Real Property Taxation FINAL

REAL PROPERTY TAXATION 1
IX.
REAL PROPERTY
TAXATION
Q. What are real property taxes?
A. Real property taxes are taxes which are imposed on real properties
such as land, building, machinery and other improvements unless
specifically exempted.1
Q. What properties are subject to real property tax?
A. Only properties which are considered as real property are subject to

real property tax (RPT).
Q. What properties are considered real properties?
A. The LGC does not provide what properties are considered as real
property for purposes of real property taxation. Thus, reference must
be made to Article 415 of the Civil Code, to wit:2
Article 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds

adhered to the soil;
(2) 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 immovable in a fixed
manner, in such a way that it cannot be separated
therefrom without breaking the material or
deterioration of the object;
1 See Benguet Corporation v. CBAA. G.R. No. 106041 January 29, 1993.
2 Id.
(4) Statues, reliefs, paintings or other objects for use or

ornamentation, placed in buildings or on lands by
the owner of the immovable in such a manner that
it reveals the intention to attach them permanently
to the tenements;
(5) Machinery, receptacles, instruments or implements
intended by the owner of the tenement for an
industry or works which may be carried on in a
building or on a piece of land, and which tend
directly to meet the needs of the said industry or
works;
(6) Animal houses, pigeon-houses, beehives, fish ponds
or breeding places of similar nature, in case their
owner has placed them or preserves them with the
intention to have them permanently attached to the
land, and forming a permanent part of it; the
animals in these places are included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter
thereof forms part of the bed, and waters either
running or stagnant;
(9) Docks and structures which, though floating, are
intended by their nature and object to remain at a
fixed place on a river, lake, or coast;
(10) Contracts for public works, and servitudes and
other real rights over immovable property.3
Note, however, thatersonal property may be classified as real property

for purposes of taxation.
Q. Are the steel towers of an electric company real property for the
purpose of RPT?
3 Section 415, Civil Code.

A. No. The Supreme Court has held that the steel towers of MERALCO
do not constitute real property or the purpose of the real property
tax. The steel towers were regarded as poles and under its franchise
Meralco's poles are exempt from taxation. Moreover, the steel towers
were not attached to any land or building. They were removable
from their metal frames.4
However, note that in Camarines Sur II Electric Cooperative, Inc. v.

Provincial Assessor of the Province of Camarines Sur,5 the Court of Tax
Appeals en banc held that the scope of the provision of the LGC on
Machineris subject to real estate taxation is broad enough to include
the electric posts and electric transformers. This case is different from
the above-mentioned case, in that the electric towers involved were
not ordinary electric posts (whether made of wood, steel or concrete)
that are embedded into the ground or mounted on permanent
foundations, but steel towers that are "removable and merely
attached to a square metal frame by means of bolts, which when
unscrewed could easily be dismantled and moved from place to
place."
Q. Define machinery.
A. Machinery embraces machines, equipment, mechanical contrivances,

instruments, appliances or apparatus which may or may not be
attached, permanently or temporarily, to the real property. It
includes the physical facilities for production, the installations and
appurtenant service facilities, those which are mobile, self-powered
or self-propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used to meet
the needs of the particular industry, business or activity and which
by their very nature and purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial or
agricultural purposes.6
4 Board of Assessment Appeals v. MERALCO, G.R. No. L-15334, January 31,

1964.
5 CTA EB No. 1014 (CBAA Case No. L-77), August 13, 2014.
6 See Section 199(o), Local Government Code.
Q. What types of machinery are subject and not subject to RPT?
A. In determining if machinery is subject to RPT or not, the following

rules must be followed:
1. Machinery that is permanently attached to land and buildings is

subject to the real property tax, even though this is actually,
directly, and exclusively used for religious, charitable or
educational purposes.
2. Machinery that is not permanently attached to real estate is:
a. Subject to the real property tax if it is an essential and
principal element of an industry, work or activity without
which such industry, work or activity, cannot function;
b. Not subject to the real property tax if it is not an essential
and principal element of an industry, work or activity.
3. Notwithstanding rules 1 and 2, machinery of non-stock, non-profit
educational institutions used actually, directly, and exclusively for
educational purposes is not subject to real property tax.7
Q. Define improvement.
A. Improvement is a valuable addition to the property or an

amelioration in its condition amounting to more than a repair or
replacement of parts.8
Q. What are the requisites for taxability of an improvement?
A. For an improvement to be taxable:
1. It must enhance the value of the property;

2. It must be separately assessable; and
3. It can be treated independently from the main property.
7 DOF Local Finance Circular No. 001-2002, APRIL 25, 2002.

8 See Section 199(m), Local Government Code.
Q. Give some examples of objects other than land which have been
classified as real property for real property tax cases.
A. In Camarines Sur II Electric Cooperative, Inc. v. Provincial Assessor of the

Province of Camarines Sur,9 the Court of Tax Appeals en banc provided
the following list of objects other than land classified as real
properties (whether as improvements or machineries):
(1) Telephone posts;10

(2) Underground tanks, elevated tanks, elevated water tanks, water
tanks, gasoline pumps, computing pumps, water pumps, car
washer, car hoists, truck hoists, air compressors and tireflators,
which were held to be taxable as improvements and machinery; 11
(3) Mine tailings dam; 12
(4) Fuel storage tanks not embedded in the land, along with their
foundations and pipelines; 13
(5) 30 kilometers of steel oil pipelines in Laguna, (wherein “what are
being characterized as real property are not the steel pipes but the
pipeline system as a whole");14
(6) Siltation dam and decant system; 15
(7) Floating power barges moored in a bay, under Section 199(c)
ofR.A. No. 7160; 16
(8) Relay station tower, although it is neither an equipment nor
machinery but a structure;17
(9) Carriageways and passenger terminal stations, as private
improvements on national roads owned by the government;18
9 CTA EB No. 1014 (CBAA Case No. L-77), August 13, 2014.
10 Digital Telecommunic-ations Philippines, Inc. vs Province of
Pangasinan, G.R. No. 152534,23 February 2007.
11 Caltex Philippines, Inc. vs Central Board of Assessment Appeals and City
Assessor of Pasasy, G.R. No. L-50466, 31 May 1982.

12 Benguet Corporation vs Central Board of Assessment Appeals, et a!, G.R.
No. 106041, 29 January 1993, en banc.

13 Manila Electric Company vs CBAA, G.R. No. L-47943, May 31, 1982.
14 MERALCO Securities Industrial Corporation vs CBAA, G.R. No. L-46245, 31
May 1982.
15 Provincial Assessor of Marinduque vs Court of Appeals, G.R. No. 170532,
30 April 2009.
16 PELS Energy, Inc. vs Province of Batangas, G.R. No. 168557, 16 February
2007.
17 Radio Communications of the Philippines, Inc. vs Provincial Assessor of
South Cotabato, et al, G.R. No. 144486, 13 April 2005.

(10) Port facilities and appurtenances;19 and

(11) Fishing boats, under R.A. No. 3218.20
Q. The City Assessor of CDO assessed as taxable the machinery of

Asian College of Science and Technology (ACSAT), a non-stock,
non-profit educational institution. Upon the issuance of DOF
LOCAL FINANCE CIRCULAR 001-2002 [APRIL 25, 2002], the City
Assessor declared the machinery as tax exempt effective the 2 nd
quarter of 2002. ACSAT argues that the exemption should retroact
to the year 1998. Is ACSAT correct?
A. Yes. In BLGF Opinion dated December 15, 2006, it was held that the
request for retroactive effectivity in 1998 of exemption of the subject
machinery owned by ACSAT should be given due course
Q. Are equipment/machineries in cement or wooden platform and

which were never used as industrial equipments to produce
finished products for sale nor to repair machineries offered to the
general public for business or commercial purposes considered as
realty subject to RPT?
A. No. The Supreme Court has held that for equipment to be real
property, they must be essential and principal elements. In addition,
the machinery should be essential to carry on business in a building
or piece of land and this is not the case here since it was proven that
the equipment was not essential because it is used only for repairs
which could actually be done elsewhere.21
Q. Are the gas station equipment and machinery (tanks, pumps, etc)
permanently affixed by an petroleum company to its gas station
and pavement, albeit on leased land, considered real property
18 Light Rail Transit Authority vs CBAA, et al., G.R. No. 127316, 12

October 2000.
19 Philippine Ports Authority vs City of Iloilo, et al., G.R. No. 143214,
11 November 2004.
20 Digital Telecommunications Philippines, Inc. vs City Government of
Batangas, et al., G.R. No. 156040, 11 December 2008, en banc.
21 Mindanao Bus Co. v. City Assessor and Treasurer, G.R. No. L-17870,
September 29, 1962.
subject to real property taxes even if lessor does not become the
owner of the said assets?
A. Yes, because they are essential to the business of the taxpayer. The
Supreme Court has ruled that the said equipment and machinery, as
appurtenances to the gas station building or shed owned by the
petroleum company and which fixtures are necessary to the
operation of the gas station for without them the gas station would be
useless and which have been attached or affixed permanently to the
gas station site, are taxable improvements and machinery. 22
Note that machinery which is movable in its nature only becomes

immobilized when placed in a plant by the owner of the property or
plant, but not when so placed by a tenant, a usufructuary, or any
person having only a temporary right, unless such person acted as
the agent of the owner. But, if the tenant placed the machinery as an
agent of the owner, such as when the same was done in accordance
with his obligations of the lease agreement, then the machinery is
considered as real property from the act of the owner in giving by
contract a permanent destination to the machinery.23
Q. What is the taxability of the following properties of a bank: (1)

vault doors; (2) safety deposit boxes; (3) surveillance cameras; (4)
generator sets; (5) water pumps; (6) uninterrupted power supply
equipment; (8) exhaust fans; and (9) ceiling fans?
A. (1) Vault doors, (2) safety deposit box; and (3) surveillance cameras
should be assessed as improvements for enhancing the utility of the
bank. (4) to (9) do not fall within the definition of machinery subject
to RPT.24
22 Caltex v. Central Board of Assessment Appeals, G.R. No. L-50466, May 31,
1982.
23 Valdes vs. Central Altagracia, 192, 225 U.S., 58, cited in Davao Sawmill
Co. v. Castillo, G.R. No. L-40411, Auhust 7, 1935.

24 BLGF Opinion dated March 22, 2005.
Q. What is the taxability of the following properties of a bank: (1)

ATM Machine procash; (2) Cash vault door protect; (3) Security
cash locker fortress; (4) Protect safe deposit boxes; (5) Security
Devices; (6) Magitek UPS; (7) Airconditioning units; (8) Computers
(CPU, printer, deskset, monitors, scanner/HP Flatbed, PC Server,
modem, etc.); (9) Phone Panasonic Wireless; (10) Phone SNI Digital;
and (11) Exhaust fans?
A. Items Nos. 2-5 should have been classified as improvement subject to

real property tax as discussed above; while item Nos. 6-11 should be
classified as machinery of general purpose use thus exempt from
payment of real property tax. ATMs, however, are correctly classified
as machinery subject to real property tax.25
Q. What is the taxability of the following properties: (1) printing and

developing machine owned by a photo center and (2) equipment
being utilized by water refilling stations in purification process?
A. The printing and developing machine owned by the photo center is a

taxable real property considering that the same falls within the
definition of "Machinery" without which, the work or activity of the
said photo center cannot function, and therefore, an essential and
principal element of the business of photography. On the other hand,
the equipment being utilized by the water refilling stations thereat in
purification process also fall within the definition of machinery and
considered real property subject to real property tax.26
Q. MERALCO installed two oil storage tanks on a lot in Batangas

which it leased from Caltex. They are used for storing fuel oil for
MERALCO’s power plants. Are the oil storage tanks real property
for purposes of RPT?
A. Yes. In MERALCO v. CBAA,27 the Supreme Court held that while the
two storage tanks are not embedded in the land, they are to be
25 BLGF Opinion dated February 17, 2005.

26 BLGF Opinion dated August 5, 2004.
27 G.R. No. L-47943, May 31. 1982.
considered improvements on the land enhancing its utility and

rendering it useful to the oil industry. The two tanks have been
installed with some degree of permanence as receptacles for the
considerable quantities oil needed by MERALCO for its operations,
Q. MERALCO installed a pipeline system running from Batangas to

Manila consisting of cylindrical steel pipes joined together and
buried not less than one meter below the surface along the
shoulder of the public highway, with a portion of it running
through Laguna. The provincial assessor of Laguna treated the
pipeline as real property and assessed MERALCO for real property
tax. Is the pipeline real property for purposes of RPT?
A. Yes. In Meralco Securities Industrial V. CBAA,28 the Supreme Court held

that A pipeline for conveying petroleum has been regarded as real
property for tax purposes.29 The pipeline system in question is
indubitably a construction adhering to the soil. It is attached to the
land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to
maintain the flow of oil, it is in a sense machinery within the meaning
of the Real Property Tax Code. It should be borne in mind that what
are being characterized as real property are not the steel pipes but the
pipeline system as a whole.30
Q. Is a dam, constructed by a mining company within the mined area,

along with the lands submerged thereunder, real property for real
property tax purposes?
A. Yes. In Benguet Corporation V. CBAA,31 the Supreme Court has held

that a dam falls within the definition of an "improvement" because it
28 G.R. No. L-46245, May 31. 1982.

29 Meralco Securities Industrial v. CBAA, G.R. No. L-46245, May 31. 1982,
citing Miller County Highway, etc., Dist. vs. Standard Pipe Line Co., 19
Fed. 2nd 3; Board of Directors of Red River Levee Dist. No. 1 of Lafayette
County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note 86.
30 Meralco Securities Industrial v. CBAA, G.R. No. L-46245, May 31. 1982.
31 G.R. No. 106041 January 29, 1993.
is permanent in character and it enhances both the value and utility

of petitioner's mine. Moreover, the immovable nature of the dam
defines its character as real property under Article 415 of the Civil
Code and thus makes it subject to real property tax. Whether a
structure constitutes an improvement so as to partake of the status of
realty would depend upon the degree of permanence intended in its
construction and use. The expression "permanent" as applied to an
improvement does not imply that the improvement must be used
perpetually but only until the purpose to which the principal realty is
devoted has been accomplished. It is sufficient that the improvement
is intended to remain as long as the land to which it is annexed is still
used for the said purpose.
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1. Fundamental Principles
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Q. Enumerate the fundamental principles that shall guide real

property taxation.
A. The following fundamental principles govern real property taxation:

1. Real property shall be appraised at its current and fair market
value
2. Real property shall be classified for assessment purposes on the
basis of its actual use
3. Real property shall be assessed on the basis of a uniform
classification within each LGU
4. The appraisal, assessment, levy and collection of real property tax
shall not be let to any private person
5. The appraisal and assessment of real property shall be equitable.32
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2. Nature of Real Property Tax
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32 Section 198, Local Government Code.

Q. What is the nature of a real property tax?
A. Real property tax is:
a. A direct tax;
b. An indivisible single obligation;
c. An ad valorem tax based on the assessed value of the property;
d. A local tax;
e. Imposed on the use and not on the ownership of the property; and
f. Progressive in character depending to a certain extent on the use
and value of the property.
In real estate taxation, the unpaid tax attaches to the property and is
chargeable against the taxable person who had actual or beneficial use
and possession of it regardless of whether or not he is the owner.33
Note that in Meralco Securities Industrial Corp. v. CBAA,34 the Supreme

Court ruled that RPT is a national tax. However, this no longer holds
true, as such ruling was made long before real property taxation was
made part of the LGC.
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3. Imposition of real property tax
a) Power to levy real property tax
b) Exemption from real property tax
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a) Power to levy real property tax
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Codal Reference: Sections 232 to 233, LGC.
33 National Grid Corporation of the Philippines vs. Central Board of

Assessment Appeals, CTA EB No. 801, January 29, 2013.
34 Meralco Securities Industrial v. CBAA, G.R. No. L-46245, May 31. 1982.
Q. Do all types of LGUs have the power to impose real property taxes?
A. No. Only provinces and cities, as well as municipalities within Metro

Manila, may impose RPTs.35
Thus, municipalities outside Metro Manila and barangays cannot

impose RPT.
Q. What are the rates of levy for purposes of RPT?
A. A province or city or municipality within Metro Manila shall fix a

uniform rate of basic property tax applicable to their respective
localities:
1. In the case of a province, at the rate not exceeding 1% of the

assessed value.
2. In the case of a city or municipality within Metro Manila, at the rate
not exceeding 2% of the assessed value.36
Note that the bar syllabus did not include special levies. Nonetheless,
Sections 235-245, LGC on special levies on real property are likewise
herein discussed.
Q. What are the special levies under the LGC?
A. The LGC provides for the following special levies:
1. Additional Levy for the Special Education Fund (SEF) – 1% on

the assessed value of real property in addition to the basic RPT.37
2. Special Levy on Idle Lands – idle lands shall be taxed at a rate not
exceeding 5% of the assessed value in addition to the basic RPT.38
3. Special Levy by LGUs for lands benefited by public works
(special assessment) – the special levy shall not exceed 60% of the
35 See Sections 200 and 232, Local Government Code.

actual cost of such project and improvements, including the costs

of acquiring land and other real property.39
Q. When may idle lands be exempted from tax?
A. Lands which are idle, may be exempted by the LGU from RPT by
reason of:
a. Force majeure
b. Civil disturbance
c. Natural calamity
d. Any cause which physically or legally prevents the owner of the
property or person having legal interest therein from improving,
utilizing, or cultivating the same.40
Q. What are the conditions for the validity of a tax ordinance

imposing special levy for public works?
A. Tax ordinances imposing special levies for public works must:

1. Describe the nature, extent, and location of the project, state the
estimated cost, and specify the metes and bounds by monuments
and lines;
2. State the number of annual installments, not less than 5 years nor
more than 10 years; and
3. Notice thereof must be given to the owners and a public hearing is
conducted. 41
Note that if you want to contest a special levy, the interested person
may appeal to the LBAA and then to the CBAA following the same
process as an administrative protest.42 This process will be further
discussed in another portion of the book.
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b) Exemption from real property tax
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41 See Sections 241 and 242, Local Government Code.
Q. What are the properties exempt from RPT?
A. The following properties are exempt from RPT:
a. Real property owned by the Republic or any of its political

subdivisions (except when beneficial use has been granted to a
taxable person);
b. Charitable institutions, churches, parsonages, or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries
and all lands, buildings or improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
c. All machineries and equipment actually, directly and exclusively
used by local water districts and GOCCs engaged in supply and
distribution of water and/or generation and transmission of
electric power;
d. All real property owned by duly registered cooperatives; and
e. Machinery and equipment used for pollution control and
environmental protection (includes infrastructure).43
Q. Is the Metro Manila International Airport Authority (MMIA) a

GOCC which will now be considered liable for RPT under the
LGC?
A. No. In Metro Manila Manila International Airport Authority v. Court of

Appeals,44the Supreme Court, in resolving the issue on whether the
lands and buildings owned by the Manila International Airport
Authority were subject to real property tax, ruled in the negative. The
Supreme Court opined that since MIAA is not a GOCC but instead as
government instrumentality vested with corporate powers or a
government corporate entity. As such, it is exempt from real property
tax.
43 See Section 234, Local Government Code. Note that under RA 7942
(Philippine Mining Act of 1995), pollution control devices exempted from
RPT include “infrastructure.”
44 G.R. No. 155650, July 20, 2006.
However, in Mactan Cebu International Airport Authority v.

Marcos,45the Supreme Court ruled that MCIAA is a GOCC and since
the last paragraph of Section 234 of the LCG unequivocally withdrew
the exemptions from payment of RPT granted to natural or juridical
including GOCCs, MCIAA is now liable for RPT.
The different rulings in these two cases have been settled by the
ruling of the Supreme Court in the case of Mactan-Cebu International
Airport Authority (MCIAA) v. City of Lapu-Lapu,46 wherein it was held
that MCIAA is an instrumentality of the government, thus, its
properties actually, solely and exclusively used for public purposes,
consisting of the airport terminal building, airfield, runway, taxiway
and the lots on which they are situated, are not subject to real
property tax and respondent City is not justified in collecting taxes
from petitioner over said properties. In the words of the Court, the
case presented “a clear opportunity for this Court to clarify the effects
of our two previous decisions, issued a decade apart, on the power of
local government units to collect real property taxes from airport
authorities located within their area, and the nature or the juridical
personality of said airport authorities.”
Q. Is the Philippine Fisheries Development Authority (PFDA) a

GOCC and, hence, now liable for RPT?
A. No. In Philippine Fisheries Development Authority v. Court of Appeals,],47

the Supreme Court ruled that the PFDA is not a GOCC but an
instrumentality of the national government which is generally
exempt from payment of RPT. However, said exemption does not
apply to the portions of the properties which the PFDA leased to
private entities.48
45 G.R. No. 120082, September 11, 1996.

46 G.R. No. 181756, June 15, 2015.
47 G.R. No. 169836, July 31, 2007.
48 Note that under Section 234 of the LGC, the exemption to the government
and its political subdivisions does not apply to properties whose

beneficial use has been granted to a taxable person
Q. Is the GSIS liable for RPT?
A. No. As held in GSIS v. City Treasurer of the City of Manila,49the

Supreme Court stated that the ruling in Metro Manila Manila
International Airport Authority v. CA,50argues for the non-tax liability
of the GSIS for RPT. The Court ruled that GSIS is an instrumentality
of the government and, as such, is not a taxable juridical person for
purposes of RPT.
Q. Is the Philippine Reclamation Authority (PRA) a GOCC and, as

such, liable for RPT?
A. No. In Philippine Reclamation Authority v. City of Paranaque,51], the

Supreme Court ruled that PRA is not a GOCC. Much like the MIAA,
PPA, UP, PFDA, GSIS and BSP, it is considered a government
instrumentality exercising corporate powers but which are not
considered GOCCs as they are neither a stock (for not having the
authority to distribute dividends), not a non-stock corporation (for
not having members) corporation. In addition, the Constitution
likewise provides that a GOCC is created under two conditions: (a)
established for a common good and (b) meets the test of economic
viability. While test (a) is complied with, the PRA was undoubtedly
not created to engage in economic or commercial activities as it is the
only entity engaged in reclamation which was described as
essentially a public service. Thus, PRA is not liable for RPT.
Q. Is the Light Rail Transit Authority (LRTA) a GOCC, and, as such,

liable for RPT?
A. Yes. Although not expressly stating that LRTA is a GOCC, the

Supreme Court in Light Rail Transit Authority v. CBAA,52 stated that
the LRTA is clothed with corporate status and corporate powers in
the furtherance of its proprietary objectives. It operates much like any
49 G.R. No. 186242, December 23, 2009.

50 G.R. No. 155650, July 20, 2006.
51 G.R. No. 191109, July 18, 2012.
52 G.R. No. 127316, October 12, 2000.
private corporation engaged in the mass transport industry. As such,

it is liable for RPT.
Q. ABC Company owned two parcels of land in Pasig City. Portions of

the properties are leased to different business establishments.
Being part of ill-gotten wealth of the Marcoses, the owner of ABC
voluntarily surrendered ABC Company to the Republic through
the PCGG. Now, Pasig City seeks to impose RPT on the properties
of ABC. Are the properties of ABC liable for RPT?
A. It depends. In Pasig City v. Republic,53 the Supreme Court held that the
portions of the properties not leased to taxable entities are exempt
from RPT while the portions leased to taxable entities are subject to
RPT.
Q. The Philippine Lung Center leased portions of its real property out
for commercial purposes. Are these exempt from real property
taxes?
A. No. In Lung Center of the Philippines v. Quezon City,54 the Supreme

Court held that the hospital was not exempt from real property tax
on the portions of its property not actually, directly, and exclusively
used for charitable purposes. Thus, those leased out for commercial
purposes are subject to real property tax. Those used by the hospital
even if used for paying patients remain exempt from real property
taxes.
Q. ABC Association is a non-stock, non-profit organization owned by

XYZ Hospital in Cebu City. XYZ likewise owns the XYZ Medical
Arts Center. The City Assessor assessed the XYZ Medical Arts
Center Building with the assessment level of 35% for commercial
buildings (instead of the 10% special assessment imposed on XYZ
hospital and its buildings). Was the medical arts center built to
house its doctors a separate commercial building?
53 G.R. No. 185023, August 24, 2011.

54 G.R. No. 144104, 29 June 2004.
A. No. The Supreme Court in City Assessor of Cebu City v. Association

of Benevola de Cebu Inc.,55 ruled that the fact alone that doctors holding
clinics in the separate medical center are consultants of the hospital and
the ones who treat the patients takes way the medical center from being
categorized as commercial. The Supreme Court classified the medical
arts center building as “special” for the following reasons: (1) the
medical arts center was an integral part of the hospital; (2) the medical
arts center facility was incidental to and reasonably necessary for the
operations of the hospital; and (3)charging rentals for the offices used by
its accredited physicians was a practical necessity and could not be
equated to a commercial venture.
Q. What are the requisites to claim exemption from RPT for

machineries and equipment used by LWDs and GOCCs?
A. Machineries and equipment of LWDs and GOCCs, to be exempt from

RPT must be:
1. Actually, directly, and exclusively used by the LWDs and GOCCs;
and
2. The LWDs and GOCCs claiming exemption must be engaged in
the supply and distribution of water and/or generation and
transmission of electric power. 56
Q. FELS entered into a lease contract with NAPOCOR over two engine
power barges at Balayan Bay Batangas. The lease contract
stipulated that NAPOCOR shall be responsible for all taxes
(including RPT on the barges), fees and charges that FELS may be
liable except income tax of FELS and its employees and
construction permit and environmental fees. FELS was assessed for
RPT and the LBAA upheld the assessment stating that while the
barges may be classified as personal property, they are considered
real property for RPT purposes because they are installed at a
55 G.R. No. 152904, June 28, 2007.

56 See Section 234(c), Local Government Code.
specific location with a character of permanency. Are the power

barges subject to RPT?
A. Yes. First, Article 415(9) of the Civil Code provides that “docks
and structures which, though floating, are intended by their nature and
object to remain at a fixed place on a river, lake or coast. Barges fall
under this provision. Second, FELS cannot claim exemption given that
the requirement is that to be exempt the machineries and equipment
must be actually, directly and exclusively used by GOCCs engaged in
the generation of power. Since the agreement between FELS and
NAPOCOR is that FELS will own and operate the barges and not
NAPOCOR.57
Q. FPPC entered into a BOT Agreement with NAPOCOR for the

construction of a powerplant. Under the agreement BPPC was
created to own, manage and operate the powerplant. The BOT
Agreement provided that after a period of time, the power plant
shall be transferred to NAPOCOR without payment of any
compensation and that NAPOCOR shall be responsible for
payment of RPT. BPCC was assessed for RPT. NAPOCOR filed a
petition to declare the properties exempt from RPT. The LBAA
ruled that the properties were not exempt as this is only available
to a GOCC which owns and/or actually uses the machineries and
equipment for generation and transmission of power. The CBAA
affirmed. Are the properties exempt from RPT?
A. No. NAPOCOR’s basis for exemption which is Section 243(c)

provides that the machinery and equipment used for generation and
transmission of power must be actually, directly and exclusively used
by the GOCC. The machineries and equipment here are owned by
BPPC, subject only to the transfer of these properties to NAPOCOR
after the lapse of the 15-year period agreed upon. BPPC’s use of the
machineries and equipment are actual, direct and immediate while
57FELS Energy, Inc. v. Province of Batangas, G.R. No. 168557, February 16,
2007.
NAPOCOR’s is contingent and, at this stage of the BOT Agreement,

not sufficient to support its claim for exemption.58
Similarly, in NAPOCOR v. Province of Quezon,59 at issue was whether

NAPOCOR as a GOCC can claim exemption under Section 234 of the
LGC for the taxes due from the Mirant Pagbilao Corporation whose tax
liabilities the NAPOCOR has contractually assumed under the BOT
Agreement where Mirant would build and finance a power plant and
transfer the same to NAPOCOR after 25 years without compensation.
The Supreme Court ruled that NAPOCOR does not have the legal
interest that the law requires to give it personality to protest the tax
imposed by law on Mirant. Further, the machinery and equipment must
actually, directly and exclusively be used by the GOCC. Here,
NAPOCOR’s use is merely contingent.
Q.
A. The answer would be yes in light of Section 91 of RA 7942 in relation

to Section 3(am) which includes “infrastructure” in the definition of
pollution control devices exempt from RPT.
Nonetheless, it must be noted that in Provincial Assessor of Marinduque v.

Court of Appeals,60 the Supreme Court ruled that the tax exemption of
machineries and equipment used for pollution control and
environmental protection is based on usage, i.e., direct, immediate and
actual application of the property itself to the exempting purpose. Here,
the Supreme Court found that the subject property was not a machinery
used for pollution control, but a structure adhering to the soil and
intended for pollution control.
58NAPOCOR v. CBAA, G.R. No. 171470, Janaury 30, 2009.

59G.R. No. 171586, July 15, 2009.
60G.R. No. 170532, April 30, 2009. The Supreme Court pointed out that the
disputed assessment notice took effect on 1 January 1995. The governing
law was the 1991 LGC. All references to RA No. 7942, which came into
effect only on 14 April 1995, were all out of place.
Note that, by virtue of Section 234 of the LGC, any exemption from RPT
previously granted or presently enjoyed by all persons, whether natural
or juridical, including all GOCCs were withdrawn upon the effectivity
of the LGC. We have to note that Congress has the power to exempt an
entity again from RPT notwithstanding the withdrawal made by the
LGC.
Q. ABC Telecom was granted a 25-year franchise to install, operate

and maintain telecommunications system throughout the
Philippines under a law which states that “The grantee shall be
liable to pay the same taxes on its real estate, building, and
personal property exclusive of this franchise.” As they were not
being issued a Mayor’s permit, ABC Telecom paid RPT under
protest. ABC argued that the phrase “exclusive of this franchise”
means that only the real properties not used in furtherance of its
franchise are subject to RPT. Is ABC’s contention correct?
A. No, the properties of ABC whether or not used in its

telecommunications business is subject to RPT. In Digital
Telecommunications Philippines Inc. v. City Government of Batangas,61 the
Supreme Court held that the phrase “exclusive of this franchise”
qualifies the term “personal property.” This means that the legislative
franchise, which is an intangible personal property, shall not be
subject to taxes. This is to put franchise grantees in parity with non-
franchisees as the latter obviously do not have franchises which may
potentially be subject to RPT. There is nothing in the law which
expressly or even impliedly exempts the company from RPTC.
Finally, the company cannot rely on the BGLF opinion as they have
no authority to rule on claims for RPT exemption.
Q. Prior to the LGC, XYZ telecom was exempted from paying RPT
under its original franchise. Years after the effectivity of the LGC,
Congress passed a law amending XYZ’s franchise and contained a
reenactment of the tax provision in XYZ’s original franchise
granting it RPT exemption. Is XYZ liable for RPT?
61 G.R. No. 156040, December 11, 2008.

A. No. As held in City Government of Quezon City v. Bayan

Telecommunications,62 the Supreme Court held that the RPT exemption
enjoyed by Bayantel under its original franchise, but subsequently
withdrawn by force of Section 234 of the LGC, has been restored by
the new law which amended its original franchise.
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4. Appraisal and assessment of real property tax
a) Rule on appraisal of real property at fair market value
b) Declaration of real property
c) Listing of real property in assessment rolls
d) Preparation of schedules of fair market value
(i) Authority of assessor to take evidence
(ii) Amendment of schedule of fair market value
e) Classes of real property
f) Actual use of property as basis of assessment
g) Assessment of real property
(i) Assessment levels
(ii) General Revisions of assessments and property classification
(iii) Date of effectivity of assessment or reassessment
(iv) Assessment of property subject to back taxes
(v) Notification of new or revised assessment
h) Appraisal and assessment of machinery
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a) Rule on appraisal of real property at fair market value
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Q. How is real property appraised?
62 G.R. No. 162015, March 6, 2006.

A. All real property, whether taxable or exempt, shall be appraised at

the current and fair market value (FMV) prevailing in the locality
where the property is situated.63
Note that FMV is the price at which a property may be sold by a seller
who is not compelled to sell and bought by a buyer not compelled to
buy.
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b) Declaration of real property
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Q. What is the purpose of a tax declaration?
A. A tax declaration only enables the assessor to identify the property

for purposes of determining the assessment levels. It does not bind the
assessor when he makes the assessment.64
Q. Are tax declarations conclusive evidence of ownership?
A. As a rule, tax declarations are not conclusive evidence of ownership.

However, the rule admits of an exception: tax receipts and tax
declarations become strong evidence of ownership acquired by
prescription when accompanied by proof of actual possession of the
property.65
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c) Listing of real property in assessment rolls
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Q. What is an assessment roll?

64 Alfredo Patalinhug v. Court of Appeals, G.R. No. 104786, January 27,
1984.
65 Tabuena v. Court of Appeals, G.R. No. 85423, May 6, 1991.
A. An assessment roll is basically a list prepared and maintained by the

provincial, city or municipal assessor wherein all real property,
whether taxable or exempt, located within the territorial jurisdiction
of the LGU concerned are listed.66
Q. How are real proeprties listed in the assessment roll?
A. Real properties are listed in the following manner:
1. Real property shall be listed, valued and assessed in the name of

the owner or administrator, or anyone having legal interest in the
property.
2. The undivided real property of a deceased person may be listed,
valued and assessed in the name of the estate or of the heirs and
devisees without designating them individually; and undivided
real property other than that owned by a deceased may be listed,
valued and assessed in the name of one or more co-owner. The
heir, devisee, or co-owner shall be liable severally and
proportionately for all obligations imposed by this Title and the
payment of the real property tax with respect to the undivided
property.
3. The real property of a corporation, partnership, or association
shall be listed, valued and assessed in the same manner as that of
an individual.
4. Real property owned by the Republic of the Philippines, its
instrumentalities and political subdivisions, the beneficial use of
which has been granted, for consideration or otherwise, to a
taxable person, shall be listed, valued and assessed in the name of
the possessor, grantee or of the public entity if such property has
been acquired or held for resale or lease.67
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d) Preparation of schedules of fair market value

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Q. When is the schedule of FMVs prepared?
A. The schedule of FMVs shall be prepared before any general revision

of property assessment is made.68
Q. Who prepares the schedule of FMVs?
A. The provincial, city and the municipal assessors of the municipalities

within Metro Manila prepares the schedule of FMV for the different
classes of real property situated in their respective LGUs for
enactment by ordinance of the Sanggunian concerned. The schedule
of FMV shall be published in a newspaper of general circulation in
the province, city or municipality concerned or the posting in the
provincial capitol or other places as required by the law.69 The
proposed FMVs of real property in a LGU as well as the ordinance
containing the schedule must be published in full for 3 consecutive
days in a newspaper of local circulation where available, within 10
days of its approval and posted in at least 2 prominent places in the
provincial capitol, city, municipal, or barangay hall for a minimum of
3 consecutive weeks.70
Q. What are the different approaches in estimating the FMV of real

property for RPT purposes?
A. In estimating the FMV of real property, the following approaches

may be utilized:
1. Sales Analysis Approach – the sales price paid in actual market

transactions is considered by taking into account valid sales data
accumulated from among the Register of Deeds, notaries public,

70 Belen Figuerres v. Court of Appeals, G.R. No. 119172, March 25, 1999.
appraisers, brokers, dealers, bank officials, and various sources stated

under the LGC.
2. Income Capitalization Approach – the value of an income-producing
property is no more than the return derived from it. An analysis of the
income produced is necessary in order to estimate the sum which
might be invested in the purchase of the property.
3. Reproduction cost approach – the formal approach used exclusively
in appraising man-made improvements such as buildings and other
structures, based on such data as materials and labor costs to
reproduce a new replica of the improvement.71
Note that an ordinance whereby the “parcels of land sold, ceded,

transferred and conveyed for remuneratory consideration after the
effectivity of this revision shall be subject to real estate tax based on the
actual amount reflected in the deed of conveyance or the current
approved zonal valuation of the BIR prevailing at the time of sale,
cession, transfer and conveyance, whichever is higher, as evidenced by
the certificate of payment of the CGT issued therefore” is invalid being
contrary to public policy and for restraining trade.72
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Q. What is covered by the authority of the assessor to take evidence?
A. For the purpose of obtaining information on which to base the

market value of any real property, the assessor of the province, city
or municipality or his deputy may summon the owners of the
properties to be affected or persons having legal interest therein and
witnesses, administer oaths, and take deposition concerning the
property, its ownership, amount, nature, and value.73
71 Allied Banking Corporation v. Quezon City Government, G.R. No. 154126,

October 11, 2005, citing Local Assessment Regulations No. 1-92.
72 Allied Banking Corporation v. Quezon City Government, G.R. No. 154126,
October 11, 2005, citing Local Assessment Regulations No. 1-92.

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Q. How are the schedules of fair market values amended?
A. The provincial, city or municipal assessor may recommend to the

sanggunian concerned amendments to correct errors in valuation in
the schedule of fair market values. The sanggunian concerned shall,
by ordinance, act upon the recommendation within ninety (90) days
from receipt thereof.74
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e) Classes of real property
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Read Section 215 to 216, LGC
Q. What are the classes of real property for assessment purposes?
A. The following are the classes of real property for purposes of

assessment:
4. Residential;
5. Agricultural;
6. Commercial;
7. Industrial;
8. Mineral; and
9. Special.75
Residential Land Is land principally devoted to habitation.76
Agricultural Is land devoted principally to the planting of

75See Section 215, Local Government Code.
76See Section 199(u), Local Government Code.
Land trees, raising of crops, livestock and poultry,

dairying, salt making, inland fishing and similar
aquaculture activities and other agricultural
activities and is not classified as mineral, timber,
residential, commercial or industrial land.77
Commercial Is land devoted principally for the object of
Land profit and is not classified as agricultural,
industrial, mineral, timber or residential land.78
Industrial Land Is land devoted principally to industrial activity
as capital investment and is not classified as
agricultural, commercial, timber, mineral or
residential land.79
Mineral Lands Are lands in which minerals exist in sufficient
quantity or grade to justify the necessary
expenditures to extract and utilize such
minerals.80
Q. What are the special classes of real property under the LGC?
A. All lands, buildings, and other improvements actually, directly and

exclusively:
1. Used for hospitals, cultural or scientific purposes;

2. Owned and used by local water districts;
3. Owned and used by GOCCs rendering essential public services in:
a. Supply and distribution of water; and
b. Generation and transmission of electric power.81
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f) Actual use of property as basis of assessment
---------------------------------------------------------------
Q. What is the basis for assessing real property tax?
77See Section 199(d), Local Government Code.

78See Section 199(i), Local Government Code.
79See Section 199(n), Local Government Code.
80See Section 199(p), Local Government Code.
A. Real property shall be classified, valued and assessed on the basis of

its actual use regardless of where located, whoever owns it, and
whoever uses it.82 Thus, the bais for assessing real property taxes is
the actual use to which the real property is devoted to.
Q. What does “actual use” mean?
A. Actual use refers to the purpose for which the property is principally
or predominantly utilized by the person in possession thereof.83
Q. The real property of Mr. and Ms. X, situated in a commercial area in

front of the public market, was declared in their tax declaration as
residential because it is used as their family residence. However,
when the spouses left for the US to stay there permanently with
their children, the property has been rented to a single proprietor
engaged in sale of appliances and agricultural products. The
Provincial assessor reclassified the property as commercial for tax
purposes. Mr. and Ms. X appealed to the LBAA and argued that the
tax declaration classifying their property as residential is binding.
Is the contention of the spouses correct? Commented [W1]: San mo pinulot ito?
A. No. The law focuses on the actual use of the property for
classification, valuation and assessment purposes regardless of
ownership. Section 217 of the LGC provides that “real property shall
be classified, valued, and assessed on the basis of its actual use
regardless of where located, whoever owns it, and whoever uses it.”
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g) Assessment of real property
(i) Assessment levels
82See Section 217, Local Government Code; see also Section 1 A, Chapter V.
BLGF Manual on Real Property Appraisal and Assessment Operations, January
2006.
83Section 199 (b), Local Government Code.

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Q. Define assessment.
A. Assessment is the act or process of determining the value of a

property or proportion thereof subject to tax, including the discovery,
listing, classification, and appraisal of properties.84
Q. Define assessment level.
A. Assessment level is the percentage applied to the Fari Market Value

(FMV) of the real property to determine the taxable value of the
property.85
Q. What are the assessment levels to be used in determining the

assessed values of real properties subject to real property tax?
A. The assessment levels to be applied to the fair market value of real

property to determine its assessed value shall be fixed by ordinances
of the sangguniang panlalawigan, sangguniang panlungsod or
sangguniang bayan of a municipality within the Metropolitan Manila
Area, at rates not exceeding the following:86
Class of Property Assessment Level

Residential 20%
Agricultural 40%
Commercial 50%
Lands
Industrial 50%
Mineral 50%
Timberland 20%
Assessment
Class Fair Market Value Level
84Section 199 (f), Local Government Code.

85Section 199 (g), Local Government Code.
86Section 218, Local Government Code.
Not over P175,000.00 0%

Over P175,000.00 but
not over P300,000.00 10%
Over 300,00.00 but not
over P500,000.00 20%
not over P750,000.00 25%
Residential Over P750,000.00 but

not over P1,000,000.00 30%
Over P1,000,000.00 but
not over P2,000,000.00 35%
Over P2,000,000.00 but
not over P5,000,000.00 40%
Over P5,000,000.00 but
not over 10,000,000.00 50%
Over 10,000,000.00 60%
Not over P300,000.00 25%
over P500,000.00 30%
Buildings and other Over P500,000.00 but
Structures not over P750,000.00 35%
Agricultural
not over P1,000,000.00 40%
Over P1,000,000.00 but
not over P2,000,000.00 45%
Over P2,000,000.00 50%
Not over P300,000.00 30%

over P500,000.00 35%
not over P750,000.00 40%
Commercial/Industrial
not over P1,000,000.00 50%
Over P1,000,000.00 but
not over P2,000,000.00 60%
Over P2,000,000.00 but
not over P5,000,000.00 70%
Over P5,000,000.00 but
not over 10,000,000.00 75%
Over 10,000,000.00 80%

Not over P300,000.00 45%
over P500,000.00 50%
not over P750,000.00 55%
Timberland
not over P1,000,000.00 60%
Over P1,000,000.00 but
not over P2,000,000.00 65%
Over P2,000,000.00 70%
Class Assessment Level

Agricultural 40%
Machineries Residential 50%
Commercial 80%
Industrial 80%
Actual Use Assessment Level

Cultural 15%
Scientific 15%
Hospital 15%
Local Water Districts 10%
Special Classes of
Properties GOCCs engaged in the
supply and
distribution of water
and/or generation and
transmission of electric
power 10%
Q. Define assessed value
A. It is the FMV of the real property multiplied by the assessment level.

It is synonymous with “taxable value”.87
Q. What is the procedure in computing real property tax?
87Section 199 (h), Local Government Code.

A. In computing real property tax, the following procedure is to be

followed:
1. Ascertain the assessment level of the property.
2. Multiply the market value by the applicable assessment level of
the property.
3. Find the tax rate which corresponds to the class (use) of the
property and multiply the assessed value by the applicable tax
rates.88
Otherwise stated:
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 × 𝐴𝑠𝑠𝑒𝑠𝑠𝑚𝑒𝑛𝑡 𝐿𝑒𝑣𝑒𝑙 (%) = 𝐴𝑠𝑠𝑒𝑠𝑠𝑒𝑑 𝑉𝑎𝑙𝑢𝑒
𝐴𝑠𝑠𝑒𝑠𝑠𝑒𝑑 𝑉𝑎𝑙𝑢𝑒 𝑥 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 (%) = 𝑅𝑒𝑎𝑙 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦 𝑇𝑎𝑥 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
---------------------------------------------------------------
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Q. What are the steps to be followed for the mandatory conduct of

general revision of real property assessments under Section 219 of
the LGC?
A. The following steps are to be followed for the mandatory conduct of

general revisions of real property assessments:
1. Preparation of the Schedule of FMVs.

2. The enactment of Ordinances.
a. Levying an annual ad valorem tax on real property and an
additional tax accruing to the SEF.
b. Fixing the assessment levels to be applied to the market
values of the real properties.
c. Providing necessary appropriation to defray expenses
incident to general revision of real property assessments.
d. Adopting the Schedule of FMVs prepared by the assessors.89
88See Section 215 to 255, Local Government Code.
Q: When can an assessor make a valuation of real property?
A. The following are the instances where he assessor shall make a

valuation of real property:
1. The real property is declared and listed for taxation purposes for
the first time;
2. There is an ongoing general revision of property classification and
assessment; or
3. A request is made by the person in whose name the property is
declared.90
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Q. What is the date of effectivity of an assessment or reassessment?
A. All assessments or reassessments made after the first (1st) day of

January of any year shall take effect on the first (1st) day of January of
the succeeding year. But, if the reassessment of real property is due to its
partial or total destruction, or to a major change in its actual use, or to
any great and sudden inflation or deflation of real property values, or to
the gross illegality of the assessment when made or to any other
abnormal cause, it shall be made within ninety (90) days from the date
any such cause or causes occurred, and shall take effect at the beginning
of the quarter next following the reassessment.91
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89Lopez v. City of Manila, G.R. No. 127139, February 19, 1999; Memorandum
Circular No. 04-95, Bureau of Local Government Finance.
Q. How are real properties assessed for back taxes?
A. Real property declared for the first time shall be assessed for taxes for
the period during which it would have been liable but in no case for
more than ten (10) years prior to the date of initial assessment. Such
taxes shall be computed on the basis of the applicable schedule of
values in force during the corresponding period. If such taxes are
paid on or before the end of the quarter following the date the notice
of assessment was received by the owner or his representative, no
interest for delinquency shall be imposed thereon; otherwise, such
taxes shall be subject to an interest at the rate of two percent (2%) per
month or a fraction thereof from the date of the receipt of the
assessment until such taxes are fully paid.92
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---------------------------------------------------------------
Q. In case of a new or revised assessment, should the assessor give
notice to the person in whose name the property is declared?
A. Yes. When real property is assessed for the first time or when an
existing assessment is increased or decreased, the provincial, city or
municipal assessor shall within thirty (30) days give written notice of
such new or revised assessment to the person in whose name the
property is declared. The notice may be delivered personally or by
registered mail or through the assistance of the punong barangay to
the last known address of the person to be served.93
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h) Appraisal and assessment of machinery
---------------------------------------------------------------

Q. How are machineries appraised?
A. Machineries shall be appraised based on their farimarket value which

depends if the machinery is brand new or not, or imported or
locally-made. The fair market value of a brand-new machinery shall
be the acquisition cost. In all other cases, the fair market value shall
be determined by dividing the remaining economic life of the
machinery by its estimated economic life and multiplied by the
replacement or reproduction cost.94
If the machinery is imported, the acquisition cost includes freight,

insurance, bank and other charges, brokerage, arrastre and handling,
duties and taxes, plus cost of inland transportation, handling, and
installation charges at the present site. The cost in foreign currency
of imported machinery shall be converted to peso cost on the basis of
foreign currency exchange rates as fixed by the Central Bank. 95
Q. How are machineries assessed?
A. For purposes of assessment, a depreciation allowance shall be made

for machinery at a rate not exceeding five percent (5%) of its original
cost or its replacement or reproduction cost, as the case may be, for
each year of use, provided that the remaining value for all kinds of
machinery shall be fixed at not less than twenty percent (20%) of
such original, replacement, or reproduction cost for so long as the
machinery is useful and in operation.96
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5. Collection of real property tax
a) Date of accrual of real property tax and special levies
b) Collection of tax
(i) Collecting authority
(ii) Duty of assessor to furnish local treasurer with assessment rolls
94Section 224 (a), Local Government Code.

95Section 224 (b), Local Government Code.
(iii) Notice of time for collection of tax

c) Periods within which to collect real property tax
d) Special rules on payment
(i) Payment of real property tax in installments
(ii) Interests on unpaid real property tax
(iii) Condonation of real property tax
e) Remedies of LGUs for collection of real property tax
(i) Issuance of notice of delinquency for real property tax
assessment
(ii) Local government’s lien
(iii) Remedies in general
(iv) Resale of real estate taken for taxes, fees, or charges
(v) Further levy until full payment of amount due
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---------------------------------------------------------------
a) Date of accrual of real property tax and special levies
---------------------------------------------------------------
Q. When does real property tax accrue?
A. The real property tax for any year shall accrue on the first day of
January and from that date it shall constitute a lien on the property
which shall be superior to any other lien, mortgage, or encumbrance
of any kind whatsoever, and shall be extinguished only upon the
payment of the delinquent tax.97
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b) Collection of tax
(i) Collecting authority
(ii) Duty of assessor to furnish local treasurer with assessment rolls
(iii) Notice of time for collection of tax
---------------------------------------------------------------
---------------------------------------------------------------

c) Periods within which to collect real property tax

---------------------------------------------------------------
Q: What is the prescriptive period for the collection of real property

taxes?
A. The general rule is that basic real property tax and any other tax
levied along with it shall be collected within five (5) years from the
date they become due. No action for the collection of the tax, whether
administrative or judicial, shall be instituted after the expiration of
such period.98
However, in case of fraud or intent to evade payment of the tax, such

action may be instituted for the collection of the same within ten (10)
years from the discovery of such fraud or intent to evade payment.99
Q. Can the running of the prescriptive period for collection of RPT be

suspended?
A. Yes. The running of the prescriptive period is suspended for the time
during which:
1. The treasurer is legally prevented from assessing/ collecting;

2. The taxpayer requests for reinvestigation and executes waiver;
3. The taxpayer is out of the country or cannot be located.100
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d) Special rules on payment
(i) Payment of real property tax in installments
(ii) Interests on unpaid real property tax

99Id.
(iii) Condonation of real property tax

---------------------------------------------------------------
Q.Can there be a condonation or reduction of RPT?
A. Yes. Condonation or reduction of RPT by the Sanggunian concerned

is allowed to be had by ordinance passed prior to the first day of
January of any year, upon recommendation of the Local Disaster
Coordinating Council, when:
1. There is general failure of crops;
2. Substantial decrease in the price of agricultural or agri-based
products; and
3. Calamity. 101
In cases the public interest so requires, the President of the Philippines

may also condone or reduce the real property tax and interest for any
year in any province or city or a municipality within the Metropolitan
Manila Area.102
4. When public interest so requires.
(In Executive Order No. 27,103the President under the power given to him
by Section 277 of the LGC reduced the RPT payable in Quezon by
independent power producers under BOT contracts with GOCCs and
condoned the penalties and surcharges of such RPT payables.
---------------------------------------------------------------
e) Remedies of LGUs for collection of real property tax
assessment
103February 28, 2011.

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assessment
---------------------------------------------------------------
Q. What happens when the RPT becomes delinquent?
A. When the real property tax or any other tax imposed under the
provisions of the LGC on RPT, becomes delinquent, the provincial,
city or municipal treasurer shall immediately cause a notice of the
delinquency to be posted at the main entrance of the provincial
capitol, or city or municipal hall and in a publicly accessible and
conspicuous place in each barangay of the local government unit
concerned. The notice of delinquency shall also be published once a
week for two (2) consecutive weeks, in a newspaper of general
circulation in the province, city, or municipality.104
Q. What should be stated in the notice of delinquency?
A. Such notice shall specify the date upon which the tax became
delinquent and shall state that personal property may be distrained
to effect payment. It shall likewise state that at any time before the
distraint of personal property, payment of the tax with surcharges,
interests and penalties may be made, and unless the tax, surcharges
and penalties are paid before the expiration of the year for which the
tax is due except when the notice of assessment or special levy is
contested administratively or judicially, the delinquent real property
will be sold at public auction, and the title to the property will be
vested in the purchaser, subject, however, to the right of the
delinquent owner of the property or any person having legal interest
therein to redeem the property within one (1) year from the date of
sale.105

---------------------------------------------------------------
---------------------------------------------------------------
Q. What is the Local Governments’ Lien?
A. The basic RPT constitutes as a lien on the property subject to tax,

superior to all liens, charges or encumbrances in favor of any person,
irrespective of the owner or possessor thereof, enforceable by
administrative or judicial action and may only be extinguished by
payment of the tax and related interests and expenses.106
In Testate Estate of Concordia Lim v. City of Manila,107 the Supreme Court

held that unpaid real estate taxes attaches to the property and is
chargeable against the taxable person who had actual or beneficial use
and possession of it, regardless of whether or not he is the owner.
---------------------------------------------------------------
---------------------------------------------------------------
Q. What are the remedies available to the LGU for the collection of
RPT?
A. to collect RPT, the LGU concerned has the following remedies:

1. Administrative action thru levy of real property, which are:
a. Distraint of personal property;

107GR No. 90639, February 21, 1990.
b. Lien on property subject to tax; and

c. Levy on real property tax; and
2. Judicial action.108
Note that the above remedies are concurrent and simultaneous.
Q. When is there levy on real property?
A. After the expiration of the time required to pay the tax levied, the real
property subject to tax may be levied upon. Such remedy of levy may
be repeated if necessary until the full amount due including all
expenses is collected.109
Q. Outline the procedure for levy on real property.
A. When the LGU levies on real property to collected unpaid RPT, the
following procedures are to be taken:
Note: Owner.
1. Tax constitutes a lien on the property superior to all liens and may
only be extinguished upon payment of the tax and charges. 110
2. Time for payment of real property taxes expires.111
3. Warrant of Levy issued by the Local Treasurer (LT), which has the
force of legal execution in the LGU concerned. 112(Section 258, LGC)
4. Warrant is mailed to or served upon the delinquent owner, which
means owner or administrator of real property or any person having
legal interest thereto. 113
108Sections 256 to 269, Local Government Code.

112Id.
113Id.
5. Written notice of the levy and the warrant is mailed/served upon the
assessor and the Registrar of Deeds of the LGU.114
6. 30 days from service of warrant, LT shall advertise sale of the
property by:
a. posting notice at main entrance of LGU hall/building and in a
conspicuous place in the barangay where property is located; and
b. by publication once a week for 2 weeks.115
Note that in cases of levy for unpaid local taxes publication is once a
week for 3 weeks.
7. Before the date of sale, the owner may stay the proceedings by paying
the delinquent tax, interest and the expenses of sale.116
8. Sale is held:
a. at the main entrance of the LGU building, or
b. on the property to be sold, or
c. at any other place specified in the notice.117
The next steps in the procedure will vary depending on whether, during
the sale, there is a bidder or not. Thus:
If there is a bidder If there is no bidder
9. Bidder pays and 30 days 9. LT shall purchase the property

after the sale, the LT shall in behalf of the LGU.122
report the sale to the
sanggunian. Note that in cases of levy for
10. LT shall deliver to purchaser unpaid local taxes, LT may
certificate of sale purchase if there is no bidder or if
11. Proceeds of sale in excess of the highest bid is insufficient.123
delinquent tax, interest &
expenses of sale remitted to 10. Register of Deeds shall transfer
the owner.118 the title of the forfeited
114Id.
116Id.
117Id.
12. Within 1 year from sale, property to the LGU without

owner may redeem upon need of a court order.124
payment of the 1. delinquent 11. Within 1 year from forfeiture,
tax, 2. interest due, 3. the owner, may redeem the
expenses of sale (from date property by paying to the local
of delinquency to date of treasurer the full amount of the
sale) and additional interest tax and the related interest and
of 2% per month on the the costs of sale otherwise the
purchase price from date of ownership shall be vested on
sale to date of redemption. the local government unit
Delinquent owner retains concerned.125
possession and right to the 12. Sanggunian concerned may, by
fruits.119 (Section 261, LGC) ordinance sell and dispose of
13. LT returns to the the real property acquired
purchaser/bidder the price under the preceding section at
paid plus interest of 2% per public auction.126
month. 120
14. If property is not redeemed,

the local treasurer shall
execute a deed of
conveyance to the
purchaser.121
In both cases, levy may be repeated until the full amount due, including
all expenses, is collected.127
Recall that the procedure for levying real properties to satisfy local taxes
is the SAME as the levy procedure for satisfying RPT EXCEPT for two
things: (1) Publication is once a week for 3 weeks for local taxes while it

120Id.
125 Id.
is once a week for 2 weeks for RPT and (2) for local taxes, the LGU may
purchase levied property for two reasons– there is no bidder OR the
highest bid is insufficient to cover the taxes and other charges – but for
RPT, the LGU may purchase for only one reason – there is no bidder! It’s
that simple.
Q. What is the effect of lack of notice and publication of sale?
A. Notice and publication for sale, as well as the legal requirements for a
tax delinquency sale are mandatory and failure to comply can
invalidate the sale.128
Q. What is the redemption period for tax delinquent properties sold at

public auction?
A. Under the LGC, the redemption period is within 1 year from the date
of sale.129
However, in City Mayor of Quezon City v. RCBC,130 the Supreme Court

ruled that while the LGC provides that the one year period begins
from the date of sale on which date the delinquent tax is and other
fees are paid, the local tax ordinance of Quezon City provides that
the period is reckoned from the date of annotation of the sale. To
reconcile the two conflicting laws, the Court applied the rule that a
special law prevails over a general law. Thus, the period shall be
counted from the date of annotation of the sale.
Q. Discuss the remedy of civil action for collection of real property

tax.
128 De Knecht v. CA; De Knecht v. Sayo GR Nos. 108015 and 109234, May 20,
1998.
130GR No. 171033, August 3, 2010.
A. The civil action for the collection of real property tax shall be filed by
the local treasurer in any court of competent jurisdiction within 5 or
10 years wherein real property taxes may be collected.131
---------------------------------------------------------------
6. Refund or credit of real property tax
a) Payment under protest
b) Repayment of excessive collections
---------------------------------------------------------------
Please see the discussion on payment under protest and refund under
the section on Taxpayer’s Remedies.
---------------------------------------------------------------
7. Taxpayer’s remedies
a) Contesting an assessment of value of real property
(i) Appeal to the Local Board of Assessment Appeals
(ii) Appeal to the Central Board of Assessment Appeals
(iii) Effect of payment of tax
b) Payment of real property tax under protest
(i) File protest with local treasurer
(ii) Appeal to the Local Board of Assessment Appeals
(iv) Appeal to the CTA
(v) Appeal to the Supreme Court
--------------------------------------------------------------
Note that contesting an assessment and payment under protest are part
of the same process, and are not two different remedies of the taxpayer.
The distinction should instead be made on whether the taxpayer is
questioning the validity of the tax ordinance (in such case, the
assessment would be illegal or void) or is disputing the correctness,
reasonableness or excessiveness of the assessment.
Thus, if the taxpayer is questioning the validity of the tax ordinance, the
taxpayer may either question the legality of a tax ordinance before the
DOJ Secretary under Section 187 of the LGC or question the

constitutionality of the ordinance before the Regular Courts. In this case,

payment under protest is not required.
If the taxpayer is questioning the correctness, reasonableness or

excessiveness of the assessment, the taxpayer will resort to
administrative remedies. In this case, payment under protest is required.
Q. Who may contest the assessment of real property?
A. In order for a taxpayer to have legal standing to contest an

assessment to the LBAA, he must be a person having legal interest in
the property.
In NAPOCOR v. Province of Quezon,132 the Supreme Court stated that

legal interest is defined as interest in property or a claim cognizable at
law, equivalent to that of a legal owner who has legal title to the property. A
review of the provisions of the 1991 LGC on real property taxation
shows that the phrase “person having legal interest in the property” has
been repeatedly adopted and used to define an entity:
1. in whose name the real property shall be listed, valued, and

assessed;
2. who may be summoned by the local assessor to gather
information on which to base the market value of the real
property;
3. who may protest the tax assessment before the LBAA and may
appeal the latter’s decision to the CBAA;
4. who may be liable for the idle land tax, as well as who may be
exempt from the same;
5. who shall be notified of any proposed ordinance imposing a
special levy, as well as who may object the proposed ordinance;
6. who may pay the real property tax;
132GR No. 171585, July 15, 2009.

7. who is entitled to be notified of the warrant of levy and against

whom it may be enforced;
8. who may stay the public auction upon payment of the delinquent
tax, penalties and surcharge; and
9. who may redeem the property after it was sold at the public
auction for delinquent taxes.
Q. What is the process in contesting an RPT assessment?
A. In contesting an assessment of RPT, the following procedure is to be

followed:
1. Pay the tax under protest and annotation of “paid under protest”
in receipt.133
2. File written protest with local treasurer within 30 days from
payment of the tax.134
3. Treasurer to decide within 60 days from receipt of the protest.135
4. From treasurer’s decision or inaction, appeal to the LBAA within
60 days.136
5. LBAA to decide within 120 days from date of receipt of the
appeal.137
6. Appeal LBAA decision to CBAA within 30 days from receipt of
adverse decision.138
7. CBAA appealable to CTA (Court of Tax Appeals) en banc within 30
days from receipt of the adverse decision of the CBAA.139
8. Appeal to SC within 15 days from receipt of adverse decision of
CTA.140
Note that (1) to (4), if the treasurer’s decision is in favor of the taxpayer,
he may now apply for a tax refund or tax credit.

134Id.
135Id.
136Section 195 and 226, Local Government Code.
138Id.
139 See Section 7, RA No. 1125 as amended by RA No. 9282; Section 2, Rule 4,
AM No. 05-11-07-CTA, Novemebr 22, 2005.
140Section 1, Rule 16, AM No. 05-11-07-CTA, Novemebr 22, 2005.
Q. What is the effect of an appeal on assessments?
A. An appeal on assessments of real property shall, in no case, suspend

the collection of the corresponding realty taxes on the property
involved as assessed by the provincial or city assessor, without
prejudice to subsequent adjustment depending upon the final
outcome of the appeal.141
Q. Can the RTC issue an injunction against the collection of RPT if

there is a pending appeal with the LBAA?
A. Yes. In Talento v. Escalada, Jr.,142the Supreme Court held that as a

general rule, appeal shall not suspend the collection of RPT.
However, an exception to the rule is where the taxpayer has shown a
clear and unmistakable right to refuse or hold in abeyance the
payment of RPT. In this case, the taxpayer showed that the
assessments covered more than 10 years, the assessment included
items which should properly be excluded, and the subject assessment
should take effect on January 1 the following year. Further, the filing
of a bond was deemed to have been in compliance with Section 11 of
RA 9282.
Payment under Protest
Q. Is payment a pre-requisite to protest an assessment for RPT?
A. Yes. Section 252 of the LGC provides that no protest shall be

entertained unless the taxpayer first pays the tax.
Q. When is payment under protest not required?
A. The protest contemplated under Section 252 is required where there

is a question as to the reasonableness or correctness of the amount
assessed, hence, considered a question of fact. If a taxpayer disputes

142GR No. 180884, June 27, 2008.
the reasonableness of an increase in a real property tax assessment,

he is required to "first pay the tax" under protest. Otherwise, the city
or municipal treasurer will not act on his protest.143 It presupposes
that the taxpayer is subject to the tax but is disputing the correctness
of the amount assessed.144 In such case, the assessment being
questioned is “erroneous”.145
Prior payment under protest is not required when the taxpayer is

questioning the very authority and power of the assessor to impose the
assessment and of the treasurer to collect the tax as opposed to
questioning the increase/decrease in the tax to be paid.146 In this case,
the assessment involved is “illegal”.147 These are not questions merely of
amounts of the increase in the tax but attacks on the very validity of any
increase.148
Q. Distinguish between an illegal assessment and an erroneous

assessment of real property taxes in terms of remedies to be taken?
A. An erroneous assessment is different from an illegal assessment, and

the proper remedy of a taxpayer issued an assessment depends on
whether the assessment was erroneous or illegal.
An erroneous assessment “presupposes that the taxpayer is subject to

the tax but is disputing the correctness of the amount assessed.” With
an erroneous assessment, the taxpayer claims that the local assessor
erred in determining any of the items for computing the real property
tax, i.e., the value of the real property or the portion thereof subject to
tax and the proper assessment levels. In case of an erroneous
assessment, the taxpayer must exhaust the administrative remedies
provided under the Local Government Code before resorting to
143 National Power Corporation v. Province of Quezon, G.R. No. 171586,
January 25, 2010.
144 See National Power Corporation v. Province of Quezon and Municipality of
Pagbilao, GR No. 171586, January 25, 2010.

145 See National Power Corporation v. Municipal Government of Navotas, G.R.
No. 192300, Novemebr 24, 2014.

146 See Jardine Davies Insurance Brokers, Inc. v. Aliposa, GR No. 118900,
February 27, 2003.

147 City of Lapu-Lapu v. PEZA, G.R. No. 184203 & 187583, November 26, 2014.
148 City of Lapu-Lapu v. PEZA, G.R. No. 184203 & 187583, November 26, 2014.
judicial action. The taxpayer must first pay the real property tax
under protest. Should the taxpayer find the action on the protest
unsatisfactory, the taxpayer may appeal with the Local Board of
Assessment Appeals within 60 days from receipt of the decision on
the protest. If the taxpayer is still unsatisfied after appealing with the
Local Board of Assessment Appeals, the taxpayer may appeal with
the Central Board of Assessment Appeals within 30 days from receipt
of the Local Board’s decision. The decision of the Central Board of
Assessment Appeals is appealable before the Court of Tax Appeals
En Banc. The Court of Tax Appeals’ decision may then be appealed
before the Supreme Court through a petition for review on certiorari
under Rule 45 of the Rules of Court raising pure questions of law.
On the other hand, an assessment is illegal if it was made without

authority under the law. In case of an illegal assessment, the taxpayer
may directly resort to judicial action without paying under protest
the assessed tax and filing an appeal with the Local and Central
Board of Assessment Appeals. The taxpayer shall file a complaint for
injunction before the Regional Trial Court to enjoin the local
government unit from collecting real property taxes. The party
unsatisfied with the decision of the Regional Trial Court shall file an
appeal, not a petition for certiorari, before the Court of Tax Appeals,
the complaint being a local tax case decided by the Regional Trial
Court. The appeal shall be filed within fifteen (15) days from notice of
the trial court’s decision. The Court of Tax Appeals’ decision may
then be appealed before the Supreme Court through a petition for
review on certiorari under Rule 45 of the Rules of Court raising pure
questions of law.149
Q. Can the taxpayer file a case directly to the RTC if it claims that it
was questioning the authority of the treasurer to assess and not
only the amount of the assessment?
149See National Power Corporation v. Municipal Government of Navotas, G.R.

No. 192300, Novemebr 24, 2014.
A. No. In Olivares v. Mayor Marquez,150it was found that the taxpayer

raised issues on prescription, double taxation, and tax exemption. In
such case, the correctness of the assessment must be dealt with and
the treasurer has initial jurisdiction and his decision is appealable to
the LBAA.151 Payment under protest is required.
Q. The Province of Quezon assessed Mirant for unpaid real property

taxes. NAPOCOR, which entered a BOT with Mirant, protested the
assessment before the LBAA, claiming the entitlement to tax
exemption under Sec. 234 of the LGC. The RPT assessed were not
paid prior to the protest. LBAA dismissed NAPOCOR’s petition for
failure to make a payment under protest. Is NAPOCOR required o
make a payment under protest?
A. Yes. By claiming an exemption from realty taxation, NAPOCOR is

simply raising the question of the correctness of the assessment. As
such real property taxes must be paid prior to the making of the
protest. On the other hand, if the taxpayer is questioning the
authority of the local assessor to assess RPT, it is not necessary to pay
the RPT prior to the protest. A claim for tax exemption, whether full
or partial, does not question the authority of the local assessor to
assess RPT .152
Refund or Credit of RPT
Q. What is the rule on refunds of RPT?
A. The taxpayer must file the written claim within 2 years from the
date of payment of tax or from the date when the taxpayer is entitled to
150 G.R. No. 155591, September 22, 2004.

151 Unlike in JARDINE DAVIES INSURANCE BROKERS, INC. V. ALIPOSA [FEBRUARY 27, 2003],
the taxpayer in this case should make a payment under protest as the
issues included correctness of the assessment.
152 See National Power Corporation v. Province of Quezon and Municipality of
Pagbilao, GR No. 171586, January 25, 2010.

reduction or adjustment.153 The localtreasurer has 60 days to decide the

claim for tax refund or credit.154
Q. What is the remedy available if the claim for tax refund or credit is
denied?
A. Follow steps 4 to 8 in the procedure in contesting an RPT assessment.

Thus, if the local treasurer denies the claim, the following steps are to
be followed:
1. From treasurer’s decision or inaction, appeal to the LBAA within

60 days.155
2. LBAA to decide within 120 days from date of receipt of the
appeal.156
3. Appeal LBAA decision to CBAA within 30 days from receipt of
adverse decision.157
4. CBAA appealable to CTA (Court of Tax Appeals) en banc within 30
days from receipt of the adverse decision of the CBAA.158
5. Appeal to SC within 15 days from receipt of adverse decision of
CTA.159
153 Sections 196 and 253, Local Government Code. Note that the Supervening
cause doctrine applies.
155Section 195 and 226, Local Government Code.
157Id.
158 See Section 7, RA No. 1125 as amended by RA No. 9282; Section 2, Rule 4,
AM No. 05-11-07-CTA, Novemebr 22, 2005.

159Section 1, Rule 16, AM No. 05-11-07-CTA, Novemebr 22, 2005.

Real Property Taxation FINAL

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REAL PROPERTY TAXATION 1

Q. What properties are subject to real property tax?

A. Only properties which are considered as real property are subject to

Q. What properties are considered real properties?

Article 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds

(4) Statues, reliefs, paintings or other objects for use or

Note, however, thatersonal property may be classified as real property

3 Section 415, Civil Code.

However, note that in Camarines Sur II Electric Cooperative, Inc. v.

A. Machinery embraces machines, equipment, mechanical contrivances,

4 Board of Assessment Appeals v. MERALCO, G.R. No. L-15334, January 31,

Q. What types of machinery are subject and not subject to RPT?

A. In determining if machinery is subject to RPT or not, the following

1. Machinery that is permanently attached to land and buildings is

A. Improvement is a valuable addition to the property or an

Q. What are the requisites for taxability of an improvement?

A. For an improvement to be taxable:

1. It must enhance the value of the property;

7 DOF Local Finance Circular No. 001-2002, APRIL 25, 2002.

A. In Camarines Sur II Electric Cooperative, Inc. v. Provincial Assessor of the

(1) Telephone posts;10

Assessor of Pasasy, G.R. No. L-50466, 31 May 1982.

No. 106041, 29 January 1993, en banc.

South Cotabato, et al, G.R. No. 144486, 13 April 2005.

(10) Port facilities and appurtenances;19 and

Q. The City Assessor of CDO assessed as taxable the machinery of

Q. Are equipment/machineries in cement or wooden platform and

18 Light Rail Transit Authority vs CBAA, et al., G.R. No. 127316, 12

Note that machinery which is movable in its nature only becomes

Q. What is the taxability of the following properties of a bank: (1)

Co. v. Castillo, G.R. No. L-40411, Auhust 7, 1935.

Q. What is the taxability of the following properties of a bank: (1)

A. Items Nos. 2-5 should have been classified as improvement subject to

Q. What is the taxability of the following properties: (1) printing and

A. The printing and developing machine owned by the photo center is a

Q. MERALCO installed two oil storage tanks on a lot in Batangas

25 BLGF Opinion dated February 17, 2005.

considered improvements on the land enhancing its utility and

Q. MERALCO installed a pipeline system running from Batangas to

A. Yes. In Meralco Securities Industrial V. CBAA,28 the Supreme Court held

Q. Is a dam, constructed by a mining company within the mined area,

A. Yes. In Benguet Corporation V. CBAA,31 the Supreme Court has held

28 G.R. No. L-46245, May 31. 1982.

is permanent in character and it enhances both the value and utility

Q. Enumerate the fundamental principles that shall guide real

A. The following fundamental principles govern real property taxation:

32 Section 198, Local Government Code.

Q. What is the nature of a real property tax?

A. Real property tax is:

Note that in Meralco Securities Industrial Corp. v. CBAA,34 the Supreme

33 National Grid Corporation of the Philippines vs. Central Board of

A. No. Only provinces and cities, as well as municipalities within Metro

Thus, municipalities outside Metro Manila and barangays cannot

Q. What are the rates of levy for purposes of RPT?

A. A province or city or municipality within Metro Manila shall fix a

1. In the case of a province, at the rate not exceeding 1% of the

Q. What are the special levies under the LGC?

A. The LGC provides for the following special levies:

1. Additional Levy for the Special Education Fund (SEF) – 1% on

35 See Sections 200 and 232, Local Government Code.

actual cost of such project and improvements, including the costs

Q. When may idle lands be exempted from tax?

Q. What are the conditions for the validity of a tax ordinance