LOCAL GOVERNMENT TAXATION

Local government units (LGUs) derive their revenues from local and external sources. Local sources include tax
revenues from the real property tax and the business tax, and non-tax revenues from fees and charges, receipts from
government business operations and proceeds from sale of assets. External sources, on the other hand, include the
Internal Revenue Allotment (IRA) and other shares from special laws, grants and aids and borrowings.

The power to impose a tax, fee, or charge or to generate revenue under this Code shall be exercised by the Sanggunian
of the local government unit concerned through an appropriate ordinance (Sec. 132, Local Government Code):
Provided, that the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory to declared national
policy, and that the ordinance levying such taxes, fees, or charges shall not be enacted without any proper public
hearing conducted for the purpose (Sec. 186, LGC).

Real Property Taxes

Only provinces, cities, and municipality within the Metropolitan Manila Are (“MMA”) may levy an annual ad valorem
tax on real property such as land, building, machinery, and other improvements not specifically exempted by the LGC
(Sec. 232, LGC). These public corporations shall be primarily responsible for the proper, efficient, and effective
administration of the real property tax (Sec. 200).

1. General Principles of Real Property Taxation

a. Fundamental Principles (Sec. 198, LGC)

i. Real property shall be appraised at its current and fair market value.

Note: All real property, whether taxable or exempt shall be appraised at the current and
fair value prevailing in the locality where the property is situated (Sec. 201, LGC).

ii. Real property shall be classified or assessment purposes on the basis of its actual use (Note:
“Actual use” refers to the purpose for which the property is principally or predominantly
utilized by the person in possession thereof.)

For purposes of assessment, real property shall be classified as:

• Residential • Industrial
• Agricultural • Mineral
• Commercial • Timberland

• Special – Lands, buildings, and other improvements thereon (a) actually, directly,
exclusively used for hospital, cultural, or scientific purposes, (b) those owned
by local districts, (c) and those owned by GOCCs rendering essential public
services in the supply and distribution of water and/or generation and transmission
of electric power (Sec. 216, LGC).

iii. Real property shall be assessed on the basis of a uniform classification within each LGU.

iv. The appraisal, assessment, levy and collection of RPT shall not be let to private persons.

• “Appraisal” is the act or process of determining the value of a property as of a

specified date for a specific purpose.
• “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.

v. The appraisal and assessment of real property shall be equitable.

 b. Exemption from Real Property Tax – The following are exempted from the payment of RPT:

• Real property owned by the Republic of the Philippines or any of its political subdivisions,
except when the beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person;
• Charitable institutions, churches, parsonages or covenants appurtenant thereto, mosques,
non-profit or religious cemeteries and all lands, buildings, and improvements actually,
directly and exclusively used for religious, charitable, or educational purposes;
• All machineries and equipment that are actually, directly and exclusively used by local
water districts and GOCCs engaged in the supply and distribution of water and/or
generation and transmission of electric power;
• All real property owned by duly-registered cooperatives as provided under RA 6938
• Machinery and equipment used for pollution control and environmental protection

Note: Sec. 206 of the LGC provides persons claiming exemption shall file with the assessor
within 30 days from the date of the declaration of real property, and sufficient documentary
evidence in support of such claim. Otherwise, the property shall be listed as taxable in the
assessment roll. However, if proven to be tax-exempt, the same shall be dropped.

2. Basic Real Property Taxes

a. Tax rate – The real property tax (RPT) is an ad valorem tax on real properties such as lands,
buildings, and other improvements, and machineries imposed by provinces, cities and municipalities
within the MMA using a uniform rate applicable to their respective localities as follows:

Provinces Rate not exceeding 1%

Cities and Municipality within MMA (Municipality of Pateros) Rate not exceeding 2%

b. Tax base – The RPT is based on the assessed value which is a certain percentage of the market value
of the real property. The assessed value is arrived at upon application of the assessment levels to
the market value of the property. The “assessment levels” are fixed by ordinance of the local
Sanggunian depending on the actual use of the property, at rates not exceeding the following:

Classes Land Buildings Machineries

Residential 20% Minimum: 0% for FMV not over P175,000 50%
Maximum: 60% for FMV over P10,000,000

Agricultural 40% Minimum: 25% for FMV not over P300,000 40%
Maximum: 50% for FMV over P2,000,000

Commercial 50% Minimum: 30% for FMV not over P300,000 80%
/Industrial Maximum: 80% for FMV over P10,000,000

Mineral 50% - -

Timberland 20% Minimum: 45% for FMV not over P300,000 -

Maximum: 70% for FMV over P2,000,000

Special 15% for all taxable real properties actually, directly and exclusively used for
cultural, scientific or hospital purposes

10% for all taxable real properties owned by local water districts, and GOCCs
engaged in the supply and distribution of water and/or generation and
transmission of electric power
3. Special Real Property Taxes

These are additional real property taxes levied upon properties.

a. Special Education Fund Tax – In addition to the basic RPT, a province or city, or a municipality
within the MMA may levy and collect an annual tax of 1% on the assessed value of real property
which shall be in addition to the basic RPT. The proceeds thereof shall exclusively accrue to the
Special Education Fund (SEF) to support public education (Sec. 235).

b. Idle Lands Tax – A province or city, or a municipality within the MMA may levy an annual tax on
idle lands at a rate not exceeding 5% of the assessed value of the property which shall be in addition
to the basic RPT (Sec. 236)

i. Coverage (Sec. 237) – For purposes of real property taxation, idle lands shall be:
• Agricultural lands, more than 1 hectare (or 10,000 m2) in area, suitable for
cultivation, dairying, inland fishery, and other agricultural uses, one-half (1/2) of
which remain uncultivated or unimproved
• Lands, other than agricultural, located in a city or municipality, more than 1,000
square meters in area one-half (1/2) of which remain unutilized or unimproved

Note: Regardless of land area, the tax shall likewise apply to residential lots in
subdivisions duly approved by proper authorities, the ownership of which has been
transferred to individual owners, who shall be liable for the additional tax.

ii. Excluded
• Agricultural lands planted to permanent or perennial corps with at least 50 trees
to a hectare
• Lands actually used for grazing purposes

Note: The LGU may exempt idle lands from the additional levy by reason of force
majeure, civil disturbance, natural calamity or any cause or circumstance which
physically or legally prevents the owner of the property or person having legal interest
therein from improving, utilizing or cultivating the same.

c. Special Levy (or Special Assessment) (Sec. 240) – A province, city or municipality may impose a
special levy on the lands within its territorial jurisdiction specially benefitted by public works
projects or improvements funded by the LGU concerned. The special levy shall not exceed 60% of
the actual cost of such projects and improvements, including the costs of acquiring land and such
other real property in connection therewith.

It shall not apply to:

• Lands exempt from basic real property tax
• Remainder of the land portions of which have been donated to the LGU concerned
for the construction of such projects or improvements

Note: Sec. 241 provides that the Sanggunian concerned shall not be obliged, in the
apportionment and computation of the special levy, to establish a uniform percentage of all
lands subject to the payment of the tax for the entire district, but it may fix different rates
for different parts or sections thereof, depending on whether such land is more or less
benefited by the proposed work

d. Socialized Housing Tax (RA 7279) – In addition to the RPT and SEF tax, a socialized housing tax
may also be imposed by a province, city or municipality within the MMA. The tax is 1/2 of 1% of
the assessed value of all lands in urban areas in excess of P50,000.
Local Business Taxes

1. Provincial Taxes

Sec. 135 Tax on transfer of real property ownership – On sale donation, barter, or any other mode of
transferring ownership or title of real property
The amount of tax shall not exceed 50% of 1% of the total consideration involved, or of the fair market
value in case the monetary consideration involved in the transfer is not substantial, whichever is higher

Except: Sale, transfer, or other disposition of real property pursuant to RA 6657 (Comprehensive Agrarian
Reform Law)

Sec. 136 Tax on business of printing and publication – Business of persons engaged in the printing
and/or publication of books, cards, posters, leaflets, handbills, certificates, receipts, etc.
The amount of tax shall not exceed 50% of 1% of gross annual receipts for the preceding calendar year;
however, if the business is new, the tax for the first year shall not exceed 1/20 of 1% of the capital
investment

Except: Receipts from printing and publication of books or other reading materials prescribed by the
Department of Education, Culture and Sports as school texts or references

Sec. 137 Franchise Tax – On business enjoying a franchise

The amount of tax shall not exceed 50% of 1% of gross annual receipts for the preceding calendar year;
however, if the business is new, the tax for the first year shall not exceed 1/20 of 1% of the capital
investment

Sec. 138 Tax on Sand, Gravel, and Other Quarry Resources – On ordinary stones, sand, gravel, earth,
and other quarry resources, as defined under NIRC, as amended, extracted from:
• Public lands; or
• Beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial
jurisdiction.
The amount of tax shall not exceed 10% of the fair market value in the locality per cubic meter.

Sec. 139 Professional Tax – On each person engaged in the exercise or practice of his profession requiring
government examination
The amount of tax shall not exceed P300.

Except: Professionals exclusively employed in the government

Notes:
• Any individual or corporation employing a person subject to professional tax shall require
payment by that person of the tax on his profession before employment and annually thereafter.
• Such person who has paid the corresponding professional tax shall be entitled to practice his
profession in any part of the Philippines without being subjected to any other national or local
tax, license or fee for the practice of such profession.
• A line of profession does not become exempt even if conducted with some other profession for
which the tax has been paid.
• Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports,
books of account, plans and designs, surveys
• The PRC shall likewise require proof of payment of the professional tax before registration of
professionals or renewal of their licenses.
 Sec. 140 Amusement Tax – On proprietors, lessees, or operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement
The amount of tax shall not exceed 10% of the gross receipts from admission fees:

Except:
• Flower shows
• Musical programs
• Literary and oratorical presentations
• Concerts (except pop, rock and similar concerts)
• Painting and art exhibitions
• Recitals
• Operas
• Dramas

Sec. 141 Annual Fixed Tax for Every Delivery Truck or Van – Every truck, van or any vehicle used
by manufacturers, wholesalers of, dealers or retailers in the delivery or distribution of distilled spirits,
fermented liquors, soft drinks, cigars and cigarettes, and other products to sales outlets or consumers,
whether directly or indirectly
The amount of tax shall not exceed P500 for every delivery truck or van.

2. Municipal Taxes

In addition to the taxes allowed to be levied by municipalities, the municipality within Metropolitan Manila
Area (i.e. Municipality of Pateros), pursuant to Section 186 of the LGC, may also levy and collect the taxes
which may be imposed by the province under Sec. 135 to 141 of the LGC at rates not exceeding those
prescribed therein.

The following are taxes that may be levied by municipalities.

a. Tax on Business (Sec. 143)

Person levied Subject matter taxed

Sec. 143 (a)
Manufacturer, assemblers, repackers, Liquors
processors, brewers, distillers, rectifiers and Distilled spirits
compounders; and Wines

Manufacturers Article of commerce of whatever kind or nature

The amount of tax per annum shall be a fixed amount that increases with the taxpayer’s domestic
gross sales or receipts for the preceding calendar year. However, when such gross sales or
receipts is P6,500,000 or more, the tax shall equal the sales/receipts multiplied by a tax rate not
exceeding 37.5% of 1%.

Sec. 143 (b)

Wholesalers, distributors, or dealers Article of commerce of whatever kind or nature
The amount of tax per annum shall be a fixed amount that increases with the taxpayer’s domestic
gross sales or receipts for the preceding calendar year. However, when such gross sales or
receipts is P2,000,000 or more, the tax shall equal the sales/receipts multiplied by a tax rate not
exceeding 50% of 1%.

Except: Those business which was already subject to tax on Section 143(a)
Sec. 143 (c)
Exporters, and manufacturers, millers,
producers, wholesalers, distributors, dealers
or retailers
Note: For purposes of this section, the term
“exporter” shall refer to those who are
principally engaged in the business of
exporting goods and merchandise, as well as
manufacturers and producers whose goods or
products are both sold domestically or
abroad.
The amount of tax shall be at a rate not exceeding 1/2 of the rates prescribed under subsection
(a), (b) and (d) of Section 143 of the LGC.
Essential commodities, as enumerated in LGC:
• Rice and corn
• Wheat or cassava flour, meat, dairy
products, locally manufactured,
processed, or preserved food, sugar, salt
and other agricultural, marine, and fresh
water products, whether in their original
state or not
• Cooking oil and cooking gas
• Laundry soap, detergents and medicine
• Agricultural implements, equipment
and post-harvest facilities, fertilizers,
pesticides, insecticides, herbicides, and
other farm inputs
• Poultry feeds and other animal feeds
• School supplies; and
• Cement

Sec. 143 (d)

Retailers
With gross sales/receipts of preceding year Rate of tax per annum
P400,000 or less 2%
More than P400,000 1%

Sec. 143 (e)

Contractors and other independent contractors who are not subject to professional tax under Sec.
139 of LGC whose activity consists of the sale of all kinds of services for a fee, regardless of
whether or not the performance of the service calls for the exercise or use of the physical or mental
facilities of such contractor or his employees
The amount of tax per annum shall be a fixed amount that increases with the taxpayer’s domestic
gross sales or receipts for the preceding calendar year. However, when such gross sales or
receipts is P2,000,000 or more, the tax shall equal the sales/receipts multiplied by a tax rate not
exceeding 50% of 1%.

Sec. 143 (f)

Banks and other financial institutions, such as: On their:
• Non-bank financial intermediaries • Discounts, interests and commission
• Lending investors from lending activities
• Finance and investment companies • Income from financial leasing
• Pawnshops and money shops • Profits from exchange or sale of
• Insurance companies properties
• Stock markets • Rentals on property
• Stock brokers • Insurance premiums
• Dealers in securities and foreign • Dividends
exchange
The amount of tax per annum shall be at a rate not exceeding 50% of 1% on the gross receipts of
the preceding calendar year on the income and receipts stated above.
 Sec. 143 (g)
Peddlers (i.e. any person who, either for Any merchandise or articles of commerce
himself, or on commission, travels from place
to place and sells his goods or offers to sell and
deliver the same)
The amount of tax shall not exceed P50 per peddler annually.

Sec. 143 (h)

On any business, not otherwise specified in the preceding paragraph, which the Sanggunian
concerned may deem proper to tax
The amount of tax shall be at a rate not exceeding 2% of gross sales or receipts of the preceding
calendar year for those businesses subject to excise, VAT, or OPT under the Tax Code, as
amended. The Sanggunian concerned may prescribe a schedule of graduated tax rates but in no
case to exceed the rates prescribed in the LGC.

Except: Those businesses engaged in the production, manufacture, refining, distribution, or sale
of oil, gasoline and other petroleum products.

b. Fees and charges

i. Permits/Licenses – The municipality may impose and collect such reasonable fees and
charges on business and occupation, and except as reserved to the province in Sec. 139
(Annual Professional Tax), on the practice of profession or calling, commensurate with the
cost of regulation, inspection and licensing before any person may engage in such business
or occupation, or practice such profession or calling.

ii. Fees for Sealing and Licensing of Weights and Measures

iii. Fishery Rentals, Fees, and Charges – Municipalities shall have the exclusive authority to
grant fishery privileges in the municipal waters and impose rentals, fees or charges,
therefore in accordance with the provisions of Sec. 149 of LGC.

3. City Taxes

The city government may impose and collect:

a. Any of the taxes, fees and charges imposed by the province or municipality: Provided the rates of
taxes may exceed the maximum rates allowed for the province or municipality by not more than
50% except the rates of professional and amusement taxes (Sec. 151)

b. Percentage tax on any business not otherwise specified under subsections (a) to (g) of Section 143
of the LGC at rates not exceeding 3% of the gross sales or receipts of the preceding calendar year.

c. Mayor’s permit, in addition to the annual fixed tax under Sec. 141 from the same manufacturers,
producers, wholesalers, retailers, and dealers using route trucks
4. Barangay Taxes

The Barangays may levy taxes, fees, and charges, which shall exclusively accrue to them (Sec. 152):

a. Taxes – On stores or retailers with fixed business establishments at a rate not exceeding 1% on such
gross sales or receipts:
Gross sales or receipts of the preceding calendar year
P50,000.00 or less, in the case of barangays within cities;
P30,000.00 or less, in the case of barangays within municipalities.

These business may no longer be taxed by the municipalities on their tax on retailers under Sec.
143(d) of the LGC since the Barangays have the exclusive power to levy taxes on these businesses
falling within the foregoing threshold.

b. Service Fees or Charges – Barangays may collect reasonable fees or charges for services rendered
in connection with the regulation or the use of Barangay-owned properties or service facilities such
as palay, copra, or tobacco dryers.

c. Barangay Clearance – No city or municipality may issue any license or permit for any business or
activity unless a clearance is first obtained from the Barangay where such business or activity is
located or conducted. For such clearance, the Sangguniang Barangay may impose a reasonable fee.

Note: The application for clearance shall be acted upon within seven (7) working days from the
filing thereof; otherwise, the city or municipality may issue the said license or permit

d. Other Fees and Charges – The Barangay may levy reasonable fees and charges on:
i. Commercial breeding of fighting cocks, cockfighting and cockpits
ii. Places of recreation which charge admission fees
iii. Billboards, signboards, neon signs, and outdoor advertisements: Provided, that the
following shall be exempt from such charges, if they belong to manufacturers, producers
or professionals, but displayed:
• At the place where a business or profession is conducted; or
• On delivery or other service and public utility vehicles

5. Common Taxes for all LGUs

The following revenue-raising powers are available to all LGUs:

a. Service Fees and Charges – LGUs may impose and collect such reasonable fees and charges for
services rendered, which must be in an amount reasonable commensurate to the service rendered by
the LGU: Provided, that no service charge shall be based on capital investments, or gross sales or
receipts of the person or business liable therefor.

b. Public Utility and Charges – The Sanggunian of the LGUs concerned may fix the rates for the
operation of public utilities owned, operated and maintained by them within their jurisdiction.

c. Toll fees and Charges – LGUs may prescribe toll fees and charges for the use of public road, pier,
or wharf, waterway, bridge, or ferry or telecommunication system: Provided no such toll fees or
charges shall be collected from
• Officers and enlisted men of AFP and PNP on mission;
• Post-office personnel delivering mail;
• Persons who are physically-handicapped; and
• Disabled citizens who are 65 years or older
Community Taxes

Only cities or municipalities may levy a community tax. (Sec. 156):

1. Community Tax of Individuals

a. Persons Liable
• Every inhabitant of the Philippines, 18 years of age or over, who has been regularly
employed on a wage or salary basis for at least 30 consecutive working days during any
calendar year;
• Individuals engaged in business or occupation;
• Individuals who own real property with an aggregate assessed value of P1,000 or more, or
• Individuals required by law to file an income tax return

Note: However, diplomatic and consular representatives, and transient visitors when their stay
in the Philippines does not exceed three (3) months shall be exempt from community tax.

b. Rate of Community Tax Payable

i. Basic community tax – P5

ii. Additional community tax – P1.00 for every P1,000 income, regardless of whether from
business, exercise of profession or from property, which in no case shall exceed P5,000

Provided: In case of husband and wife, the additional tax herein imposed shall be based
upon the total property owned by them and total gross receipts or earnings derived by them.

2. Community Tax of Juridical Persons

a. Persons Liable – Every corporation, no matter how created or organized, whether domestic or
resident foreign, engaged in or doing business in the Philippines (Sec. 158)

Note: The definition of corporation under the LGC is the same under NIRC, as amended. A
cooperative enjoying exemption from local taxes, including the real property tax, is still required to
secure a Mayor’s permit and the Community Tax Certificate (BLGF Opinion No. 26-2016).

b. Rate of Community Tax Payable

i. Basic community tax – P500

ii. Additional community tax, which in no case, shall exceed P10,000 in accordance with the
following schedule:

• P2.00 for every P5,000 gross receipts or earnings derived by it from its business
in the Philippines during the preceding year
• P2.00 for every P5,000 worth of real property in the Philippines owned by it
during the preceding year based on the valuation used for the payment of the RPT

Note: Dividends received by a corporation from another corporation however shall, for the
purpose of the additional tax, be considered as part of the gross receipts or earnings of said
corporation.
Administrative & Compliance Provisions
Real Property Tax
Accrual of tax The real property tax for any
due – Period year shall accrue on January 1
for which the of each year.
prescriptive
period begins The special levy shall accrue
on the first day of the quarter
next following the effectivity
of the ordinance imposing
such levy (Sec. 245)
Timing of The city or municipality
payment of treasurer shall, on or before
the tax due January 31 in case of RPT and
additional tax for SEF, post the
notice of the dates when the
tax may be paid without
interest at a conspicuous place
at the city or municipal hall
and shall be published.
However, the owner of the real
property or the person having
legal interest therein may pay
the basic real property tax and
the additional tax for SEF due
thereon without interest in four
equal installments:
• On or before Mar. 31
• On or before June 30
• On or before Sept. 30
• On or before Dec. 31
Exception:
Special levies/assessments –
Governed by ordinance
Note: Payments of real
property taxes shall first be
applied to prior year’s
delinquencies, interests and
penalties, if any. Only after the
said delinquencies are settled
may tax payments be credited
for the current period.
Place of In the place where the real
payment of property is located
the tax due
Local Business Tax
Unless otherwise provided, all
local taxes, fees, and charges
of January 1 of each year.
However, new taxes, fees or
charges, or changes in the rates
thereof, shall accrue on the 1st
day of the quarter next
following the effectivity of the
ordinance. (Sec. 166)
Unless otherwise provided in
this Code, all 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:
Provided that such taxes, fees
and charges may be paid in
quarterly installments as
provided in the tax ordinance
(Sec. 165)
Exceptions:
Tax on transfer of real property
ownership – 60 days from the
date of execution of deed, or
from decedent’s death
Professional tax – Annually,
on or before January 31; or
after Jan. 31, if taxpayer first
begins to practice his
profession after the month of
January.
Note: The Sanggunian
concerned may, for a establishment
justifiable reason or cause,
extend the time of payment of
such taxes, fees, or charges
without surcharges or
penalties, but only for a period
not exceeding six 6 months
In the place where the tax was
levied, following the situs of
the subject matter
Community Tax
As a rule, the community tax
shall accrue on January 1 of
each year.
The community tax shall be
paid not later than the last day
of February of each year (Feb.
28 or 29, as the case may be).
Exceptions:
For individuals reaching 18
year old or loses benefit of
exemption, and Corporations
established and organized:
On or before March 31 – He
shall have twenty (20) days to
pay the community tax without
becoming delinquent.
On or before June 30 – He
shall be liable for the
community tax on the day he
reaches such age or upon the
day the exemption ends, or the
of the
corporation
On or after July 1 – He shall
not be subject to any
community tax for that year.
In the place of residence of the
individual, or in the place
where the principal office of
the juridical entity is located
 Real Property Tax
Collection City or municipal treasurer
agent
Provided: That these persons may designate or deputize the barangay treasurer to collect all taxes
concerned, as the case may be, provided that:
• The barangay treasurer is properly bonded for the purpose
• The premiums on the bond shall be paid by the provincial, city or municipality concerned
Surcharges Failure to pay the basic RPT or
and Interests any other tax levied for real
properties shall subject the
taxpayer to the payment of 2%
per month on the unpaid
amount or a fraction thereof,
until the delinquent tax shall
have been fully paid, but in no
case shall the total interest on
the unpaid amount or portion
thereof exceed 36 months.
Period of The provincial, city or
assessment municipal assessor shall
prepare and submit to the
treasurer of the LGU on or
before December 31 of each
year an assessment roll
containing a list of all persons
whose real properties have
been newly assessed or
reassessed and the values of
such properties.
Period of The basic real property tax and
collection any other tax levied under Title
II of Book II of the LGC shall
be collected within 5 years
from the date they become
due.
Exception:
In case of fraud or intent to
evade the payment of taxes,
fees or charges, the same may
be assessed within 10 years
from discovery of fraud or
intent to evade payment.
Local Business Tax Community Tax
Provincial, city, municipal or City or municipal treasurer
barangay treasurer
The Sanggunian may impose a -
surcharge not exceeding 25%
of the amount of taxes, fees or
charges, not paid on time, and
an interest at the rate not
exceeding 2% per month of the
unpaid taxes, fees or charges
including surcharges, until
such amount is fully paid, but
in no case shall the total
interest on the unpaid amount
or portion thereof exceed 36
months.
Local taxes, fees, or charges -
shall be assessed within 5
years from the date they
become due (or have accrued).
No action for the collection of
such taxes, fees or charges,
whether administrative or
judicial, shall be instituted
after the expiration of such
period.
Exception:
In case of fraud or intent to
evade the payment of taxes,
fees or charges, the same may
be assessed within 10 years
from discovery of fraud or
intent to evade payment.
Local taxes, fees, or charges -
may be collected within 5
years from the date of
assessment by administrative
or judicial action. No such
action shall be instituted after
the expiration of said period.
1. Real Property Taxes – From that date of its accrual, 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 payment of the delinquent tax.

a. Declaration of Real Property (Appraisal) – It shall be the duty of the following persons to declare
the real property:

i. By owner or administrator or their duly authorized representative (Sec. 202) – It shall be

their duty to prepare, or cause to be prepared, and file with the assessor once every 3 years
during the period from January 1 to June 30, a sworn statement declaring the true value of
their property, whether previously declared or undeclared, taxable or exempt, which shall
be the current and fair market value of the property as determined by the declarant.

ii. By person acquiring real property or making improvement thereon (Sec. 203) – It shall be
their duty to prepare, or cause to be prepared, and file with the assessor concerned a sworn
statement declaring the true value of subject property within 60 days after the acquisition
of such property or upon completion, or occupancy of the improvement, whichever comes
earlier.

iii. By provincial, city or municipal assessor (Sec. 204) – When any person required to declare
real property refuses or fails for any reason to make such declaration to make such
declaration within the time prescribed, the assessor concerned shall himself declare the
property in the name of the defaulting owner (if known) or against an unknown owner, and
shall assess the property for taxation. No oath shall be required of a declaration thus made
by the provincial, city, or municipal assessor.

b. Listing of Real Property in Assessment Rolls – In every province and city, including the
municipalities with the MMA, there shall be prepared and maintained by the provincial, city, or
municipal assessor an assessment roll shall be listed all real property, whether taxable or exempt,
located within the territorial jurisdiction of the LGU concerned.

c. Appraisal, Assessment and Depreciation Allowance for Machinery (Sec. 224 & Sec. 225)

i. The fair market value of a brand-new machinery shall be the:

• As a rule, acquisition cost

Note: If the machinery is imported, the acquisition cost includes freight,

insurance, bank and other charges, brokerage, arrastreand handling, duties and
taxes, plus charges at the present site.

• In all other cases, replacement cost x (remaining life ÷ estimated life)

ii. For purposes of assessment, a depreciation allowance shall be made for machinery at a rate
not exceeding 5% of the original cost or replacement cost, as the case may be, for each year
of use: Provided, that the remaining value shall be fixed at not less than 20% of such
original, replacement, or reproduction cost for so long as the machinery is useful and in
operation.

d. Registration in the Registrar of Deeds – Before any document of transfer, alienation, or

encumbrance of real property may be registered, the Registrar of Deeds shall require the presentation
of a certificate of clearance issued by the Local Treasurer concerned to the effect that all current and
past year basic and additional special educational fund levy, real property taxes, and the tax on
transfer of real property ownership due on the subject property, have been paid in full, including
interests or penalties due thereon (Art. 300 (b), LGC IRR).
2. Local Business Taxes (Sec. 143)

a. Retirement of Business – A business subject to tax on business pursuant to Sect. 143 shall upon
termination thereof, submit a sworn statement of its gross sales or receipts for the current year. If it
is found that the retirement or termination of the business is legitimate, and the tax paid during the
year be less than the tax due on said gross sales or receipts of the current year, the difference shall
be paid before the business is considered officially retired or terminated.

Note: Termination shall mean that the business operations are stopped immediately.

b. Payment of Business Taxes – The tax on a business must be paid by the person conducting the same
for every separate or distinct establishment or place where business subject to tax is conducted.

c. Situs of Business Taxes

i. Business with branch, sales outlet, or warehouses – Sale shall be recorded on such branch,
sales outlet, or warehouse where the sale or transaction is made, and the tax thereon shall
accrue and shall be paid to the municipality where such branch, sales outlet, or warehouse
is located.

ii. Business with no branch, sales outlet, or warehouses – Sales shall be recorded in the
principal office, and the tax shall accrue as follows:

No factory, project office, plant or plantation – 100% to the city or municipality where
said principal office is located

With factory, project office, plant or plantation

a) 30% of all sales recorded in the principal office shall be taxable by the city or
municipality where the principal office is located

b) 70% of all sales recorded in the principal office shall be:

• General rule – Taxable by the city or municipality where the factory,

project office, plant or plantation is located
• If there are more than one and located in different localities – Taxable
to each locality and shall be prorated among the localities where such
are located in proportion to their respective volumes of production
during the period for which the tax is due

However, if a plantation is located at a place other than the place where the
factory is located, the 70% allocation shall be further divided as follows:
• 60% to the locality where the factory is located, and
• 40% to the locality where the plantation is located.