribution of w a t e r and/or generation a n d transmission of
electric power.

1 3 6 9 . W h a t a r e t h e a s s e s s m e n t levels t o b e a p p l i e d t o t h e fair
m a r k e t value of real properties for taxation p u r p o s e s ?

Who fixes the assessment levels? - S a n g g u n i a n g Panlalawigan

or P a n l u n g s o d of the place w h e r e the property is located.

At what rates? At rates not exceeding the following:

Classification Description / Fair Market V a l u e Assessment

levels
Residential 20%
Commercial 50%
Agricultural 40%
Land Industrial < 50%
Mineral 50%
Timberland 20%

Not over 175K 0%

1 7 5 K - n o t over 300K 10%
Buildings and 300K - not over 500K 20%
other 5 0 0 K - not over 750K 25%
Structures 7 5 0 K - not over 1.0m 30%
(FMV) 1.0M - not over 2.0M 35%
2.0M - not over 5.0M 40%
5.0M - not over 10.0M 50%
10.0Million and above 60%

803
 Not over 300K 25% ~n
300K - not over 500K 30%
Agricultural 500K - not over 750K 35%
(FMV) 750K - not over 1 .OM 40%
1.0M-not over2.0M 45%
2.0 million and above 50%
Not over 300K 30% ~~
300K - not over 500K 35%
500K - not over 750K 40%
Commercial or 750K - not over - 1 .OM 50%
Industrial 1.0M-not over2.0M 60%
(FMV) 2.0M - not over 5.0M 70%
5.0M - not over 100M 75%
10.0 million and above 80%
Not over 300K 45%
300K - not over 5 0 0 K 50%
500K - not over 7 5 0 K 55%
Timberland 7 5 0 K - n o t oveM.OM 60%
1.0M - not o v e r 2 . 0 M 65%
2.0 million and a b o v e 70%
Machineries Agricultural 40%
Residential 50%
Commercial 80%
Industrial 80%

Classification Description / Fair M a r k e t V a l u e Assessment

levels
Cultural 15%
Scientific 15%
Special classes Hospital 15%
of property: Local W a t e r Districts 10%
GOCC engaged in the supply and 10%
distribution of water and/or generation a n d
transmission of electric power
all machineries not land.
1370. W h a t kind of real p r o p e r t i e s a r e e x e m p t f r o m t h e idle
tax?

A n s w e r . T h e additional levy on idle lands of 5% shall not apply to

property o w n e r s w h o are unable to improve, utilize or cultivate their
lands due to any of the following c a u s e s :

a) A d v e r s e peace and order conditions as certified by the

Provincial C o m m a n d e r of the A r m Forces of the Philippines.
However, if within 1 year u p o n restoration of the p e a c e and

804
order in the locality as certified by the said officer, the said
land r e m a i n s u n i m p r o v e d , unutilized or uncultivated, the
additional tax provided shall be i m p o s e d .

Financial losses of the o w n e r due to fire, flood, typhoon,

e a r t h q u a k e and other causes of similar nature declared by
t h e o w n e r in a s w o r n statement to be submitted to the
Provincial, City or Municipal A s s e s s o r stating the ground(s)
therefore, w h i c h shall be a c c o m p a n i e d by a certification from
t h e proper a g e n c y of the local g o v e r n m e n t c o n c e r n e d . If the
idle land is not improved to within 2 years f r o m the date of
the o c c u r r e n c e of the loss, the idle land tax shall be imposed
subject to the rules a n d regulations issued in connection
therewith.

Existing court litigation involving t h e land subject to the case

is pending unless said land is not improved within 1 year
after t h e final adjudication of the c a s e .

Necessity to leave the land in a fallow state as certified by

t h e Provincial, City or Municipal Agriculturist, or in their
a b s e n c e by the Secretary of Agriculture or his duly
authorized representatives, stating a m o n g others, the length
of time within w h i c h the land shall be considered ready for
production. If the idle land is not improved within one (1)
year after t h e termination of such period of time, the idle land
tax shall be i m p o s e d .

Unfavorable physical factors such as rocky nature of ground,

and uneven topography in case of agricultural land which
render the land unsuitable for cultivation as certified by the
Provincial, City or Municipal Agriculturist, or in their absence,
by the Secretary of Agriculture or his duly authorized
representatives.

Acquired subdivision lots which remains idle due to the

failure of the subdivision owner or developer to develop the
said subdivision plan as determined by the assessor. If
within 1 year from the time the subdivision is developed, the
said lot remains unutilized or unimproved, the tax shall be
imposed.

805
1 3 7 1 . W h o bears the b u r d e n of paying the real property tax?

Answer. The real property tax shall be assessed in the name of

the person owning or administering the property on which the tax
is levied.

O To impose the real property tax on the subsequent owner

which was neither the owner nor the beneficial user of the
property during the designated periods would be contrary to
law and unjust. [(Manila Electric Company vs. Barlis, 357
SCRA 833 (2001)]

O A tax declaration in the name of a person w h o has no

successional or administrative rights to a decedent's estate is
null and void. [Cenido vs. Apacionado, 318 SCRA 388
(1999)]

1372. W h o bears the b u r d e n of t a x a t i o n w h e n real property is

held in usufruct?

Answer. Generally, the naked o w n e r is the o n e liable for the realty

tax on real property held in usufruct; it is the usufructuary w h o may
pay the tax which he can recover f r o m the o w n e r u p o n termination
of the usufruct.

1373. What are the duties of persons, natural or juridical,

o w n i n g or administering real property u n d e r the R P T C ?

Answer.
a) To prepare and file with provincial or city assessor, a sworn
statement declaring the true value (current fair market value) of
their property o n c e every 3 years during the period from
January 1 to J u n e 30 to start in 1980,

b) To describe the property sufficient in detail to e n a b l e the

assessor to identify the s a m e for a s s e s s m e n t purposes;

c) To file a sworn statement on the true value of subject property

within 60 days after t h e acquisition of s u c h property, or upon
completion or o c c u p a n c y of t h e i m p r o v e m e n t , w h i c h e v e r date
c o m e s earlier.

806
1374. W h a t is t h e duty of a b u y e r of real property or of a
person making improvement thereon?

A n s w e r . Every buyer of real property must m a k e a new declaration

thereof. Failure to do so shall m a k e the a s s e s s m e n t in the n a m e of
the previous o w n e r binding. (Tajonera vs. CA, 102 SCRA 467)

In c a s e of i m p r o v e m e n t s introduce on real property - the owner

thereof or his authorized representative shall file a sworn statement
declaring t h e true value of subject property within 60 days after
completion of the i m p r o v e m e n t or its o c c u p a n c y , whichever c o m e s
first.

1375. W h a t is the c o n s e q u e n c e of failure or refusal of property

owners to make such declaration within the prescribed
time?

A n s w e r . T h e provincial or city a s s e s s o r shall himself declare the

property in t h e n a m e of the defaulting owner, if k n o w n , or against
an u n k n o w n owner, and shall assess the property for taxation.

1376. Is t h e p a y m e n t of t h e real p r o p e r t y tax an e v i d e n c e of

title of o w n e r s h i p ?

A n s w e r . A s s e s s m e n t alone is of little value as proof of title to a

property and mere tax declaration does not vest ownership of the
property in the declarant. Neither tax receipts nor declaration of
ownership for taxation purposes are evidence of ownership or of
the right to possess realty w h e n not supported by other effective
proofs. (Perez vs. Court of Appeals, 59 SCRA 15, Ferrer-Lopez vs.
CA, 150 SCRA 393, Prov. of Camarines Sur vs. Dir. of Lands, 64
Phil. 600)

1377. W h a t is the probative value of a property tax

declaration?

Answer. While by itself it is not an adequate proof of ownership, it

may serve as sufficient basis for inferring possession. It proves that
the holder has a claim of title over the property - aside from
manifesting a sincere desire to obtain title thereto, they announce
the holder's adverse claim against the state and other interested
parties. (Olegario vs. Man, 608 SCRA 134)

807
 1378. Is the possession of property tax declaration a n d tax
receipts sufficient to p r o v e o w n e r s h i p of real p r o p e r t y ?

Answer. Property tax declarations and tax receipts are good

indicia of possession in the concept of an owner. The same must
be accompanied by possession for a period sufficient for
acquisitive prescription to set in; by themselves, tax declaration and
tax receipts do not conclusively prove ownership of real property.
(Encinares vs. Achero, 597 SCRA 34)

1379. A s s e s s m e n t defined:

Answer. It is the act or process of determining the value of a

property or proportion thereof, subject to the tax, including the
discovery, listing and appraisal of properties. This must be
distinguished from the w o r d " a s s e s s m e n t " under the N I R C .

1380. May the validity of an a s s e s s m e n t under the R P T C be

questioned in the ordinary courts?

Answer. Sec. 64 of the R P T C provides that "no courts can

entertain any suit on the validity of the tax a s s e s s m e n t before
payment of the tax under protest, thus, implying that it may so
entertain the question after the payment of the tax under protest".

1381. May the City Assessor amend fair market value

schedules of real properties within its territorial
jurisdiction?

Answer. T h e City A s s e s s o r m a y r e c o m m e n d a m e n d m e n t s to
correct errors in valuation in fair market schedules to the
Sanggunian P a n l u n s o d . T h e S a n g g u n i a n P a n l u n s o d shall, by
ordinance, act on the r e c o m m e n d a t i o n within 90 d a y s after
receiving it.

1382. W h e n is appeal to the Local Board of Assessment

Appeals (LBAA) obtaining?

A n s w e r . A n y o w n e r or person having legal interest in t h e property

w h o is not satisfied with the action of t h e provincial, city or
municipal assessor in the a s s e s s m e n t of his property may, within
60 days from the receipt of the written notice of a s s e s s m e n t ,
appeal to the L B A A of the province or city w h e r e the property is
located by filing a petition under oath in the form prescribed for the

808
 purpose, together with copies of tax declarations and such
affidavits or d o c u m e n t s submitted in support of the appeal. Within
30 days from receipt of the L B A A ' s adverse decision, dissatisfied
property o w n e r can appeal to the central Board of A s s e s s m e n t
A p p e a l s w h o s e decisions is final and executory unless appealed.
Within 15 d a y s f r o m receipt of the C B A A ' s adverse decision, and
appeal m a y be n o w be m a d e before t h e Court of T a x Appeals,
under the e x p a n s i o n jurisdiction of the C T A of RA No. 9282.

1383. W h a t is the composition of the L B A A ?

A n s w e r . T h e " L B A A " shall be c o m p o s e d of three (3) m e m b e r s , as

follows -

a) T h e Register of D e e d s , as chairperson

b) T h e Provincial or City Auditor, as m e m b e r ; and

c) T h e Provincial or City Engineer, as m e m b e r .

T h e s e officials shall serve in the " L B A A " in an ex-officio

capacity without additional c o m p e n s a t i o n .

1384. W h a t are powers of the L B A A ?

A n s w e r . T h e " L B A A " shall decide a p p e a l e d cases brought before it

within 120 days f r o m the date of receipt of such appeal. In the
exercise of its appellate jurisdiction, the Board shall have the power
to s u m m o n witnesses, administer oaths, and conduct ocular
inspection, take depositions and issue s u b p o e n a and subpoena
duces tecum.
4

T h e proceedings of the Board shall be conducted solely for the

purpose of ascertaining the truth without necessarily adhering to
technical rules applicable i n j u d i c i a l proceedings.

1385. W h a t is the composition of the Central Board of

Assessment Appeals (CBAA)?

A n s w e r . The " C B A A " shall be c o m p o s e d of -

a) Secretary of Finance, as Chairman;

b) Secretary of Justice, as Member and

809
 c) Secretary of Local Government and Community Development
as member, all of w h o m shall serve without additional
compensation.

1386. W h a t are the powers of the C B A A ?

Answer. The Board shall have jurisdiction over appealed

assessment cases decided by the "LBAA". It has the power to
s u m m o n witnesses, administer oaths, take depositions, and issue
subpoena and subpoena duces tecum.

The decision of the Board shall b e c o m e final and executory

after the lapse of 15 days from receipt of its decision by the
appellant. Within 15 days, a petition for reconsideration may be
filed. The R P T C does not provide for the review of the Board's
decision by the S u p r e m e Court. T h u s , the only remedy available for
seeking a review by the SC of the decision of the " C B A A " is the
special civil action of certiorari. Under the e x p a n d e d jurisdiction
of the CTA, decisions of the C B A A m a y n o w be reviewed by the
CTA and subsequently to the S u p r e m e Court. (Caltex (Phils.) vs.
CBAA, 5 SCRA 247)

1387. W h a t are the remedies of property o w n e r w h o d o e s not

agree with the a s s e s s m e n t of his real p r o p e r t y by t h e
Assessor?

A n s w e r . A n y property o w n e r w h o is not satisfied with the action of

the provincial or city assessor in t h e a s s e s s m e n t of his property
may file an written a d m i n i s t r a t i v e protest with the local treasurer
within thirty (30) d a y s from p a y m e n t of t h e tax with the provincial or
city or municipal treasurer w h e r e the property is located w h o shall
decide the protest within sixty (60) d a y s from receipt of the protest.
Thereafter, he may, within sixty (60) d a y s f r o m date of receipt of
the written notice of a s s e s s m e n t appeal to t h e Local Board of
A s s e s s m e n t A p p e a l s ( L B A A ) of the province or city, by filing with it
or with the municipal treasurer of the municipality w h e r e the
property a s s e s s e d is situated w h o is duty b o u n d to transmit it to the
"LBAA" a petition under oath stating the g r o u n d s of his a p p e a l and
using the form prescribed for the p u r p o s e , together with copies of
the tax declarations and s u c h affidavit or d o c u m e n t s submitted in
support of the a p p e a l .

T h e " L B A A " will decide the a p p e a l within 120 d a y s from the

receipt of the a p p e a l . T h e decision r e n d e r e d must be based on
substantial evidence presented at the hearing or at least contained

810
 in the record or disclosed to the parties or s u c h relevant evidence
as a r e a s o n a b l e m i n d might accept as a d e q u a t e to support the
c o n c l u s i o n . If the decision of the " L B A A " is adverse to the claim of
the taxpayer, t h e n he m a y file an a p p e a l to the Central Board of
A s s e s s m e n t A p p e a l ( C B A A ) within thirty (30) d a y s from receipt of
t h e decision of the " L B A A " by filing his appeal under oath with the
Secretary of the " L B A A " stating therein the g r o u n d s and the reason
for the a p p e a l , and attaching thereto any e v i d e n c e pertinent to the
c a s e . A copy of t h e a p p e a l should also be furnished the "CBAA",
thru the C h a i r m a n . Within t e n (10) d a y s f r o m receipt of the appeal,
t h e secretary of t h e " L B A A " c o n c e r n e d shall forward the s a m e and
all papers related thereto, to the " C B A A " , through the Chairman
thereof. T h e said " C B A A " will decide the c a s e brought on appeal
within twelve (12) m o n t h s f r o m date of receipt, which decision shall
b e c o m e final a n d executory after the lapse of 15 days from the
date of receipt of a copy of t h e decision by the appellant. If the
t a x p a y e r is not still satisfied with the decision of the " C B A A " he
may, within t h e r e g l a m e n t a r y period of thirty (30) days, file a
petition for review with the C T A under Rule 4 3 , R R C . within thirty
(30) d a y s f r o m receipt thereof (RA 9 2 8 2 , April 2 3 , 2004) and
thereafter file a certiorari proceedings with the S C , as the case may
be.

1 3 8 8 . W h a t i s t h e effect o f a n a p p e a l o n t h e p a y m e n t o f real
property tax?

A n s w e r . A p p e a l s on a s s e s s m e n t s of real property made shall not

s u s p e n d the collection of the corresponding realty taxes on the
property involved as a s s e s s e d by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon the
o u t c o m e of the a p p e a l .
4

1389. W h e n are property taxes due and payable?

A n s w e r . The real property tax for any year shall attach and
b e c o m e due and payable on the first day of January and from the
s a m e date said tax and all penalties subsequently accruing thereto
shall constitute a lien upon the property subject to such tax.

Illustration:

If a real property is tax-exempt at the beginning of the year

because its use at the time is confined actually, directly, and
exclusively to religious, charitable or educational purposes the
exemption covers the entire year even assuming that sometime

811
 during the year the use of that property ceases to be for said
purposes. Likewise, if at the beginning of that year, the property is
taxable because at that particular point in time, the use is for a
non-exempt purpose, not religious, educational and charitable
("REC"), the taxable status of said property continues for that
entire year even if at certain time during the year it is used for
" R E C " purposes.

Property liens shall be superior to all other liens, mortgages, or

encumbrances of any kind whatsoever and shall be enforceable
against the property whether in the possession of the delinquent or
any subsequent owner or possessor, and shall be extinguished
only by the payment of the delinquent taxes and penalties.

Illustrations:

If a real property is transferred by a non-exempt person to

an exempt person after January 1, there is still liability to pay
the tax e v e n in the hands of e x e m p t person, the tax having
accrued at the time of the transfer.

If the transfer is m a d e of an e x e m p t property after the tax

date (January 1), the property still remains e x e m p t for that
year even in the hands of a n o n - e x e m p t person. (Institucion
Teresiana vs. Board of Assessment Appeals, CTA Case No.
1110, April 1, 1963)

1390. M a y real p r o p e r t y t a x e s b e p a i d o n i n s t a l l m e n t ?

A n s w e r . At the discretion of the taxpayer, real property taxes may

be paid without penalty in four (4) equal installments.

1st on or before M a r c h 3 1 .
2 n d on or before J u n e 30
3rd on or before Sept. 30, a n d
4th o n o r before Dec. 3 1 .

3 Real property taxes paid in full on or before M a r c h 31 shall be

given 2 0 % discount.

3 T h e date for the p a y m e n t of any other real property tax without

interest shall be prescribed by the s a n g g u n i a n c o n c e r n e d .

3 Payments of real property taxes shall first be applied to prior

years' delinquencies, interests, a n d penalties, if any, a n d only

812
 after said delinquencies are settled m a y tax payments be
credited for the current period.

1391. Is there tax discounts for advance payment of real

property tax?

A n s w e r . If t h e basic real property tax and the additional tax

accruing to the S E F are paid in a d v a n c e in accordance with the
prescribed s c h e d u l e of payment, the sanggunian concerned may
grant a discount not e x c e e d i n g 2 0 % of the annual tax due.

1392. C a n p a y m e n t of real property t a x e s be effected thru the

mails?

A n s w e r . Remittances of p a y m e n t s sent through mail is allowed

either in m o n e y order, c a s h or check covering the tax due from
property o w n e r s provided t h e s a m e shall reach the treasurer's
office on or before the close of the office hours on the last day for
the p a y m e n t of the tax. If t h e receipt thereof is after due date it
shall be considered delinquent and subject to the payment of the
surcharges or statutory penalty.

1393. W h a t is t h e penalty for failure to pay real property tax

within the period provided by law?

A n s w e r . T h e taxpayer shall pay a penalty of 2% on the amount of

the delinquent tax (installment due and not paid) for each month
until the tax shall be fully paid. In no case shall the total penalty
e x c e e d 2 4 % of the delinquent tax.

1394. State the restrictions upon the power of the Courts to

impeach tax:

Answer.
a) No court shall entertain any suit assailing the validity of a tax
assessed under the R P T C until the taxpayer shall have paid,
under protest, the tax assessed against him.

b) No court shall declare any tax invalid by reason of irregularities

or informalities in the proceedings of the officers charged with
the assessment or collection of taxes or of failure to perform
their duties within the specified time for their performance
unless such irregularities, informalities, or failure shall have
impaired the substantial rights of the taxpayer;

813
 c) No court shall declare any portion of the tax assessed under
the provisions of the RPTC invalid except upon the condition
that the taxpayer shall pay the just amount of the tax, as
determined by the court in the pending proceedings.

1395. C o m p a r i s o n of taxpayer's right to claim tax refund/tax

credit under the R P T C . L T C . NIRC a n d the T C C :

Answer.

RPTC LTC NIRC TCC

The Code The Code The C o d e does not The Code requires
expressly provides that any require protest for protest. Any
provides that no tax or fee paid claims of tax refund taxpayer affected
court shall pursuant to a or credit; a suit by a ruling or
entertain any suit protested m a y be maintained decision of the
assailing the ordinance shall in any court for the Collector on duties
validity of a tax be considered as recovery of any must first pay the
assessed until having been paid internal revenue duties determined
the taxpayer under protest taxes or penalty and within 15 days
shall have paid, until final alleged to have thereafter, file a
under protest, resolution of the been erroneously written protest
the tax assessed issues raised. or illegally setting forth his
against him. collected, provided objections to the
the doctrine of ruling in question.
"Exhaustion" has
been complied
with.

1396. P R O T E S T A T T H E T I M E O F P A Y M E N T I S R E Q U I R E D T O
PRESERVE TAXPAYER'S RIGHT TO CLAIM TAX
REFUND/CREDIT UNDER THE RPTC.

1397. Is " p a y m e n t u n d e r protest" required if the real property

tax w a s paid under a mistaken belief?

A n s w e r . Protest is not required to claim a refund or credit w h e r e a

taxpayer paid the realty tax under a mistaken belief that it is
required by law b e c a u s e p a y m e n t in s u c h c a s e is m a d e through
error or mistake, in the honest belief that taxpayer is liable, and
therefore could not have b e e n m a d e under protest, but with
complete voluntariness.

814
 Under t h e principle of solution indebiti a tax paid through error
m a y be recovered within a period of six (6) years.

* R a m i e Textiles Inc. vs. H o n . Ismael Mathay, Sr., April 30, 1979

1398. Under the R P T C , protest is required before a written

c l a i m for r e f u n d of real p r o p e r t y tax m a y be filed. W h a t is
the exception to this rule?

A n s w e r . P a y m e n t of a t a x p a y e r under mistaken belief or error or

that he had no k n o w l e d g e of t h e fact that he is not covered by the
imposition m a y ask for t h e refund of s u c h realty tax paid by mistake
b e c a u s e he should not be held to suffer loss by his g o o d intention
to c o m p l y with w h a t he believes is his legal obligation which such
obligation d o e s not really exist. In addition, the g o v e r n m e n t may
not enrich itself of the e x p e n s e of t h e taxpayer.

1399. Will a loss or destruction of property subject to real

p r o p e r t y t a x e s e x t i n g u i s h t h e liability t h e r e t o ?

A n s w e r . No.

Illustration: "X" o w n s 500 s q . m. of land bordering the sea. He

has not paid the real property taxes due thereon for 4 years
before the property w a s entirely eaten by the sea. X is still liable
for the taxes that had already a c c r u e d and b e c o m e delinquent.
T h e loss of the object of taxation is not one of the ways by
w h i c h realty tax is remitted.

1400. W h a t would be the basis of "just compensation" in

c a s e s of g o v e r n m e n t expropriation of real property?

A n s w e r . T h e basis for the determination of the just compensation

in case of g o v e r n m e n t expropriation shall be the value declared by
the owner in his sworn declaration or the assessed value of the
s a m e property whichever is lower.

1 4 0 1 . T a x r e f u n d or t a x c r e d i t - The taxpayer may file a written claim

for refund or credit for taxes and interest with the provincial or city
treasurer within two (2) years from the date the taxpayer is entitled
to such reduction or adjustment.

815
1402. What are the duties and responsibilities of the Secretary
of Finance in matters of real p r o p e r t y t a x ?

Answer. The Secretary of Finance shall exercise direct executive

supervision over all assessment and treasury officials and
personnel in the local governments. He shall be primarily
responsible for the proper, efficient and effective administration of
the real property tax, and shall:

a) Evolve a comprehensive system of real property appraisal that

will ensure fair and realistic property valuations for taxation
purposes;

b) Establish uniform a s s e s s m e n t methods and procedures that

will equalize property values in e a c h local political subdivision;

c) Ensure that the ad valorem tax on real property shall be just,

uniform and equitable;

d) Adopt the necessary m e a s u r e s that will promote m a x i m u m tax

collection efficiency at the local levels;

e) Provide for the o p t i m u m utilization by the local g o v e r n m e n t s of

the proceeds from the real property tax; and

f) Formulate and adopt policies a n d procedures that will improve

technical skills and develop reasonable standards of
performance in the local a s s e s s m e n t and treasury services.

1403. W h a t are the President's special p o w e r s in matters of

real property t a x a t i o n ?

A n s w e r . In the interest of local a u t o n o m y and the general welfare

and subject to the conditions and limitations herein prescribed, the
President, upon r e c o m m e n d a t i o n of t h e Secretary of Finance, is
e m p o w e r e d to take adjustments in the real property tax s y s t e m , as
regards -

a) The classification of real properties for taxation purposes;

b) T h e frequency of general revisions of property valuation;

c) T h e assessment levels or a s s e s s e d values of real properties;

and

816
 d) T h e extent of e x e m p t i o n from real property tax and the rates of
levy.

1404. Under w h a t conditions m a y the President exercise the

above-described powers?

Answer.
a) W h e r e , in the light of e c o n o m i c , social and other relevant
c h a n g e s , it b e c o m e s necessary to modify or adjust the
classification of real properties, their a s s e s s m e n t levels and/or
taxable v a l u e s on t h e basis of new concepts of essentiality and
m o d e m a p p r o a c h e s to real property valuations;

b) W h e r e in v i e w of n e w social and e c o n o m i c conditions, it

b e c o m e s imperative to c h a n g e real property assessment
patterns for taxation purposes.

1405. W h a t are the limitations on the President's taxing power

in matters involving real properties?

Answer.
a) T h e m a x i m u m rates of levy fixed by the Code may be
increased by not more t h a n 2% of the a s s e s s e d value of real
property or reduced by not more than 1 % thereof;

b) For any tax year, the existing a s s e s s m e n t level or levels may

be increased or d e c r e a s e d by not more than 3 0 % ;

c) As m a y be r e c o m m e n d e d by the Secretary of Finance on the

basis of c h a n g e s in price levels, the period of general revision
of property valuations for taxation purposes may be extended
up to five (5) years or reduced to two (2) years.

d) Before any recommendation is submitted to the President by

the Secretary of Finance pursuant to the provisions of the
R P T C , a public hearing shall first be held, whenever
practicable, w h e r e interested parties shall be afforded a
reasonable opportunity to be heard.

817
1406. W h a t are the procedures on the levy of the realty tax by
the local S a n g g u n i a n or council?

Answer.
a) The ordinance fixing the rate of real property tax shall be
enacted by the provincial, city or municipal board or council not
later that the 15th day of September of the year next
proceeding the year the tax shall begin to accrue.

b) Within 5 days after enactment, the board or council secretary

shall forward the ordinance to the local chief executive for his
approval and signature. If he considers any such ordinance
prejudicial to the public welfare, he m a y veto it by signifying to
the local board or council concerned his disapproval thereof in
writing.

c) The local board or council may, by a 2/3 of all its m e m b e r s and

within 15 days from the date of receipt of a copy of the vetoed
ordinance, re-pass the s a m e over the veto, in which case it
shall be d e e m e d a p p r o v e d without the local chief executive's
approval or signature. If the local chief executive fails to
approve or veto the ordinance within 10 days after receipt of a
copy thereof, it shall likewise be d e e m e d a p p r o v e d .

d) The ordinance fixing the rate of real property tax shall remain in
full force and effect unless a m e n d e d on or before S e p t e m b e r
15 of the year next preceding the o n e in w h i c h the a m e n d m e n t
is to take effect.

1407. Are the government's remedies in local taxation

imprescriptible?

A n s w e r . Both the LTC and the R P T C do not have any provision on

prescription of the a s s e s s m e n t and collection of g o v e r n m e n t taxes
and other revenues. T h e y are t h u s , imprescriptible, E X C E P T that:

a) T h e LTC does not prohibit the local g o v e r n m e n t from providing

for prescription in its tax o r d i n a n c e s , and

b) Under Sec. 25 of the R P T C , real properties declared for the

first time cannot be a s s e s s e d for back taxes for more than 10
years.

Sec. 270, of the L G C , provided for the Prescriptive Periods

for Collection of realty taxes -

818
 T h e basic real property tax a n d other tax levied under the L G C
shall be collected W I T H I N FIVE (5) Y E A R S from the date they
b e c o m e d u e . No action for the collection of the tax whether
administrative or judicial shall be instituted after the expiration of
s u c h period, E x c e p t i o n : In c a s e of fraud or intent to evade
p a y m e n t of the tax, s u c h action for collection m a y be instituted
within 10 Y E A R S from t h e discovery of s u c h fraud or intent to
evade payment.

1408. W h e n are the prescriptive period interrupted?

A n s w e r . T h e period of prescription within w h i c h to collect shall be

s u s p e n d e d for t h e time during w h i c h -

a. T h e local treasurer is legally prevented from collecting the tax;

b. T h e o w n e r of the property or t h e person having legal interest

therein requests for reinvestigation and executes a waiver in
writing before the expiration of t h e period within which to
collect; a n d

c. T h e o w n e r of the property or the person having legal interest

therein is out of the country or otherwise cannot be located.

1409. W h a t are the g o v e r n m e n t ' s remedies in the collection of

real p r o p e r t y t a x e s ?

Answer.

a) Administrative remedies -

1. Distraint of personal property of the taxpayer, and/or

2. Sale of the delinquent real property of the taxpayer itself.

b) Judicial action that may be brought in any court of competent

jurisdiction.
1410. W h a t is the p r o c e d u r e on levy of real property to enforce
collection of delinquent local t a x e s ? (Sec. 176)

Answer. After the expiration of the time required to pay the

delinquent tax, fee, or charge, real property may be levied on or
before, simultaneously or after the distraint of personal property
belonging to the delinquent taxpayer. The provincial, city or
municipal treasurers as the case may be shall prepare a duly

819
authenticated certificate showing the name of the taxpayer and the
amount of the tax, fee or charge and penalty due from him. Said
certificate shall operate with the force of a legal execution
throughout the Philippines.

Levy shall be effected by writing upon said certificate the

description of the property upon which levy is m a d e . At the same
time, written notice of the levy shall be mailed to or served upon (a)
the assessor and (b) the Registrar of Deeds of the province or city
where the property is located w h o shall annotate the levy on the tax
declaration and certificate of title of the property respectively and
the (c) delinquent taxpayer or if he be absent from the Philippines
to (d) his agent or the (e) manager of the business in respect to
which the liability arose, or if there be none to (f) the occupant of
the property in question.

In case the levy on real property is not issued before or

simultaneously with the warrant of distraint on personal property
and the personal property of the taxpayer is not sufficient to satisfy
his delinquency, the provincial, city or municipal treasurer as the
case may be shall within thirty (30) d a y s after the execution of the
distraint proceed with the levy on the taxpayer's real property. A
report on any levy shall within ten (10) d a y s after receipt of the
warrant be submitted by the levying officer to the S a n g g u n i a n
concerned.

Within thirty (30) days after levy, t h e local treasurer shall

proceed to publicly advertise for sale or auction the property or a
usable portion thereof as m a y be necessary to satisfy the claim and
cost of sale; such advertisement shall cover a period of at least
thirty (30) days and it shall be effected by posting a notice by the
main entrance of the municipal building or city hall, a n d in a public
and conspicuous place in the barangay w h e r e the real property is
located. T h e advertisement notice shall contain t h e a m o u n t of
taxes, penalties and all increments incident thereto, t h e time and
place of sale, n a m e of t a x p a y e r against w h o m t h e a m o u n t are
levied and a short description of the property to be sold.

W h e r e there is no bidder for the real property advertised for

sale or if the highest bid is for an a m o u n t insufficient to pay the
taxes, fees, or charges, surcharge, interests a n d costs the local
treasurer conducting the sale shall p u r c h a s e t h e property in behalf
of the local g o v e r n m e n t unit c o n c e r n e d to satisfy the claim
(Forfeiture) and within t w o (2) days thereafter shall m a k e a report
of his proceedings which shall be reflected u p o n t h e records of his
office. It shall be the duty of the Registrar of D e e d s c o n c e r n e d

820
upon registration with his office of any declaration of forfeiture to
transfer the title of the forfeited property to the local government
unit c o n c e r n e d without the necessity of an order from a competent
court. T h e S a n g g u n i a n c o n c e r n e d may, by ordinance duly
a p p r o v e d , and u p o n notice of not less t h a n twenty (20) days, sell
and dispose of t h e real property acquired by public auction. The
proceeds of the sale shall accrue to the general fund of the local
g o v e r n m e n t unit c o n c e r n e d .

At any time before t h e date fixed for the sale, the taxpayer
m a y stay t h e proceedings by paying the taxes, fees, charges,
penalties a n d interests. (Right of P r e - e m p t i o n )

If the t a x p a y e r fails to settle the delinquency on time, the sale

shall proceed and shall be held either at the main entrance of the
provincial, city or municipal building, or on the property to be sold,
or at any other place as d e t e r m i n e d by the local treasurer
conducting the sale and specified in the notice of sale. Within thirty
(30) d a y s after the sale the local treasurer or his deputy shall make
a report of t h e sale to t h e s a n g g u n i a n c o n c e r n e d , and which shall
form part of his records. After consultation with the sanggunian, the
local treasurer shall m a k e and deliver to the purchaser a certificate
of sale, s h o w i n g the proceedings of the sale, description of the
property sold, n a m e of purchaser, a m o u n t involved. A n y excess in
the proceeds of the sale over a n d a b o v e the a m o u n t due shall be
turned over to the o w n e r of the property.

Within one (1) year f r o m date of forfeiture, the taxpayer or any

of his representatives may r e d e e m the property by paying to the
local treasurer the full a m o u n t of the taxes inclusive of all
increments, costs and e x p e n s e s of the sale, plus 2% interest per
month from the date of purchase to the date of redemption. (Right
of R e d e m p t i o n ) Such payment shall invalidate the certificate of
sale issued to the purchaser and the owner shall b entitled to a
certificate of redemption from the provincial, city of municipal
treasurer or his deputy. If the property is not redeemed, the
ownership thereof shall be fully vested on the local government unit
concerned. T h e owner shall not be deprived of the possession of
subject property and shall be entitled to the rentals and other
income thereof until the expiration of the 1 year allowed for its
redemption.

In case the owner-taxpayer fails to redeem he property, the

local treasurer shall; execute a deed of conveying to the purchaser
so much of the property as has been sold, free from liens of any
taxes, fees and charges, related surcharge, interests and penalties.

821
 The deed shall concisely recite all the proceedings upon which the
validity of the sale depends.

1 4 1 1 . W h o m a y exercise the Right of R e d e m p t i o n after sale?

The redemption period of one (1) year is counted from the date
of registration of the sale of the real property by either of the
following -
1. The delinquent taxpayer;

2. His representative (an agent or, in case of taxpayer's

death, his executor or administrator;

3. In the absence of the taxpayer, any person holding a lien

or claim over the property such as a mortgagee;

N O T E : The remedies by distraint and levy m a y be repeated as

often as necessary until the full a m o u n t d u e , including all e x p e n s e s
is collected.

1412. May the local government avail of criminal action to

enforce collection of local a n d real property t a x e s ?

A n s w e r . Both the LTC and the R P T C do not provide for collection

of taxes and revenues by criminal action. Criminal prosecution and
the penalties provided under the t w o (2) c o d e s are persuasive
means for collection of taxes.

1413. Briefly d e s c r i b e t h e m a n n e r of protesting special levies

imposed by the Sangguniang Bayan?

A n s w e r . Protest must be submitted within thirty (30) d a y s after the

last publication of the o r d i n a n c e and a list of l a n d o w n e r s shall be
included in the z o n e subject to the special levy. If no protest is filed
within the prescribed time and conditions, t h e ordinance shall
b e c o m e final a n d effective in all points after its approval.

Said protest m a y be submitted to the s a n g g u n i a n b a y a n that

proposed to impose t h e special levy. T h e protest must be signed
by a majority of the l a n d o w n e r s affected, setting forth the address
and the a r g u m e n t s against the i m p r o v e m e n t to bee m a d e or the
special levy i m p o s e d .

If the protest is d e n i e d , the l a n d o w n e r s m a y A P P E A L TO T H E

P R O V I N C I A L B O A R D within thirty (30) d a y s f r o m the last

822
 publication of the decision giving immediately the municipal council
a written notice of a p p e a l . T h e decision of the provincial board on
the a p p e a l shall be FINAL. (Sec. 52, R P T C )

1414. W h a t is the m a n n e r of protesting special levies imposed

by the Sangguniang Panlalawigan or Panlungsod?

A n s w e r . S a m e as a b o v e . T h e decisions of said Sanggunians

b e c o m e final 30 d a y s after the last publication. (Sec. 5 1 , RPTC)

1415. W h a t is the m a n n e r of protesting special levies imposed

by the Secretary of Finance?

A n s w e r . T h e majority of t h e l a n d o w n e r s affected m a y file a protest

against t h e order of the Secretary within 60 days from the date of
publication of t h e D e p a r t m e n t Order imposing the special levy. The
Secretary's decision adversely affecting the property owners may
be a p p e a l e d to the proper court. (Sec. 55, R P T C )

1416. Comparative remedies of taxpayers involving different

prescriptive periods:

Answer.

A. Q u e s t i o n i n g the tax o r d i n a n c e - under the LTC

Remedies Prescriptive Periods

Formal protest - filed by taxpayer

adversely affected with t h e Sec. of 120 days after approval of the
Finance thru the Provindial/City ordinance or its initial implementation
treasurer - on 4 grounds specified
under Sec. 4 5 , LTC.

Formal query on legality of ordinance No time fixed in law for the filing
filed with the Provincial/City Fiscal on
other than the 4 grounds under Sec.
45, LTC.

- appealable to Secretary of Justice Within 30 days from receipt of the

thereafter appeal to the Courts. decision

Action in ordinary court for Before liability has attached.

declaratory relief to clarify, or

823
 determine possible liability under a
law, ordinance or regulation.

B. Questioning the A s s e s s m e n t :

No provision on assessment remedies, other than to

make payment and claim for refund.

Under the R P T C :

Administrative r e m e d y - (a) Appeal of Assessor's

assessment to Provincial or City Board of A s s e s s m e n t
Appeals within 60 days from receipt of a s s e s s m e n t notice,
(b) Appeal the decision of the L B A A to the C B A A within 30
days from receipt of the decision.

C. C l a i m for R E F U N D / C R E D I T u n d e r t h e L T C :

Remedies Prescriptive Period

Administrative - Claim for refund filed

with collecting office based on solutio Six (6) years from payment
indebeti

Judicial - Action for refund in the

ordinary courts, after exhaustion of Six (6) years f r o m p a y m e n t
administrative remedies

Judicial - (a) A p p e a l to t h e C T A - a. 30 d a y s f r o m receipt of decision

Division ( R A 9 2 8 2 )
(b) Motion for R e c o n . / or b. 15 d a y s f r o m division to En Banc
Motion for N e w Trial (RA 9282)
- En B a n c (RA 9282)

Judicial - A p p e a l to S u p r e m e Court 15 d a y s f r o m receipt of t h e decision

D. Claim for Refund/credit under the R P T C :

Remedies Prescriptive Periods

Administrative - P a y m e n t must first Upon payment

be paid under protest (except

824
payment by mistake)

Administrative - If protest is m a d e
verbally, it must be confirmed in 30 d a y s
writing within

Judicial - Claim for refund with

collecting office a n d , after e x h a u s t i o n 6 years f r o m payment
of administrative r e m e d i e s , with t h e
ordinary court

E. Redemption, seizure and other cases under the LTC:

Administrative r e m e d y - R e d e m p t i o n of property distraint

must be m a d e before sale of the s a m e .

F. Redemption, seizure and other cases under the RPTC:

Remedies Prescriptive Periods

Administrative - Redemption of Before sale

personal property under distraint

Administrative - R e d e m p t i o n of real 1 year from registration of sale

property sold for tax delinquency

- and redemption after acquisition by Before sale

the g o v e r n m e n t for lack of adequate
bidder
;
Administrative - Protest by majority of 30 days from last publication of the
landowners affected by special ordinance
municipal levy, filed with Sanggunian
Bayan within

- and appeal to Sanggunian 30 days from last publication of the

Panlalawigan of decision of decision
Sanggunian Bayan

Administrative - Protest by majority of

landowners affected by special levy 30 days from last publication
of Province or City

825
 Remedies Prescriptive Periods

Administrative - Protest against 60 days from publication of the

special levies imposed by the Department Order
Secretary of Finance

Judicial - Action in ordinary court to

contest validity of sale due to tax Imprescriptible
delinquency if claim is that it is void
ab initio

1417. H o w are the p r o c e e d s of real p r o p e r t y t a x e s a p p o r t i o n e d

a m o n g the local g o v e r n m e n t units?

Answer.
(a) In the case of Provinces -

1. Province - 3 5 % shall accrue to the general f u n d ;

2. Municipality - 4 0 % to the general fund of the

municipality w h e r e the property is located; and

3. Barangay - 2 5 % shall a c c r u e to the barangay w h e r e

the property is located.

(b) In the case of cities:

1. City - 7 0 % shall a c c r u e to the general fund of the city;

and

2. B a r a n g a y s - 3 0 % shall be distributed a m o n g the

c o m p o n e n t b a r a n g a y s of the cities w h e r e t h e property
is located in the following m a n n e r -

a) 5 0 % shall a c c r u e to the barangay where the

property is located;

b) 5 0 % shall a c c r u e equally to all component

barangays of the city.

(c) In the case of a municipality within the Metropolitan Manila

Area:

1 Metropolitan Manila Authority - 3 5 % shall accrue to

the general fund of the Authority;

826
 2. Municipality - 3 5 % shall accrue to the general fund
of t h e municipality w h e r e the property is located;

3. B a r a n g a y s - 3 0 % shall be distributed a m o n g the

c o m p o n e n t b a r a n g a y s of the municipality w h e r e the
property is located in the following m a n n e r -

a) 5 0 % shall accrue to the barangay w h e r e the

property is located and

b) 5 0 % shall accrue equally to all component

b a r a n g a y s of the municipality.

(d) T h e share of e a c h b a r a n g a y shall be released without need

of any further action, directly to the barangay treasurer on a
quarterly basis within 5 d a y s after t h e e n d of e a c h quarter
and shall not be subject to a n y lien or hold back for
whatever purpose.

1 4 1 8 . VELAYO DOCTRINE defined:

A n s w e r . W h e n the sale of property for delinquent tax is made by a

person N O T A U T H O R I Z E D by law, t h e sale may be nullified except
w h e n the title to the property has passed to a third person, w h o
purchased the s a m e in value and in g o o d faith. (Velayo vs.
Ordoveza, 102 Phil. 395, Heirs of Mariano V. Tajonera vs. Court of
Appeals, March 27, 1981; Reyes vs. IAC, February 28, 1985)

1419. I M P O R T A N T C A S E S INVOLVING REAL PROPERTY TAX

EXEMPTIONS:

City of Baguio vs. Busuego, Sept. 18, 1980

G S I S m a y b e e x e m p t from realty tax under its charter,

however if the beneficial use or actual possession thereof is
granted for a consideration or otherwise to a taxable person,
the property is taxable.

Province of Nueva Ecija vs. Imperial Mining Co.,

November, 19, 1982

IMC leased from the government mineral land with the right
to explore and develop the same. The contract stipulates that
IMC shall be liable for realty tax on buildings and other
improvements but is silent on the tax on the mineral land itself.

827
 IMC, even if only a lessee is liable. The policy of taxing real
property is on the basis of actual use even if the user is not the
owner. Sec. 234(a) of the RPTC provides that real property
owned by the RP, or any of its political subdivisions, and any
G O C C (so exempt by its charter) is exempt from tax, this
exemption shall not apply to real property, the beneficial use of
which has been granted for consideration or otherwise to a
taxable person.

S S S vs. City ofBacolod, 115 SCRA 412

SSS is a government agency exercising ministrant or

proprietary functions, its properties and assets are exempt from
realty taxes because said properties possessed by the SSS
although devoted to private or proprietary (providing disability,
sickness, death, and old age benefits to non-government
employees) are in fact o w n e d by the G o v e r n m e n t . Properties of
Government whether exercising purely sovereign, political or
constituent functions or only ministrant or proprietary functions
are tax exempt.

NOTE: SSS, GSIS, CSC or any bureau o f the

G o v e r n m e n t is N O T in the category of G O C C
w h i c h is taxable unless e x p r e s s l y e x e m p t in its
corporate charter.

NDC vs. Province ofNueva Ecija, 125 SCRA 752

N D C is neither the G o v e r n m e n t of t h e Republic nor a

branch or subdivision thereof but a G O C C that c a n n o t be said
to exercise a sovereign function. T h u s , it cannot invoke the
exemptions thereof b e c a u s e it is merely an agency for the
performance of purely corporate, proprietary or business
functions. It is therefore subject to real property taxes.

828
 PROBLEM EXERCISES

1420. T h e local g o v e r n m e n t of X province learned that several

b u s i n e s s c o m p a n i e s within the locality use pipelines to
transport petroleum products to their dealers. M a y the
local g o v e r n m e n t i m p o s e t a x e s on the gross receipts on
petroleum companies that use said pipelines to
transport petroleum to other localities a n d dealers?

A n s w e r . In t h e c a s e of First Phil. Industrial Corporation vs. CA,

December 29, 1998, T h e S u p r e m e Court held that pipeline
operators are in t h e truest s e n s e of the w o r d c o m m o n carriers and
are therefore e x e m p t f r o m the gross receipt tax imposed by the
local g o v e r n m e n t . T h e r e f o r e , there are two reasons w h y the local
imposition should be considered null and void, (a) Under the NIRC,
t h e right to impose tax on the gross receipts of a c o m m o n carrier
belongs to the national g o v e r n m e n t , and (b) The petroleum
c o m p a n i e s that use pipelines are c o m m o n carriers transporting
their g o o d s by land as defined under Sec. 133 of the Local
Government Code.

1421. X was a lucky recipient of a parcel of land sold on

installment for a period of 20 years by the local
government. W h e n X took possession of the property he
received a notice of assessment from the provincial
a s s e s s o r i n f o r m i n g h i m that he s h o u l d begin paying real
property t a x e s . He p r o t e s t e d c o n t e n d i n g that he is not
y e t t h e o w n e r o f s a i d p r o p e r t y b e c a u s e title shall o n l y b e
transferred to him upon full payment of the contract
p r i c e . Is X c o r r e c t ?

A n s w e r . In the case of City of Baguio vs. Busuego, the S. C.

applied the Doctrine of Usage and held that since the property
w a s already being used by a non-exempt taxpayer, it cannot be
exempted from real property tax. The beneficial user of said
property is liable.

1422. X, a b u s i n e s s m a n by profession, leases from the

g o v e r n m e n t a parcel of land that he uses as a
w a r e h o u s e a n d parking area. T h e contract w a s for 20
y e a r s . U p o n p o s s e s s i o n of the real property he received
an assessment notice from the City Treasurer
d e m a n d i n g p a y m e n t of real property taxes. X protested

829
 contending that he is not the owner thereof and therefor
n o t l i a b l e . Is X c o r r e c t ?

Answer. W h e n the beneficial use of a public property is transferred

to a private individual said property becomes a taxable property
and the person liable is the beneficial user of the said property.

1 4 2 3 . C i t e a t l e a s t f i v e (5) f u n d a m e n t a l p r i n c i p l e s g o v e r n i n g
real p r o p e r t y t a x a t i o n t h a t are limitations on t h e t a x i n g
p o w e r of the local g o v e r n m e n t s to i m p o s e real property
taxes.

Answer.
a) appraisal of real properties must be based at the current fair
marker value,

b) Classification of real property for a s s e s s m e n t must be on the

basis of actual use of the real property;

c) A s s e s s m e n t must be on the basis of uniform classification;

d) Appraisal and a s s e s s m e n t must be equitable; and

e) Appraisal, assessment, levy and collection shall not be let to

private persons.

1424. X o w n s a big track of land w h e r e his s o n extracts

stones, sand, gravel, earth and other quarry resources
for sale. T h e provincial g o v e r n m e n t i m p o s e s tax on the
extraction of said products. X protested. Is the province
correct?

A n s w e r . T h e province has no authority to impose taxes on stones,

s a n d , gravel, earth and other quarry resources extracted f r o m
private lands. (Province of Bulacan vs. CA, 299 SCRA 442 [1998])

1425. Distinguish a Certificate of R e p u r c h a s e After Sale f r o m a

Certificate of Sale:

A n s w e r . T h e former is given to the delinquent taxpayer or his

assign if he exercised his option to r e d e e m the property sold either
to the highest bidder in the public auction, or to the province if there
w a s no winning bidder, w h e r e a s , the latter is given to the winning
bidder at the public auction or to the province if it decided to

830
 purchase the property w h e n there w a s no other bidder or no
satisfactory bid. (2003 case)

1426. X, r e c e i v e d a c o p y of t h e latest T a x D e c l a r a t i o n on his

real p r o p e r t y f r o m the Office of the A s s e s s o r , X believes
that there should be no increase in the assessed market
v a l u e o n his realty b e c a u s e f o r t h e last 1 0 y e a r s h e h a s
not introduced any additional improvement thereon, the
h o u s e c o n s t r u c t e d w i t h i n t h e p r o p e r t y w h i c h h e a n d his
family presently occupies is the s a m e house he inherited
from this d e c e a s e d mother. W h a t remedies are available
to X if the local g o v e r n m e n t e n f o r c e s real property tax
collection b a s e d on the latest tax declaration. R e a s o n .

A n s w e r . X is still required to pay real property tax under the latest

a s s e s s e d market v a l u e of his property as stated in the tax
declaration he received. W h e n e v e r the local assessor sends a
notice to the o w n e r or lawful possessor of real property of its
revised a s s e s s e d value, the property o w n e r w h o does not agree
thereto must dispute s u c h a s s e s s m e n t within 60 days from receipt
of notice. Thereafter, u p o n receipt of an adverse decision he may
file an appeal before the Local Board of A s s e s s m e n t Appeals
questioning the taxability and/or increase of the market value of
real property. Failure on his part to question such assessment
within the reglamentary period provided by law, the local
g o v e r n m e n t ' s right to collect b e c o m e s absolute upon the expiration
of such period with respect to that property. (1998 case)

1427. The taxpayer (LRT) resisted the assessment on the

c a r r i a g e w a y s a n d terminal stations for realty taxes upon
t h e t h e o r y that such' real properties are for public use
similar in nature to public roads. Is the contention valid?
(LRT Case)

Answer. T h e court held that it w a s not for public use since only
those w h o are riding the LRT use them and that there is no grant of
real property tax exemption in the Charter of the LRT was provided.

Unlike public roads that are open for use by everyone, the LRT
is accessible only to those w h o pay the required fare. It is thus
apparent that petitioner does not exist only solely for public service,
and that the LRT carriageways and terminal stations are not
exclusively for public use. Moreover, the charter of petitioner does
not provide for any real estate tax exemption in its favor. Even

831
 granting that the national government indeed owns the
carriageways and terminal stations, the exemption would not apply
because their beneficial use has been granted to petitioner (LTR),
a taxable entity.

1428. C a n the local g o v e r n m e n t avail of the r e m e d y of distraint

and levy of personal property s u c h as the issuance of
warrants of garnishment over bank deposits of erring
taxpayers?

Answer. Yes. (Meralco vs. Barlis, May 18, 2001)

1429. Distinctions between p r o c e d u r e for refund of real

property taxes based on unreasonableness of amounts
collected and refund based on solution indebeti:

Procedure for tax refund b a s e d P r o c e d u r e for tax refund b a s e d

on unreasonable collection
excessive a s s e s s m e n t of real
property taxes
1. Payment under protest at the
time of payment or within 30 days
thereafter is mandatory
2. Protest filed before the treasurer
3. Treasurer has 60 d a y s f r o m
receipt to decide
4. Within 30 days from receipt of
treasurer's adverse decision
taxpayer may appeal before the
LBAA or if the treasurer did not act
on the protest within 60 d a y s from
receipt of said protest, "T" m a y
within 30 days file an appeal with
the L B A A
5. T h e L B A A has 120 d a y s f r o m
receipt of the appeal to decide
- on solution indebiti - p a y m e n t by
mistake
1. P a y m e n t under protest is not
required
2. Claim/application for refund is
a d d r e s s to the treasurer
3. Treasurer decides within 60 days
f r o m receipt of t h e written claim
4. Treasurer's denial w o u l d bring
the case within the original
jurisdiction of the R T C , t h e review
being t h e initial judicial c o g n i z a n c e
of the matter. (Yamane vs. BA
Lepanto Condominium. Corp., Oct.
25, 2005)*
5. T h e decision of the R T C is
a p p e a l e d to the C T A (division) by
w a y of a petition for review. (Rule
42, RRC)

6. Within 30 days from receipt by 6.The division of the CTA-Division

"T" of the adverse decision of the m a y be the subject of a review by
L B A A appeal to the C B A A t h e C T A - En Banc

832
 7. T h e a d v e r s e decision of the 7. T h e decision of the C T A - En
C B A A m a y be a p p e a l e d to the C T A Banc, may be appealed before the
(En Banc) within 30 d a y s from SC on pure question of law by w a y
receipt of said decision by w a y of of Petition for Review on Certiorari
petition for review. (Rule 4 3 , R R C ) within 15 days from receipt of the
a d v e r s e decision.
8. T h e decision of a division of the
C T A m a y be subjected to an MR or
Motion for N e w Trial with C T A En
Banc a n d thereafter an a p p e a l to
the SC by m e a n s of Petition for
Review on Certiorari on pure
questions of law within 15 d a y s
from receipt of the C T A ' s En B a n c
a d v e r s e decision (Appeal to SC
m a y be e x t e n d e d for a period of 30
days)

* Sec. 195 of t h e L G C states that the r e m e d y of the taxpayer

w h o s e protest is denied by t h e local treasurer is "to appeal with the
court of c o m p e t e n t jurisdiction", labeling the said review as an
exercise of appellate jurisdiction in not correct b e c a u s e the denial
of t h e protest is N O T t h e j u d g m e n t or order of a lower court but a
local g o v e r n m e n t official.

1430. D o e s the local g o v e r n m e n t have the p o w e r to impose a

franchise tax on a business enjoying a legislative
franchise?

A n s w e r . Y e s . T h e local g o v e r n m e n t may impose a local franchise

pursuant to the authority granted by the L G C that provides that,
notwithstanding any e x e m p t i o n granted by law, the province/city
m a y impose a franchise tax on all businesses enjoying a franchise.
There w a s thus an implied repeal by the L G C of PD551 insofar as
the latter imposes a 2% tax "in lieu of all taxes and assessments of
whatever nature."

The L G C did not violate the non-impairment clause of the

Constitution, as the former w a s enacted in pursuance of the
constitutional policy to ensure autonomy to local government.
Likewise, local legislative bodies are granted direct authority by the
Constitution to levy taxes. The Constitution also reserves to
Congress the right to a m e n d , alter or repeal all franchises when the
public interest so requires. But even without such reservation
clause, franchise are subject to alterations through a reasonable

833
 exercise of police power and the power to tax, both of which cannot
be contracted away. (1999 case)

1 4 3 1 . X files a c o m p l a i n t assailing the validity of the tax

o r d i n a n c e a n d p r a y i n g f o r a t a x r e f u n d o f its p e r c e i v e d
o v e r p a y m e n t s without protest. Will his claim p r o s p e r ?

Answer. Yes. X may file a complaint assailing the validity of the

ordinance and praying for tax refund of its perceived overpayments
without first filing a protest to the payment of taxes due under the
ordinance. However, failure of X to interpose the requisite appeal to
the Secretary of Justice is FATAL to his complaint for a tax refund.
(2003 case)

O W h e n questioning the validity of a tax ordinance, the decision

of the Secretary of Justice is mandatory under the Principle of
Exhaustion of Administrative R e m e d y .

N O T E : The local tax has to be contra-distinguished from a real

property tax which cannot he protested without payment.

1432. X questions the validity of an ordinance which has

appropriated money for the construction of a public
market, including the validity of c o n t r a c t s e n t e r e d into
by the local g o v e r n m e n t for t h e o c c u p a n c y of stalls in
the said public market, X argues that there was no
publication of the ordinance such that it operated
unfairly against t h o s e w h o w e r e interested to lease a
space but were not given the opportunity to make
deposits for the market stalls. X's locus standi t o bring
the suit w a s q u e s t i o n e d b e c a u s e he is not a party to the
contract. Will the suit of X p r o s p e r ?

A n s w e r . In a taxpayer's suit, t h e petitioner need not be a party to

the contract b e t w e e n the g o v e r n m e n t and a private party to
challenge its validity. However, he must clearly establish that such
ordinance operated unfairly against t h o s e w h o w e r e not notified.
X's unsubstantiated allegation that t h e public w a s not notified does
not suffice to o v e r c o m e the p r e s u m p t i o n of regularity in the
performance of official functions.

T h e general rule for a taxpayer's suit is that: "Any taxpayer

may impugn the validity of a tax m e a s u r e or the expenditure of
public funds if he has locus standi or standing in court (a personal

834
 a n d substantial interest in the case, such that the party has
sustained or will sustain direct injury as a result of the challenged
act"

N O T E : In the recent case of Coconut Oil Refiners Association, Inc.

vs. Torres, July 29, 2005, a taxpayer's suit may be allowed to
prosper e v e n w h e r e there is no direct injury to the party claiming
the right of judicial review w h e r e serious constitutional questions
are involved.

1433. C a n t h e local g o v e r n m e n t ( p r o v i n c e a n d / o r city) i m p o s e

a b u s i n e s s tax on entities e n j o y i n g a f r a n c h i s e ?

A n s w e r . Y e s . T h e Local G o v e r n m e n t C o d e explicitly authorizes

the province a n d cities notwithstanding "any e x e m p t i o n granted by
any law or other special laws" to impose a tax on businesses
enjoying a franchise.

1434. X, a d o m e s t i c c o n d o m i n i u m corporation is e n g a g e d in
selling of real p r o p e r t y w i t h i n the city proper; it received
a n a s s e s s m e n t f r o m t h e C i t y G o v e r n m e n t o f its u n p a i d
local business taxes. X contends that it is not liable
b e c a u s e the b u s i n e s s of selling real property is e x e m p t
f r o m local t a x a t i o n . Is X c o r r e c t ?

A n s w e r . X is correct. While the power of the L G U s to impose taxes

within their territorial jurisdiction is derived from the Constitution
itself, w h i c h recognizes the power of these unit "to create their own
resources of revenue and to levy taxes, fees and charges", such
authority is subject to t h e guidelines and limitations as the
Congress m a y p r o v i d e , ' c o n s i s t e n t with the basic policy of local
authority. A m o n g the limitations set by the Congress in the Local
G o v e r n m e n t C o d e , is that proviso which generally exempts
condominium corporations from local business taxation,
irrespective of any local ordinance that seeks to declare otherwise.
(2005 case)

1435. T h e President a n d the local g o v e r n m e n t units both

exercise the delegated p o w e r of taxation. Can they re-
delegate such authority?

Answer. A delegated power cannot be further delegated.

835
 1436. Are properties o w n e d by G O C C s subject to real property
taxes?

Answer. Yes. In the case of Mactan-Cebu Int'l. Airport Authority,

the Supreme Court held that properties owned by G O C C s are
subject to real property taxes "unless otherwise provided." The
exemption from real property taxes under Sec. 234 of the RPTC
specifically states that only real properties o w n e d by the Republic
of the Philippines or any of its political subdivisions (local
governments) are e x e m p t e d .

1 4 3 7 . A r e p o w e r p l a n t b a r g e s a n d its a c c e s s o r y e q u i p m e n t
mounted on the barges subject to real property
taxation? ( P r o v i n c e of B a t a n g a s et. al., v s . N a p o c o r , Feb.
16, 2007)

Answer. Yes. T h e s e are intended by their nature and object to be

immovable properties by destination, being in the nature of
machinery and other implements intended by the o w n e r for an
industry or work w h i c h may be carried on in a building or a piece of
land and which tend directly to meet the needs of said industry or
work. Further, subject accessories are m o u n t e d on the barges and
attached to gas turbine power plants designated to generate
electric power installed at a specific location with a character of
permanency.

1438. Is the opinion of the Department of Finance that "power

barges are not real properties" binding on the local
government thereby exempting the same from real
property taxation?

Answer. No. A n opinion c a n n o t override the power o f taxation

especially w h e n the opinion has no leg to stand o n . In several
cases, the highest court held that m o v a b l e properties installed at a
specific location with a character of p e r m a n e n c y w o u l d be
considered real properties for purposes of real property tax in
c o n s o n a n c e with the definition of real property under the Civil
Code.

1439. "X", a local electric c o m p a n y w a s a s s e s s e d real property

taxes on its s t e e l t o w e r s , electric posts, transformers
a n d t r a n s m i s s i o n l i n e s t h a t i t i n s t a l l e d f o r its o p e r a t i o n .
"X" contends that the said properties are personal

836
 properties a n d therefore not subject to real property tax
Is "X" correct?

A n s w e r . T h e C T A en banc held that the subject properties are now

included in t h e t e r m machinery provided under Sec. 199 (0) of the
L G C . Under the said provision, facilities which are permanently
attached to real property that a r e actually, directly and exclusively
used to meet the needs of the particular industry, business or
activity are c o n s i d e r e d as machineries subject to real property tax.
(Cotabato Electric Cooperative vs. CBAA, CTA EB Case No. 377
October 2, 2009)

1440. Is tax declaration or real property tax p a y m e n t s proof of

o w n e r s h i p of real p r o p e r t y ?

Answer. A tax declaration by itself is not sufficient to prove

o w n e r s h i p of real property it m a y serve as sufficient basis for
inferring possession and are considered g o o d indicia of possession
in t h e concept of an o w n e r a n d p a y m e n t of taxes is not proof of
ownership either, it is, at best, an indicium of possession in the
concept of o w n e r s h i p b e c a u s e no o n e in his right mind would be
paying taxes for a property that is not in his actual or constructive
possession.

1 4 4 1 . Give a brief s u m m a r y of the taxpayer's remedies in

REAL PROPERTY TAXATION:

Answer.
a) Administrative protest - A taxpayer may file a written protest
with the local treasurer within 30 days from payment of the tax
with the provincial or city or municipal treasurer where the
property is located w h o shall decide the protest within 60 days
from receipt of the protest.

b) A p p e a l to the Local Board of A s s e s s m e n t Appeals - Any

owner or person having legal interest in the property who is not
satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within 60 days
from the receipt of the written notice of assessment, appeal to
the LBAA of the province or city where the property is located
by filing a petition under oath in the form prescribed for the
purpose, together with copies of tax declarations and such
affidavits or documents submitted in support of the appeal.
Within 30 days from receipt of the LBAA's adverse decision,
dissatisfied property owner can appeal to the Central Board of

837
 Assessment Appeals w h o s e decisions is final and executory
unless appealed. Within 30 days from receipt of the CBAA's
adverse decision and appeal may now be made before the
Court of Tax Appeals, under the expanded jurisdiction of the
CTA of RA No. 9282, April 23, 2004.

C) Tax refund or tax credit - T h e taxpayer may file a written

claim for refund or credit for taxes and interest with the
provincial or city treasurer within two (2) years from the date
the taxpayer is entitled to such reduction or adjustment.

1442. Is the p r e s e n c e of s q u a t t e r s or illegal settlers c o n s i d e r e d

in determining real property v a l u a t i o n ?

Answer. Their presence is not a factor in determining real property

valuation as this would result in different valuation of lands located
in the s a m e area, which will result in violation of the fundamental
principle that property in the s a m e locality should be appraised
uniformly.

1443. W h a t is the basis of just c o m p e n s a t i o n in case a private

property is acquired by the government for public use?

Answer. T h e basis shall be the current and market value declared

by the owner or administrator, or s u c h market value as determined
by the assessor, w h i c h e v e r is lower.

1444. H o w are vacant lands classified a n d a s s e s s e d for tax

purposes?

Answer. Vacant lands shall be classified, v a l u e d and a s s e s s e d like

similar lands in the locality. E x a m p l e - If Lot N o . 1-A and 1-B are
undeveloped vacant lots they must be classified and a s s e s s e d as
"commercial lots" if the predominant use of t h e lots in the locality is
c o m m e r c i a l or if they are located within a c o m m e r c i a l z o n e under
the zoning ordinance.

1445. W h e n d o e s the tax on a n e w building c o m m e n c e ?

Answer. A building wholly c o m p l e t e d , o r partly c o m p l e t e d but

already occupied by t h e owner, will be subject to the real property
tax beginning f r o m the year following its c o m p l e t i o n or habitation as
evidenced by the Certificate of O c c u p a n c y issued by t h e building
official c o n c e r n e d .

838
1446. A r e r o a d s built o n private l a n d s s u b j e c t t o real p r o p e r t y
taxes?

Answer. Roads are considered " i m p r o v e m e n t s " and therefore

taxable w h e n built on private lands, or e v e n if the land is o w n e d by
the g o v e r n m e n t if the roads are built by individuals or corporations
for their o w n use or benefits. (Asiatic Petroleum Co., vs. Llanes, 49
Phil. 466)

1447. Are machinery and equipment taxable during the period

of their non-use?

A n s w e r . T h e y shall be taxable only w h e n they are actually, directly

and essentially used to meet t h e needs of the particular industry,
business or w o r k s . H e n c e , w h e n they are no longer actually used
for their purpose by reason of closure or cessation of production,
the s a m e should be transferred f r o m the Taxable Roll to the
E x e m p t Roll and no longer subject to the payment of real property
taxes during t h e period of n o n - u s e .

1448. Is amicable settlement of delinquent taxes and penalties

allowed?

A n s w e r . Y e s . C o m p r o m i s e settlement is allowed except when

there is tax fraud or that the delinquency has already been decided
by the Court. Local treasurers are allowed to enter into a
compromise agreement with the taxpayers to liquidate
delinquent taxes and penalties in installments, which may last up to
36 months, d e p e n d i n g upon the a m o u n t of total delinquencies
involved.

839
 PART XV

TARIFF AND CUSTOMS LAW

The law governing tariff and customs duties is P.D. No. 1464,
otherwise known as the Tariff and Customs Code of 1978, which
consolidated and codified the tariff and customs laws in the Philippines.
It superseded Republic Act No. 1937, the first Tariff and Customs
Code, which was approved on June 2, 1957 and b e c a m e effective on
July 1, 1957. The former Code w a s substantially a m e n d e d by P.D. No.
34 which took effect 30 days after its promulgation on October 27,
1972, except Section 104 thereof (rates of import duty) which took
effect on January 1, 1973.

The offices charged with the administration and enforcement of

the law is the Tariff C o m m i s s i o n and the Bureau of C u s t o m s .

1 4 4 9 . C i t e t w o (2) c o n s t i t u t i o n a l p r o v i s i o n s a f f e c t i n g t a r i f f :

Answer.
a) All appropriation revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application, and
private bills shall originate exclusively in the H o u s e of
Representatives, but t h e S e n a t e m a y propose or concur with
a m e n d m e n t s . (Sec 2 4 , Art. V I , 1987 Constitution).

b) The President shall have t h e p o w e r to veto any particular

item or items in an appropriation, r e v e n u e , or tariff bill, but
veto shall not affect the item or items to w h i c h he does not
object. (Sec. 27(2), Art V I ; 1987 Constitution)

1450. General concept:

The Tariff and C u s t o m s C o d e ( T C C ) is divided into t w o books,

the first on Tariffs and the s e c o n d on C u s t o m s Duties.

3 It is actually a book of rates.

3 Import duty is different from Import tax. T h e import tax is

imposed under the N I R C (in t h e form of V A T , percentage or
excise tax), although it m a y be collected by the Bureau of
C u s t o m s before the release of the g o o d s , t h e import duty, on
the other h a n d , is i m p o s e d under the T C C .

840
 O All articles c o m i n g from or going abroad have to pass
through the c u s t o m s e v e n if e x e m p t .

O C u s t o m s duties cover both export and import duties, but the

f o r m e r w e r e s u s p e n d e d by E. O. 26 (1986).

1451. C u s t o m s law defined:

A n s w e r . T h e t e r m includes not only the provisions of the Tariff and

C u s t o m s C o d e but also regulations m a d e pursuant thereto and all
other laws and regulations that are subject to enforcement by the
Bureau of C u s t o m s or otherwise within its jurisdiction like Bangko
Sentral ng Pilipinas' circulars, w h i c h also h a v e the force and effect
of law. (Sy vs. CB of the Phils., 4/30/76, Acting Collector of
Customs vs. Caluag, 5/24/67)

1452. Distinguish "tariffs" f r o m " c u s t o m s " :

A n s w e r . T h e two (2) are often used interchangeably. " T a r i f f

d e n o t e s t h e lists or schedules of c o m m o d i t i e s with particular duties
or c h a r g e s u p o n e a c h noted, w h e r e a s , "customs" originally denotes
all "customary tolls or dues paid by merchants upon commodities
on their w a y to a n d f r o m the market.

1453. M o d e r n C u s t o m s Tariffs defined:

A n s w e r . A systematic a r r a n g e m e n t of customs duties levied on

goods w h e n they cross the border of a political unit. It is an official
list or schedule setting forth the several customs duties to be
imposed on imports, exports of g o o d s in transit.

1454. W h e n are tariff a n d c u s t o m s laws a p p l i e d ?

Answer. Only after importation has begun but before importation is

terminated.

1455. W h o has the power to subject public premises to

customs jurisdiction?

Answer. If necessary or desirable for customs purposes, the

President of the Philippines, by executive order, may declare,
subject to customs jurisdiction, any public wharf, landing place,
street or land in any port of entry that are previously under the
jurisdiction of the Bureau of Customs.

841
 The President, upon the recommendation of the Commissioner
and the Secretary of Finance, has the power to open and close a
port of entry.

1456. W h a t is the F L E X I B L E T A R I F F C L A U S E ? (Sec. 401 of the

TCC)

Answer. The flexibility clause authorizes the President to:

a) increase, reduce or remove existing protective rates of import

duty, including the necessary change in classification of goods
or articles imported. (The existing rates may be increased or
decreased to any level, one or several stages, but in no case
shall the increased rate of import duty be higher than m a x i m u m
of 1 0 0 % ad valorem;

b) to establish import quota or ban imports of any commodity, as

may be necessary; and

c) to impose an additional duty on all imports not exceeding 1 0 %

ad v a l o r e m , w h e n e v e r necessary; provided that upon period of
investigations by the Tariff C o m m i s s i o n a n d r e c o m m e n d a t i o n
of the N E D A , the President m a y c a u s e a gradual reduction of
protection levels granted under the Tariff and C u s t o m s C o d e .

Under the 1987 Constitution, t h e President is allowed to

change the tariff rates in view of public interests, only while
Congress is not in s e s s i o n . H o w e v e r , there must be public
hearing. Further, he can modify t h e f o r m of duty but not reclassify
an item from duty-free to dutiable, a n d vice-versa.

Sec. 401 S e c . 402

(Flexibility Tariff Clause)
T h e President is e m p o w e r e d to
(a) increase, reduce or r e m o v e
existing protective rates of import
duty, provided that any increase in
import duty shall not e x c e e d 1 0 0 % ad
valorem, (b) to establish import quota
or to ban imports of any c o m m o d i t y ,
and (c) to impose an additional duty
on all imports not exceeding 1 0 % ad
valorem.
(Reciprocal T r a d e a g r e e m e n t
provision)
The President is allowed to
modify duties and other import
restrictions on products and other
items with w h i c h the Philippines had
entered into a trade a g r e e m e n t .
This section is called the reciprocal '
trade a g r e e m e n t provision authorizing
the President to enter into trade
a g r e e m e n t with foreign countries on a
reciprocal basis without need of
submitting the results of such trade

842
 T h e items subject to the increase agreement to the Congress for
or d e c r e a s e of import duties a n d the ratification.
establishment of t h e import quota
need not be subject of a trade
agreement.

1457. W h y is it called the "Flexibility clause?

A n s w e r . B e c a u s e it m a k e s the c u s t o m s tariff responsive or readily

adjustable to the c h a n g i n g e c o n o m i c conditions within and outside
the country.

1458. W h a t are the requisites in the exercise of the president's

p o w e r of t a x a t i o n u n d e r the flexibility c l a u s e of the Tariff
and Customs Code?

Answer.
a) T h e increase, reduction or r e m o v a l of existing protective tariffs
or rates of duty are necessary in the interest of national
e c o n o m y , general welfare and/or national defense;

b) T h e r e must be prior investigation by the Tariff C o m m i s s i o n and

r e c o m m e n d a t i o n by the N E D A ;

c) T h e President m a y reduce the existing rates of import duty by

not lower than the basic rate of 1 0 % ad v a l o r e m ;

d) A n y other impositions issued by the President under said

section shall take effect only 30 d a y s after promulgation except
in the imposition of additional duty not exceeding 1 0 % ad
valorem that shall take effect at the discretion of the President.

1459. W h e n does the Bureau of Customs acquire exclusive

jurisdiction over imported goods for purposes of
enforcement of customs laws?

Answer. The Bureau of Customs acquires exclusive jurisdiction

over imported goods, for purposes of enforcement of the customs
laws, from the m o m e n t the goods are actually in its possession or
control, even if no warrant of seizure or detention had previously
been issued by the Collector in connection with the seizure and
forfeiture proceedings. (Ponce Enrile vs. Vinuya, 37 SCRA 381)

843
1460. W h e n does importation begin and w h e n does it end?

Answer. Importation begins when the carrying vessel or aircraft

enters the jurisdiction of the Philippines with the intention to unload
therein. (General Travel Service, Ltd. vs. David, 18 SCRA 59,
Viduya vs. Berdiago, 73 SCRA 553)

Importation is deemed terminated/ended (a) upon payment of

the duties, taxes and other charges due upon the articles, or
secured to be paid, at a port of entry and (b) the legal permit for
withdrawal shall have been granted, or in case said articles are free
of duties, taxes and other charges, until they have legally left the
jurisdiction of the customs. T h e duties, taxes and other fees must
be paid in full.

Thus, Importation begins from the time the carrying vessel or

aircraft enters the Philippine territorial jurisdiction with the intention
to unload therein and ends at the time the g o o d s are released or
withdrawn from the c u s t o m s w a r e h o u s e u p o n payment of the
customs duties or with legal permit to withdraw. (Viduya vs.
Berdiago, 73 SCRA 553) In case said articles are free of duties,
taxes and other charges, until they have legally left the jurisdiction
of the C u s t o m s .

Illustration:

To import g o o d s , T secures a loan from Bank X, to cover a

letter of credit (L/C) in favor of the exporter-seller.

He is then m a d e to e x e c u t e a trust receipt by t h e bank for

goods imported, conditioned on his obligation to apply the
proceeds of the sale of the imported g o o d s to the bank loan. If the
goods are in a bonded w a r e h o u s e , t h e c u s t o m s duties are paid as
the g o o d s are w i t h d r a w n .

S u p p o s e T w i t h d r a w s the g o o d s c o v e r e d by t h e trust receipt,

sells t h e m , but does not turn over t h e p r o c e e d s . T h e n he is liable
for estafa under the R P C a n d for a civil c a s e of collection for which
the bank may apply a preliminary a t t a c h m e n t d u e to the fraud of T.

T h e bank, as holder of the trust receipt, cannot attach the

g o o d s on the w a r e h o u s e so as to prevent the importer f r o m further
withdrawing the g o o d s in fraud of t h e bank, since t h e g o o d s are in
the custody of the c u s t o m s . However, it can pay taxes and duties
and withdraw the goods itself. A n y a t t a c h m e n t of the g o o d s while in
the custody of the c u s t o m s is void.

844
 No. 2. Six years ago, X bought an imported van from "Y". X used
falsified d o c u m e n t s in effecting the release of the motor vehicle
thus enabling him to pay lower import t a x e s . Acting u p o n report of
its intelligence, the c u s t o m s agents seized the car while parked at
the parking area of S M while X w a s then w a t c h i n g a movie inside
the c i n e m a . Thereafter, an a s s e s s m e n t in the a m o u n t of Php 850K
by w a y of unpaid c u s t o m s duties, surcharge and interest were
slapped on X. X w e n t to the court questioning the seizure of his car
since no warrant a p p e a r e d to have b e e n issued for the said
imported motor vehicle. That he having purchased the s a m e six
years a g o f r o m Y as e v i d e n c e d by a D e e d of Sale. He further
argues that the right of the g o v e r n m e n t to collect said taxes has
already prescribed. Rule on the validity of the seizure and X's
contention.

A n s w e r . T h e seizure is valid. T h e c u s t o m s agents have authority

over seizure and forfeiture c a s e s involving imported goods. The
regular courts do not have jurisdiction to take cognizance of cases
involving seizure of imported g o o d s . T h e r e is no need of warrant
under the given facts. In fact, t h e seizure is not unconstitutional
b e c a u s e it w a s m a d e for purposes of enforcing collection of unpaid
t a x e s . Notably, t h e collection of taxes is never unreasonable. X's
s u b m i s s i o n that the right to collect c u s t o m s duties has prescribed is
not correct b e c a u s e importation had not e n d e d . For articles subject
to c u s t o m s duties, importation ends w h e n the regular permit for
withdrawal shall have b e e n issued and the corresponding taxes
thereto fully paid. Considering that falsified d o c u m e n t s were used
importation w a s not yet e n d e d . T h u s , prescription period to collect
has not toiled.

1 4 6 1 . Doctrine of " H O T P U R S U I T " in c u s t o m s law defined:

A n s w e r . This refers to a situation w h e r e a vessel becomes subject

to seizure by reason of an act done in the Philippine waters in
violation of the tariff and customs laws, a pursuit of such vessel
began within the jurisdictional waters may continue beyond the
maritime zone, and the vessel may be seized on the high seas.

N O T E : This Doctrine is applicable to imported article that may be

subject to seizure for violation of the tariff and customs laws when
the s a m e is being transported in the Philippines by land, water or
air, and jurisdiction may be exerted over it at any place aforesaid
as may be necessary for the due enforcement of the law.

845
1462. M a y articles arriving into our c o u n t r y be a l l o w e d to be
exported?

A n s w e r . The general rule is that articles arriving in our country are

not permitted to be exported unless it shall appear by the bill of
lading, invoice, manifest or other satisfactory evidence that the
articles are destined for transshipment.

1463. W h a t are the functions of the Bureau of C u s t o m s ?

A n s w e r . Powers and Jurisdiction:

Primary functions -

a) To assess and collect customs lawful duties, fees and

charges, fines and penalties related to importation accruing
under the tariff and c u s t o m s law;

b) To prevent and suppress smuggling and other frauds in

violation of the Tariff and C u s t o m s C o d e .

Secondary functions -

(a) To supervise and control entrance a n d clearance of vessels

and aircraft in foreign c o m m e r c e ;

(b) To enforce tariff and c u s t o m s laws and all other laws, rules
and regulations relating to tariff a n d c u s t o m s administrations;

(c) T h e supervision a n d control over t h e handling of foreign

mails arriving in t h e Philippines, for the purpose of the
collection of the lawful duty on the dutiable articles thus
imported and the prevention of s m u g g l i n g through the
m e d i u m of s u c h mails;

(d) Supervision and control over all import and export cargoes,
landed or stored in piers, airports, terminal facilities, including
container yards and freight stations, for t h e protection of
g o v e r n m e n t r e v e n u e ; and

(e) Exclusive original jurisdiction on seizure a n d forfeiture cases

under the tariff a n d c u s t o m s laws.

846
 NOTE:

O T h e general supervision, control, and regulation of every matter

that pertains to port facilities, port operations or port works are
transferred and vested with the Philippine Ports Authority. (P
D. No. 857)

O Under Rep. Act No. 7 6 5 0 , a p p r o v e d on April 6, 1993,

m a n d a t o r y requirement of ten percent (10%) examination of
imported g o o d s w a s abolished. It repeals Section 1404 and
a m e n d s Section 1401 and 1403 of the Tariff and Customs
C o d e of t h e Philippines, as a m e n d e d . T h e Act addresses the
problem of the u n d u e delay in the clearance and release of
imported g o o d s . T o w a r d this e n d , it provides six (6) instances
w h e n a n d w h e r e regular physical examination may b e
e n f o r c e d , outside of w h i c h the Bureau of C u s t o m s is given the
discretion w h i c h s h i p m e n t s can be released without physical
e x a m i n a t i o n , s u c h as:

a) the g o v e r n m e n t surveyor's seal on the container has been

t a m p e r e d with or b r o k e n or the container s h o w s signs of
having b e e n o p e n e d or having its identity c h a n g e d .

b) the container is leaking or d a m a g e d ;

c) the shipment is covered by alert/hold order issued pursuant

to existing orders;

d) the number, weight, and nature of packages indicated in

t h e c u s t o m s entry declaration and supporting documents
differ from that in the manifest;

e) the importers disagree with the findings as contained in the

g o v e r n m e n t surveyor's report, or

f) the articles are imported through airfreight where the

Commissioner or Collector has knowledge that there is a
variance between the declared and true quantity,
measurement, weight, and tariff classification.

1464. W h o are the chief officials of the B u r e a u of C u s t o m s ?

Answer.
a) T h e Commissioner of Customs w h o is appointed by the
President of the Philippines upon the recommendation of the
Secretary of Finance.

847
 b) Five (5) Deputy Commissioners who are appointed by
President of the Philippines upon the recommendation of the
Commissioner of Customs.

1 4 6 5 . W h a t a r e t h e f i v e (5) n e w l y c r e a t e d o f f i c e s o f t h e B u r e a u
of Customs headed by the five (5) Deputy
Commissioners?

Answer.

a) Customs Revenue Collection Monitoring Group

b) Customs A s s e s s m e n t and Operation Coordinating Group.

c) Intelligence and Enforcement Group

d) Internal Administrative G r o u p

e) M a n a g e m e n t Information System and Technology G r o u p .

1466. W h a t is the territorial jurisdiction of the Bureau of
Customs?

A n s w e r . The Bureau of C u s t o m s has the right of supervision and

police authority over all seas within the jurisdiction of the
Philippines and over all coasts, ports, airports, harbors, bays, rivers
and inland waters w h e t h e r navigable f r o m t h e sea or not.

T h e Bureau exercises special surveillance to protect customs

revenue and prevent s m u g g l i n g . This is c o n d u c t e d over the coast,
beginning w h e n a vessel or aircraft enters Philippine territory until
the articles have passed through t h e c u s t o m h o u s e after paying the
duties or being given legal permit.

W h e n a vessel b e c o m e s subject to seizure by reason of an act

d o n e in Philippine waters in violation of the tariff and c u s t o m s laws,
a pursuit of such vessel b e g u n within the jurisdictional w a t e r s may
continue beyond the maritime z o n e , and t h e vessel m a y be seized
on the high sea. (Right of Pursuit or Extra-territorial
Jurisdiction) {llluh Asaoli vs. Commissioner, 2/28/69)

To the end of preventing s m u g g l i n g , it is the right of a custom

official to seize g o o d s that are suspected to have b e e n introduced
into the country in violation of the revenue laws not only in his o w n
district but also in any other district than his o w n .

848
 T h u s , should a vessel loaded with untaxed motorcycles and
electronics products leave the port of L i n g a y e n , Pangasinan bound
to S t o . D o m i n g o , llocos Sur, t h e Collector of C u s t o m s of llocos Sur
has the power to a p p r e h e n d the culprits responsible for smuggling
and seize the untaxed goods. (Vierneza vs. Commissioner of
Customs, 7/30/68)

T h e B u r e a u of C u s t o m s shall, for c u s t o m s purposes, have

exclusive control, direction and m a n a g e m e n t of c u s t o m h o u s e ,
w a r e h o u s e s , offices, w h a r v e s and other premises in the respective
ports of entry in all c a s e s without prejudice to the general police
powers of t h e City or municipality w h e r e i n such premises are
situated. (Rigor vs. Rosales, October 23, 1982)

1467. How does the customs officials exercise jurisdiction

o v e r all f o r e i g n v e s s e l s c o m i n g into P h i l i p p i n e territorial
sea?

A n s w e r . T h e c u s t o m s officials exercise jurisdiction over foreign

vessels by posting at least a c u s t o m s inspector and a customs
guard on board e a c h s u c h vessel as long as it is anchored within
Philippines territorial waters.

1468. Under the T C C w h o is the "Secretary" or "Department

Head" referred to?

A n s w e r . T h e Secretary of Finance.

1469. What are the tax cases arising under the Tariff and
Customs Code?

Answer.
a) Protest cases or those w h e r e the importer questions the
legality of the a s s e s s m e n t and collection of customs duties and
other fees or charges (except the fixing of fine in seizure
cases). T h e issue involved in these cases generally relates to
the correctness of the appraisal and/or classification of
imported goods; and

b) Seizure cases or those wherein goods or merchandise are

ordered seized by customs authorities and made subject to the
penalty of forfeiture or fine for violation of the customs law.
Here, the issue involved is the legality of the importation of
goods either because the goods are in themselves prohibited
importations or their importations is effected contrary to law.

849
 1 4 7 0 . I s t h e B u r e a u o f C u s t o m s s u b j e c t t o s u i t i n its o p e r a t i o n
of the arrastre service?

Answer. No. The Bureau of Customs, acting as part of t h e

machinery of the National Government in the operation of the
arrastre service, pursuant to express legislative mandate and as a
necessary incident of its prime government function, is immune
from suit, there being no statute to the contrary. (Mobil Phils.
Exploration, Inc. vs. Customs Arrastre Service, 18 SCRA 1120)

1471. W h a t are the functions of the Tariff C o m m i s s i o n ?

Answer. The Commission shall investigate:

a) the administration of and the fiscal and industrial effects of the

country's tariff and customs laws;

b) the relations between the rates of duty on raw materials and

finished or partly finished products;

c) the effects of ad valorem and specific duties and of c o m p o u n d

specific and ad v a l o r e m duty;

d) all questions relative to the a r r a n g e m e n t of schedules and

classifications of articles under t h e tariff law;

e) the tariff relations b e t w e e n t h e Philippines and foreign

countries, c o m m e r c i a l treaties, etc.

f) the v o l u m e of importation's c o m p a r e d with domestic production

and c o n s u m p t i o n ;

g) conditions, c a u s e s , a n d effects relating to competition of

foreign industries with those of the Philippines;

h) in general, to investigate t h e operation of c u s t o m s and tariff

laws and to submit report of its investigations; a n d

i) the nature, composition and classification of articles for

customs revenue a n d other related purposes w h i c h shall be
furnished to the N E D A , Board of Investments, B a n g k o Sentral
ng Pilipinas and the Secretary of Finance.

850
1472. W h o is authorized to m a k e ruling on commodity
classification of imported article not specifically
classified in the Tariff and C u s t o m s C o d e ?

A n s w e r T h e Tariff C o m m i s s i o n u p o n the request by any interested

party. A n y ruling, however, of the Tariff C o m m i s s i o n shall be
binding u p o n t h e B u r e a u of C u s t o m s unless the Secretary of
Finance rules otherwise.

1473. W h a t is the extent of the c u s t o m s officer's power to

s e a r c h , seize a n d arrest u n d e r t h e tariff a n d c u s t o m s
law?

A n s w e r . C u s t o m s officials and a g e n t s can search any building or

other places e x c e p t d w e l l i n g h o u s e s (specially if the articles
involved are s u b j e c t to excise tax) and seize any discovered
c o n t r a b a n d w h e n there are reasonable g r o u n d s to believe that they
are stored a n d f o u n d in said place, to enforce the T C C , even
without a search warrant.

O A dwelling h o u s e is o n e used for residence. However, a

storage place or w a r e h o u s e does not b e c o m e a dwelling just
b e c a u s e a w a t c h m a n lives in the place or his family stays
there.

O T h e seizure of g o o d s concealed to avoid the duties on them is

not e m b r a c e d within the prohibition of this constitutional
guarantee. (Chia vs. Collector, 26 September 1989,People vs.
Hope, 17 November 1980;Viduya vs. Collector, 73 SCRA 553

O This in effect is an exception to the constitutional guarantee

against searches and seizures without warrants issued by a
j u d g e u p o n probable cause, since historically, in the U.S. and
England, such a search w a s excepted.

O Only proper parties in interest can invoke the constitutional

right against unlawful search and seizure.

3 Customs officials may seize vessels, aircrafts, cargoes, goods

and animals w h e n subject to forfeiture or fine. (Pads vs.
Pamaran, 56 SCRA 16, Nasiad vs. CTA, 61 SCRA 238; Papa
vs. Mago, 22 SCRA 857; People vs. Lo Ho, January 21, 1991)

851
1474. What are the rule-making p o w e r s of the C o m m i s s i o n e r
of Customs?

Answer.
a) The Commissioner shall, subject to the approval of the
Secretary of Finance, promulgate all rules and regulations
necessary to enforce the provisions of the Tariff and Customs
Code.

b) He shall also cause the preparation and publication of a

Customs Manual covering up-to-date rules and regulations and
decisions of the Bureau of C u s t o m s .

c) He has the power to designate any government official as

customs inspector at coastwise port w h e r e no customs official
or employee is regularly assigned. This designation of national,
provincial or municipal official shall be m a d e with the consent
of the proper Department Head of the official so designated.

In addition to the regular functions of t h e C o m m i s s i o n e r of

C u s t o m s , he shall submit an annual report to the President of
the Philippines, matters related to:

1. Quantity and value of the articles imported into the

Philippines, and the corresponding c u s t o m s duties, taxes
and other charges a s s e s s e d and collected on imported
articles itemized in a c c o r d a n c e with the tariff headings and
s u b h e a d i n g s as appearing in the liquidated c u s t o m s
entries as provided by law.

2. Percentage collection of the peso v a l u e of imports;

3. Quantity and value of conditionally free importations.

4. C u s t o m s valuation over and a b o v e letters of credit o p e n e d ;

5. Quantity a n d value of tax-free imports;

6. Quantity and value of articles exported f r o m the Philippines

as well as the taxes and other c h a r g e s a s s e s s e d and
collected on t h e m for t h e preceding year.

852
1475. W h a t are the supervisory authority of the Commissioner
of Customs and the Secretary of Finance?

Answer.
a) In cases involving a s s e s s m e n t of duties - If in any case
involving the a s s e s s m e n t of duties, the Collector renders a
decision it shall automatically be elevated to, and reviewed by
the C o m m i s s i o n e r ; and if the Collector's decision would be
affirmed by the C o m m i s s i o n e r , s u c h decision shall be
automatically elevated to, and finally reviewed by the Secretary
of Finance. However, if within 30 d a y s f r o m receipt of the
record of the case the C o m m i s s i o n e r or by the Secretary of
Finance, as the c a s e m a y b e , no decision is rendered by either
of t h e m , the decision under review shall b e c o m e final and
executory. A n y party aggrieved by either the decision of the
C o m m i s s i o n e r or of the Secretary of Finance may appeal to the
C T A within 30 d a y s f r o m receipt of a copy of such decision.

Except as provided a b o v e , the supervisory authority of the

Secretary of Finance over t h e Bureau of C u s t o m s does not
extend to the administrative review of the ruling of the
C o m m i s s i o n e r in matters a p p e a l e d to the CTA.

b) in seizure cases - Supervisory authority may be exercised by

the C o m m i s s i o n e r while the case is pending in the Office of the
Collector of C u s t o m s a n d before the decision of the Collector
b e c o m e s final. (Sampaguita Shoe and Slipper Factory vs.
Commissioner of Customs, 102 Phil. 350, Mon vs. Jacinto, 93
Phil. 1093)

1476. May the Commissioner of Customs determine the

legality of an importation or ascertain whether the
conditions prescribed by law for its importation has
been complied with?

A n s w e r . Under the Tariff and C u s t o m s Code, the Commissioner of

Customs has jurisdiction to determine the legality of an importation
or ascertain whether the conditions prescribed by law for an
importation have been complied with. (Commr. of Customs vs.
Cloribel, 20 SCRA 183)

1477. May the Commissioner of C u s t o m s order the seizure of

u n t a x e d g o o d s w i t h o u t being liable for usurpation of
judicial functions?

853
 Answer. The Commissioner of Customs may order seizure of
untaxed goods without being liable for usurpation of judicial
function. (Pads vs. Pamaran, 56 SCRA 16)

1478. W h o are conferred police authority to effect searches,

seizures a n d arrest u n d e r t h e c u s t o m s a n d tariff l a w s ?

Answer.
a) Officials of the Bureau of Customs, district collectors, deputy
collectors, police officers, agents, inspectors and guards.

b) Officers of the Philippine navy and other m e m b e r s of the

A r m e d Forces and national law enforcement agencies when
authorized by the Commissioner.

c) Officials of the BIR on all cases falling within the regular

performance of their duties, w h e n the payment of internal
revenue taxes is involved.

d) Officers generally e m p o w e r e d by law to effect arrests, and

execute processes of courts w h e n acting under the direction of
the Collector.

The a b o v e do not need a warrant to m a k e searches, seizures

and arrests, owing to the e x p r e s s e d m a n d a t e and authority granted
to them in the performance of their functions as provided under the
Tariff and C u s t o m s C o d e .

1479. Where such authority m a y be exercised?

Answer. It may be exercised at any place within the jurisdiction of

the Bureau of C u s t o m s .

1480. W h a t particular powers may be exercised under such

police authority in the e n f o r c e m e n t of the Tariff and
Customs Laws?

Answer.
a) He may require the assistance of any police officer.

b) He may enter and s e a r c h any enclosure.

c) He may search vessel or aircraft and persons or articles

conveyed therein.

854
 d) He m a y search vehicles, beasts and persons

e) He m a y s e a r c h persons arriving f r o m foreign countries.

The search of a dwelling house in Customs Law mav be

effected only upon warrant issued bv a judge of the court or
such other responsible officers as maybe authorized by law.

1 4 8 1 . W h o h a s the authority to designate airport of entry for

civil aircraft arriving in t h e P h i l i p p i n e s ?

A n s w e r . T h e Secretary of Finance u p o n the r e c o m m e n d a t i o n of

t h e C o m m i s s i o n e r of C u s t o m s and the Director of the Civil
Aeronautics Administration.

1482. W h a t are the rules regarding arrivals of aircrafts in the

Philippines f r o m any foreign port or place?

A n s w e r . They a r e required to m a k e their first landing at

International Airport of Entry except in the following cases -

a) E m e r g e n c y or forced landing.

b) W h e n permission to land e l s e w h e r e other than international

airport of entry is first obtained f r o m the Commissioner.

1483. On the Collector of Customs:

9 T h e Collector of C u s t o m s has discretionary authority to REMIT

the a s s e s s m e n t and collection of duties, taxes and other
charges w h e n the aggregate a m o u n t of the duties, taxes and
other charges is less than Php 10.00.

O T h e Collector m a y dispense with the seizure of articles for

violation of the tariff customs laws if the value of articles to be
seized is less than Php 10.00 E X C E P T , if the article is
prohibited or in violation of the tariff and customs laws appears
to be intentional or habitual.

3 The Collector of Customs has rule-making power pursuant to

Sec. 711 of the T C C , which provides that he may exercise
such power of prescribing local administrative regulations
provided they are not inconsistent with law or the general
bureau regulations and must be subject to the approval of the
Commissioner of Customs.

855
 O The Deputy Collector shall temporarily discharge the duties of
the Collector of Customs in case the latter is absent, disabled,
or vacancy of his office.

3 Where no deputy collector is available, any official to serve in

such contingency maybe designated in writing by the Collector
from his own force.

3 The District Collector, Deputy Collector and other customs

officials acting in such capacities are required to keep true,
correct and permanent record of their official transactions and
to submit the s a m e to the inspection of authorized officials at all
time, and to turn over all records and official papers to their
successor or other authorized official.

3 Decision of the Collector of C u s t o m s is not appealable to the

Court of Tax Appeals. T h e s a m e m a y be appealed to the
Commissioner of C u s t o m s . (Seneres vs. Frias, 39 SCRA 533,
Collector of Customs vs. Torres, 45 SCRA 272)

1484. W h a t are the duties of the Collector over importation of

articles?

Answer.
a) He shall cause the entry of all imported articles at the
customhouse.

b) He shall cause all such articles to be appraised and classified.

c) He shall c a u s e all a s s e s s m e n t and collection of the duties,

taxes and other charges d u e on t h e imported articles.

d) He shall hold possession of all imported articles u p o n which

duties, taxes and other c h a r g e s have not b e e n paid or secured
to be paid, and shall dispose of t h e s a m e in a c c o r d a n c e with
law.

1485. W h a t is the duty of the Collector in so far as dutiable

value of articles entering his port of responsibility is
concerned?

A n s w e r . Upon the written application of t h e o w n e r or agent of

imported goods, the Collector shall furnish any importer, the latest
information in his possession as to the dutiable value of articles
entered at his port. T h e information is given only if the Collector is

856
 satisfied that the importer acted in g o o d faith and unable to obtain
proper information as to the dutiable value of the subject articles.
T h e information given by the Collector is in no sense an appraisal
or binding u p o n the Collector's action on appraisal.

1486. Matters that a Collector is required to immediately report

to the C o m m i s s i o n e r under the Tariff C o d e :

Answer.
a) Prospective or newly b e g u n litigations concerning his district
relating to the c u s t o m s service.

b) All transactions in the port and district that shall be contained in

a regular monthly report in such f o r m and detail as may be
required by the C o m m i s s i o n e r of C u s t o m s .

1 4 8 7 . A r e all i m p o r t e d a r t i c l e s s u b j e c t t o c u s t o m s d u t y ?

A n s w e r . All imported articles, w h e n imported from any foreign

country into the Philippines, are subject to duty upon each
importation, e v e n t h o u g h previously exported f r o m the Philippines,
e x c e p t as otherwise provided in the Tariff and C u s t o m s C o d e or in
other laws.

1488. W h a t articles are under the jurisdiction of the T C C :

Answer.
a) All articles subject to duty, or

b) Prohibited from being imported (Prohibited importation); or

c) Conditionally-free from tariff and c u s t o m s duties (conditionally-

free importation); and

d) Free from tariff and customs duties (duty-free)

Imported goods must be entered in a customhouse at their

port of entry otherwise they shall be considered as contraband
and the importer is liable for smuggling. (Sec. 1 0 1 , TCC)

857
1489. Distinguish absolutely free importation from
conditionally free importation:

Answer.
Absolutely Free Importation Conditionally Free Importation ~~
Articles exempt from duty only uporT
Articles exempt from duty without compliance with the formalities
any condition. prescribed or with the regulations
promulgated in connection with the
importation.

1490. W h a t is the effect of violation of circulars in case of

importation of articles not in the prohibited importation
list?

Answer. While goods imported in violation of the circulars may not

be considered "merchandise of prohibited importation", they
nevertheless fall within the other category of merchandise imported
"contrary to law", because regulations issued pursuant to "customs
laws" form part thereof, so that violation of the said regulations can
properly be regarded as c o m i n g within the purview of law. (F. Sare
Enterprises vs. Commissioner of Customs, 29 SCRA 112.)

1491. W h a t are the articles of prohibited importations?

Answer. Contrabands - Articles o f prohibited importation or

exportation.

a) Dynamite, a m m u n i t i o n , explosive, firearms and weapons,

except w h e n authorized by law; (absolute)

b) Written or printed article advocating or inciting treason,

rebellion, subversion, insurrection or sedition against the
Government, or forcible resistance to any law of the
Philippines; (absolute)

c) O b s c e n e or immoral articles or objects; (absolute)

d) Drugs or substances preventing human conception or

producing unlawful abortion;

e) Gambling outfits or paraphernalia; (qualified)

f) Lottery and s w e e p s t a k e s tickets except if authorized by our

Government;

858
 g) Articles manufactured holly or partially of g o l d , silver, etc. not
s h o w i n g their actual fineness;

h) Adulterated or misbranded foods or drugs;

i) O p i u m , marijuana a n d similar drugs or narcotics or synthetic

drugs declared habit forming or preparation thereof unless
authorized by law; (absolutely, but if for medical purposes, then
qualified)

j) O p i u m pipes and part thereof; and

k) All other articles, importation of w h i c h is prohibited by law.

N O T E : Prohibited importations are subject to forfeiture whether

the importation is direct or indirect such as w h e n the shipper and
t h e c o n s i g n e e are o n e a n d t h e s a m e p e r s o n . (Ute Paterok vs. Bu.
of Customs, 193 SCRA 132)

O U n d e r RA 1125, c a s e s involving forfeiture of articles of

prohibited importation are N O T cognizable by the CTA
b e c a u s e t h e s e c a s e s d o not i n v o l v e liability for c u s t o m s
duties or other money charges. However, under Sec.
2 4 0 2 o f t h e T C C , w h i c h w a s e n a c t e d t h r e e (3) y e a r s a f t e r
RA 1125, it expressly confers upon the C T A jurisdiction
over appeals in seizure cases. Thus, there seems to be
no doubt as to the jurisdiction of said appellate court
over such cases.

1492. W h a t is the extent of the phrase "merchandise of

prohibited importation? '

A n s w e r . T h e term "merchandise of prohibited exportation" use in

the Administrative C o d e is broad to e m b r a c e not only those already
declared prohibited at the time of its adoption but also goods,
commodities or articles that may be the subject of activities
undertaken in violation of subsequent laws. (Geotina vs. CTA, 40
SCRA 362)

1493. W h a t articles are free of import duties?

A n s w e r . The Code enumerates the articles that shall be exempt

from the payment of import duties upon compliance with the
formalities prescribed in, or with the regulations prescribed by the

859
 Commissioner of Customs with the approval of the Secretary of
Finance, such as:

a) Animals and plants for experimental, scientific, breeding and

national defense purposes;

b) Aquatic products gathered by Philippine vessels;

c) Samples of commodities of small quantity; Physician's samples

not for sale;

d) Articles necessary for the take-off and landing of aircrafts as

well as for safe navigation of vessels;

e) Articles for repair;

f) Medals, badges and caps bestowed as trophies or prizes;

g) Articles used for public expositions;

h) Historical and technical books under certain conditions;

i) Personal effects of returning residents previously exported from

the Philippines, or bought abroad and brought into the country
within 90 d a y s before or after arrival;

j) Personal effects of tourist n e e d e d by their profession or

comfort; (Cars are not personal effects)

k) T h o s e granted to international institutions or agencies,

associations or organizations entitled to e x e m p t i o n pursuant to
treaties, a g r e e m e n t s or special laws; (e.g. A D B officials can
bring cars tax free, so long as not sold locally, if sold locally,
the import tax will be i m p o s e d ) .

I) Articles brought into the country for p r o c e s s i n g , but to be re-

e x p o r t e d ; (e.g. Export Processing Z o n e )

m) T h o s e granted to g o v e r n m e n t agencies, instrumentalities or

G O C C with existing contracts, a g r e e m e n t s or obligations
(requiring such e x e m p t i o n ) with foreign countries;

n) T h o s e granted by the President u p o n the r e c o m m e n d a t i o n of

N E D A in the interest of national e c o n o m i c d e v e l o p m e n t ;

o) Bibles, missals, prayer books, Koran, ahadith and other

860
 religious b o o k s of similar nature and extracts therefrom,
h y m n a l a n d h y m n s for religious uses.

1494. W h e n shall imported articles be subject to the regular

physical examination under the customs law?

Answer.
a) W h e n the g o v e r n m e n t surveyor's seal on the container has
b e e n t a m p e r e d with or broken or the container shows signs of
having b e e n o p e n e d or having its identity c h a n g e d .

b) W h e n t h e container is leaking or d a m a g e d .

c) W h e n t h e n u m b e r entry declaration and supporting documents

differ f r o m that in t h e manifest.

d) W h e n the s h i p m e n t is covered by alert hold order issued

pursuant to existing orders.

e) W h e n the importer disagrees with the findings as contained in

t h e g o v e r n m e n t surveyor's report, or

f) W h e n t h e articles are imported through airfreight where the

C o m m i s s i o n e r of C u s t o m s or the Collector of Customs has
k n o w l e d g e that there is a variance between the declared and
true quantity, m e a s u r e m e n t , weight and tariff classification.

1495. T w o kind of liquidation of duties under the Tariff and

Customs Code?

Answer.
a) Tentative liquidation - It is subject to future and final
readjustment and settlement within a period of six (6) months
from date of tentative liquidation.

b) Final liquidation - W h e n articles have been entered and

passed free of duty or final adjustments of duties made with
subsequent delivery, such entry and passage free of duty or
settlement of duties will, after the expiration of one (1) year
from the date of final payment of duties, in the absence of fraud
or protest be final and conclusive upon all parties.

861
1496. How is liquidation of duties in c u s t o m s law effected?

Answer. If the Collector shall approve the returns of the appraiser

and the report of the weights, gauge or quantity, the liquidation
shall be made on the face of the entry showing the particulars
thereof, initialed by the customs assessor, approved by the Chief
Customs Assessor, and recorded in the record of liquidation.

1497. W h o are the o w n e r s of i m p o r t e d articles?

Answer. All articles imported into the Philippines shall be held t o

be the property of the:

a) person to w h o m the s a m e are c o n s i g n e d ; and

b) the holder of a bill of lading duly indorsed by the consignee

therein n a m e d , or if consigned to order, by the consignor,
shall be d e e m e d the consignee thereof.
c) the underwriters of a b a n d o n e d articles and

d) the salvors of articles saved f r o m a w r e c k at sea, along a

coast or any area of the Philippines m a y be regarded as the
consignees.

1498. To w h o m is "Person" referring to for purposes of the

TCC?

Answer.

a) An individual, or

b) A corporation or c o m p a n y , or

c) A partnership, or

d) An association or any other kind of organization.

1499. May the imported goods be allowed delivery to another
person upon order of the importer?

Answer. Yes. T h e importer o n record m a y authorize delivery to

another person by writing u p o n the f a c e of the w a r e h o u s e
withdrawal entry his orders to that effect.

The delivery of the article to another person does not relieve

the importer and his c a s h deposit, irrevocable domestic letter of

862
 credit, bank g u a r a n t e e or b o n d from liability for the payment of
duties, taxes a n d other charges due t h e r e o n . U N L E S S , the person
to w h o m delivery w a s authorized a s s u m e s such liability by
c o m p l y i n g with the requirements provided under the Tariff and
Customs Code.

1500. W h a t is t h e n a t u r e of t h e liability of i m p o r t e r for c u s t o m s

duties, fees and charges?

A n s w e r . Unless otherwise relieved by laws and/or regulations, the

liability for duties, t a x e s , f e e s and other charges attaching on
importation constitutes a personal debt d u e from the importer to the
g o v e r n m e n t that can be discharged only by payment in full of said
duties a n d c h a r g e s . It also constitutes a lien upon the articles
imported w h i c h m a y be enforced while s u c h articles are in custody
or subject to the control of t h e g o v e r n m e n t .

T h e liability of the importer for c u s t o m s duties is considered a

personal debt to the g o v e r n m e n t unless relieved by laws or
regulations. This liability shall be fully extinguished upon full
p a y m e n t of all duties, t a x e s , fees and other charges legally
accruing to the importation.

1 5 0 1 . Export tariff d e f i n e d :

A n s w e r . It is the duty i m p o s e d for bringing out goods from the

territory of the Philippines. At present, by virtue of E. O. No. 26
(1986), all export taxes, except on logs have been suspended.

1 5 0 2 . I m p o r t tariff d e f i n e d ?

A n s w e r . It is imposed on articles imported from a foreign country,

even though previously exported from the Philippines, unless
e x e m p t e d by law. (Viduya vs. Berdiago, 73 SCRA 553)

1503. W h a t are the different kinds/classifications of customs

duties?

Answer. As to determination of amount, customs duties may be:

A) Ordinary or regular which are imposed and collected merely

as a source of revenue, namely:

1. Ad valorem - the duty is based on the market value or

price of the imported article.

863
 The imported articles are appraised by appraisers of
the port w h o shall be responsible to the Collector of such
port for the correct appraisal of the articles imported into
the Philippines. (Commr. vs. Procter & Gamble, Jan. 11,
1989, Commr. vs. CTA, 21 May 1988)

2. Specific - the duty is based on the weight, head, number

or volume or some standard of measurement of the
imported article. (Commr. vs. Delgado Shipping, 184
SCRA 579)

P.D. 34 drastically a m e n d e d the Tariff and Customs

Code and it now provides for percentage on imported
articles, ad valorem.
3. Alternating duties - are those imposed on the basis of
either the weight or volume or the value of the imported
articles (specific or ad valorem), whichever is higher.

4. C o m p o u n d c u s t o m s duties are those w h i c h are imposed

based on both the weight and v o l u m e a n d the value of
the imported articles.

As to dutiable articles, c u s t o m s duties m a y be:

B) Special duties consisting of:

1. D u m p i n g duties - w h i c h are i m p o s e d in addition to regular

duties in order to offset any d i s a d v a n t a g e to local industry
brought about by exportation to the Philippines of items at
a price less than its fair market v a l u e ;

T h e duty is equal to the difference b e t w e e n the actual

purchase price a n d the fair v a l u e of the article as
determined in the d u m p i n g decision of t h e Secretary of
Finance, (now Secretary of T r a d e a n d Industry).

T h e imposition of d u m p i n g duty is d e t e r m i n e d by the

Secretary of Finance u p o n prior investigation by the Tariff
Commission.

2. Countervailing duty - is o n e d e s i g n e d to offset any foreign

subsidy granted to g o o d s exported to t h e Philippines to the
prejudice of our local industries;

T h e duty is equal to the ascertained or estimated

a m o u n t of the bounty or subsidy given. T h e Secretary of

864
 Finance (now Secretary of Agriculture) upon prior
investigation and report of the Tariff Commission
d e t e r m i n e s the countervailing duty.

3. Marking duty (5%) - w h i c h is an additional duty imposed for

improper marking of imported articles and their containers,
for t h e purpose of preventing deception of consumers.

T h e purpose is to prevent deception of customers and

t h e rate is 5% ad v a l o r e m . T h e articles will be d e e m e d
a b a n d o n e d u p o n failure to mark t h e m within 30 days from
notice.

4. Discriminatory or retaliatory duty - is one which is imposed

by t h e President under Sec. 304 of the Tariff and Customs
C o d e not in e x c e s s of 1 0 0 % of existing rates, designed to
offset a n y foreign discrimination against our local
c o m m e r c e , it is an addition to regular c u s t o m s duties.

In c a s e of c o n t i n u e d discrimination the articles coming

f r o m such foreign country m a y be b a n n e d .

5. Duty - i m p o s e d under the flexible tariff clause under

Section 401 of t h e Tariff a n d C u s t o m s C o d e .

In the interest of national e c o n o m y , general welfare

and/or national security, and subject to the limitations
herein prescribed, the President, upon the
r e c o m m e n d a t i o n of N E D A , is hereby e m p o w e r e d -

a) to increase, reduce or r e m o v e existing protective rates

of import duty; '

b) to establish import guota or to ban imports of any

commodity, as may be necessary; and

c) to impose an additional duty on all imports not

exceeding 1 0 % ad valorem.

865
 1504. Distinctions among the different special levies on
importation:

Answer.
Dumping Duty Countervailing Marking Duty Discriminatory^
Duty Duty
Imposed upon Imposed upon Imposed upon Imposed uporT
foreign goods foreign goods those not goods coming
Nature with value enjoying subsidy properly from countries
lower than their thus allowing marked as to that discriminate
F M V to t h e t h e m to sell at place of origin against
detriment of lower prices to of the goods Philippine
local products the detriment of Products.
local products
similarly situated
Difference A n y amount noT
Amount between the Equivalent to the 5% ad exceeding 100%
or actual price bounty, subsidy valorem of as valorem of
Rate and the normal or subvention articles the subject
value of the articles
article
Special
Committee on
Anti-Dumping
( C o m p o s e d of
the Sec. of
Impo- Finance as Secretary of Commissioner President of the
sing Chairman; Finance of C u s t o m s Philippines
authori- M e m b e r s : Sec.
ty of Department
of Trade &
industry and
either the Sec.
of Agriculture if
article in
question is agri.
products or the
Sec. of Labor if
non-agri.

1505. Briefly d i s c u s s the procedures in the imposition of

taxes/duties:

Answer.
a) Declaration by the importer of the importation, m a d e in:

866
 1) Import entry - if c o m m e r c i a l quantity

2) Informal Import Entry - if articles have a dutiable value of

P h p 500 or less, or if g o o d s are personal effects for
personal use.

b) Examination of g o o d s

c) A p p r a i s a l :

1) If ad v a l o r e m - valuation

2) If specific - just weight, m e a s u r e or count

d) Classification

e) A s s e s s m e n t o f taxes

f) Liquidation of import entry - p a y m e n t of tax

1) Final liquidation

2) Provisional liquidation - liability not ascertained but must

be liquidated in six (6) months.

1506. How are customs duties paid?

Answer. C u s t o m s duties are payable upon withdrawal from the

c u s t o m h o u s e and based on import entries prepared, whether
formal or informal by:

a) Tentative liquidation subject to readjustment; and

b) Final liquidation.

If proper protest is filed and found meritorious, the entry may

be ordered re-liquidated by the Collector of Customs.

1507. W h a t is the effective rate or rates of import duty:

Answer. Imported articles shall be subject t o the rate or rates of

import duty existing at the time of entry, or withdrawal from the
warehouse, in the Philippines, for consumption.

867
 On articles abandoned or forfeited to or seized by the
Government, and then sold at public auction, the rates of duty and
tariff imposed on the date of the auction shall apply provided
that duty based on the weight, volume and quantity of articles shall
be levied and collected on the weight, volume and quantity at the
time of their entry into the warehouse or at the date of
abandonment, forfeiture and/or seizure.

The value and prices of imported articles in foreign currency of

the Philippines shall be converted into the currency of the
Philippines at the current rate of e x c h a n g e or value specified or
published, from time to time, by the Bangko Sentral ng Pilipinas of
the Philippines. (CIR vs. Tanjuatco, December 27, 1980)

The basis of dutiable value is the fair market value of the

goods.

1508. What other charges or fees are payable under the T C C ?

Answer.
a) Harbor fee - it is payable by the o w n e r or operator of a vessel
for entrance into or departure f r o m a port of entry in the
Philippines.

Rationale for the imposition of harbor fees:

A vessel ordinarily enters a harbor a n d lays anchor or

moors in a port to load, or unload or both a n d in doing so,
the vessel derives benefits from port facilities maintained
by the G o v e r n m e n t , hence, they are m a d e to contribute a
share in said G o v e r n m e n t undertaking by p a y m e n t of
berthing charges a n d harbor f e e s .

b) Wharfage due - w h i c h is a s s e s s e d against t h e cargo of a

vessel e n g a g e d in foreign trade b a s e d on t h e quantity, weight
or m e a s u r e received and/or d i s c h a r g e d by s u c h v e s s e l ;

1. the owner, c o n s i g n e e or agent of the article is the one

liable to pay the c h a r g e a b o v e ;

2. wharfage dues are payable w h e t h e r or not the wharf

used in unloading is privately o w n e d or o w n e d by the
G o v e r n m e n t , such d u e s being a s s e s s e d against the
cargo.

3. it partakes of the nature of a tax that is collected by the

868
 G o v e r n m e n t to support its operation of the customs
service. (Associated Sugar, Inc. et. al., vs. Commissioner
of Customs, 25 November, 1982)

How are exemptions from wharfage dues construed?

A n s w e r . Considering that w h a r f a g e dues are specifically

allotted by law for the special Port W o r k s Fund and that
e x e m p t i o n s are regarded as in derogation of sovereign
authority and of c o m m o n right a n d are construed in
strictissimi juris against the person or entity claiming
e x e m p t i o n , the e x e m p t i o n of Caltex for c u s t o m s duties is
construed not to include e x e m p t i o n from w h a r f a g e dues. (Phil.
Iron Mines, Inc. vs. Commissioner of Customs, 30 SCRA 60,
Victorias Milling Co. Inc., vs. Auditor General, 116 Phil. 1139)

c) Berthing c h a r g e - a s s e s s e d against a vessel for mooring or

berthing at the pier, wharf, etc., at any part of the Philippines;
the m o m e n t a vessel has c o m e within any slip, channel, basin,
river or canal under the jurisdiction of any port in the
Philippines, it b e c o m e s subject to berthing or mooring charges.

T h e o w n e r or operator of the vessel pays the charge above.

N O T E : T h e g o v e r n m e n t ' s right to collect berthing charges is

not planted u p o n the condition that the pier be publicly o w n e d ,
likewise m e r c h a n d i s e imported or exported loaded in/from a
private wharf m a y still be covered by wharfage dues. (Luzon
Stevedoring Corporation vs. CTA, 18 SCRA 436, Procter &
Gamble, PMC vs. Commissioner of Customs, 19 SCRA 883)

d) Storage c h a r g e - a s s e s s e d on articles for storage in customs

cargo sheds and w a r e h o u s e s of the government;

Storage charge Defined:

It is the amount which the owner, consignee, or agent of

either article or baggage has to pay for the temporary
handling, storage and custody of the imported or exported
article or the baggage of the passenger.

e) Arrastre charge - which the owner of article or baggage has to

pay for the handling, receiving and custody of such imported or
exported article;

869
 Arrastre charge defined:

It is the amount which the owner, consignee, or agent of

either article or baggage has to pay for the handling,
receiving and custody of the imported or exported article or
the baggage of the passenger.

f) Tonnage due - paid by the owner or operator of a vessel

engaged in foreign trade coming to the Philippines from a
foreign port or going to foreign port from the Philippines, based
on the net tonnage of the vessel or weight of the article
discharged or laden.

Tonnage dues defined:

It is the a m o u n t paid by the owner agent, operator or

master of a vessel e n g a g e d in foreign trade coming to the
Philippines based on the net t o n n a g e of the vessel or weight
of the articles discharged or laden.

g) Other fees and c h a r g e s - charged and collected for services

rendered and d o c u m e n t a t i o n issued by the Bureau of C u s t o m s .

Examples:
1. Certificate of Philippine registry
2. Coastwise license
3. Others

1 5 0 9 . D r a w b a c k d e f i n e d - It is a d e v i c e w h e r e b y g o o d s affected by
taxes are re-exported as if they are not taxed at all.

It refers to duties or taxes paid back or remitted by the

G o v e r n m e n t on the exportation of that on w h i c h they w e r e levied.
Under the T C C , d r a w b a c k s also refer to refund of duties on
imported fuel used for p r o p u l s i o n of v e s s e l s .

1510. Prescription under the T C C :

A n s w e r . T h e T C C does not e x p r e s s any general statute of

limitation, it provided, however, that " w h e n articles have entered
and passed free of duty or final adjustment of duties m a d e with
subsequent delivery, such entry and p a s s a g e free of duty or
settlement of duties will after the expiration of o n e (1) year, from
the date of final payment of duties, in the a b s e n t of fraud or protest,
be final and conclusive u p o n all parties. This limitation does not
apply to liquidations that are tentative.

870
 H e n c e , o n e (1) year after final liquidation, the matter can no
longer be r e o p e n e d except only in two cases:

1. protest is m a d e meanwhile

2. taxpayer is guilty of fraud

N O T E : If the tax is paid in installments, the liquidation is deemed

final for the purpose of c o m p u t i n g the prescriptive period from
t h e last installment. [Ramos vs. Pamaran, 60 SCRA 327)

N O T E : T h e Tariff a n d C u s t o m s C o d e , unlike the N L R C , does not

provide for any statute of limitations on penal offenses
c o m m i t t e d under it, in such and other cases, the prescriptive
periods prescribed for the violation of penal statutes in general.
T h e periods vary d e p e n d i n g on the penalty imposed by law.

1511. What are the penalties in case of violation of the

provisions of the T C C ?

Answer.
a) If g o o d s have b e e n forfeited for violation of the Tariff and
C u s t o m s C o d e , t h e importer thereof m a y still be held criminally
liable;

b) G o o d s imported without license as required by the circulars of

the B a n g k o Sentral ng Pilipinas may be forfeited under the
Tariff and C u s t o m s C o d e ;

Importations m a d e without the necessary import

license and the release certificates issued by the Bangko
Sentral Ng Pilipinas or its authorized agent bank in the
prescribed form falls within the class of merchandise of
prohibited importation or merchandise the importation of
which is effected contrary to law, thus, the Commissioner of
Customs may seize and order forfeiture. (P. Sare
Enterprises vs. Commissioner of Customs, 29 SCRA 112)

c) Undervalued goods can be forfeited;

d) Conviction of the importer does not preclude valid imposition of

administrative fines;

N o t e : The imposition of administrative fine is not subject to

protest.

871
 e) Forfeiture may be waived by the Collector of Customs w h o may
instead impose a fine;

f) The imposition of dumping duty by the Commissioner of

Customs is appealable to the Court of Tax Appeals;

g) Administrative penalties under the Tariff and Customs Code

consist of surcharges, fines and forfeitures.

1 5 1 2 . S m u g g l i n g d e f i n e d - It is an act of any person w h o shall

fraudulently import or bring into the Philippines, or assist in so
doing, any article, contrary to law, or shall receive, conceal, buy,
sell or in any manner facilitate the transportation, concealment, or
sale of such article after importation, knowing the s a m e to have
been imported contrary to law.

Under Republic Act 5173, the main duty to suppress

smuggling or prevent smuggling is lodged with the Philippine
Coastguard.

1513. W h e n is s m u g g l i n g c o m m i t t e d ?

Answer. It is committed w h e n a person (a) fraudulently imports or

brings into the Philippines or assists in transporting or bringing into
the Philippines any article contrary to law, or (b) receives, conceals,
buys, sells or in any m a n n e r facilitates the transportation,
concealment or sale of such articles after importation knowing the
s a m e to have been imported contrary to law. (Rodriguez vs. CA)

1514. Foreign Port defined:

A n s w e r . A port or place outside the jurisdiction of the Philippines.

1515. Principal Port of Entry defined:

A n s w e r . W h i c h is the chief a n d p e r m a n e n t port of entry of the

collection district wherein it is situated and is the p e r m a n e n t station
of the Collector of such port.

Sub-port of Entry - It is a port under the administrative jurisdiction

of the Collector of the Principal Port of Entry of t h e District.

872
1516. Port of entry defined:

A n s w e r . It is a domestic port o p e n to both foreign and coastwise

trade. It shall include "airport of entry". This term shall refer to both

Entry point of imported articles:

All imported articles or g o o d s w h e t h e r subject to duty or

otherwise, c o m i n g into the Philippines shall be entered through
a c u s t o m h o u s e at the port of entry.

T h e C o m m i s s i o n e r of C u s t o m s has the authority to change

t h e limits of a collection district u p o n the approval of the
Secretary of Finance.

1517. Coastwise ports defined:

A n s w e r . T h e s e are d o m e s t i c ports as are o p e n to coastwise trade

only, w h i c h include all ports, harbors and places not ports of entry.

1518. Cargo manifest defined:

A n s w e r . Is a d o c u m e n t required by law specifying the cargoes on

broad a v e s s e l , their marks, n u m b e r s , quantity and description of
the packages and the n a m e s of the consignees thereof. It shall
include the port of departure and t h e port of delivery.

This cargo manifest is required in coastwise trade for cargo

and passengers transported f r o m one place or port in the
Philippines to another only w h e n o n e or both of such places is a
port of entry.

However, this cargo manifest is not required for cargo and

passengers transported from a coastwise port to another coastwise
port because neither of the aforesaid ports is a port of entry.

O T h e general rule is that after entry of vessel no cargo manifest

thereof shall be changed or altered E X C E P T , in the following
cases-

1. By a m e n d m e n t by the master, consignee or agent

thereof, under oath and attached to the original manifest.

2. W h e n the invoice and/or entry covering an importation

shall not have been received and recorded in the Office
of the Appraiser.

873
 5 No amendment of a cargo manifest shall be allowed when the
preceding invoice and/or entry shall have been received and
recorded in the Office of the Appraiser, E X C E P T when it is
obvious that a clerical error or any discrepancy has been
committed in the preparation of the manifest without any
fraudulent intent, discovery of which would not have been
made until after examination of the importation has been
completed.

Z> If the cargo manifest is originally written in a language other

than the official language of the Philippines, the s a m e and each
copy thereof shall be a c c o m p a n i e d by a translation into the
official language of the Philippines, i.e. in Filipino and until
otherwise provided by law, in English.

1 5 1 9 . D i s t i n c t i o n s b e t w e e n a c a r g o m a n i f e s t a n d bill o f l a d i n g :

Answer.
C a r g o Manifest Bill of L a d i n g
It is a declaration of the entire cargo It is a declaration of a specific part of
the cargo
The object of a manifest is to This is prepared as a matter of
facilitate the labors of the customs business convenience based
authorities and to prevent the exclusively on a contract and
unlawful entry of goods into the d e s i g n e d to protect the importer or
country. consignee.

O This is likewise applicable to cargo manifest of aircraft w h i c h shall

not be c h a n g e d or altered after entry of t h e aircraft into Philippine
territorial jurisdiction, E X C E P T

1. By a m e n d m e n t by the p i l o t - i n - c o m m a n d or authorized agent

thereof under oath and attached to the original manifest.

2. W h e n the invoice and/or entry covering an importation shall not

have been received and recorded in t h e Office of the
Appraiser. O n c e the cargo manifest shall h a v e b e e n received
and recorded in the said office, no a m e n d m e n t shall be allowed
E X C E P T w h e n a clerical error or any discrepancy has been
committed in the preparation of the manifest without any
fraudulent intent, discovery of w h i c h could not have b e e n made
until after e x a m i n a t i o n of the importation has b e e n c o m p l e t e d .

874
1520. Transit cargo defined:

A n s w e r . It is an article at any port from another port or place noted

in the carrier's manifest and destined for transshipment to another
local port or to a foreign port.

1521. W h o are authorized to make import entry under the

customs law?

Answer.
a) T h e importer as a holder of the bill of lading.

b) A duly licensed c u s t o m s broker w h e n so authorized by the

holder of the bill of lading.

c) An attorney-in-fact as e m p o w e r e d by the holder of the bill of

lading.

S h o u l d the import entry be coursed thru (b) and (c)

a b o v e , the importer shall himself be required to declare
under oath and under the penalties of falsification or perjury
that the declarations and statements contained in the entry
are true and correct.

S u c h statement under oath by the importer shall be a

prima facie evidence of his knowledge and consent thereto
should the importation be found unlawful.

1522. What is the rule regarding description of articles in

import entry?

A n s w e r . All imported articles must be described in sufficient detail

to enable t h e m to be identified both for tariff classification and
statistical purposes.

1523. W h a t is the m e a n i n g of "entry" in the Tariff C o d e ?

Answer. It has a triple meaning -

a) the documents filed at the customs house,

b) the submission and acceptance of the documents, and

c) the procedure of passing goods through the customs house.

875
 1524. C u s t o m s ' requirement as to the entry d o c u m e n t s :

Answer. Under the relevant provisions if the T C C , both the Import

Entry Declaration (IED) and the Import Entry and Internal Revenue
Declaration (IEIRD) should be filed within 30 days from the date of
discharge of the last package from the vessel or aircraft, otherwise,
the Bureau of Customs will d e e m the imported goods impliedly
abandoned.

1525. Within what period s h o u l d imported articles be entered

and claimed under customs law?

Answer. The imported articles shall be entered within thirty (30)

days that is non-extendible, from the date of discharge of the last
package from the vessel or aircraft, and shall be claimed within
fifteen (15) days that is also non-extendible f r o m the date of posting
of the notice to claim in conspicuous places in the Bureau of
Customs.

1526. " D i s c h a r g e of the last p a c k a g e " d e f i n e d :

Answer. It is the completion of the unloading of the shipment from

the international carrier in the case of direct discharge or from the
domestic carrier in case of a transshipped cargo.

1527. W h a t is t h e effect of failure to file an entry of i m p o r t e d

articles within 30 d a y s as prescribed by the c u s t o m s
law?

A n s w e r . T h e articles shall be d e e m e d a b a n d o n e d and shall be

subject to sale.

1 5 2 8 . D i s t i n g u i s h t h e t w o (2) k i n d s o f i m p o r t e n t r y ?

Answer
Formal Entry Informal Entry
It is used to clear from customs
This is used to clear from custody b a g g a g e a c c o m p a n i e d by
customs custody commercial p a s s e n g e r s , s h i p m e n t s of parcels
shipments and the f o r m itself is through the mails and through the
filled out by the importer himself international airport with a dutiable
or his broker. value of Php 2K or less, a n d it is filled
out by the c u s t o m s e x a m i n e r himself
for the o w n e r or a d d r e s s e e of the
parcel.

876
1529. E x a m p l e s of importations that are cleared on an informal
entry:

Answer.
a) Articles of c o m m e r c i a l nature intended for sale, barter or hire,
the dutiable value of w h i c h is P h p 10,000.00.

b) Personal and household effects, and

c) Articles not in c o m m e r c i a l quantity imported in passenger's

b a g g a g e , mail or otherwise for personal use.

1530. W h a t importations are not subject to formal or informal

entry?

Answer.
a) T h o s e intended for official use of foreign embassies, legation
and other a g e n c i e s of foreign g o v e r n m e n t ; provided the
Principle of Reciprocity is applicable.

b) T h o s e imported for personal use or family use of the members

a n d attaches' of foreign e m b a s s i e s , legations, consular officers
and other representatives of foreign government; provided the
Principle of Reciprocity is recognized.

This privilege m a y be granted only upon specific instructions of

the Secretary of Finance in e a c h instance that will be issued only
upon request of the D e p a r t m e n t of Foreign Affairs.

1 5 3 1 . Split entry defined:

A n s w e r . This happens w h e n import entries of articles covered by

one bill of lading are m a d e simultaneously for both consumption
and w a r e h o u s i n g .

1532. Pratique defined:

Answer. This is a certificate issued by the Bureau of Quarantine to

a vessel coming from a foreign port or place outside of the
Philippines before such vessel is permitted to make entry.

877
 1533. Coastwise trade defined:

Answer. In the case of Commissioner of Customs vs. Borres, 1056

Phil. 625, it was maintained that "coastwise trade" and "inter-island
trade" are not only confined to carriage for hire of passengers
and/or merchandise on board vessels between ports and places in
the Philippines. They shall also include vessels engaged in deep
sea fishing which carry their catch to a port to sell.

1534. W h a t is the duty of vessels e n g a g e d in foreign trade

u p o n arrival in the Philippines?

Answer. Vessels e n g a g e d in foreign trade are obliged to report

and enter at Ports of Entry only, E X C E P T as otherwise specially
allowed.

O W a r vessel belonging to a foreign g o v e r n m e n t is not required

to report and enters upon arrival in the Philippines pursuant to
international comity unless they are also e n g a g e d in the
transportation of articles in the w a y of trade.

3 The general rule on boarding or leaving a vessel is that - No

person is allowed to board or leave a vessel e n g a g e d in foreign
trade upon arrival at a port of entry without permission of the
customs official in charge E X C E P T the pilot, c o n s u l , quarantine
official, c u s t o m s official or other duly authorized persons.

1535. What is the prohibition i m p o s e d against any tugboat,

r o w b o a t or other craft to loiter near or a l o n g side a
vessel e n g a g e in foreign trade u p o n the arrival at a port
of entry?

A n s w e r . It is unlawful for any tugboat, rowboat or other craft

without the permission of c u s t o m s officials to loiter near or
alongside aforesaid vessel and takes any p e r s o n aboard thereon or
takes any person t h e r e f r o m .

Unauthorized tugboat, r o w b o a t or other craft is required to keep

away from aforesaid vessel at a distance of not less than 50
meters.

878
1536. W h a t is t h e rule on overstaying imported articles on
board any vessel?

A n s w e r . T h e overstaying imported articles on board any vessel

m a y be u n l a d e n by c u s t o m s authorities and stored at the expense
of the vessel after the expiration of the time for unloading thereof.

This a b o v e rule of disposal a d m i t s certain exception, such as -

a) If t h e overstaying articles are reported for transshipment to

another port.
b) Port congestion
c) Strike
d) Riots
e) Civil c o m m o t i o n
f) Failure of vessel's g e a r
g) Bad w e a t h e r
h) Other similar c a u s e s .

1537. W h a t is the duty of the master of vessel in case of

entrance of vessel through necessity?

A n s w e r . T h e master shall, within 24 hours after arrival, make a

protest under oath and state the causes or circumstances of such
necessity

T h e requisite protest must be filed with the proper Collector of

C u s t o m s of the port w h e r e the vessel has entered.

1538. W h a t is the duty of the m a s t e r of vessel in case any part

o f t h e c a r g o w a s u n l a d e n d u e t o n e c e s s i t y o r lost b y
casualty?

A n s w e r . Within 24 hours after arrival, the master shall make report

to the Collector of such fact of unlading w h o upon satisfactory proof
may approve the s a m e , and the unlading shall be considered
lawful.

1539. Are vessels entering the country due to stress of

weather or other necessities subject to port charges?

Answer. No port charges are collected on vessels entering through

stress of weather or due to other necessities.

879
1540. What are considered "remains" of a w r e c k e d vessel?

Answer. The hull and rigging of the vessel including sea stores,
articles or equipment such as sails, ropes, chains anchors and
others.

Remains, parts or equipment of Philippine vessel wrecked

either in Philippine or foreign waters are N O T S U B J E C T to duty.

Whereas, D E R E L I C T S and A R T I C L E S S A L V A G E D from

foreign vessels or aircraft picked up at sea or taken from wreck is
prima facie dutiable and may be entered for consumption or
warehousing.

1541. W h e n vessels are considered warlike under the customs

law?

Answer.
a) W h e n the vessel is of c o m m e r c i a l registry.
b) W h e n it is manifestly built for warlike purpose.

c) W h e n it is about to depart f r o m the Philippines with a cargo

consisting principally of a r m s and munitions.

d) W h e n it has on board the n u m b e r of m e n that renders it

probable that s u c h vessel is intended to c o m m i t hostilities
upon the subjects, citizens or property of any foreign state
with w h o m the Philippines is at peace.

1542. What is the duty of the Collector of C u s t o m over warlike

vessel under the T C C ?

A n s w e r . It shall be his duty to detain said vessel until t h e decision

of the President of the Philippines is obtained or until the o w n e r of
said vessel gives a b o n d or security, in d o u b l e t h e value of the
vessel and c a r g o , that the vessel will not be so e m p l o y e d , to
commit hostile acts u p o n any foreign state or people with w h o m the
Philippines is at peace.

1543. Appraised value defined:

A n s w e r . A p p r a i s e d value for the p u r p o s e of determining the proper

amount of the c a s h bond necessary for release of article under
seizure includes the dutiable value of the article plus duties, taxes
and other c u s t o m s charges.

880
1544. Transactional value defined:

A n s w e r . It is the price actually paid or payable for the goods w h e n

sold for export to the Philippines. It includes t h e invoice value of the
article plus freight, insurance, costs, e x p e n s e s and other necessary
e x p e n s e s that is used as basis for the determination of dutiable
value.

This replaces t h e Home Consumption Value as basis of

valuation of g o o d s .

1545. H o m e consumption value defined:

A n s w e r . This is the value of the imported g o o d s is based on the

value declared in the consular, c o m m e r c i a l , trade or sales invoice.
It is the price of the s a m e , like or similar articles as bought and sold
or offered for sale freely in t h e usual wholesale quantities in the
ordinary c o u r s e of trade in the principal markets of the exporting
country on the date of exportation to the Philippines (excluding
internal excise taxes to be remitted or rebated) or w h e r e there is
none on such date, t h e n on the price nearest to the date of
exportation.

N o w , the transactional value had replaced the home consumption

value in the c o m p u t a t i o n of import taxes.

1546. W h a t are the duties of the customs officer in the

examination, classification and appraisal of imported
articles?

Answer.
a) He shall determine that the packages designated for
examination and their contents are in accordance with the
declaration in the entry, invoice and pertinent documents.

b) He shall thereafter make a return in such a manner to indicate

whether the articles have been truly and correctly declared in
the entry as regard their quantity, measurement, weight and
tariff classification and not imported contrary to law.

c) He shall determine the unit of quantity in which they are usually

bought and sold and appraise in accordance with the Tariff and
Customs Code.

881
 A Customs officer who fails to comply with the
aforesaid duties - shall be punished with a fine not less than
Php 5,000.00 nor more than Php 50,000.00 and imprisonment
for not less then one (1) year nor more than ten (10) years and
perpetual disqualification to hold public office, to vote and to
participate in any public election. (RA 7650, April 6, 1993)

In addition:

1. He shall, by all reasonable w a y s and means, ascertain

the value or price of imported articles as required by law
notwithstanding any invoice, affidavit or statement of cost
of production and shall report the appraisal and
classification of said articles.

2. He shall describe all articles on the face of the entry in

tariff and in such terms as will enable the Collector to
pass upon the appraisal and classifications of said
articles.
3. He shall see to it that representative and sufficient
samples of all kinds of articles that m a y be readily
sampled are taken under proper receipts and retained for
official purposes, E X C E P T s a m p l e s of articles identical in
quality, material and values if return is desired longer
than may be required for use in contested c a s e s .

1547. An appraisal, classification or return as finally passed

upon by the Collector m a y not be c h a n g e d or readjusted,
EXCEPT-

Answer.
a) Within O N E (1) Y E A R after p a y m e n t of the duties, upon
statement of error as provided under the Tariff and Customs
Code.

b) Within fifteen (15) d a y s after p a y m e n t of t h e duties, upon

request for reappraisal and/or classification a d d r e s s e d to the
C o m m i s s i o n e r by the Collector, if the appraisal and/or
classification are d e e m e d to be low.

c) In case of a timely protest filed by the interested party with the

Collector.

882
1548. M a y the import taxes be assessed for a lesser amount
than the entered values?

A n s w e r . No. Import taxes and duties shall not be assessed in any

c a s e u p o n an a m o u n t less than the entered value unless by
direction of the C o m m i s s i o n e r .

1549. W h a t is the rule as to a m o u n t of duty after the

a s s e s s m e n t of imported articles is m a d e by the customs
official?

A n s w e r . T h e correct duty shall be a s s e s s e d on every imported

article and the said a m o u n t shall not be less than the entered value
unless by direction of the C o m m i s s i o n e r under the following cases

a) W h e n t h e importer certifies at the time of entry that the entered

value is higher by the dutiable value.

b) T h a t the articles are so entered to meet increases made by the

appraiser in similar c a s e s pending re-appraisement.

c) T h a t the lower a s s e s s m e n t shall be allowed only w h e n the

importer's contention is sustained by final decision and shall
a p p e a r that the action of the importer w a s taken in good faith
after due diligence and inquiry on his part.

1550. W h a t is the effect of failure to pay internal revenue taxes

on imported cigarettes?

A n s w e r . Said cigarettes Become merchandise of prohibited

importation. According to the S u p r e m e Court, where internal
revenue on certain cigarettes has not been paid, it is clear that said
cigarettes fall within the category of "merchandise of prohibited
importation", the importation of which is contrary to law and may
justify its forfeiture. (Vierneza vs. Commissioner of Customs, 24
SCRA)

1 5 5 1 . Is t h e C o l l e c t o r a u t h o r i z e d to sell i m p o r t e d articles
w h o s e delivery is withheld for non-payment of customs
duties?

Answer. The Collector may sell imported articles or any portion

thereof whose delivery is withheld due to non-payment of customs

883
 duties upon proper notice to the importer as in seizure cases to
cover the outstanding account or liability of the importer.

1552. W h a t are the legal r e q u i r e m e n t s for delivery or release of

imported articles under the c u s t o m s law?

A n s w e r . The Collector shall make delivery of shipment only, upon

the surrender of the bill of lading, to person w h o by the terms
thereof appears to be the consignee or lawful holder of the bill and
the Collector shall not be liable on account of any defect in the bill
or irregularity in its negotiation, unless he has notice of the s a m e .

O The Collector shall be liable for d a m a g e s arising from the

delivery or release of articles without the surrender from such
person of the bill of lading covering said articles.

EXCEPTION -

Upon written order of carrier or agent of the importing

vessel or aircraft in w h i c h case neither the g o v e r n m e n t nor the
collector shall be held liable for any d a m a g e s that may arise
out of wrongful delivery. T h e Collector m a y require the
production of an exact copy of the bill of lading subsequent
thereto.

1553. Under what instances m a y the Collector validly withheld

the delivery of imported articles?

Answer.
a) W h e n the Collector is duly notified in writing of a lien on
freight, lighterage or general a v e r a g e u p o n any imported
articles in his custody, unless he is satisfied that the claim
has been paid or s e c u r e d .

b) W h e n the c u s t o m s e x p e n s e s incurred by the c u s t o m s service

for the handling or storage of articles and other necessary
operations in connection therewith or incident to seizure and
constituting as c h a r g e s on t h e articles h a v e b e e n paid.

c) W h e n any fine or surcharge legally i m p o s e d on the articles is

not paid or secured to be paid.

d) W h e n e v e r any importer except the g o v e r n m e n t has an

outstanding and d e m a n d a b l e account with the Bureau of
C u s t o m s , unless delivery is authorized by the Commissioner.

884
1554. W h a t are the rules on delivery of u n e x a m i n e d package?

A n s w e r . To effect the delivery of u n e x a m i n e d package, the

Collector shall -

a) Require a c a s h deposit, an irrevocable domestic letter of credit,

bank g u a r a n t e e or a bond in an a m o u n t equal to 1 0 0 % of the
duties, taxes, fees or other c h a r g e s sufficient to safeguard the
revenue.

b) In c a s e of n o n - c o m p l i a n c e therewith, all the packages shall be

held until t h e return is m a d e a n d duties, taxes, fees and other
charges are paid.

1555. W h a t is the rule on a b a t e m e n t of duties due to d a m a g e

incurred during voyage of the vessel?

A n s w e r . A b a t e m e n t of duties shall not be allowed on account of

d a m a g e incurred or deterioration suffered during the voyage of
importation, a n d duties will be a s s e s s e d on the actual quantity
imported as s h o w n by the return of w e i g h e r s , gaugers, measurers
or appraisers.

In case of missing package(s) as appearing in the manifest or

bill of lading, u p o n certification under penalty or perjury and/or
falsification by the importer or consignee and upon production of
proper proof to the Collector that the missing goods have not been
imported into the Philippines, abatement shall be effected.

In case of deficiency of any article as called for by the invoice,

upon proper certification under penalties of perjury and/or
falsification by the importer and production of satisfactory proof to
article in the Philippines, abatement shall likewise be effected.

1556. Under w h a t instances m a y the Collector abate or refund

t h e a m o u n t o f d u t i e s a c c r u i n g o r p a i d u p o n a r t i c l e s lost
or d e s t r o y e d after arrival of vessel in the Philippines?

Answer.
a) W h e n the articles are lost or destroyed while within the limits of
any port of entry prior to unlading under customs supervision.

b) While the articles aforesaid remain in customs custody after

unlading.

885
 c) While the articles aforesaid are in transit under irrevocable
domestic letter of credit, bank guarantee or bond with formal
entry in accordance with the T C C from the port of entry to any
port in the Philippines.

Abatement of duty on dead or injured animal shall be allowed

upon certification under penalties of falsification or perjury and
upon production of satisfactory proof to the Collector that the said
animal that is the subject of importation dies or suffers injury before
arrival or while in customs custody. However, the carcass of any
dead animal remaining on board a vessel or within customs
custody shall be removed in the manner required by the Collector
and at the expense of the importer.

Abatement or refund of duties, taxes and other charges are not

allowed on articles lost or destroyed in bonded public or private
warehouses outside customs z o n e .

1557. W h e n does the Bureau of C u s t o m s normally exercise

administrative remedy to enforce tax collection?

A n s w e r . The Bureau of C u s t o m s normally avails itself of the

administrative remedy of seizure, s u c h as by enforcing the tax lien
on the imported articles, instead of t h e judicial r e m e d y w h e n the
goods to w h i c h the tax lien attaches, regardless of ownership, is
still in the custody or control of the G o v e r n m e n t . However, if the
importation is prohibited or u n d e c l a r e d , the r e m e d y of seizure and
forfeiture may still be exercised by the BC e v e n if the g o o d s are no
longer in custody.

1558. W h e n does the Bureau of Customs normally exercise

judicial remedy to enforce tax collection?

A n s w e r . W h e n t h e g o o d s are properly released and thus beyond

the reach of tax lien, the g o v e r n m e n t can seek p a y m e n t of the tax
liability through judicial action since the tax liability of the importer
constitutes a personal debt to t h e g o v e r n m e n t , therefore,
enforceable by action. In this c a s e , judicial r e m e d y is normally
availed of instead of administrative r e m e d y .

1559. R E M E D I E S O F T H E G O V E R N M E N T :

A n s w e r . A) Extrajudicial or A d m i n i s t r a t i v e -

886
1. Enforcement of Tax Lien:

H o w effected? Bureau issues a warrant of distraint. T h e

property is sold and the proceeds applied to the taxes. The
e x c e s s a n d deficiency both go to the taxpayer.

Available only w h e n t h e g o o d s are still within the custody or

control of the B u r e a u .

T h i s r e m e d y is u s e d w h e n the importation is not

prohibited nor the import entry improperly m a d e . For
e x a m p l e - the lien arose only b e c a u s e there w a s a mistake
in the a s s e s s m e n t , not b e c a u s e the g o o d s w e r e prohibited
or t h e importation w a s irregular.

If t h e importation is not prohibited and there was a

declaration in the import, t h e n there is a final liquidation of
t h e import entry. Consequently, t h e period to enforce the
lien, if there is a deficiency is only o n e year, unless there is
fraud or protest.

T a x lien is distinct f r o m " e n f o r c e m e n t of tax lien".

W h e n t h e tax to an article is not paid, the tax lien

attaches to the thing a n d can be enforced against it, even if
m e a n t i m e it gets into the hands of an innocent purchaser
for value. However, the lien can be enforced
administratively only if the thing is still within the custody of
the B u r e a u . O n c e it is no longer in the Bureau's custody,
the only w a y to enforce the tax lien is by going to court in
an action for collection.

If the property falls into the hands of an innocent

purchaser for value, the Bureau of Customs can no longer
retake the property. In fact, e v e n he innocent purchaser
still has all the g o o d s intact, the Bureau cannot retake
t h e m , although it can go to court to enforce its tax lien.

2. Seizure and Forfeiture:

Comparison: While enforcement (equivalent to distraint)

applies only w h e n the importation is neither prohibited nor
improperly made, seizure and forfeiture applies when the
importation is prohibited or improperly made.

887
How effected? Collector issues warrant for the detention of the
goods. Formal hearing is set, and the importer is notified
thereof. The Collector renders decision.

Appeals . . . .

The net result of this remedy is that the government

appropriates the ownership of the thing, but without
deficiency and without prejudice to criminal action.

Available only w h e n the importation is unlawful or irregularly

made. For example - importation is contraband. T h u s , if the
importation is legal, even if the goods are still within the
custom's custody and still in the hands of the importer, the
goods cannot be seized or forfeited.

Available even w h e n the g o o d s are no longer in the custody of

the Bureau. Available e v e n w h e n the g o o d s are already in
the hands of an innocent purchaser w h o knew nothing of
the illegality of the importation. G o o d faith is immaterial as
far as the seizure is c o n c e r n e d . It is, however, a valid
defense in a criminal prosecution.

While pending with the collector of c u s t o m s , the courts

cannot interfere with the seizure and forfeiture. T h e Court
of Tax A p p e a l s must wait for the a p p e a l .

Examples of properties subject to forfeiture under the T C C :

1. Vessels or aircraft u s e d for s m u g g l i n g ;

2. Articles of prohibited importation;

3. Un-manifested c a r g o e s ;

4. A n y p a c k a g e or imported article w h i c h is found by

the e x a m i n i n g official to contain any article not
specified in the invoice or entry;

5. A n y m o n e y or thing of v a l u e offered as a bribe or

for the purpose of exerting improper influence
over a c u s t o m s official or e m p l o y e e .

M o n e y if attempted to be brought outside of the

Philippines contrary to law, c a n be forfeited.

888
1560. W h a t is the nature and purpose of seizure proceedings
under the T C C ?

Answer.
a) P r o c e e d i n g s in seizure c a s e s are actions in rem directed
against t h e property seized, not against the owner thereof. In
s u c h actions, the property itself is the defendant. T h e title of
the c a s e is, for instance, Republic of the Philippines vs. T w o
H o n d a A c c o r d Motor Vehicles. T h e r e is an actual trial as in
judicial proceedings (Pascual vs. Commr. of Customs,
4/29/66, Cigare vs. Commr. of Customs, 8/29/66, Vierneza
vs. Commr. of Customs, 7/30/61)

Forfeiture proceedings are civil and not criminal in

nature. (Lazaro vs. Commr. of Customs, 5/14/66, Capulong
vs. Aseron, 5/14/66)

b) In a seizure c a s e , the g o v e r n m e n t seeks t h e transfer of the

title to the property f r o m the o w n e r to the state as a
punishment to t h e property itself. T h e forfeiture may be
enforced against the g o o d s independently of the criminal
prosecution against the offender. (Pascual vs. Commr. of
Customs, 4/25/62)

N O T E : Every vessel from a foreign port must have on board a

c o m p l e t e manifest of all her cargo. The cargo manifest and
e a c h copy thereof shall be a c c o m p a n i e d by a translation into
the official language of the Philippines if originally written in
another language. T h u s , g o o d s that are not manifested or
those that do not form part of the sea store's inventory or
provisions can be the subject of forfeiture. [Kurst Nilsen, et al.
vs. Commissioner of Customs, 89 SCRA 43)

1 5 6 1 . Procedure in seizure cases of imported articles:

Answer.
a) T h e Collector issues a warrant for the detention or forfeiture of
the imported articles;

b) T h e Collector gives the importer a written notice of the seizure

and fixes a hearing date to give the importer an opportunity to
be heard;

c) A formal hearing is conducted;

889
 d) The Collector renders a declaration of forfeiture

e) The importer aggrieved by the action of the Collector in any

case of seizure may appeal to the Commissioner for review
within fifteen (15) days from written notice of the collector's
decision;

f) The importer aggrieved by the action or ruling of the

Commissioner in any case of seizure may appeal to the CTA;

g) The imported may proceed on appeal to the SC as in case may

be.

1562. Under w h a t g r o u n d m a y the Collector of C u s t o m s issue

Warrant of Seizure and Detention of articles under the
TCC?

Answer. Issuance of the W a r r a n t of Seizure and Detention must

be based upon probable c a u s e that the articles in question were
imported or attempted to be exported contrary to the Tariff and
Customs Law.

1563. Proof required in seizure and forfeiture of imported

goods under the T C C :

Answer. W h e n goods are seized and the seizure is not protested,

there is no need for prima facie e v i d e n c e , probable cause is
enough. However, w h e n t h e seizure is contested, prima facie
evidence is required to effect the seizure.

T h e existence of probable c a u s e is required to warrant the

institution of forfeiture proceedings. H o w e v e r , o n c e this is
established, the burden of proof shifts to the importer to s h o w that
he is excepted from the violation. (Acting Commr. vs. CTA &
Andrulis)

Notice to taxpayer if there are proceedings for seizure,

forfeiture etc. is a requirement of d u e process. (Commissioner vs.
Campos Rueda)

1564. What is the duty of the Collector of Customs upon

m a k i n g a seizure of imported articles?

A n s w e r . The Collector of C u s t o m s shall issue a W a r r a n t for the

detention of the property.

890
 The o w n e r or importer of the property m a y ask for the release
of his property under seizure provided the property is going to be
u s e d for legitimate purpose and u p o n filing of sufficient cash bond
in an a m o u n t to be fixed by the Collector of C u s t o m s subject to the
following conditions -

a) T h e a m o u n t of the cash shall not in any case be less than the

appraised value of t h e article plus fines, e x p e n s e s and costs
that m a y b e a d j u d g e d in the case.

b) T h e r e is no prima facie e v i d e n c e of fraud in the importation of

the article.

c) T h e importation of the article is not prohibited by law, and

d) T h e release under c a s h b o n d has been approved by the

Commissioner of Customs.

1565. W h o are the o w n e r s of articles in seizure proceedings?

Answer.
a ) Importer
b) Consignee
c) A n y person holding the bill of lading

1566. W h o are d e e m e d agents in seizure proceedings?

A n s w e r . It shall include not only any agent in fact of the owner of

t h e seized property but also any person having responsible
possession of the property at the time of seizure, if the owner or his
agent in fact is u n k n o w n or cgnnot be reached.

1567. H o w is notification to k n o w n o w n e r of imported articles

effected in case of seizure?

Answer. By giving written notice of the seizure and opportunity to

be heard to the importer, consignee or their agents in reference to
the delinquency that w a s the occasion of such seizure.

1568. H o w is service of notice to u n k n o w n owner of goods

effected in seizure cases?

Answer.
a) By posting the notice for 15 days in the public corridor of the
customhouse of the district in which the seizure was made.

891
 b) By publication in a newspaper.

c) By such other means as the Commissioner of Customs shall

consider desirable.

If after fifteen (15) days the unknown owner fails to appear after
notification of seizure the Collector shall declare the property
forfeited to the government to be sold at auction in accordance with
law.

1569. H o w is seizure case in c u s t o m s law settled?

Answer.
a) By payment of fine, or

b) By redemption of forfeited property.

1570. W h a t are the requisites for the settlement of seizure case

through the payment of fine:

Answer.
a) T h e seizure case is still pending adjudication with the
Collector of C u s t o m s .

b) There is no fraud in the importation or exportation of the

article in question.

c) T h e owner, exporter, importer or c o n s i g n e e or his agent shall

offer to pay the fine i m p o s e d u p o n the property, a n d

d) T h e fine imposable must be in an a m o u n t not less than 2 0 %

or more than 8 0 % of the landed cost of the imported seized
article or the F O B value of t h e seized article for export.

e) T h e property under seizure is not absolutely prohibited nor

the release thereof is not contrary to law, and

f) T h e settlement must be subject to the approval of the

C o m m i s s i o n e r of C u s t o m s .

1571. Requisites of forfeiture of g o o d s u n d e r the Tariff C o d e :

A n s w e r . T h e wrongful making by the owner, importer, exporter or

consignee of any declaration or affidavit, or t h e wrongful making or

892
 delivery by t h e s a m e person of any invoice, letter or paper - all
touching on the importation or exportation of merchandise;

T h e falsity of s u c h declaration, affidavit, invoice, letter or paper;

and an intention on the part of the importer or consignee to evade
the p a y m e n t of the duties d u e .

T h e fraud must be proved to justify forfeiture. It must be actual,

a m o u n t i n g to intention of w r o n g d o i n g with the clear purpose of
avoiding the tax. {Republic vs. CTA, October 2, 2001)

1572. W h a t is the extent of the jurisdiction of the

C o m m i s s i o n e r of C u s t o m s in forfeiture proceedings?

A n s w e r . T h e C o m m i s s i o n e r of C u s t o m s w h e n sitting in forfeiture
proceedings constitutes a tribunal u p o n w h i c h the law confers
jurisdiction to d e t e r m i n e all questions touching the forfeiture and
further disposition of t h e illegally imported merchandise. (Auyong
Hian vs. CTA, 59 SCRA 110)

1573. W h o has the b u r d e n of proof in seizure and/or forfeiture

cases?

Answer.
a) In all proceedings t a k e n for the seizure and/or forfeiture of any
vehicle, v e s s e l , aircraft, beast or articles under the provisions
of the tariff and c u s t o m s laws, the burden of proof lies upon the
claimant;

b) It is required, however, that probable cause shall be first shown

for the institution of such proceedings and the seizure and/or
forfeiture w a s m a d e under the circumstances and in the
manner prescribed by the Tariff and Customs Code.

1574. W h a t is the degree of burden of proof in protest cases?

Answer. In protest cases, the protestant has the burden of proving

the correctness of his contention for the issue is not whether the
Collector w a s w r o n g but whether the importer is right. The
presumption is that the assessment if correct. (Behn Meyer & Co.
Ltd., vs. Insular Collector of Customs, 26 Phil. 647)

893
1575. Distinguish b e t w e e n protest a n d forfeiture of imported
goods:

A n s w e r . In protest cases involving the legality or correctness of

customs duties, where the taxpayer disagrees with the ruling of the
Collector, the taxpayer can file a protest within 15 days from his
payment, or within 15 days from the date the importer is entitled to
refund if payment is rendered erroneous or illegal by events
occurring after the payment. If not thus protested, the action taken
by the Collector shall be final and conclusive against the taxpayer
except as to manifest error.

In seizure cases involving the forfeiture of prohibited, absolute

or qualified, or illegal importations including the carrying vessel or
aircraft, the Collector, shall give the o w n e r a written notice thereof,
if known, or cause its posting or publication, if u n k n o w n , giving him
an opportunity to be heard. After hearing, the Collector shall make
his written decision. An aggrieved taxpayer may, within 15 days
from notice thereof, appeal the s a m e to the Commissioner by
simply notifying the Collector of his desire to have the matter
reviewed by the Commissioner, forthwith, t h e Collector should
forward the records to the C o m m i s s i o n e r .

N O T E : The release of the property under seizure a n d cash bond

does not release the o w n e r or the importer of any criminal liability
arising out of the importation or exportation of his shipment.

1576. Cases reiterating that the importation of g o o d s deemed

smuggled are subject to forfeiture by the customs
officials:

A n s w e r . In the following c a s e s , it w a s held that:

a) Commissioner vs. Castro - dutiable g o o d s of commercial

quantity m a d e to pass under the cover of p a s s e n g e r s ' baggage
or otherwise u n m a n i f e s t e d ; unless there be unmistakable proof
of honest mistake.

b) Leuterio vs. Commissioner - imported articles that are

undervalued.

c) Bastida vs. Acting Commissioner - m e r c h a n d i s e , including

foreign dollars or other foreign currency that have c e a s e d to be
legal tender, a n d anything that m a y be the subject of
importation or exportation, not d e c l a r e d .

894
1577. Rule on forfeiture of vessels used in unlawful
importation:

A n s w e r . In Commissioner vs. CTA and Pascual, a motorboat

o w n e d by Pascual w a s a p p r e h e n d e d by the navy off Cavite loaded
with blue seal cigarettes. Forfeiture proceedings w e r e instituted.
Pascual c o n t e n d e d that he had no knowledge of the cargo, and
that the crew w a s forced at gunpoint to load t h e m . T h e SC
nevertheless allowed the forfeiture, citing par. (a) and (b), Section
2 5 3 0 of T C C . Since forfeiture proceedings are in r e m and are thus
directed against the res, the fact that the o w n e r of the vessel had
no actual k n o w l e d g e that his vessel w a s being illegally used to
transport dutiable items d o e s not render the vessel i m m u n e from
forfeiture;

In Rigor vs. Rosales, it w a s e v e n held that the articles do not even

have to be i m p o r t e d , since t h e C o d e refers to unmanifested articles
f o u n d on vessels or aircraft e n g a g e d in coastwise trade.

In Sotoyama vs. C.A., however, t h e SC did not hold for the

forfeiture of the vessel after being found carrying unmanifested
cargo on e x a m i n a t i o n . Forfeiture only holds if (1) the vessel came
in other than through a port of entry, or (2) the vessel w a s used
illegally to import g o o d s .

1578. W h e n is redemption of forfeited property N O T allowed:

Answer.
a) W h e n there is fraud

b) W h e r e the importation is absolutely prohibited.

c) W h e r e the release of the property is contrary to law.

(Transglobe Int'l. Inc. vs. CA and Commr. of Customs, January
25, 1999)

After settlement of a seizure or forfeiture case the property in

question shall be forthwith released and all liabilities that might
attach to the property by virtue of the offense including liability
incurred under any cash deposit or bond shall be deemed
released.

895
 1579. Is there double j e o p a r d y in the civil r e m e d y of seizure
and forfeiture?

Answer. As held the following cases:

People vs. Hope - Seizure and forfeiture is a civil, not a

criminal remedy. Thus, even if the property is subjected to
forfeiture, the importer can still be prosecuted without
violating the constitutional prohibition against double
jeopardy. Likewise, if the importer wins and recovers what
w a s forfeited, he may still be prosecuted.

Acting Commissioner vs. CTA and Andrulis - It was

held that the acquittal from the criminal charge does not
operate a s res judicata in a seizure o r forfeiture
proceeding, since the proceeding in the fiscal's office in
one in personam while the forfeiture proceeding is one in
rem directed against the thing itself.

Neither the C o m m i s s i o n e r of C u s t o m s nor the Secretary

of Finance may remit fines or forfeitures. (Rovero vs.
Amparo, 91 Phil. 229)

1580. W h a t a r e t h e civil p e n a l t i e s u n d e r t h e Tariff a n d C u s t o m s

Code?

Answer. Surcharge is imposable w h e n there is:

a) Failure to pay liquidated charges;

b) Unauthorized withdrawal of imported articles from bonded

warehouses;

c) Failure to supply the consular invoice w h e n required;

d) Undervaluation, misdeclaration or misclassification;

e) Failure or refusal to give e v i d e n c e or submit d o c u m e n t s for

examination.

Fine is imposable under the following c i r c u m s t a n c e s :

a) A n y dutiable article is found in the b a g g a g e of an arriving

passenger w h i c h is not included in the baggage
declaration;

896
b) B r e a c h of b o n d ;

c) Unlawful boarding or leaving of vessel or aircraft;

d) Unloading of cargo before arrival at port of destination or at

improper time or place after arrival;

e) Failure to supply t h e requisite manifest.

Forfeiture is imposable under t h e following instances:

a) A n y v e s s e l or aircraft, including c a r g o , which shall be used

unlawfully in t h e importation or exportation of articles into
or f r o m any Philippine port or place except a port of entry,
and any vessel w h i c h , being of less than 30 tons capacity,
shall be u s e d in the importation of articles into any
Philippine port or place except into a port of the Sulu sea
w h e r e importation in s u c h vessel m a y be authorized by the
C o m m i s s i o n e r , with the approval of the department head;

b) Unmanifested articles found on any vessel or aircraft, if

s u c h is required;

c) A n y m o n e y or thing of value offered as a bribe or for the

purpose of exerting improper influence over a Customs
official or e m p l o y e e ;

d) A n y article w h i c h is fraudulently concealed in or removed

f r o m any public or private w a r e h o u s e under Customs
supervision;

e) Sea stores or aircraft stores adjudged by the Collector to

be excessive, w h e n the duties assessed by the Collector
thereon are not paid or secured forthwith upon assessment
of the s a m e ;

f) Boxes, cases, trunks, envelopes and other containers of

whatever character used as receptacles or as devices to
conceal any article which is itself subject to forfeiture under
the customs and tariff laws or which is designed as to
conceal the character of the article;

g) Any vessel engaging in the coastwise trade which shall

have on board any article of foreign growth, produce or
manufactured in excess of the amount necessary for sea

897
 stores without such articles having been properly entered
or legally imported;

h) Any vessel or aircraft into which shall be transferred cargo

unladen contrary to law prior to the arrival of the importing
vessel or aircraft at her port of destination;

i) Any article of prohibited importation or exportation the

importation of exportation of which is effected or attempted
contrary to law, and all other articles w h i c h , in the opinion
of the Collector, have been u s e d , are or were intended to
be used as instrument in the importation of the former;

j) Unmanifested articles found on any vessel or aircraft, if a

manifest therefor is required;

k) Any package of imported article w h i c h is found by the

examining official to contain article not specified in the
invoice or entry, including all other packages purportedly
containing imported articles similar to those declared in the
invoice or entry to be the contents of t h e misdeclared
package, provided the Collector is of the opinion that the
misdeclaration w a s c a u s e d with fraudulent intent;

I) A n y beast actually being used for the c o n v e y a n c e of

articles subject to forfeiture under t h e c u s t o m s and tariff
laws, with the e q u i p a g e or trappings, and any vehicle
similarly used, together with the equipage and
a p p u r t e n a n c e s , including the beast, t e a m or other motive
power drawing or propelling the s a m e ; but t h e forfeiture
shall not be effected if it is established that t h e o w n e r of the
m e a n s of c o n v e y a n c e used as aforesaid, or his agent in
charge thereof at the time, has no k n o w l e d g e of the
unlawful act;

m) A n y article sought to be imported or e x p o r t e d :

1. Without going t h r o u g h a c u s t o m h o u s e , w h e t h e r the act

w a s c o n s u m m a t e d , frustrated or a t t e m p t e d ;

2. By failure to m e n t i o n to a c u s t o m s officials articles

found in the b a g g a g e of a person arriving from abroad;

3. On the strength of a false declaration or affidavit

executed by the owner, importer, exporter or

898
 c o n s i g n e e concerning the importation or exportation of
s u c h articles;

4. On the strength of a false invoice or other d o c u m e n t

executed by the owner, importer, exporter or
c o n s i g n e e concerning the importation or exportation of
s u c h article, a n d

5. T h r o u g h any other fraudulent practice or device by

m e a n s of w h i c h s u c h article w a s entered through the
c u s t o m h o u s e to the prejudice of the Government.

T h e law requires the existence of probable cause to

warrant the institution of forfeiture proceedings, but o n c e thus
t a k e n , the b u r d e n of proof lies on o n e w h o would take
exceptions thereto.

1581. May the Collector of Customs exercise the power of

remission of custom duties?

A n s w e r . A Collector of C u s t o m s has discretionary authority to

remit t h e a s s e s s m e n t and collection of c u s t o m s duties, taxes and
other charges w h e r e the aggregate a m o u n t thereof is less than ten
pesos (Php 10.00), and he m a y d i s p e n s e with the seizure of
articles of less then ten pesos in value except in cases of prohibited
importations or habitual or intentional violation of tariff and customs
laws.

1582. Is J U D I C I A L R E M E D Y for tax collection available under

the T C C ?

A n s w e r . Only civil action for collection is available. Criminal action

is not available, only in the N I R C is there recovery of taxes
t h r o u g h criminal suit.

1583. R E M E D I E S OF T H E T A X P A Y E R :

Answer. T h e taxpayer has both administrative and judicial

remedies available, but both are intertwined.

Protest

Ground - legality or correctness of the assessment of the

duties.

899
 Elements of a valid protest -

a. It must be in writing;

b. It must set forth the objection(s) to the ruling, decision or

order of the Collector of Customs in question together
with the reasons therefor.

c. It must be filed at the time of payment or 15 days

thereafter.

d. The corresponding docket fee must be paid.

Scope of protest in Customs Law -

The protest must be limited to the subject matter of a

single adjustment or other independent transaction, but
any number of issues may be raised in a protest with
reference to the particular item(s) constituting the subject
matter of the protest.

Single adjustment - refers to the entire content of one

liquidation, including all duties, f e e s , and surcharges or
fines incident thereto.

Procedure - If the t a x p a y e r disagrees with the assessment

made by the collector, he must nevertheless pay the tax,
and then protest the a s s e s s m e n t within 15 days from
payment. T h e protest must be in writing, setting forth all the
objections to the ruling or decision in question together with
the reasons relied u p o n , or else the s a m e shall be deemed
waived.

O No protest shall be considered unless p a y m e n t of the

a m o u n t due after final liquidation has first b e e n m a d e .

3 If no protest is m a d e by the importer, t h e decision of the

Collector shall be final and conclusive against him except
as to matters correctable for manifest error in the manner
prescribed by law. (Allied Brokerage Corp. vs.
Commissioner of Customs, 40 SCRA 555)

3 T h e collector t h e n c o n d u c t s a hearing de parte, and then

m a k e s a decision.

900
 3 If the decision favors the g o v e r n m e n t , the taxpayer must
appeal the s a m e to the C o m m i s s i o n e r , within fifteen (15)
d a y s f r o m receipt of notice, otherwise it b e c o m e s final. The
records of the case are automatically elevated w h e n
a p p e a l is t a k e n .

3 If the decision of the collector favors the taxpayer, there is

an a u t o m a t i c review by the Commissioner. The decision
t h e n does not b e c o m e final.

O T h e C o m m i s s i o n e r on review m a k e s his decision. If

favorable to t h e taxpayer, again there is an automatic
review by the Secretary of Finance, and so the decision
never b e c o m e s final. If, on the other h a n d , the decision
favors the g o v e r n m e n t , the taxpayer must appeal the
s a m e , otherwise it will b e c o m e final. In this case, he may
file a motion for reconsideration with the Secretary of
Finance, provided the motion is not pro forma (that is, the
motion raises n e w issues), but this is risky because the
p e n d e n c y of s u c h motion for reconsideration does not
s u s p e n d t h e running of t h e prescriptive period to appeal.
T h e better r e m e d y then is for the taxpayer to appeal the
decision of the C o m m i s s i o n e r to the Court of Tax Appeal
within 30 d a y s f r o m receipt of the decision adversely
affecting the interest of the taxpayer.

O Only the decision of the C o m m i s s i o n e r can be raised to the

C T A on petition for review. T h e decision of the collector
cannot, not only b e c a u s e it is technically not a "decision"
yet, but also b e c a u s e of the doctrine of "exhaustion of
administrative r e m e d y " .

N O T E : A tax protest case, under the T C C involves a protest of

the liquidation of import entries; A liquidation id the final
computation and ascertainment by the collector of the duties
on imported merchandise, based on official reports as to the
quantity, character and value thereof, and the collector's own
finding as to the applicable rate of duty.

1584. W h a t is the r e m e d y of a taxpayer aggrieved by the

decision or ruling if the Collector in case of seizure?

A n s w e r . Within 15 days after notification in writing by the Collector

of his action or decision on the seizure case the aggrieved person
may:

901
 A) A p p e a l the same to the Commissioner of Customs within 15
days from receipt of said adverse decision.

B) Seizure cases: Claim and Dispute

W h e n the goods are seized, the taxpayer can claim the

seized goods by paying the fine. However, this can only be
availed of if the thing is not prohibited.

Or, the taxpayer can dispute the forfeiture.

In either case, a hearing is set, the collector decides. The

same procedure for appeal as in protest cases applies.

C) R e f u n d

D) A b a t e m e n t - W h a t w a s declared and paid w a s not what was

imported, because of any of the following:
1. d a m a g e w a s incurred during the v o y a g e ;

2. packages w e r e missing;

3. contents of the p a c k a g e w e r e deficient;

4. articles w e r e lost or destroyed after arrival;

5. d e a d or injured animals.

E) D r a w b a c k - imported g o o d s w e r e correct, but w e r e re-

e x p o r t e d . (Sees. 1701-1708)

This refers to duties or taxes paid back or remitted by

the G o v e r n m e n t on the exportation of that on w h i c h they
w e r e levied. It also refers to t h e refund of duties on
imported fuel used for propulsion of vessels.

F) A b a n d o n m e n t

1. E x p r e s s - Within ten (10) d a y s f r o m the filing of import

entry, a b a n d o n m e n t m a y be m a d e , provided:

a) portion a b a n d o n e d is at least 1 0 % of total invoice;

b) not less than o n e p a c k a g e ;

902
 c) g o o d s are placed within the area.

Elements of express abandonment:

a) It m u s t be in writing;

b) It must be a d d r e s s e d to the Collector of C u s t o m s

concerned;

c) It m u s t expressly signify the intention of the owner

importer or c o n s i g n e e to a b a n d o n his importation
or s h i p m e n t ;

d) It must be subscribed and s w o r n to before a

notary public or a n y C u s t o m s officer authorized to
administer oath under Sec. 3503 of T C C . ( C M O
15-94)

H o w effected? - It occurs w h e n the owner, importer,

c o n s i g n e e of the imported article expressly signifies in
writing to the Collector of C u s t o m s his intention to
abandon.

2. Implied - If the import entry is not submitted within fifteen

(15) days. However, for the g o o d s to be sold by the
government, the collector must declare the
a b a n d o n m e n t , giving notice to the taxpayer.

H o w effected?

a) W h e n the owner, consignee or interested party after

due notice, fails to file an entry within 30 days, which
shall not be extendible from the date of discharge of
the last package from the vessel or aircraft.

b) W h e n the owner, consignee or interested party, after

having filed an entry, fails to claim his importation
within fifteen (15) days that is not also extendible,
from the date of posting of notice to claim such
importation.

c) W h e n the owner or importer fails or refuses to mark

his imported article w h e n required by law within a
period of 30 days after due notice thereof.

903
 1585. M a y an importer submit bond in support of the release of
his g o o d s f r o m t h e c u s t o m s c u s t o d y ?

Answer. Yes. However, Sec. 2301 of the T C C states that seized

articles may not be released under bond if there is prima facie
evidence of fraud in their importation.

1586. W h a t is the effect of a b a n d o n m e n t of articles subject to

tax?

Answer.
a) The owner, importer, consignee or other interested party shall
be d e e m e d to have renounced all his interest and property
rights over the a b a n d o n e d imported articles;

b) The abandoned articles shall ipso facto be d e e m e d the property

of the government and shall be disposed of in accordance with
the provisions of the Tariff and C u s t o m s C o d e ;

c) It does not relieve the o w n e r or importer from any criminal

liability that m a y arise from any violation of law committed in
connection with the importation of the imported articles.

1 5 8 7 . R e m e d y o f d e l i n q u e n t i m p o r t e d t o p r e v e n t t h e s a l e o f his
unpaid and undelivered shipment:

Answer. T h e delinquent importer m a y prior t o the sale of the

imported article, settle his obligations with t h e B u r e a u of Customs,
in which c a s e the aforesaid articles m a y be delivered u p o n proper
payment of duties, taxes and other c h a r g e s and c o m p l i a n c e with
the requirements of law.

1588. NO Injunction Rule defined:

Answer. No court can interfere in the exercise o f the exclusive

jurisdiction of the B u r e a u of C u s t o m s to enforce t h e tax liabilities
under the T C C .

The only court that c a n grant injunctions against the

Commissioner is the C T A (by special provision of law), but it can
only do so if the c a s e is within its jurisdiction. T h u s , unless the tax
is first paid, protested and d e c i d e d , a n d t h e n a p p e a l e d to the
Commissioner, the C T A cannot issue an injunction.

904
 In effect, no injunction at all can be issued against the
Collector or C o m m i s s i o n e r for the e n f o r c e m e n t of payment or
seizure.

1589. R e m e d y of an importer during the pendency of seizure

proceedings:

Answer.
a) Filing of bond - T h e importer or o w n e r m a y secure the
release of the property u p o n the filing of a sufficient bond in
an a m o u n t to be fixed by the Collector conditioned for the
p a y m e n t of t h e appraised v a l u e of the merchandise and/or
fine, e x p e n s e s a n d cost that m a y be a d j u d g e d in the case.
H o w e v e r , articles of prohibited importation cannot be
released under b o n d .

c) Settlement of c a s e - He m a y w a i v e forfeiture proceedings by

a settlement of the c a s e u p o n p a y m e n t of the proper fine or,
if the property is subject to forfeiture, the domestic market
v a l u e (not appraised value) of t h e property.

1590. S U M M A R Y O F T A X P A Y E R ' S C U S T O M S PROTEST

A party adversely affected by the imposition of customs duties

m a y file a written protest on his alleged liabilities with the Collector
of C u s t o m s within fifteen (15) days a f t e r p a v i n g the subject
a m o u n t of duties.

Hearing within fifteen (15) d a y s from receipt of the duties under

protest before the Collector. T h e Collector shall decide the issue
after termination of t h e hearing within thirty (30) days;

a) If Collector's decision is adverse to the taxpayer-importer

he m a y appeal to the C o m m i s s i o n e r of Customs within
fifteen (15) days from receipt of the former's adverse
decision;

b) If the Commissioner's decision is adverse to taxpayer's

interest he may appeal to the C T A within thirty (30) days;

c) Appeal to the Supreme Court by certiorari within fifteen

(15) days from receipt of CTA's adverse decision.

O If the decision of the Collector is adverse to the Government:

905
 a) An automatic review is taken by the Commissioner of
Customs,

b) Should the Commissioner sustain the Collector's decision,

the Secretary of Finance automatically reviews such
decision;

N O T E : if the Commissioner or the Secretary of Finance

fails to resolve the case within 30 days from receipt of the
record of the case, the decision shall b e c o m e final and
executory.

c) If the decision of the Commissioner or the Secretary of

Finance reversed the Collector's decision resulting now to
an adverse decision against the taxpayer, he m a y appeal
to the C T A within 30 days from receipt thereof;

d) Then to the SC within 15 d a y s from receipt of the CTA's

decision.

^ The Collector acting within his jurisdiction shall cause the

imported g o o d s to be entered at the c u s t o m s w a r e h o u s e .

The Collector shall assess, liquidate and collect the duties

thereon or he may detain the goods if the importer does not
pay the duties.

1591. W h e n is there automatic review of tax cases?

A n s w e r . A u t o m a t i c review by the Secretary of Finance arises only

in the following c a s e s :

a) T h o s e involving a n t i - d u m p i n g duties a n d anti-countervailing

during;

b) w h e n the c o m m i s s i o n e r ' s decision in the a s s e s s m e n t case is

adverse to the g o v e r n m e n t .

T h a t a d e c i s i o n is a d v e r s e to the g o v e r n m e n t is r e c k o n e d
f r o m the original a s s e s s m e n t .

Illustration:

T h e examiner a s s e s s e s the tax at P h p 50,000.00. Importer

pays and protests, claiming the tax is only Php 10,000.00. After

906
 hearing, the collector reconsiders and reduces the assessment to
Php 20,000.00. This is adverse not only to the importer, but also
to the g o v e r n m e n t b e c a u s e there w a s a diminution of the
a m o u n t . So the reckoning point is the original assessment. Once
it is r e d u c e d , it is d e e m e d a d v e r s e to the government, even if the
collector a c k n o w l e d g e s his mistake.

1592. W h a t decisions of the Commissioner of Customs are

appealable to the Court of Tax Appeals?

Answer.
a) T h o s e involving liability for c u s t o m s duties, fees or other money
charges;

b) T h o s e involving seizure, detention, or release of property

affected;

c) T h o s e involving fines, forfeitures or other penalties imposed in

relation thereto;

d) T h o s e involving other matters arising under the Customs Law

or other law or part of law administered by the Bureau of
Customs.

1593. W h a t is the role of the regular courts in matters of cases

involving imported goods?

A n s w e r . T h e regular (RTC) courts are devoid of jurisdiction to

interfere in seizure proceedings despite allegation of illegality for
such exclusive authority is vested in the Bureau of Customs.
(Ponce Enrile vs. Vinuya, January 30, 1971)

T h e regular courts issuing a warrant to search a dwelling

house have no authority to take custody of goods subsequently
seized, as the s a m e would be in violation of Customs laws.
(Collector of Customs vs. Torres, et. al, May 31, 1972)

1594. T H E R E P U B L I C OF T H E PHILIPPINES IS NOT E X E M P T

FROM S T O R A G E CHARGES ON IMPORTATIONS FOR
ITS O W N U S E A N D P U R P O S E S IF S T O R E D IN A
PRIVATE WAREHOUSE, GOVERNMENT IMPORTATIONS
ARE EXEMPT ONLY WHEN STORED IN GOVERNMENT
WAREHOUSES.

907
 1595. How is a claim for refund of duties a n d taxes effected
under the Tariff a n d C u s t o m s C o d e ?

A n s w e r . All claims for refund of duties shall be made in writing and

filed with the Collector to w h o m such duties w e r e paid. Thereupon,
the Collector shall verify the claim and if found to be correct shall
certify the same to the Commissioner of Customs with proper
recommendation together with all the necessary papers and
documents. Upon receipt of the C C , he shall cause the claim to be
paid if found correct.

If as a result of the refund of customs duties there would

necessarily result a corresponding refund of internal revenue taxes
on the s a m e importation, the Collector shall likewise certify the
same to the Commissioner w h o shall cause the excess taxes to be
paid, refunded or tax credited in favor of the importer, with advice
to the CIR.

1596. C o m p r o m i s e proposal of c u s t o m s duties:

A n s w e r . T h e power to c o m p r o m i s e with respect to c u s t o m s duties

is, at best, limited to cases w h e r e potestative authority is
specifically granted such as in the remission of duties by the
Collector subject to the approval of the C o m m i s s i o n e r of Customs
and the Secretary of Finance.

1597. May the C o m m i s s i o n e r of C u s t o m s c o m p r o m i s e criminal

liability o f a n o f f e n d e r i n c a s e o f u n l a w f u l i m p o r t a t i o n ?

A n s w e r . Prior to the effectivity of R.A. 1937 on July 1, 1957, the

applicable law (Section 1369 of the revised Administrative Code)
contained a provision allowing the C o m m i s s i o n e r of C u s t o m s to
c o m p r o m i s e the criminal liability of the offender in c a s e s of unlawful
importation. However, in R. A. 1937 said section w a s eliminated.
This clearly s h o w s the intent of C o n g r e s s thereafter not to allow
c o m p r o m i s e s of the offender's criminal liability in said cases.
(People vs. Desiderio, 15 SCRA 402)

REINTERATIONS ON TARIFF and CUSTOMS LAW IN

GENERAL:

3 All articles imported into the Philippines, w h e t h e r subject to

duty or not, shall be entered through a c u s t o m h o u s e at a port
of entry.

908
3 Factors that indicate prima facie fraudulent importation:

1. T h e surreptitious entry of the vessel into Philippine waters,

so that there is no proper clearance for the vessel to entry
our w a t e r s ; and

2. The absence of cargo manifest for the subject

importations.

3 T h e G o v e r n m e n t does not a s s u m e any legal responsibility in

respect to the safekeeping of articles stored in any customs or
bonded warehouse.

3 T h e Tariff a n d C u s t o m s C o d e provides for percentage on

imported articles, ad v a l o r e m .

3 T h e prescriptive period of offenses punishable under the Tariff

and C u s t o m s C o d e is t w e l v e (12) years for offenses which is
penalized with i m p r i s o n m e n t for eight (8) years and one (1) day
to twelve (12) years.

3 All imported articles except importation admitted free of duty,

shall be subject to a f o r m a l or informal entry. Articles of
c o m m e r c i a l nature intended for sale, barter or hire, the dutiable
v a l u e of w h i c h is Php 2,000.00 or less, and personal and
household effects or articles, not in commercial quantity
imported in passenger's b a g g a g e , mail or otherwise, for
personal use, shall be cleared on an informal entry whenever
duty, tax or other charges are collectible.

Import entry d e f i n e d : Is the declaration by the proper person

of the facts and data required by law for purposes of
enabling the g o v e r n m e n t to levy and charge the import
duty, tax, fee and charge.

Period within w h i c h to deposit imported articles in the

customhouse:

Imported articles must be entered in the customhouse

at the port of entry within seven (7) days from the date of
discharge of the last package from the vessel either -

1. By the importer, being holder of the bill of lading;

2. By a customs broker acting under authority from a

holder of the bill of lading; or

909
 3. By a person duly empowered to act as agent or
attorney-in-fact for such holder.

The 7-day period may be extended by the Collector of

the port for not more than seven (7) days. (Ramon Ramos,
Jr. vs. Pamaran, 60 SCRA 327)

3 In all proceedings taken for seizure and/or forfeiture of any

vehicle, aircraft, beast or articles under the provisions of the
tariff and customs laws, the burden of proof shall lie upon the
claimant;

3 Goods in Customs custody pending payment of customs duties

are beyond the reach of attachment;

3 The Principle of Primacy of Exhaustion of Administrative

Remedies shall be followed in cases involving questions
cognizable under the T C C ;

3 Unlike in the enforcement of the tax lien, if g o o d s are forfeited

there is no deficiency j u d g m e n t . T h e taxpayer m a y recover the
goods, if importation is not prohibited, by paying the fine or the
value of the g o o d s if forfeited;

3 W h e r e the importation is prohibited, the r e m e d y of seizure and

forfeiture may be exercised by the Bureau of C u s t o m s even
w h e r e the g o o d s are not or no longer in t h e C u s t o m s custody
and in possession or control of t h e importer or his transferee
whether in g o o d faith or in bad faith;

3 T h e V A T and excise tax i m p o s e d under t h e N I R C , w h e n due

on an importation constitute a tax lien on the goods
S U P E R I O R to all c h a r g e s or liens t h e r e o n irrespective of the
possessor thereof.

1598. COMPARATIVE SUMMARY OF DEVICES AND REMEDIES

UNDER THE NIRC A N D THE T C C TO E N F O R C E TAX
COLLECTION: (Government devices & remedies in
general)

/ WAYS OF STRENGTHENING THE EFFECTIVE TAX

ENFORCEMENT

910
 U n d e r the N I R C a n d the BIR: U n d e r the T C C , BC & T C :

a) Educational c a m p a i g n , publicity a) Educational c a m p a i g n , publicity

and tax counseling. and tax counseling

b) O b s e r v a n c e of t h e c a n n o n s of a b) O b s e r v a n c e of the canons of a
sound tax s y s t e m . s o u n d tax s y s t e m .

c) Information gathering and c) Tariff C o m m i s s i o n and Philippine

preparation of tax registers. C o n s u l a r Officer's researches and
continuous data gathering

d) Registration of business name d) Registration of vessels and

with the DTI a n d with BIR. aircraft in coastwise and foreign
trade.

e) Required issuance of sales e) Required commercial and

invoices and receipts a n d keeping of consular invoices or certification by
accounting books. Philippine consular officials.

f) Effective BIR organization, and f) Effective B C , T C , PCG & PPA

selection of efficient and honest organization and manning them with
personnel, proper coordination with efficient and honest personnel,
other g o v e r n m e n t offices lending proper coordination with other
indirect support to tax collection. g o v e r n m e n t offices.

g) Accreditation and registration of g) Examination, accreditation and

tax agents certification of Customs Brokers.

h) Exhibition of certificate of p a y m e n t
of taxes at places of business, signs
to be exhibited by business e n g a g e d
in liquor or tobacco production or
sale

//. HOW IS DISCOVERY AND DETECTION METHODS UNDER

THE NIRC AND TCC EFFECTED?

| NIRC TCC |
a) Inspection and investigation of 1
arriving and departing vessels and
a) Examination of accounting books
aircraft; and their "entry" and
and records, requiring issuance of
"clearance" before leaving; cargo
| invoices and receipts.

91 1
 and passenger manifests and stores*
list; examination of "import entry"
required.

b) Conducting surveillance of a b) Surveillance of the Phil, coast,

business. and of arrival of vessels and aircraft.

c) Making investigation, issuing c) Making investigation, issuing

summons and taking testimony s u m m o n s and taking testimony

d) Rewards to tax informers d) Rewards to assistance in

detection of smuggling.

e) Exercise of police powers - e) Exercise of police powers -

making searches, seizures, arrests. making searches, seizures, arrests.

///. WHAT ARE THE DIFFERENT PERSUASIVE MEANS AND

SAFEGUARDS TO INSURE TAX COLLECTION UNDER THE
NIRC AND TCC?

NIRC TCC

a) Requiring deposits of b o n d s to a) Requiring bonds, cash deposits or

assure collection, or re-exportation of bank g u a r a n t e e to assure collection
goods. or re-exportation.

b) Statutory tax lien b) Statutory tax lien

c) Posing the threat and liability for: c) Posing the threat and liability for:
1. interest 1. Interest
2. Surcharges 2. S u r c h a r g e s
3. Deportation 3. Deportation
4. Criminal liability 4. Criminal liability
5. Fines, forfeitures and other 5. Fines, forfeitures and other
penalties. penalties.

d) Declaration, statements and d) Declaration of "import entry" under

returns to be m a d e under penalties penalties of falsification and perjury.
of perjury.

e) Cooperative functions of other e) Cooperative functions of the

non-tax-collecting government Philippine Coast G u a r d , Phil. Ports
agencies or offices under Authority; t h e Tariff C o m m i s s i o n and

912
 "Administrative Agencies enforcing Police A g e n c i e s .
Tax L a w s " .

f) Storage in b o n d e d w a r e h o u s e s of f) Storage in customs bonded

goods subject to specific tax. warehouses.

g) A p p r o v a l , supervision and joint g) A b s o l u t e control of BC over port

control of p r e m i s e s used in the premises, requiring all goods to pass
production or storing of g o o d s thru c u s t o m s house at port of entry;
subject to excise taxes under the vessels in foreign trade to touch only
NIRC. ports of entry and aircraft to land first
in an international port of entry.

h) Ordering termination of
accounting period.

1 5 9 9 . W H A T A R E T H E D I F F E R E N T C O E R C I V E (Extrajudicial) M E A N S
IN THE COLLECTION OF DELINQUENT TAXES:

NIRC TCC
a) Distraint (actual and constructive)
injunction is not generally
available; it m a y only be issued by
a) Collector may get goods on which
the C T A - proceeds are applied to
the g o v e r n m e n t has any claim for
the tax liability, surcharges and costs
unpaid duties, taxes, fees and other
of sale; any excess goes to the
charges.
taxpayer but any deficiency shall
also be for his account.

b) Levy b) No levy.

c) Seizure is generally applied when

c) Forfeiture - applied in non-
payment of specific taxes. (The
property subject to the tax is forfeited
in favor of the government).
penalty is fine and forfeiture -
remedy is availed of when the
importation is prohibited or irregular,
e.g., failure to file an import entry
although the importation is not
prohibited. The taxpayer, by paying
the fine or the value of the goods
may recover the goods under certain
conditions.

91 3

d) Enforcement of tax lien.
e) Compromise (does not need
Secretary's approval, and includes
criminal cases) and abatement.
f) Judicial -The g o v e r n m e n t may file
either a civil or criminal action to
recover the tax liability.
1600. COMPARATIVE REMEDIES AVAILABLE
UNDER THE NIRC AND T H E TCC:
NIRC
A) Administrative remedies
1. Before payment of the tax:
a) Protest - Disputing the
assessment by filing a
motion for reconsideration
or reinvestigation within 30
d a y s from receipt of t h e
formal a s s e s s m e n t . (Sec.
228)
b) Entering into a c o m p r o m i s e
with the BIR (Sec. 204)
2. After payment of the tax:
914
d) Enforcement of tax lien while the
goods are in customs custody or
control. The tax lien is beyond the
reach of the regular courts. The
proceeds are applied to the tax
liability surcharges and cost of sale;
any excess goes to the taxpayer but
he is also subject to make good any
deficiency. This remedy is availed of
w h e n the importation is neither
prohibited nor irregular.
e ) C o m p r o m i s e (needs approval of
Secretary, and does not include
criminal cases), and settlement.
f) Judicial - W h e n the goods are
released a n d the tax lien is lost,
judicial action against the importer
m a y then be instituted. (When the
g o o d s are prohibited or imported
irregularly, although released, the
g o o d s are still subject to seizure.
TO TAXPAYERS
TCC
A) Administrative remedies
1. Protest
a), any importer or interested
party adversely affected with
the published value of duties
m a y within 15 days from
date of publication file a
written protest.
b) If legality of assessment
or appraisal is questioned,
t a x p a y e r may protest within
15 d a y s from assessment.
* P a y m e n t under protest is
necessary.
 a) Filing claim for refund or 2. Refund - Abatement or
credit within 2 years drawback (if importation
regardless of any missing or deficient or if re-
supervening event. (Sec. exported). (Sees. 1701-
229) 1708, T C C )
N O T E : * P a y m e n t under protest is * Settlement of any seizure by
not necessary. p a y m e n t of fine or redemption of
* T a x p a y e r is given the right of foreclosed goods shall not be
r e d e m p t i o n within 1 year allowed in any case where
f r o m date of sale or forfeiture importation is absolutely prohibited
of the property sold. (Sec. or if released thereof is prohibited by
215) law. (Sec. 2 3 0 7 , T C C )

B) Judicial r e m e d i e s : B) Judicial remedies:

1. Civil A c t i o n : 1. Civil Action -
a) A p p e a l to the C T A within 30 a) A p p e a l to C T A within 30
d a y s f r o m receipt of t h e d a y s from received of the
a d v e r s e decision of the C I R adverse decision of the
or f r o m lapse of 180 d a y s C o m m i s s i o n e r of Secretary
inaction of t h e C I R on the of Finance.
dispute. (Sec. 2 2 8 ) * A d v e r s e decision of the
Collector is appealable to
b) Action to contest forfeiture t h e Commissioner not to the
C T A within 15 days from
of chattel. (Sec. 231)
receipt thereof (notice to the
collector of appeal to the
c) Action for d a m a g e s (sec. C o m m i s s i o n e r is required)
227) (Sec. 2313. T C C )

d) Injunction - W h e n the b) Action to question the

collection of the tax m a y legality of the seizure.
jeopardize interest of
taxpayer or the government,
c) A b a n d o n m e n t of the goods.
CTA may enjoin the
collection and may require (Sec. 1802, TCC)
the taxpayer to put in a
b o n d . (Sec. 1, RA 1125)

2. Criminal Action:
Acting erring and abusive
tax officials and/or
employees of the BIR.

915
N O T E : The taxpayer's judicial relief both under the NIRC and the
TCC may lie either with the CTA (exclusive in all cases
cognizable by it) or the ordinary courts (in all other cases).
 PROBLEM EXERCISES

1601. What is the objective of the anti-dumping law?

A n s w e r . It a i m s to prohibit the sale to and in the Philippines of

foreign g o o d s at unfair prices. T h e importance of the law lies not in
the n u m b e r of findings of d u m p i n g m a d e neither by the Department
of Finance nor in the a m o u n t of d u m p i n g duties collected but in its
deterrent effect on attempts to injure local industries by unfair
prices.

1602. X, a dual citizen opted to permanently reside in the

country after the approval of his dual citizenship. He
imported a two-door refrigerator for their o w n use and
paid the corresponding duties. After sometime he
decided to relocate his family to Bangkok, Thailand
instead bringing along with them all their personal
effects. Six months thereafter, his eldest son (S) got
married a n d he decided to reside in Manila. X shipped to
S t h e still n e w 2-door refrigerator earlier imported and
exported together with other various appliances so S
n e e d not b u y t h e m a g a i n in starting his family. Is the re-
importation of the same 2-door refrigerator subject to
duty?

A n s w e r . Y e s , b e c a u s e the T C C provides that "all articles, when

imported from any foreign country shall be subject to duty upon
e a c h importation, even t h o u g h previously exported, except as
otherwise specifically provided in the C o d e or in other laws.

1603. Can the customs authorities subject persons coming

into the Philippines f r o m f o r e i g n countries to search of
their person and property?

Answer. All persons coming into the Philippines from foreign

countries are liable to detention and search by Customs authorities
under such regulations as maybe prescribed relative thereto,
E X C E P T heads of states and foreign diplomats pursuant to
international law and comity.

917
 1604. W h a t treatment is a c c o r d e d to b a g g a g e of diplomats
stationed in the Philippines, a n d their office supplies and
e q u i p m e n t under the Tariff C o d e ?

Answer. They are not only exempt from duties and taxes and the
requirement of an informal and formal entry but also immune from
examination and search under condition of reciprocity.

1605. "X", a p a s s e n g e r on b o a r d a ship p a s s i n g t h r o u g h the

Port of Manila has s o m e tins of o p i u m (prohibited
articles) in his p o s s e s s i o n . Is the o p i u m subject to
seizure and the o w n e r to prosecution for alleged
importation of opium?

Answer. No. T h e mere possession of o p i u m on board vessel in

Philippine waters is not in itself sufficient to a m o u n t to an
importation of the s a m e . There must be proof of intent to import.
"X" is not guilty of the crime of illegal importation of such drug, in
the absence of proof that he intended to discharge the s a m e or to
actually bring it within the Philippines. (U.S. us C h u a Loy, 37 Phil.
510)

1606. "X", a finance attache a s s i g n e d in the Middle East, came

h o m e to the Philippines after c o m p l e t i n g his 4-year tour
of duty, bringing with him a BMW motor vehicle
registered in his n a m e . Is the car e x e m p t f r o m p a y m e n t
of duty?

Answer. Yes. Finance attache and all other attache's are included
in the e x e m p t i o n of one car. T h e y enjoy the benefits of exemption
from duties and taxes, including o n e motor vehicle upon the
dissolution of their mission.

1607. Is Philippine Government officials who returned from

special or diplomatic missions abroad exempt from
baggage examinations?

Answer. All Philippine G o v e r n m e n t officials leaving for, or returning

f r o m , official or unofficial missions a b r o a d are subject to baggage
inspection by the Bureau of C u s t o m s personnel. This is intended to
curb s m u g g l i n g .

918
1608. W h a t about packages imported by such diplomats by
freight or through the mail?

A n s w e r . S u c h p a c k a g e s w h e n bearing the official seal of a foreign

g o v e r n m e n t , a c c o m p a n i e d by a certificate under such seal to the
effect that they contain d o c u m e n t s may be admitted from of duty
without C u s t o m s e x a m i n a t i o n . A proper notation as to the
disposition of the articles should be m a d e by the Customs officer
c o n c e r n e d on the manifest.

1609. W h a t about those articles imported for the personal or

family use of the said diplomats?

A n s w e r . T h e y are also e x e m p t f r o m duties and taxes under special

a g r e e m e n t b e t w e e n t h e Philippine G o v e r n m e n t and the countries
w h i c h they represent. T h e privilege is granted only upon specific
instruction by t h e D e p a r t m e n t of Finance which is issued only upon
request by t h e D e p a r t m e n t of Foreign Affairs.

1610. T h e c u s t o m s officials seized allegedly untaxed vehicles

a n d p a r t s o f b u s i n e s s m a n J a o , p r o m p t i n g t h e latter t o
file a petition for certiorari, prohibition a n d m a n d a m u s
with prayer for a temporary restraining order with the
RTC. The RTC granted the injunction and prohibited the
respondent from seizing, detaining, transporting and
selling at public auction the disputed article. Contending
that the R T C h a d no jurisdiction over the subject matter,
the tax officials filed a petition for review with the Court
of A p p e a l s . Decide. [ N O T E : this case w a s decided prior
to RA 9282]

A n s w e r . T h e petition of the tax officials is impressed with merits.

T h e RTC is devoid of any c o m p e t e n c e to pass upon the validity or
regularity of the seizure and forfeiture proceedings conducted by
the Bureau of C u s t o m s or to enjoin or otherwise interferes with
these proceedings. T h e Collector of Customs sitting in seizure and
forfeiture proceedings has exclusive jurisdiction to hear and
determine all questions touching upon seizure and forfeiture of
dutiable goods. The RTC is precluded from assuming cognizance
over said matters even through petitions of certiorari, prohibition
and mandamus. (Jao vs. CA, October 6, 1995)

919
 Mison vs. Natividad.

Even the illegality of the warrant of seizure and detention

cannot justify the trial court's interference with the Collector's
jurisdiction between the existence of the collector's power to
the issue and the regularity of the proceedings taken under
such power. Even if there be irregularity in the exercise of
such power, the RTC does not have the competence to
review, modify, or reverse whatever conclusions may result
therefrom. (Taxpayer's remedies - appeal to the CTA)

1 6 1 1 . H o w is the office of the C o m m i s s i o n e r of C u s t o m s filled-

up in case of v a c a n c y ?

A n s w e r . In case of temporary and/or permanent vacancy, one of

the Deputy Commissioners shall be designated by the Secretary of
Finance to act as C o m m i s s i o n e r of C u s t o m s until the incumbent
Commissioner r e a s s u m e s his duties or the position is filled by
permanent appointment by the President.

1612. Assessment of customs duties is the responsibility of

the Collector. Under Sec. 1407 of the T C C , appraisal,
classification or return approved by him may not be
altered or modified in a n y manner. Does the Secretary of
Finance have the authority to order a re-assessment of
duties?

A n s w e r . Yes. Under the following instances:

a) Within one year after p a y m e n t of the duties or u p o n statement of

error as a p p r o v e d by t h e Collector;

b) Within 15 d a y s after p a y m e n t , u p o n request by the Collector for

re-appraisal or re-classification if the appraisal or classification
is d e e m e d to be low; and

c) Upon request for reappraisal or reclassification in the form of a

timely protest.

1613. X has a 1 0 - w h e e l e r truck that he u s e s in his personal

b u s i n e s s . Y, a b u s i n e s s m a n e n g a g e d in s m u g g l i n g hired
X's truck to transport imported garlic, vegetables and
other agricultural products from the customs
warehouse. X has no certificate of public convenience

920
 but a g r e e d to lease his vehicle only b e c a u s e X a n d Y
used to be c l a s s m a t e s in their high school days. X did
not k n o w that the g o o d s w e r e illegally i m p o r t e d .

C a n the Collector of C u s t o m s of the port area validly

seized the g o o d s a n d forfeit X's truck as an instrument
in the smuggling?

A n s w e r . Yes. T h e Collector of C u s t o m s of the port area can validly

seize all the g o o d s and forfeit t h e truck as an instrument in the
s m u g g l i n g activity, since the s a m e w a s used unlawfully in the
importation of s m u g g l e d g o o d s . T h e mere carrying of such articles
on board the truck in c o m m e r c i a l quantities shall subject the truck
to forfeiture, since it w a s not being used as a duly authorized
c o m m o n carrier, w h i c h w a s chartered or leased as such. [Sec.
2 5 3 0 (1), T C C ]

However, a l t h o u g h forfeiture of the vehicle will not be effected

if it is established that the o w n e r thereof has NO K N O W L E D G E of
or participation in the unlawful act, there arises a prima facie
presumption or k n o w l e d g e or participation if the owner is N O T in
business for w h i c h the c o n v e y a n c e is generally used. Thus, not
having a certificate of public c o n v e n i e n c e to operate a trucking
business, he is legally d e e m e d not to have been e n g a g e d in the
trucking business. (Sec. 2 5 3 1 , T C C ) T h e truck may validly is
forfeited in favor of the g o v e r n m e n t .

1614. X, a registered o w n e r of a v e s s e l licensed to e n g a g e in

c o a s t w i s e s h i p p i n g w a s a p p r e h e n d e d by the Phil. Navy
within the Phil, water carrying untaxed imported
cigarettes and goods. No one claimed the cigarettes and
g o o d s . C o n s e q u e n t l y , all w e r e f o r f e i t e d i n f a v o r o f t h e
g o v e r n m e n t . X c l a i m e d his v e s s e l alleging that he did
not k n o w that his vessel w a s u s e d for s m u g g l i n g . Is the
motorboat subject to forfeiture?

A n s w e r . The vessel is clearly subject to forfeiture in favor of the

Government. Forfeiture proceedings are in the nature of
proceedings in rem and are directed against the res. The fact that
X has no actual knowledge that his motorboat was used illegally
does not render the vessel exempt from forfeiture. X's defense that
he has no knowledge that his vessel was used illegally was
personal to him but cannot absolve the vessel from liability of
forfeiture.

921
1615. Grand Trading (GT) w a s the consignee of sacks of
refined s u g a r seized by the Collector of C u s t o m s on the
ground that these w e r e of foreign origin. However, In a
N o v e m b e r 3, 2002 decision, the Collector ordered the
r e l e a s e o f s u b j e c t s u g a r . T h i s d e c i s i o n w a s later
modified by the Collector finding that the sacks of sugar
w e r e really of f o r e i g n origin, s m u g g l e d into the country
and declared t h e m forfeited. GT c o n t e n d s that the
N o v e m b e r 3 decision b e c a m e final a n d executory in view
of the absence of an appeal therefrom by the aggrieved
party himself within the 15-day period provided in Sec.
2313 of the T C C . On the other hand, the Collector argued
that since the N o v e m b e r 3 d e c i s i o n w a s a d v e r s e to the
government, the case should have gone to the
Commissioner of Customs on automatic review
pursuant to Memorandum Order No. 20-87 which
implements Sec. 12 of the Integrated Reorganization
Plan. Is the N o v e m b e r decision of the Collector subject
to the automatic review of the Commissioner of
customs?

A n s w e r . Yes. Sec.12 of the Integrated Reorganization Plan which

the C o m m i s s i o n e r of C u s t o m s in his C u s t o m s M e m o r a n d u m Order
No. 20-87, enjoined all Collectors to follow strictly, is intended to
protect the interest of the g o v e r n m e n t in the collection of customs
duties in those seizure and protest cases w h i c h , without the
automatic review provided therein, neither t h e Commissioner of
Customs nor the Secretary of Finance w o u l d probably ever know
about. Without the automatic review by the C o m m i s s i o n e r of
Customs or the Secretary of Finance, a collector in any of our
country's far flung ports w o u l d have absolute and unbridled
discretion to determine w h e t h e r g o o d s seized by him are locally
produced, hence, not dutiable, or of foreign origin, a n d therefore
subject to payment of c u s t o m s duties and t a x e s . (Yaokasin vs.
Commissioner of Customs, 180 SCRA 591)

1616. W h a t are the requisites for forfeiture of goods under

S e c . 2 5 3 0 (f), i n r e l a t i o n t o ( 1 ) ( 3 - 5 ) , o f t h e T C C ?

Answer.
a) the wrongful making by the owner, importer, exporter or
consignee of any declaration or affidavit, or the wrongful
making or delivery by the s a m e person of any invoice, letter or

922
 paper - all touching on the importation or exportation of
merchandise;

b) the falsity of s u c h declaration, affidavit, invoice, letter or paper,

and

c) an intention on the part of t h e importer or consignee to evade

the p a y m e n t of the duties d u e .

1617. M a y the tax officials f r o m the B u r e a u of C u s t o m s m a k e a

valid search, seizure and arrest without a warrant?

A n s w e r . Under the Tariff and C u s t o m s C o d e , the tax officials from

the B u r e a u of C u s t o m s m a y m a k e a valid s e a r c h , seizure and
arrest e v e n without a warrant for purposes of enforcing customs
and tariff laws and tax collection. (2004 case)

N O T E : W h e r e there is illegality in seizure and forfeiture conducted

by t h e tax official or collector, the r e m e d y of the taxpayer is to
appeal to the C o m m i s s i o n e r (then to the C T A and to the SC) and
not to the R T C .

1618. May the president reverse, modify or a m e n d the decision

of the Tariff C o m m i s s i o n ?

A n s w e r . T h e Tariff C o m m i s s i o n is an agency in the Executive

Department necessarily it is subject to the control and supervision
of the President, its decisions and recommendations cannot tie the
hands of the Chief Executive with finality. Hence, the President can
reverse, modify of a m e n d the decision of the Tariff Commission.
(2005 case)

1619. Should there be conflict between the findings and

r e c o m m e n d a t i o n of the Tariff C o m m i s s i o n (TC) on the
imposition of import taxes, May the Department of Trade
a n d Industry (DTI) review or modify the findings of the
Tariff C o m m i s s i o n ?

Answer. The DTI has no authority to review or modify the findings

and recommendation of the Tariff Commission. Even if conceding
that the TC's findings may be administratively reviewed, it is the
N E D A that may conduct such review following the principles of
administrative law, and the NEDA's decision in turn is reviewable
by the Office of the President. In addition, actions of the Tariff

923
 Commission are not beyond the pale of certiorari jurisdiction of the
court. (2005 case. RE: Safeguard Measures Act)

1 6 2 0 . T h e B u r e a u o f C u s t o m s r a i d e d a n d s e i z e d g o o d s i n the
w a r e h o u s e of X Corporation on the belief that they were
unlawfully released f r o m t h e c u s t o m s c u s t o d y . X filed a
c a s e b e f o r e t h e r e g u l a r c o u r t q u e s t i o n i n g t h e validity
and regularity of the seizure and forfeiture proceeding.
Further, X believes that the right of the tax officials to
collect had a l r e a d y p r e s c r i b e d c o n s i d e r i n g that the
c u s t o m s officials a l l o w e d the release of the g o o d s from
c u s t o m s c u s t o d y with c l e a r a n c e s o t h e r w i s e h o w could
the g o o d s b e r e l e a s e d i f n o p a y m e n t w e r e m a d e relative
thereto? Will the action prosper?

A n s w e r . The regular courts (RTC) are devoid of any competence

to pass upon the validity or regularity of seizure and forfeiture
proceedings conducted by the Bureau of C u s t o m s and to enjoin or
otherwise interfere with these proceedings. T h e Collector sitting in
the seizure and forfeiture proceedings has exclusive jurisdiction to
hear and determine all questions touching on the seizure and
forfeiture of dutiable goods and the regular courts cannot interfere
with nor deprive him of such jurisdiction. (2005 case)

The seizure is valid. T h e c u s t o m s a g e n t s have authority over

seizure and forfeiture cases involving imported g o o d s . T h e regular
courts do not have jurisdiction to take c o g n i z a n c e of cases
involving seizure of imported g o o d s . T h e r e is no need of warrant
under the given facts. In fact, the seizure is not unconstitutional
because it w a s m a d e for purposes of enforcing collection of unpaid
taxes. Notably, the collection of taxes is never unreasonable. X's
submission that the right to collect c u s t o m s duties has prescribed is
not correct b e c a u s e importation has not e n d e d . For articles subject
to c u s t o m s duties, importation ends w h e n t h e regular permit for
withdrawal shall have b e e n issued and the corresponding taxes
fully paid. Considering that falsified d o c u m e n t s w e r e used
importation w a s not yet e n d e d . T h u s , prescription period to collect
has not toiled.

1 6 2 1 . X w a s n o t a b l e t o p a y his o b l i g a t i o n s t o Y . T h e latter filed

a case in court a n d w o n . A writ of a t t a c h m e n t w a s issued
by the Regional Trial Court. The court sheriff learned
that the customs agents are in possession of some
imported goods belonging to X. Before any seizure

924
 p r o c e e d i n g s could be initiated by the c u s t o m s officials,
the court sheriff w e n t to the Bureau of C u s t o m s to serve
the writ of attachment. May the goods of X be the subject
of the writ of attachment? Reason.

A n s w e r . T h e g o o d s in the possession of the c u s t o m s officials can

not be the subject of t h e writ of attachment issued by the regular
court. W h e n importation has not e n d e d the g o o d s are beyond the
reach of any court. Importation is d e e m e d terminated only upon full
p a y m e n t of the taxes i m p o s e d on said g o o d s at the port of entry
and the legal permit for its release shall have b e e n granted by the
Collector of C u s t o m s .

1622. X imported cellphones in commercial quantities from

abroad and through connivance with some customs
officials, he was able to cause the release of the
cellphones without tax payments and clearances. The
Collector received information that the cellphones are
n o w hidden in the house of Y, X's brother. The Collector
instituted seizure proceedings and ordered the seizure
a n d detention of subject g o o d s . On the strength of the
order, agents from the Bureau of Customs raided Y's
h o u s e a n d s e i z e d all t h e c e l l p h o n e s . I s t h e s e a r c h a n d
seizure valid? Reason.

A n s w e r . While t h e general rule provides that a search warrant is

not necessary to effect the search and seizure of dutiable goods
concealed for purposes of tax evasion, the customs officials cannot
enter a dwelling without a valid warrant. T h e search and seizure of
the c u s t o m s agents without the benefit of a search warrant issued
by the court is not valid and is unconstitutional. The customs
officials are allowed to enter offices, w a r e h o u s e or business
establishments without warrant for enforce customs laws but not
dwelling.

1623. M a y the Collector of C u s t o m s issue a warrant of seizure

a n d detention of a C e s s a plane used to transport
persons and gas lamps for the sole p u r p o s e of lighting
a n d g u i d i n g t h e plane's t a k e off f r o m the airstrip in aid of
smuggling?

Answer. Y e s , the Cessna plane w a s used to insure the successful

delivery of the smuggled goods. It transported the smugglers and
subsequently delivered the necessary lighting equipment to enable

925
 the cargo plane to take off without peril and transport the goods to
its final destination. Such complementary or collateral use of the
plane for smuggling operation is sufficient for it to be deemed to
have been used unlawfully in the smuggling of undeclared goods.

1624. W h a t is the basis of dutiable value of an i m p o r t e d article

subject to an ad valorem tax under the T C C ?

Answer. Under RA 9135, the basis now is the transactional value

which shall be the price actually paid or payable for the goods
when sold for export to the Philippines, adjusted by adding certain
cost elements to the extent that they are incurred by the buyer but
are not included in the price actually paid or payable for the subject
imported goods. If such value could not be d e t e r m i n e d , the (a)
transactional values of identical goods, (b) of similar goods; (c)
deductive value; (d) computed value and (e) fallback value may be
used to ascertain the import taxes d u e .

1625. Is the power of supervision and control over the

entrance of vessels a n d aircraft limited to t h o s e e n g a g e d
in domestic commerce only?

Answer. No. Such powers apply only t o vessels o r aircraft

e n g a g e d only in foreign c o m m e r c e .

1626. Are foreign mails arriving in the country within the

jurisdiction of the Bureau of C u s t o m s ?

Answer. Yes. A m o n g the general duties of t h e B u r e a u of Customs

is to supervise the handling of foreign and domestic mails arriving
in the Philippines w h e t h e r through the vessels or aircraft to
determine lawful duties d u e on imported dutiable articles but it has
nothing to do with the postage d u e t h e r e o n .

1627. W h a t is the nature of the jurisdiction of the Bureau of

Customs over seizure and forfeiture cases?

Answer. It is exclusively original. ( N O T concurrent original,

exclusive appellate and concurrent appellate)

1628. The Commissioner of Customs issued rules and

regulations that seek to tighten the release of imported
goods. X, an i m p o r t e r b e l i e v e s t h a t m o r e a v e n u e s for
graft a n d corruption results because more p e o p l e are

926
 n o w involved in the approval of the release of imported
articles. X inquires f r o m y o u the validity of the rules and
regulations issued by the Commissioner of Customs.
What is your position on the matter?

A n s w e r . All rules and regulations issued by the C o m m i s s i o n e r of

C u s t o m s shall be subject to the approval of the Secretary of
Finance. Under the given facts, if t h e rules and regulations w e r e
not a p p r o v e d t h e n they are v o i d . X c a n validly contest the same
before the court.

1629. Are vessels engaged in foreign trade allowed to touch at

a port o t h e r t h e n a port of e n t r y ?

A n s w e r . T h e Tariff C o d e requires that all vessels e n g a g e d in

foreign trade are required to t o u c h at a port of entry only. T h e only
exception is w h e n said vessel is specially allowed by the Bureau of
Customs.

1630. X goods arrived from Japan and were stored in the

customs warehouse. Before its release X w e n t to the
Bureau of Customs to check on the cartoons, thereupon,
he noticed some boxes opened and the others badly
damage. It was later established that the loss and
damage occurred during its v o y a g e . I s X e x e m p t f r o m
import duties on his losses?

A n s w e r . No he is not e x e m p t b e c a u s e the customs laws do not

allow a b a t e m e n t of duties on account of losses, d a m a g e and
deterioration during t h e v o y a g e . His remedy is to demand
reimbursement from the shipper, insurer or the broker as the case
may be.

1631. What kind of properties in customs custody can be

disposed of by public sale?

Answer.
a) Abandoned articles

b) Articles entered under warehousing entry not withdrawn;

c) Seized articles after proceedings were made; and

d) Articles subject to a valid lien for customs charges.

927
1632. If articles or g o o d s are imported free of duties, taxes and
other charges, when is its importation deemed
terminated?

Answer. Upon legally leaving the jurisdiction of the customs its

importation is d e e m e d to have terminated.

1633. W h o has jurisdiction over the r e m o v a l of a n y article or

the departure of any passenger from the landing place of
an aircraft c o m i n g into the Philippines in c a s e of
emergency or forced landing?

Answer. The Bureau of C u s t o m s and not the NAIA o r the Civil

Aeronautics Authority.

1634. X, an English national decided to marry her Filipina

girlfriend, N, w h o m he met in L o n d o n then w o r k i n g as a
nurse in one of the hospitals there. N c a m e h o m e ahead
to prepare for their w e d d i n g . After four m o n t h s X follows
N to settle in t h e P h i l i p p i n e s . X s t o p p e d o v e r in H o n g
Kong and bought several appliances which he caused to
be shipped to the Philippines by boat. Is X e x e m p t from
payment of duties considering that he decides to
permanently settle in the country? R e a s o n .

Answer. No, t h e appliances shipped b y X t o t h e Philippines

although intended for their personal use m a y not be e x e m p t from
import duties because a m o n g the conditions for e x e m p t i o n is that
the articles must have b e e n brought by him f r o m his former place
of abode.

1635. Is the government liable for customs duties on

importation of articles?

Answer. Yes, all g o v e r n m e n t importations for its o w n use or its

subordinates, branches, instrumentalities, or corporations shall be
subject to duty, tax, f e e s and other c h a r g e s except those
importations provided for in Sec. 105 of the Tariff a n d Customs
Code. (Sec. 1205)

928
1636. To w h o m should the imported articles be delivered or
released?

A n s w e r . To the c o n s i g n e e , or lawful holder of the bill of lading, or

to the c u s t o m s broker.

1637. Briefly d i s c u s s t h e t a x p a y e r s ' r e m e d i e s u n d e r the Tariff

and Customs Code:

A n s w e r . T a x p a y e r ' s remedies arise only after the payment of

duties. (No p a y m e n t No protest Rule) T h e administrative remedies
consist of filing for a refund w h i c h m a y take the f o r m of abatement
or d r a w b a c k .

T h e t a x p a y e r c a n also file a protest within 15 days from

p a y m e n t if he disagrees with the ruling or decision of the Collector
of C u s t o m s regarding the legality or correctness of the assessment
of c u s t o m s duties.

If the decision of the Collector is adverse to the taxpayer, he

can notify the Collector within 15 d a y s f r o m receipt of the said
decision of his desire to have his case reviewed by the
Commissioner.

Resort to judicial relief can be availed of by the taxpayer by

appealing the decision of the C o m m i s s i o n e r within 30 days from
receipt thereof to the C T A , and finally to the S C .

T h e decision of t h e Collector on the taxpayer's protest, if

adverse to the G o v e r n m e n t (that is, in favor of the taxpayer) is
automatically elevated to the C o m m i s s i o n e r for review, If such
decision is affirmed by the Commissioner, the same shall be
automatically elevated to and finally reviewed by the Secretary of
Finance.

1638. W h a t is the role of the Philippine C o a s t g u a r d under the

TCC?

Answer. T h e Code recognizes the functions of the Philippine

Coastguard to exercise surveillance of vessels entering or
departing from the Philippine territory and its role of preventing and
suppressing illegal entry, smuggling and other customs frauds and
violations of the maritime law.

929
1639. Is there n e e d for a s e a r c h w a r r a n t to go on board a
vessel or aircraft for t h e p u r p o s e of c o n d u c t i n g a search
thereof and the persons and articles therein?

Answer. No search warrant is necessary for a person exercising

police authority to search a vessel or aircraft or any person or
articles on board therein.

r The power to search under the T C C includes the removal of

any false bottom, partition, bulkhead or other obstruction.

The owner of the vessel may not claim d a m a g e caused to

any article, vessel or aircraft under a legal search.

1 6 4 0 . M a y a t a x p a y e r file a petition f o r d e c l a r a t o r y relief to

q u e s t i o n his tax liability b e f o r e t h e r e g u l a r c o u r t ?

Answer. The taxpayer is not allowed. T h e reason is t o prevent

delay in the collection of taxes u p o n w h i c h the government
depends for its existence. To allow a taxpayer to first secure a
ruling as regards the validity of a tax before paying it would defeat
the purpose. (National Dental Supply C o . vs. Meer, Oct. 16, 1951)

1641. Are Tax Credit Certificates allowed to be used in the

payment of duties and taxes due the Bureau of
Customs?

Answer. Y e s .

1642. W h a t are the other types of fees that m a y be imposed by

the Bureau of customs aside from duties?

Answer.
a) Arrastre charges

b) W h a r f a g e dues - This is c h a r g e d not for the use of the wharf

but for a special f u n d , t h e "Port W o r k s F u n d " of the B u r e a u . It is
the counterpart of license.

c) Berthing fees

d) T o n n a g e fees, and

e) Harbor fees.

930
1643. Are c o m m o n carriers subject to forfeiture?

A n s w e r . C o m m o n carriers are generally not subject to forfeiture

but if the o w n e r thereof has k n o w l e d g e of its use in smuggling
and he w a s a consenting party to the illegal activity, it may be
forfeited.

If a motor vehicle is hired to carry s m u g g l e d goods but it has

no Certificate of Public C o n v e n i e n c e (CPC), it is not a c o m m o n
carrier. It is thus subject to forfeiture and lack of personal
k n o w l e d g e of the o w n e r of the carrier is not a defense to
forfeiture.

1644.X is the owner of trucks transporting container vans

from the Bureau of Customs to the taxpayers'
warehouse or place of business. On one occasion, while
the driver w a s transporting a 20-footer containing van
loaded with perishable g o o d s , he w a s intercepted by tax
o f f i c i a l s f r o m t h e B u r e a u w h o w a n t e d t o c h e c k o n all
d o c u m e n t s appertaining to the contents of the vans. The
driver w a s not in possession of s o m e of the documents.
The truck w a s not allowed to leave. As a consequence of
the flagging down and delay in delivering the goods,
most of the items were spoiled and beyond human
c o n s u m p t i o n . A r e the tax officials liable under the T C C ?

A n s w e r . Mere flagging d o w n of the container van is not

punishable under the Tariff C o d e . The tax officials cannot be
convicted under the T C C since there is no evidence that they did
actually search the container v a n s .

1645. S e c t i o n 105, last p a r a g r a p h o f t h e Tariff a n d C u s t o m s

C o d e provides that "there shall be no exemptions
w h a t s o e v e r f r o m t h e p a y m e n t o f c u s t o m s duties", cite
exceptions thereto, if any.

Answer.
a) Identified goods that are conditionally-free from customs
duties as provided under the T C C .

b) Exemptions granted to G O C C s with existing commitments,

agreements or obligations with foreign countries.

931
c) Exemptions of international institutions, associations or
organizations pursuant to agreements and special laws
where the government is a signatory thereto.

d) Exemptions granted by the President of the Philippines upon

the recommendation of N E D A in the interest of the national
economic development.