Tax 2 Finals 404 Transcript PDF

Taxation II – Atty.
Kim Aranas SMLP | SDB | KDA | AC | JT

A.Y 2018-2019 (finals coverage)
TOPIC: INFORMER’S REWARD | CTA
Informer’s reward
This is a reward given to persons instrumental in the discovery of violations, criminal or civil, before
the provisions of the NIRC and the seizure and discovery of smuggled goods/items pursuant to the
provisions in the CMTA. However, you have to do a positive act before you can be considered as an
informer. So, when you say you have to do a positive act, it means to say you need to report to the
BIR or to the BOC and the informer’s rewards is basically to encourage 3rd party report. And this 3rd
party information is equivalent to 10% of the taxes, fines, penalties, and surcharges that have been
imposed and collected or 1M, whichever is LOWER. So, the max amount that you can receive is only
1M. But you do not really receive the entire 1M because such will be subject to 10% FWT. Max lang
na madawat nimu is around 900k. But take note, the nature of the 10% is final withholding income tax.
So, if ever you receive an informer’s reward, you do not need to declare it as part of your gross
income which is subject to 0-35% GITR. Take note also, kaning 10% is based on the fines, penalties
and surcharges that have been collected. So, dapat the government was able to collect kay pwede
wala sya ka collect kay gi-question for example ang validity sa assessment nya it was found out na
void jud diay, then you will not receive this reward. But under the law, there are requisites before you
qualify for informer’s reward:
(1) The person must not be an internal revenue official or employee, or other public official or
employee (whether in active service or retired) or his relative within the 6th degree of
consanguinity;
- Kung naa kay relative na public official, most likely uncle or auntie nimu, pwede ka ma-informer but di ka ka-receive
ug informer’s reward. It does not necessarily mean na example, ngari na RDO ka nisumbong sa violation, di tan-
awn kung naa ba kay relative in that RDO. So, if there is a finding na naa kay relative in the BIR office, or naa kay
relative na public official in congress which is not necessarily in that RDO, you can be disqualified from this
informer’s reward. Kay wa may distinction provided in the law na dapat within the RDO ang relative.
(2) The person must have given a definite and sworn information; there must be an affidavit duly
notarized;
- Definite so dapat specific. When we say sworn, so di jud sya merely anonymous letter.
(3) The information must lead to discovery of fraudulent act which leads to conviction of the parties;
- information must lead to discovery of fraudulent act or fraudulent transaction which results in the recovery of
revenues, surcharges, fees and conviction of a guilty party.
(4) The information must not yet be in possession of the BIR or BOC
(5) It must not be pursuant to a case investigated by the Commissioner of BIR or BOC
- So, it must not be pursuant to a case already pending, previously investigated or examined by the CIR or SOF. Kay
diba we’ve discussed na if 3rd party information, pwede ka-isummon to present documents or information. Kana, di
na ka ma-qualified para sa informer’s reward kay that pertains to an ongoing case or investigation man. For you to
avail of this reward, dapat wa pa juy idea si BIR or BOC. Dapat way pending LOA, pending audit or investigation na
gina-conduct si BIR or BOC.
(6) The reward should be in money
- Kung BOC, smuggled goods man nah. No problem with BIR kay recovery of tax, fees and surcharges man. But for
BOC, kung ni-report ka na nag smuggle illegally ug rice, your reward is not necessarily the rice. It has to be the
value of the smuggled items which will be based on the 10% of the FMV of the smuggled and confiscated goods or
1M, whichever is LOWER.
(di favorite: types of dutiable goods; remedies when it comes to customs)
Be familiar with:
o Prohibited goods or items or articles
o Concept of smuggling and abandonment
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Taxation II – Atty. Kim Aranas SMLP | SDB | KDA | AC | JT
COURT OF TAX APPEALS
Introduction
What is the primary law which governs the CTA? You have Republic Act 1125. Under this law, pila ang composition sa CTA?
Pila ka-justices ang naga-compose sa CTA? 9 justices. We very well know that it either sits in division or en banc. So if the
CTA sits en banc, 9 justices. If the CTA sits in division, 3 justices so pasabot, 3 divisions. Of the 9 justices, 1 is the presiding
justice and 8 are considered associate justices. If the CTA sits en banc, pila ang quorum? Pila dapat ang present for it to be
considered nga ni-constitute sila ug quorum? There must be presence of 5 justices. And the voting especially if it does not
involve revocation, modification, or it does not involve a first time issue, the voting is the majority of the 5 justices sitting in
quorum. But take note, if it involves a first time issue, modification or revocation of a previous ruling issued by the CTA en
banc, it must be absolute majority. So meaning to say, there must be at least 5 affirmative votes to modify to revoke or to
decide on a first-time issue. If they sit in division, 3 justices. Para naay quorum, there must be presence of 2 justices. Dapat
ang mudecide should be at least 2 justices. And para ma-considered as properly decided, the 2 justices must have voted ind
the same manner. Dapat mag-concur. Again, when we say CTA, the CTA is considered as a jusdicial body, not an
administrative body. However, although it is treated as a judicial body, it is deemed to have special jurisdiction because it has
exclusive jurisdiction na dili pwede i-pasa to the regular courts.
TOPIC : JURISDICTION OF THE CTA | LOCAL TAXATION
Our primary reference here is RA 1125 and as we have discussed, the composition of the CTA
basically you have 9 justices. One is the presiding justice, the other 8 are the associate justices. When
it comes to CTA, it may sit in division or en banc.
 
If in division, it is divided into 3 divisions with a quorom of 2 justices. And for there to be a valid
resolution it must be voted by the 2 justices. If in en banc, then the quorom is 5 justices. Especially if it
requires a reversal of the division otherwise a simple majority of the justices present is needed to
promulgate a decision in all other cases.
So for the jurisdiction of the CTA it has both jurisdiction on the civil and criminal aspect of tax cases. If
it is CTA en banc, it has exclusive original jurisdiction in the exercise of its administrative, ceremonial
or non-adjudicative functions. So when we say administrative we mean to say the internal laws and
nothing to do with collection and assessment nor protest or appeals.
CTA en banc also has exclusive appellate jurisdiction on (which means there had already been a
decision on the lower level):
Relevant Provision: Section 2, Rule 4
(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in
the exercise of its exclusive appellate jurisdiction over:
(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of
Customs, Department of Finance, Department of Trade and Industry, Department of
Agriculture;  
(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original
jurisdiction; and  
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(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their original
jurisdiction involving final and executory assessments for taxes, fees, charges and
penalties, where the principal amount of taxes and penalties claimed is less than one
million pesos;  
(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or
resolved by them in the exercise of their appellate jurisdiction;  
(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection cases decided or
resolved by them in the exercise of their appellate jurisdiction;  
(d) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive original jurisdiction over tax collection cases;  
(e) Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally decided
by the provincial or city board of assessment appeals;
(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive original jurisdiction over cases involving criminal
offenses arising from violations of the National Internal Revenue Code or the Tariff and
Customs Code and other laws administered by the Bureau of Internal Revenue or Bureau of
Customs;
(g) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive appellate jurisdiction over criminal offenses mentioned
in the preceding subparagraph; and
(h) Decisions, resolutions or orders of the Regional trial Courts in the exercise of their appellate
jurisdiction over criminal offenses mentioned in subparagraph.
Okay so when you look at it the exclusive appellate jurisdiction of the CTA en banc covers the
decisions of the CTA in division in its original jurisdiction if you are going to simplify all those. And of
course you have the decisions, resolutions of the RTC in the exercise of their appellate jurisdiction so
not in their original jurisdiction especially if that decision of the RTC has something to do with local
taxes and tax collection cases less than P1M or criminal offenses arising from the violations of the
NIRC or the Tariff and Customs Code where the basic tax assessed is less than P1M.
And of course you have the decisions of the CBAA or the Central Board of Assessment Appeals in its
appellate jurisdiction. So if you look at it, the exclusive appellate jurisdiction of the CTA en banc comes
from either the CTA in division, the RTC or CBAA. So RTC and CBAA, before it goes to CTA en banc
dapat appellate siya but to the CTA in division, original jurisdiction siya.
Exclusive appellate jurisdiction meaning in those cases you are not allowed to appeal to the Court of
Appeals or the Sandiganbayan but exclusively to the CTA.
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But when we say CTA in division, same with CTA en banc na naa say exclusive original jurisdiction so
you will initiate the case before the division or exclusive appellate jurisdiction.
Exclusive original jurisdiction of the CTA in division:
Relevant provision: Sec 3, Rule 4 (b) & (c)
(b) (1) Original jurisdiction over all criminal offenses arising from violations of the National internal
Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue of the Bureau of Customs, where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is one million pesos or more; and
Again, if it is less than P1M or no amount specified, the regular courts have the exclusive
original jurisdiction which can either be the MTC or RTC depending on jurisdictional amount. If
nifile kas MTC, you appeal to the RTC and you lost then appeal to the CTA en banc. But if in
excess of the jurisdictional amount of the MTC so you filed in the RTC, you appeal to the CTA
in division before going to CTA en banc. So mao to ang ganina gispecify.
If pildi ka sa CTA in division in the exercise of its exclusive original jurisdiction, where will you
appeal? CTA en banc. 
(c) (1) Original jurisdiction in tax collection cases involving final and executory assessments for
taxes, fees, charges and penalties, where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is one million pesos or more; and
Namention ni nato before that when it comes to collection cases that will be filed with
the BIR, if it’s P1M or more based on the basic tax assessed lang excluding the
increments, it will be filed before the CTA in division. If less than P1M, then mumatter to
ang jurisdictional amount if the BIR will file it before the MTC or the RTC. But point is if
the tax collection case was originally filed with the MTC, of course pildi ka then appeal
to the RTC and then if pildi ka RTC, appeal to CTA en banc not the CTA in division.
If originally filed sa RTC then appeal sa CTA in division before going to CTA en banc.
I think masabtan nato ang difference between criminal case and the tax collection case
because the latter is just a civil case. The criminal case will have to be coursed through
the DOJ and the DOJ will be the one to file the criminal case against the taxpayer.
How about the exclusive appellate jurisdiction of the CTA in division?
Relevant provision: Sec. 3, Rule 4 (a)
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue.
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
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thereto, or other matters arising under the NIRC or other laws administered by the BIR, where
the NIRC or other applicable law provides a specific period for action:
Provided, that in case of disputed assessments, the inaction of the CIR within the 180-day
period under Section 228 of the NIRC shall be deemed a denial for purposes of allowing the
taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision
of the Commissioner of Internal Revenue on the tax case;
Provided, further, that should the taxpayer opt to await the final decision of the CIR on the
disputed assessments beyond the one hundred eighty day-period abovementioned, the
taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these
Rules; and
Provided, still further, that in the case of claims for refund of taxes erroneously or illegally
collected, the taxpayer must file a petition for review with the Court prior to the expiration of the
2-year period under Section 229 of the NIRC.
So basically you have decisions, rulings or inactions of several officers such as the CIR,
Commissioner of Customs, the Secretary of Finance, and the resolutions, decisions and
inactions of the Secretary of Agriculture as well as that of Trade and Industry. Then we have
RTC in the exercise of their original jurisdiction.
Again when it comes to inaction it is deemed a denial of your administrative appeal, therefore
you can appeal it in the CTA in division. So how about regular courts? Because in CTA en banc
and in division there is exclusive original and exclusive appellate. Usually kung tanawn nimo
ang CTA in division, from an admin appeal it goes into the CTA in division and does not go
directly to the CTA en banc. So again unsa man for regular courts? What is their exclusive
original and exclusive appellate jurisdiction.
For the regular courts, the exclusive original jurisdiction involves collection cases where the
basic tax amount is less than P1M or where there is no specified amount claimed. So duha,
you have criminal cases and tax collection cases. For criminal offenses, the exclusive original
jurisdiction belongs to the regular courts, if the amount claimed is less than P1M excluding the
increments as it only involves the basic tax assessed or no specified amount. So if there is no
tax specified, then RTC. Other than criminal cases, there are also tax collection cases if the
amount claimed is less than P1M. And of course you have the local tax cases especially if you
appeal from the decision of the local treasurer then go to RTC or MTC.
When it comes to tax collection cases, will it be suspended pending appeal? General rule NO
unless you ask for a TRO from the CTA.
And remember the requirements for the restraining order or injunction by the CTA:
- if in the opinion of the CTA, it will jeopardize the interest of the government or the taxpayer
- the taxpayer must also post a bond not more than twice the amount of the tax 
But what is important is there must be a pending appeal with the CTA on an adverse
decision coming from the CIR because again dili pwede na you will just file a special
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civil action for injunction or TRO – it must be an ancillary action to your appeal of the
decision of the CIR.
When will you file your appeal? Say for example you received an adverse decision from
the CIR – 30 days from the date of the adverse decision, file an appeal to the CTA. Is
this period to appeal extendible? Non extendible.
What if there is no decision rendered by the COC or the CIR? When should you file an
appeal to the CTA? The taxpayer may either wait for the decision and make an appeal
from the receipt of that decision or he may appeal within 30 days from the lapse of the
180 period.
Again when you receive an adverse decision from the CIR, can you file a motion for
reconsideration? Yes but it will not toll the 30 day prescriptive period (if coming
from the CIR except if it came from a subordinate official then the 30 day period
is tolled)
Now, you filed your appeal in the CTA in division still napildi ka, what’s the next course
of action? Motion for reconsideration within 15 days of the receipt of the adverse
decision. After that if the decision is still adverse, the taxpayer can appeal to the CTA en
banc within 15 days from the receipt of the denial of the motion for reconsideration.
So you filed your appeal now to the CTA en banc, pildi gihapon so what is the next
step? Motion for reconsideration in the CTA en banc within 15 days from the receipt of
the decision. Again we are referring to the civil cases lang.
If the motion for reconsideration or the new trial, is denied by the CTA en banc, then file
a petition for review under Rule 45 to the SC within 15 days from the receipt of the
denial of the MR.
When do you file a petition for review under Rule 43? It involves decisions from quasi-
judicial bodies.
What about those cases na ang naay original jurisdiction is the CTA en banc? Like
those cases filed with the CBAA, how do you appeal to the CTA en banc? File a petition
for review under Rule 43 of the Rules of Court.
So let’s go to criminal cases, criminal violations of the Tariff and Customs Code
magdepende kinsa ang naay original jurisdiction if the amount is less than P1M or no
specified amount.
So let us go to criminal cases
For criminal cases again as what we have discussed, criminal violations of the Tariff and Customs
Code and the NIRC mag depende kung kinsa ang naay original jurisdiction. If the amount is less than
1 million or the amount is 1 million pesos or more or there is no specified amount.
If less than 1 million - regular courts, so either RTC or MTC.
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There is no specified amount- RTC
If 1 million or more- CTA
 
So in criminal cases, what is the rule? For example the case is decided by the RTC in its original
jurisdiction?
Remember in criminal cases, the RTC can decide in its original jurisdiction or appellate jurisdiction in
which the MTC is the original jurisdiction.
Remember again, it must be a violation in the Tariff and Custom Code or the NIRC.
Criminal Violation started with RTC.
So if napildi ka in the RTC in its original jurisdiction, you will file a notice of appeal within 15 days
from the receipt of the decision to the CTA in division because it was decided by the RTC in its
original jurisdiction.
If sa CTA in division na pildi ka, what do you file?
A motion reconsideration or motion for new trial within 15 days.
If pildi gihapon?

You file a petition for review under rule 43 to the CTA en banc.
If pildi gihapon?
You file MR or MNT within 15 days from the receipt of the decision.
If denied?
You got to the SC by filing a petition for Review under Rule 45.
Criminal Violation started with MTC
What if it was decided by the RTC in its appellate jurisdiction?
You go to CTA en banc diretso. Dili naka muadto sa CTA in division. You file a petition for review under
rule 43 within 15 days from the receipt of the adverse decision.
Just remember:
CTA en banc:
Exclusive and original jurisdiction- if it involves administrative function, ceremonial or non adjudicatory
function.
Exclusive appellate- the actions come from RTC in its appellate, CTA in its appellate, CTA in division in
its original jurisdiction.
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CTA in Division:
Exclusive and original jurisdiction- criminal offenses or tax collection, 1 million or more and then
ngadto na magkatalotalo sa exclusive appellate jurisdiction.
Exclusive and appellate jurisdiction- to simplify that libog na provision usually administrative decision
adverse administrative decisions coming from the CIR, commissioner on customs, secretary of
finance, sec. of agriculture and sec. of trade and industry. Dapat gihapon with provisions in the NIRC
or provisions in the TCC.
Ngano naapil man si agriculture and trade industry?
If you recall on our discussion on special duties kadtung imposition say for example the countervailing
duty were it will be imposed by the committee of composed the sec. of agriculture and sec. of trade
and industry, so that is one provision na pwede maapply.
We move on to local taxation
Our primary reference is the Local Government Code.
When it comes to the taxing power of the local government units it is not an inherent power in so far as
the LGU is concerned because primarily it is just a delegated power. Remember the power of taxation
is inherently legislative in nature so it belongs to the congress to levy and impose tax.
However, there is also a constitutional provision which states that LGUs must be given (fiscal?)
independence and it must be able to source out or it must be able to find a source of its own revenue.
Pursuant to that constitutional provision, our government or congress passed the Local Government
Code of 1991.
Legal Foundation of Local Taxing Power

1. Sec. 5, Article X, 1987 COnsitution
2. Sec. 129, RA 7160
Primary basis of local taxes is the section 5 article 10 of the constitution and you have republic act
7160, specifically section 129 and moving on from that chapter.
When it comes to the imposition of local taxes, it has the power to impose local taxes.
We go first to the division of the local government units.
Four divisions of LGUs:

Provinces
Cities
Municipalities
Baranggay
In those four taxing units ang pinaka powerful are the cities. Especially if that city is a highly urbanized
city or an independent component city. It can exercise taxes na pwede ma collect ni province and
municipality.
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Under the LGC, naka specify lang what type of taxes ang pwede i-collect ni province ug pwede i
collect ni municipality.
Municipalities are given the power to collect local business tax. This is the tax that you will be paying if
you are going to get the mayor's permit.
Provinces do not have the power to collect, local business tax. Provinces also has specific taxes na
pwede ma collect niya.
So the reason why cities are powerful because it can collect local business tax and it can also collect
taxes which can only be collected lang by the provinces.
Then of course ang pinaka weak when it comes to taxing power is the barangay.
Scope of taxation:
1. Local taxation
2. Real property taxation
Local taxes again it depends on the taxing authority if it is the province, city, municipality or the
barangay.
Kung muinogn ta ug local taxes this is not limited to local business tax naa tay gitawag na franchise
tax, publisher's tax, community tax. These are all covered under the local taxing power of the LGU.
This Real Property taxes unya ra nato i-discuss.
Sources of local funds

1. Internal funds
2. External funds
As required in the constitution, dapat fiscally independent si LGU. Which is why we have internal funds
and external funds
Internal funds are the internal source of funds of an LGU primarily comes from the imposition of real
property tax as well as the local business taxes and of course the non-tax revenue.
Non-tax revenue- this are the so called regulatory fees in connection with having a business in the
locality. Example are the garbage fees that you will pay, the sanitary fee of you are going to get a
permit.
External sources- wala gi generate internally ni local government unit and these are primarily this is
through the IRA (internal revenue allotment) which comes from the national government. The IRA
would also depend on the classification ni LGU.
We also have national aid or share in national wealth especially when it comes to local projects which
are being sponsored by the national government.
We also have the so called (di madungog).
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Nature of the Local Taxing Power
1. Not inherent but direct
2. Limited
Constitutional limitations
Fundamental principles (Sec. 130, LGC)
Public hearing requirements
Principle of pre-emption or exclusionary rule
Common limitations on LGUs taxing power (Sec. 131, LGC)
3. Legislative
4. Territorial
5. Accrual of tax
The power to tax is not absolute. So same ra siya na naay constitutional limitations like kadtung due
process, equal protection no undue taking of property. It is subject to fundamental principles which are
provided in Section 130 of the LGC.
It is subject to public hearing requirements; you cannot pass an ordinance imposing a local tax if you
have not conducted public hearing.
When it comes to local taxation we have this so called rule on pre- emption or the exclusionary rule.
Exclusionary rule- if that particular tax is already collected by the national government it cannot be
anymore collected by the local government. Stated otherwise, if that particular subject matter is not
subjected to tax by the national government, it means to say that the local government can subject it
to tax.
As what I’ve mentioned if you are a province or municipality naa ray naka enumerate na taxes under
the LGC na pwede nimo i-collect. and from that enumeration dira na musulod ang creative mind ni
sanggunian if unsaon niya pag elaborate na dili mu encroach sa NIRC or TCC provisions.
We focus more on section 130, the fundamental principles and section 133 on the common limitations
under the LGC.
The four aspects of local taxation which are governed by the LGC, it is the imposition of local taxes,
fees, charges and other impositions and real property taxes.
Remember lahi ang rule when it comes to local taxation as compared to real property taxation.
Although related because both are provided in the LGC, but since lahi ang rule we have to discuss
them separately.
We go to section 130.
What are the fundamental principles governing the local taxation? (PIE- CUP- UP)
1. Levied for a public purpose.

2. The revenue collected shall inure solely to the benefit of, and subject to the disposition by
the LGU levying the tax other imposition unless otherwise specifically provided.
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3. Equitable and based as far as practicable on the taxpayer's ability to pay.
4. Not contrary to law, public policy, national economic policy, or in the restraint of trade.
5. Uniform in each local government unit.
6. The collection of local taxes, fees, charges and other impositions shall not be let to any
private person.
7. Not unjust, excessive, oppressive, or confiscatory.
8. Each local government unit shall, as far as practicable, evolve a progressive system of
taxation.
If you look at the fundamental principles mu relate ra sad siya sa constitutional limitations.
But what makes that fundamental principle under LGC from the fundamental principles when it comes
to taxation from the national government, the primary difference is that requirement which provides
that collection of the local taxes shall not be lent to other private persons.
What do you mean by that?
Unlike national taxes, the national taxes under the NIRC we know when it comes to collection and
payment it can be done by the authorized agent banks. Pwede gani debit or credit card ang gamitun
nimo. Basically, these are private persons or private companies.
But it is a different story for local taxes because it is a prohibition. When you pay your local taxes, you
pay it before the treasurer's office of municipality or city.
What LGUs also need to consider is that the income tax must not be in restraint of trade because
when it comes to national taxes there is no such provision na it must not be in restraint of trade
because we follow that power of taxation is also a power to destroy.
But what do we mean that local taxes must not be in restraint for trade?
It must not discriminate a particular legal undertaking or profession for it to be exercised in the locality.
You cannot impose high tax for this particular activity as compared to another activities to the point
that it is quite unreasonable.
So local taxing authority, kinsa ang naay authority to impose tax?
It is exercised by the sangguniang of the LGU through the passage of ordinances.
When we say Sanggunian:
Province- Sanggunian Panlalawigan

City- Sangguniang panlungsod
Municipality- sangguniang bayan
Barangay- sangguniang pambarangay
Those are local legislative units. The validity also of this delegation on the power to collect local taxes
was questioned that is also one of the defenses. Although we delegated to the local government unit,
still it is not completely na wala gi exercise ni legislative because it is being exercised still by the local
legislative unit when it comes to levying local taxes.
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We go now to the powers of the sanggunian, because we said that it is the sanggunian who has the
primary authority to impose or levy the tax but sa collection it is the office of the treasurer. Sa real
property tax, naa na silay gitawag na assessor's office.
What are the powers of the sanggunian?
1. Impose local taxes

2. To prescribe penalties for tax violations and limitaitons thereon (sec. 156)
3. To adjust local tax rates (sec. 191)
4. To grant local tax exemptions (sec. 192)
Prescription of penalties
Section 516, LGC
1. The Sanggunian of a LGU is authorized to prescribe fines or other penalties for violation of
tax ordinances
(a) In no case shall such fines be less than P1,000 nor more than P5,000
(b) Nor shall imprisonment be less than 1 month nor more than 6 months.
2. Such fine or other penalty, or both, shall be imposed at the discretion of the court.
3. The Sangguniang barangay may prescribe a fine of not less than P100 nor more than P1,000.
(no imprisonment)
Other than those penalties, the LGU has the power to lock down your establishment especially if you
failed to get the local mayor's permit because this local permit is akin to license.
So kung tan-awn nimo local taxes are taxes but other than that you are also paying a fee allowing you
to do business. If you failed to pay that license, your establishment is considered as an illegal
establishment.
Power to adjust Local Tax Rates
Section 191, LGC

LGUs shall have the authority to adjust the tax rates as prescribed not oftener than once every
5 years, but in no case shall the adjustment exceed 10% of the rates fixed by the Code.
Adjustment shall:
1. Only be once every 5 years
2. Not exceed 10% of the rates fixed by the LGC.
What do we mean by this?
It is with the discretion of the Sanggunian whether or not to increase or decrease the imposition of tax.
However, it must not exceed 10% of the rate and it should be only once every 5 years.
Because in the LGC naka enumerate kung unsa ang local tax na pwede i-collect and the
corresponding rate. That rate is considered as the maximum rate. So if the rate is 0.5% of the gross
sales I can have the option na lower than .5.
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So can they increase that 0.5%?
Yes, once every 5 years.
Example the ordinance imposing that .5 of 1% was passed way back 1990 so inig 1996 they can
increase it to .55 of 1%.
To Grant local tax exemption
Section 192, LGC

LGUs may, through ordinances duly approved, grant tax exemptions, incentives or reliefs
under such terms and conditions as they may deem necessary.
However ,when it comes to the grant of tax exemptions or tax incentives, as a rule this is only granted
to units under the LGU pursuant to its taxing power. So meaning to say kung walay power si LGU to
collect this particular tax then it could not grant exemption to that tax.
So dili pwede mu grant si LGU from vat to a particular business because it has no power to collect
VAT.
When it comes to the grant of tax exemption, what is the rule?
The rule is basically is it may only be granted on cases of:

(a) Natural calamities
(b) Civil disturbance
(c) General failure of corps
(d) Adverse economic conditions such as substantial decrease in prices of agricultural or
agricultural-based products
For natural calamities we've seen situations here na nag declare ang Sanggunian ug tax exemption or
tax ruling.
It takes effect during the calendar year for a period not exceeding 12 month.
On the grant of tax incentives

As a rule this can be granted only to:
1. Shall be granted only to new investments in the locality and the ordinance shall prescribe
the terms and conditions therefor.
2. The grant of tax incentive shall be for a definite period not exceeding 1 calendar year.
3. Shall be by ordinance passed prior to the first day of January of any year.
- When it comes to local taxes it accrues on the very first day of the year. It is even collectible on or
before the 20th day of January.
4. Any tax incentive granted to a type or kind of business shall apply to all businesses similarly
situated.
How about tax exemptions granted before the effectivity of the LGC?
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It is lifted upon the passage of the LGC except for:
1. Local water districts
2. Cooperatives duly registered under RA 6938
3. Non-stock and non-profit hospitals
4. Educational institutions
For the rest they are subject na to local taxes.
Tax November 30, 2018 1st hour
On the grant of tax exemptions or tax reliefs

1. Tax exemptions or tax reliefs may be granted in cases of:
(a) Natural calamities
(b) Civil disturbance
(c) General failure of corps
(d) Adverse economic conditions such as substantial decrease in prices of agricultural or
agricultural-based products
2. The grant of exemptions shall also be through an ordinance.
3. Any exemption or relief granted to a type or kind of business shall apply to all businesses
similarly situated.
4. Any exemption or relief granted shall take effect only during the next calendar year for a
period not exceeding 12 months as may be provided in the ordinance.
Take note: That exemption is exemption of local tax. So when it comes to license fees, inspection fees
or regulatory fees, still it will be imposed continually.
Inspection fees- fees that you will pay to the inspectors of the local government or the BFP, building
inspector, sanitary or health kay i-inspect man ang imo building, and with that inspection you will pay
this inspection fees or regulatory fees like garbage collection fees.
In the case of shared revenues, the exemption or relief shall only extend to the local government unit
granting such exemption or relief.
What is this shared revenue?
This is usually common between provinces and municipalities, or between municipalities and
barangay. Because there are taxes like mining it can be imposed by the province but mu share ana
ang municipality where the source of mine gikuha.
Example: an exemption is granted by the province then it follows that only the share will be affected in
the grant of relief or exemption.
Take note: we still follow the general rule maka grant lang ug exemption si taxing authority if siya ang
ni levy sa tax. If dili siya ang ni levy then that particular authority is not authorized to grant exemption.
Incentive- this is more to encourage investors to come in their locality.
On the grant of tax incentives

As a rule this can be granted only to:
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1. Shall be granted only to new investments in the locality and the ordinance shall prescribe
the terms and conditions therefor.
2. The grant of tax incentive shall be for a definite period not exceeding 1 calendar year.
3. Shall be by ordinance passed prior to the first day of January of any year.
4. Any tax incentive granted to a type or kind of business shall apply to all businesses similarly
situated.
 
Those requisites must concur.
We are very aware of the tax incentive of PEZA or fiscal incentive with the BOI. The Barangay micro
business enterprises, kani it follows that if mu qualify ka exempted ka from local taxes
In that case kinahanglan pa ba mupass ug ordinance si Sanggunian exempting you from local tax?
No, because the exemption nimo is pursuant to a special law from the national government.
Mandated ba mu follow si local government?
It should because the taxing power of the LGU is just a delegated power from congress
How about PEZA? Is it exempted from local taxation?
Supposedly yes, because it is either 5% in lieu of all taxes. That 5% is basically divided by the local
government and the national government or the BIR. There is that fix amount gihapon na bayaran si
PEZA to the LGU.
How about tax exemptions granted before the effectivity of the LGC?

It is lifted upon the passage of the LGC except for:
1. Local water districts
2. Cooperatives duly registered under RA 6938
3. Non-stock and non-profit hospitals and Educational institutions
General rule: it is lifted.

Except: those above-mentions. They will continue to be exempted.
In connection with local taxation, the Sanggunian is empowered to impose the tax, to prescribe
penalties, to adjust the tax, to grant exemption or relief, and to grant incentive,
How about local taxes?
For local taxes we will have to discuss the common revenue raising powers of the LGUs, provided
under section 153 - 155.
What do we mean by common revenue raising powers?
Earlier we said na specific ang tax na ma collect ni LGU, when we say common revenue raising
power, this are not taxes but this can be a source of revenue na pwede i-exercise ni LGU whether
Province, City or Municipality.
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What are the common revenue raising powers of the local government code? (S-P-T)
1. Service fees and charges
Section 153, LGC

Local government units may impose and collect such reasonable fees and charges for
services rendered.
What are the examples of this?
Kanang magpa-abang sa sound system, kanang garbage collection, kanang mangayo ka ug barangay
clearance, they can collect a fee for that.
2. Public utility charges
Section 154, LGC

Local government units may fix the rates for the operation of public utilities owned, operated
and maintained by them within their jurisdiction.
What are the examples of this?
Public markets, public utility terminals
3. Toll fees or charges
Section 154, LGC

The Sanggunian concerned may prescribe the terms and conditions and fix the rates for the
imposition of toll fees or charges for the use of any public road, pier or wharf, waterway,
bridge, ferry or telecommunication system funded and constructed by the local government
unit concerned:
Provided, That no such toll fees or charges shall be collected from officers and enlisted men of
the Armed Forces of the Philippines and members of the Philippine National Police on mission,
post office personnel delivering mail, physically-handicapped, and disabled citizens who are
65 years or older.
When public safety and welfare so requires, the Sanggunian concerned may discontinue the
collection of the tolls, and thereafter the said facility shall be free and open for public use.
Remember when it comes to toll fees and charges, it must pertain to a project which is funded and
constructed by the LGU, because when it comes to skyways and bridges, this is funded by the
national government or funded by a PPP (Private Public Partnership).
But if the LGU funded for it, then it is the LGU who can collect the toll.
However there exceptions to this toll fee.

1. Officers and enlisted men of the AFP and members of the PNP
2. Post office personnel delivering mail
3. Physically handicapped and disabled citizen who are 65 years or older
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These three types of individuals, dili na collectan ug toll.
But kani na exception applies only to a toll which is being collected by the LGU, not to a toll collected
by a private corporation or entity.
We go to local tax ordinance which is the source of local taxes.
Requisites of a valid tax ordinance

1. Filing of proposal.
- of course approval or signature of the local executive
2. Publication or posting (10/3/2).
10 days after the filing of the proposal, there must be publication or posting.
(a) Publication – if there is a newspaper of local circulation (published in full for 3 consecutive
days)
(b) Posting – if there is no newspaper of local circulation. In which case, it has to be posted in
at least 2 conspicuous and publicly accessible places. (Sec. 188, LGC)
That 10- 3- 2 is 10 days after filing, publication in full for 3 consecutive days and 2 for at least 2
conspicuous public places.
3. Notification – to all stakeholders or those who may be affected by the revenue raising
measure.
Kinsa gani ang i-notify for the passage of an ordinance?
The local treasurer's office because it is the local treasurer's office which is primarily in charge in the
collection of taxes.
4. Public hearing – prior to the enactment of the tax ordinance.
In all in stances there must public hearing.
5. Approval by the Local Chief Executive (LCE).
Kinds of Local Tax Ordinance
1. Ordinances imposing local taxes enumerated under the LGC.
2. Ordinances imposing taxes not yet imposed by the national government nor specified in the
Local Government Code.
These are the taxes following or in relation to the doctrine of pre-emption or exclusion.
If that particular subject matter or activity or entity is not being subjected to tax it may be subjected to
tax by the LGU. Provided, it is still within its power to impose such type of tax.
Doctrine of pre-emption- national government elects to tax a particular area, it withholds the delegated
power to the LGU to tax that area na gi tax-an na ni national government. Stated otherwise, if it is still
not being subjected to tax by the national government, it may be subjected to tax by the LGU.
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Then we have the common limitation on the local taxing power.
What do we mean by common limitation? Pwede ba i-collect ni LGU or dili na?

Dili na.
Section 133, LGC

The exercise of taxing powers of provinces, cities, municipalities and barangays (PCMB) shall
not extend to the levy of the following:
1. Income tax, except when levied on banks and other financial institutions.
- Because this is already imposed by the National Government.
For banks, they are an exception because they need the special attention of the LGU and for the fact
that this businesses are liquid as compared to other types of businesses. They have the ability to pay.
This is the problem class with some businesses having their main office in another place. They say
that they are already paying local tax in the place where their main office is located so if taxan pa sila
ma double na ang ilang gi pay na local tax.
As an advisor , unsa man ang i-advise nimo?
The local government unit still can collect local taxes. Especially if the gross sales is generated in that
locality. It is just that the documentations comes from the head office. The sound thing to do is to
separate the gross sales or receipts in the head office and the gross sales or receipts in the branch or
locality. Para di ma doble ang bayaan na local business tax, only report the sales na generate didto sa
head office, and report separately ang sales generated in the branch.
2. Documentary stamp tax.

- already collected by the national government
3. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as
otherwise provided.
-estate tax and donor's tax dili na pwede i-collect because already collected by the BIR.
What do we mean by except as otherwise provided?
Subject to tax on transfers of real property.
Kinsa ng pwede mucollect aning tax on transfers of real properties?
Si province.
We will discuss later this tax on transfers of real properties and differentiate it with real property tax.
4. Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all
other kinds of customs fees, charges and dues, except wharfage on wharves constructed and
maintained by the LGU concerned.
-already collected by the National government.

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Ang kanag exception same with the nature of a toll basta sila ng ni construct sil ang ni fund, then
pwede sila ang mag collect.
5. Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through the territorial jurisdictions of LGUs in the guise of charges for wharfage, tolls for
bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods
or merchandise.
- not covered because governed primarily by the bureau of customs under the CMTA. basta when it
comes to toll pwede gihapon basta ang bridge or others kay constructed and funded by the LGU.
6. Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers
or fishermen.
What do we mean by marginal farmers or fishermen?

Those who farm or fish for their own subsistence not for business purposes.
7. Taxes on business enterprises certified to by the Board of Investments as pioneer or non-

pioneer for a period of 6 and 4 years, respectively from the date of registration.
When we say Board of Investments we’ve differentiated it with PEZA. Wala na nganhi ang PEZA
because it is expressly stated in the special law creating the PEZA.
When it comes to BOI wala na naka specify sa investments code. It is being specified here in the
LGC.
If you are pioneer or the first to engage in that type of business in the Philippines, you are given 6
years.
For non- pioneer or existing na ang type of industry sa country but that is considered as a priority
industry, you are given income tax holiday also that covers local tax exemption.
BOI- usually domestic operations.

PEZA- more of export or export oriented operation
.
8. Excise taxes on articles enumerated under the national Internal Revenue Code, as amended,
and taxes, fees or charges on petroleum products.
- already collected by the national government.
.
9. Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions
on goods or services except as otherwise provided herein.
-already collected by the national government.
What is this except as otherwise provided herein?
This means pwede mag collect ug business tax si local government unit. These are business taxes
which may be collected by the cities and municipalities.
What is the nature of this business tax? Because in VTA and OPT it is the tax on the object or on the
activity.
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In cases of municipalities, it includes those manufacturers, assemblers, rectifiers of distilled products,
wines, manufacturers of any article of commerce.
Remember VAT and OPT, these are types of business taxes. If you have a business, you can be
subjected either to OPT or VAT but does it mean ba nga dili na ka pwede ma subject to local business
tax? No, you can still be subjected to local business tax.
What is the purpose why that local business tax is being imposed to you?
Because you are doing business or operating within that particular locality.
10. Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code.
- This is not anymore subject to local tax because it is already collected by the National government
The "exception as provided in the Code" is applicable to gross receipts of the operations of tricycles
because wala man sila na subject sa national government.
11. Taxes on premiums paid by way or reinsurance or retrocession.

- Premium on the original insurance contract has already been subjected to tax and when we say
reinsurance, basically gi pass on ra man na nimo.
From the insurer to a reinsurer- reinsurance

From one reinsurer to another reinsurer- retrocession
12. Taxes, fees or charges for the registration of motor vehicles and for the issuance of all
kinds of licenses or permits for the driving thereof, except tricycles.
- Not subject to local tax because taxes are already being collected by the national government
Specifically what office in the national government?
LTO.
The exception again is the tricycle
13. Taxes, fees, or other charges on Philippine products actually exported, except as otherwise
provided herein.
- Already collected by the national government
-Kaning conduct of the business in the locality pwede ba i-subject to local tax?
Yes.
For example my business is into manufacturing of furniture na i-export nako. The local government
should not anymore impose a tax or fee on the furniture that I would be exporting.
Let’s say for example my business is into manufacturing of furniture and I will export them, the
local government should not anymore impose a tax or fee on the furniture I am exporting. But
pwede ba si local government muimpose ug local business tax for the conduct of my business
as I manufacture in their locality? YES, because that is not a tax on the product, rather that
is a tax on my conduct of business – which is not prohibited under the Local Tax Code.
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Section 133 (14). Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
cooperatives duly registered under R.A. No. 6810 and R.A. No. 6938 otherwise known as the
"Cooperative Code of the Philippines" respectively.
So you have the Cooperative Code and the BMBE or the Barangay Micro Business Enterprises,
not anymore subject to local business tax.
Sec 133 (15). Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.
Dili sad pwede kolektahan ni government. So those are the common limitations. But is the local
government required to comply with the withholding tax rules imposed by the BIR?Say for example
its compensation for employees or the fees of its consultants serving these offices of that
government? Yes, as a matter of fact, if these LGUs, the barangay, there was a case this year
wherein the BIR tried to pass a Revenue Memorandum that if an LGU fails to withhold on matters
requiring withholding such as compensation or consultancy fees, not only is the accountant liable
to the government but also the head of the LGU (barangay chairman, mayor or the governor). This
is following the principle of respondiat superior or taking of prior responsibility for your
government’s failure to withhold. But how did the SC resolve that case? It said you cannot hold the
mayor, governor and the barangay chairman together with the accountant as primary responsible
in the withholding because that is not provided in the law. However what is provided under the
NIRC is the primary responsibility to withhold belongs to the bookkeeper or accountant or
somebody in the accounting department of the LGU. So sila lang ang pwede mahold liable
administratively.
Let’s now go to the Types of Local Taxes. Ang idiscuss lang nato kay first is the province and
then the municipality. Recall: the city can impose the taxes that the provincial government can
impose and the municipality.
Sections 135-141, LGC (Types of local taxes imposed by the provinces)
1. Tax on transfer of real property ownership
What is this item all about?

Sec. 135 (a) The province may impose a tax on the sale, donation, barter, or on any other mode of
transferring ownership or title of real property at the rate of not more than fifty percent (50%) of the
one percent (1%) of the total consideration involved in the acquisition of the property or of the fair
market value in case the monetary consideration involved in the transfer is not substantial,
whichever is higher. The sale, transfer or other disposition of real property pursuant to R.A. No.
6657 (Comprehensive Agrarian Reform Law) shall be exempt from this tax.
Take note any other mode whether with consideration or without consideration. The province can
collect this tax on transfer of real property ownership. Again this is the exception to the general rule
that the LGU cannot anymore collect estate or donor’s tax because this is allowed under the Code.
So 50% of 1%. Mao ni ang maximum amount. Pwede ba si province mulower than 50% of the
1%? Yes but then again dili niya mamaximize ang provision under the LGC. Pwede ba na
iincrease ni province later on? Yes provided once every 5 years and not more than 10%.
Another thing that you need to remember in this type of tax is that this is limited to real properties.
Mao bitaw na na tax on the transfer of real property ownership. This does not cover transfer of
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personal properties. Other than personal properties unsa pa ang exceptions to this tax? Sale of
transfer of title on socialized housing and any transfer or sale in the agrarian reform.
Who is primarily responsible in the payment of this local tax? The seller, donor or transferor or
the administrator of the property.
When should this be remitted to the government? 60 days from the date of the execution of the
deed.
But if it is a public auction, the reckoning point shall be the date of execution not from the auction
sale.
Is this the same as real property tax? No because real property tax is collected because of your
ownership of a real property. This tax on the other hand is collected when you are going to transfer
your ownership in a real property regardless of the mode whether mortis causa, inter vivos, with or
without consideration.
The issue now is on the constitutional exemption of religious institution from real property taxation
because we said before that these institutions are exempted. Are they also exempted from transfer
tax on real properties? No, because that exemption is applicable only to real property
taxation. Walay labot si tax on transfer of real property. As it is the religious institution,
charitable etc may be subject to tax on transfer of real property.
 
2. Tax on business of printing and publication (aka printer’s or publisher’s tax)
Relevant provision: Section 136, LGC
This type of tax is imposed on business of persons engaged in the printing or the publication of
books, cards, posters, leaflets, handbills, certificates, receipts, pamphlets and others of similiar in
nature. So kana si Calimpon pwede ba nimo isubject to tax? Yes supposedly but lahi na sad
kung unsa ilang gideclare sa registration. But like Rex Bookstore and Central Bookstore pwede ba
sila masubject to printer’s or publisher’s tax where their publication business is located? Of course
their branches here in Cebu not on publication but more on retail and distribution na man lang.
But will Rex and Central fall on the exception katong “The receipts from the printing and/or
publishing of books or other reading materials prescribed by the Department of Education, Culture
and Sports as school texts or references shall be exempt from the tax herein imposed”? Take note
it only talks about DepEd and Ched so probably a portion of proceeds maexempt from taxes but
say for example law books that is under the supervision of the LEB(??) so walay labot.
Pila ang rate when it comes to this printer’s or publisher’s tax? It depends if new or existing
business. If new business, it should not exceed 1/20 of the 1% of the capital investment. Meaning
to say unsaon na pagcompute?
 
Example your capital investment is P10M, you get 1% of that which is P100,000 and then divide
that by 20. The answer would be P5,000, that would be your printer’s tax if you are a newly started
business. What if second year na nimo? If existing business na, it should not be exceeding 50% of
the 1% of gross annual receipts for the preceding calendar year. Unsa may basehan ni LGU for
your gross receipt? Usually mangayo na silag tax or VAT returns na gifile nimo to the BIR and kung
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unsa ang gross receipts na nakaspecify nganha mao na ilang basis for getting the 1%. Some
LGUs will require you to present your audited financial statement. But that would not be very
sound because in the audited FS ang gross receipts ana is based on the accrual basis so
tendency is mas dako kaysa sa actual receipts nimo nga gifile sa BIR.
Example: There is a printing company established on 2017 so the moment magparegister siya or
magkuha ug mayor’s permit so the basis will be the capital investment kay wala pa may gross
receipt ( no operation last year). How will the local treasurer’s office check the capital investment?
Adto ta sa articles of incorporation kung pila ang capital stock ngadto. Say for example the capital
investment is P10M so the printer’s tax there is P5,000. If nagoperate siya for 2017, so for that
year ang gross receipts niya is P1M – why do we need to know the gross receipts for 2017?
Because for the 2nd year, the rate applicable na is 50% of 1% of the gross annual receipts in the
preceding period. Meaning to say for 2018, nagkuha ka ug mayor’s permit so the printer’s tax na
bayaran nimo is 50% of 1% of the gross receipts in 2017. That would be P1M x 1% x50%= P5,000
gihapon.
Okay let’s say for example in 2018, although you were able to get the mayor’s permit, you failed to
operate, so 0 gross receipts for 2018. For 2019, the question now is pila ang printer’s tax na
bayaran nimo? Will it be based on the capital investment which is P10M as if you are anewly
registered or will it be 50% of 1% gihapon which is 0. We follow the latter because basically it’s
not the start of business man as a matter of fact it is on your 3rd year. But the point is since 0
gross receipts ka last year, pila ang 50% of 1% of 0? It will be zero. So magbayad kag 0 for
printer’s tax sa 2019 but you might have gross receipts for 2019, nagoperation ka so you were
able to generate gross receipts example P1M so for the next year or 2020, you pay na sad
printer’s tax which you pay every year. But the printer’s tax for 2020 would be 50% of the 1% of
P1M so you will have P5,000.
Basta point lang is if the previous year you did not have any operations so you did not have any
gross receipts then it follows that the following year walay tax base ang 50% of 1%. If the following
year nagbayad ka, it does not mean to say na mubayad ka as a newly established business.
 
3. Franchise tax
Notwithstanding any exemption granted by any law or other special law, the province may impose
a tax on businesses enjoying a franchise, at the rate not exceeding 50% of 1% of the gross annual
receipts for the preceding calendar year based on the incoming receipt, or realized, within its
territorial jurisdiction.
In the case of a newly started business, the tax shall not exceed 1/20 of 1% of the capital
investment. In the succeeding calendar year, regardless of when the business started to operate,
the tax shall be based on the gross receipts for the preceding calendar year, or any fraction
thereon, as provided herein.
Take note although termed as a franchise class, dili ni primary franchise tax ( which are granted by
Congress) because it is the National Government who collects that. This one refers usually to
secondary franchises which means franchise holder na ang entity but they need to get a franchise
from the province in order for their business to exist in that province. This is common in electric
companies, diba they get their franchise from the National Government but to operate in a
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province they need secondary franchise for their transmission lines, electric wires etc. So the
province can collect a franchise tax then. And the rate is more or less the same as printer’s or
publisher’s tax. For newly established business = 1/20 of 1% of the capital investment; second
year onwards= 50% of the 1% of the gross annual receipts of the preceding calendar year based
on the incoming receipts or realized within the territorial jurisdiction of the province. So dapat naa
juy declaration si franchise holder kung pila ang proceeds na generated within the territorial
jurisdiction.
4. Tax on sand, gravel and other quarry resources

Relevant provision: Sec. 138, LGC.
The province may levy and collect not more than 10% of FMV in the locality per cubic meter of
ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the NIRC, as
amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and
other public waters within its territorial jurisdiction.
So makacollect ug tax of not more than 10% of the FMV in the locality per cubic meter. So it will
have to be determined by the municipality or the city where the quarry resources are extracted.
Because if the quarry resources are extracted in the city then si city ang mucollect sa tax. But if
municipality, ang imposing authority ani is the province but magbahin si province, municipality and
barangay, all proceeds 30-30-40 siya. Of course it is a different story if city.
Ang imposing authority is the Sangguniang Panlalawigan issuing an ordinance allowing the
quarrying of sand and gravel, etc. Although the permit to extract the resources shall be issued
exclusively by the provincial governor. What happened in Naga? Ang naggrant sa permit was not
the province since city man siya.
5. Professional tax
Relevant provision: Sec. 139, LGC
(a) The province may levy an annual professional tax on each person engaged in the exercise or
practice of his profession requiring government examination at such amount and reasonable
classification as the Sangguniang Panlalawigan may determine but shall in no case exceed P300.  
Meaning to say if you are a licensed holder of the PRC or the IBP then you are required to
get a professional tax which is any reasonable amount as imposed by the Sangguniang
Panlalawigan provided in no case shall it exceed P300. Exception to this type of tax are
those professionals employed in the government so they don’t have to pay this. If you are
a lawyer are you required to get the professional tax? Yes, you are even required to
indicate your PTR number in any signatory portion in the pleadings.
When should this be paid? On or before the 31st day of January in the province where
he practices the profession or where he maintains principal office in case the
practice is in several places. Kausa ra ka mupay sad sa tax. Favorite man sad ni sa bar
exam.
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Example I am not just practicing law in the province of Cebu but also in Bohol, required ba ko
mukuha ug professional tax in Cebu and in Bohol? No, only one professional tax. I can get in
Cebu because that is where I maintain my principal place of business, I cannot be obliged to get
professional tax in Bohol. Si city of Cebu pwede ba siya makacollect ug professional tax? Yes
because again ang maexercise na taxing power ni city is the taxing power of the province and the
municipality.
Naay uban man sad na lawyers they are paying professional tax sa province of Cebu pwede ba
na? In practice yes, but in Cebu City they can collect professional tax.
6. Amusement tax
Relevant provision: Sec. 140 LGC
(a) The province may levy an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement at a rate of not more than 30% (now amended to 10%) of the gross receipts from
admission fees.
What is common among these places of amusement is that the spectators usually comes in, sits
down and enjoys the show which is different from other types of amusement. Apil ba nganhi ang
kanang mga theme parks, ocean parks? Yes, there is this provision kay wala man na sila gisubject
to tax by the National Government (diba naa may amusement tax nga gicollect sad under OPT).
But the amusement tax collected by the National Government nakaspecify kung unsa na
businesses like racetracks, jai alai, boxing. Meaning if wala ka nasulod ato subject to amusement
tax by the National Government, pwede ka masubject to amusement tax by the LGU.
So the amount of amusement tax should be not more than 30% of the gross receipts from the
admission fees.
(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows,
musical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall
be exempt from the payment of the tax hereon imposed.
There was a time before na naissue tong concert ni Vice Ganda in Cebu City as to collection of
amusement tax. So kanang mga concert of celebrities, can the city collect amusement tax? Dili ba
na mufall as amusement tax as part of OPT? ( idiscuss daw niya later on…)
But the point is if you go to Sec. 140, ang nakabutang nganha is amusement tax on concert halls,
circuses, boxing stadia and not necessarily the conduct of the amusement. But anyhow, let’s
leave hanging because that is part of OPT and DST.  
 
7. Annual fixed tax for every delivery truck or van of manufacturers or producers, wholesalers
of, dealers, or retailers in, certain products.
Relevant provision: Sec. 141, LGC
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(a) The province may levy an annual fixed tax for every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or retailers in the delivery or distribution of distilled
spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products as may be
determined by the Sangguniang Panlalawigan, to sales outlets, or consumers, whether directly or
indirectly, within the province in an amount not exceeding Five hundred pesos (P500.00).
Why is the province given this power to collect these types of taxes? Because remember the
province is also in charge of the maintenance of roads and highways within its jurisdiction. When
we say delivery trucks and vans these are the usual costs of the wear and tear when it comes to
roads and bridges. So to share in that cost, the province or the city can collect this annual fixed
tax. Iapil na na sa nature of business nimo kay ig kuha nimos business permit, magdeclare man ka
there what kind of business you are and then they have a computation how much additional tax to
collect.
Generally for provinces, you only have 7 types of taxes na pwede icollect ni province. Naa bay fallback
provision? Wala.
Pwede ba na kaning 7 macollect ni city? Yes.
If you ask me province of Cebu, unsa ang primary class nga kanang dako jud ug source of revenue?
It’s on mining and quarrying specially during the time na dili pa city ang Naga. Because mining and
quarrying pays 10% of FMV per cubic meter niya mumatter unsa ang giquarry nimo.
Let’s go now to local taxes na macollect ni municipality. So usa ra jud ka type of tax ang pwede
macollect ni municipality – business tax. Pwede ba si municipality muimpose ug percentage tax or
VAT? Because OPT and VAT are forms of business taxes? No. Because of the exclusionary rule or
right of preemption. VAT and OPT are already provided under the NIRC already collected by the
national office.
Pero sir, wholesaler or distributor or dealer? That’s the big problem because under the LGC it provides
kung pila lang ang macollect nimo na business tax, you cannot collect other than the rates prescribed
in the LGC.
Sections 143, 147-149, LGC

1. Tax on business
2. Fees and charges on regulation or licensing of business and occupation
3. Fees for sealing and licensing of weights and measures
4. Fishery rentals, fees and charges 
Sec. 143 a-h, LGC

A. On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and
compounders of liquors, distilled spirits, and wines or manufacturers of any article of
commerce of whatever kind or nature.
The LGC already prescribes the rate. It is a graduated annual fixed tax so naa nay range given and
the maximum is P6.5 million and upon reaching that amount it becomes na a fixed percentage tax of
37.5% of 1%.
So kung ako si LGC, pwede ba ko magbuot to impose OPT and VAT if muexceed ug P6.5M, I will
impose 5 or 10%. No because provided na sa law ang maximum.
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Maimpose ba ni ni city na tax? Yes ang kanindot pa jud if si city ang muimpose instead of 37% of 1%,
pwede ang iimpose niya is higher than that basta dili muexceed of 50%.
Pwede ba na iadjust ni city ang rate katong not exceeding 10% once every 5 years? Yes
So once you reach 2Million or more it becomes a fixed percentage tax of 50% of 1% so meaning kung
ang gross receipts or gross sales na nimo, youre a wholesaler, gross receipts, is for example 10M,
you will be paying a fixed percentage of 50% of 1% kung municipality. Pero kung city ang mu impose
ana, initial imposition could be higher not more than 50% of the rate prescribed under the LGC. So si
city, instead of 50%, can impose initially a maximum of 75% of 1% because diba, 50% of 50% is 25%
so 50+25 that is maximum of 75% of 1%, that is
On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature.
TAKE NOTE: what is being subjected to tax here is the business, not the product not the item. So
pwedi ba sad e subject to tax ni LGU ang product or item? There are cases here class, the SC said
pwedi so long as it does not violate the exclusionary rule or the rule on preemption meaning not
subjected to excise tax or not subjected to sin tax by the national govt. because of course, if it is
subjected then in that case violative na of that particular principle.
In one case ang g subject nya to tax is the bottle of the softdrinks. So ni ingon si SC nga in that case
there is double taxation but it is just indirect double taxation because ang g subject nya is ang botelys,
pwedi ba si lgu subjecan niya ug tax ang plastic, kung wala na gsubject to tax sa national then why not
for that particular nature.
Municipalities limited lang gyud to local business tax ang province ky limited lang sd to the 7 local
taxes.
Third na ma subject to local business tax:

C. On exporters, and on manufacturers, millers, producers, wholesalers, distributors,
dealers or retailers of essential commodities.
TAKE NOTE: there is a specific enumeration as to what are considered as essential commodities, so
you have:
(1) Rice and corn;
(2) 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;
(3) Cooking oil and cooking gas;
(4) Laundry soap, detergents, and medicine;
(5) Agricultural implements. equipment and post-harvest facilities, fertilizers, pesticides,
insecticides, herbicides and other farm inputs;
(6) Poultry feeds and other animal feeds;
(7) School supplies; and
(8) Cement.
These are considered essential commodities, they enjoy preference, lower local business tax rate not
exceeding ½ of the rates or sales of articles mentioned.
So ganina ang maximum is 37.5% of 1% and 50% of 1%, kung essential commodity, wholesaler ko,
say for example, rice and corn, I will only be paying local business tax of at most 25% of 1%, kay not
exceeding ½ of the rates or sales of articles mentioned in (A)
That is for the manufacturer, (B) that is for the wholesaler and (D) that is for retailer so katunga ang
bayaran.
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D. On Retailers
So (D) that pertains to retailers, for retailers, pila ang bayranan for local business tax? It is percentage
tax so you have annual percentage tax of 2% or 1%, on gross sales not exceeding P400,000 – 2%
and On sales or receipts exceeding P400,000 – 1%
E. On Contractors and other independent contractors.

Graduated annual fixed tax gihapon.
12M or more is the maximum. Once it reaches 12M, fixed tax of 50% of 1%.
F. Banks and other financial institutions.

Tax is 50% of 1% in their gross receipt.
TAKE NOTE: the definition of gross receipt for a bank is different from the definition of gross receipts
applicable to wholesalers, manufacturers, and retailers.
Why? Naka specify sa tax code unsa dapat ang mu form part sa gross receipt nga edeclare ni bank.
So you have:
interests, commissions, and discounts from lending activities, income from financial leasing, dividends,
rentals on property and profit from exchange or sale of property, insurance premium
Kay kanang mga insurance premium, mga dividends, diba usually in the normal definition of gross
receipt na bayaran nimo for tax purposes or for vat purposes, ypu do not include it but different for
banking institution.
So ang rate again is 50% of 1%.
G. Peddlers engaged in the sale of any merchandise or article of commerce.

Mao ni usually ang mamaligya dir aug taho or kanang fiesta, naa mga fiesta duol sa churches, so
pwedi ba na sila ma collectahan ug local business tax? The answer is yes. At a rate not exceeding fifty
(50) pesos per peddler annually.
H. Any business, not otherwise specified above.

This is the fallback provision.
Provided that on any business subject to excise, value-added or percentage tax under the NIRC, the
rate of the tax shall not exceed 2% of gross sales or receipts of the preceding calendar year. The
Sanggunian concerned may impose a schedule of graduated tax rates but in no case to exceed the
rates prescribe in Sec. 143 of LGC.
TAKE NOTE: kanang last provision nga dapat not exceeding 2% ang e impose, kay diba ingon ko
ganina pwedi bako mu impose vat or opt to wholesaler higher than the rate prescribed under the
code? The answer is dili, naa na mai rate g prescribe sa LGC.
But what if not among those businesses enumerated above, lets say for example, business services,
mga service enterprises or industries, pwedi bak o magsubject local business tax even if they are
already subjected to OPT and VAT? The answer is yes. But dapat dili mu exceed 2% of their gross
sales or receipts.
MUNICIPALITIES
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Sec 143. If a municipality is located within metro manila, pila ang e impose? It can impose a higher
rate not exceeding 50% of the maximum rate that weve discussed ka ganina, 37.5 of 1%, 50% of 1%
so pwedi higher not exceeding 50% to it.
CITIES
For cities, how much ang ma collecta?
Section 151, LGC The city, may levy the taxes, fees, and charges which the province or municipality
may impose and the amount that it may levy may exceed the maximum rates, na discuss na nato ang
maximum rates usually mag revolve lang anang 50% of 1%, 37.5% of 1% or 120th of 1% by capital
investement, etc. but not more than 50%.
So maximum 50%.
Initial imposition na class, imagine from 1991 up to now, pila na na ka 5yrs ang nilabai, so pwedi na
gyud na, so dako na kaayu as of the moment. But then as what I have told you, there are many cities
and municipalities that failed to adjust their local taxes due to changes in administration.
TAKE NOTE: although si cities maka levy higher tax rates not exceeding 50%, it does not apply to
professional and amusement taxes.
Meaning to say, for professional tax, maximum of 300 and for amusement tax that is maximum of 10%
of the entrance fees.
Nagkasinabot rata sa province ug municipality class? Basta province, familiarize the 7.

Sa municipality, local business tax lang gyud. Usually para mahinumduman nnyo, wholesaler, retailer,
ug manufacturer, mao gyud na ang nature.
Ang isa is of course, kadtong essential commodity nga 50% lower.
Now if wala, di ka mu fall under wholesaler, retailer, ug manufacturer or contractor, pwedi gyapon kai
subject to local business tax basta maximum of the 2% of the gross sales or receipts.
And then the cities, either the province, or municipality, pwedi niya e impose higher by not more than
50% except for professional tax or amusement tax.
BARANGAYS
Can a barangay collect/impose a local tax?
Unsai pwedi e levy?
What type of taxes and how much?
Sec 152.
So basically, what type of tax? Because the service fee, surcharges, and the brgy clearance diba di
naman na tax, other forms of revenue naman na.
So lets go to the taxes,
Section 152 (a) LGC On stores or retailers with fixed business establishments with gross sales of
receipts of the preceding calendar year of P50k or less, in the case of cities and P30k or less, in the
case of municipalities, at a rate not exceeding 1% on such gross sales or receipts.
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So basically, mao ni ang mga sari sari store.

So the gross sales is 50thou or less for barangays in cities
30thou or less for brgys in municipalities.
Ang authorized nga mu collect ug tax on that is the brgy. Is there such power? The answer is yes,
pwedi ni ma source of revenue. Pero usually man gud mostly brgys it is either wala kabalo sa officials
and dependent sila sa share from the national govt.
Under the code, pila ang rate for these types of taxes? Not exceed 1% of gross sales or receipts.
Other than taxes brgys can also collect what type of revenue source?
Service fees or charges
Barangay clearance – pila man ni? Reasonable fees lang.
Other fees and charges – no limit, so long as reasonable fees and charges.
Section 152 (b) LGC The barangay may levy reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits.
(2) On places of recreation which charge admission fees, and
(3) On billboards, signboards, neon signs, and outdoor advertisements.
You can use the mnemonics— CRB
Other than those taxes nga e collect ni local government unit, naa sad tai gtawag nga community tax.
COMMUNITY TAX
Community Tax Certificate (CTC)
Who usually levies or impose this so called community taxes?

✓ Cities or municipalities
Nganong kinahanglan ta mubayad sa community tax?

✓ This is provided in sec 163. What are these?
For individuals:
1. Acknowledges any document before a notary public.
2. Takes the oath of office upon election or appointment to any position in the government
service.
3. Receives any license, certificate or permit from any public authority
4. Pays any tax or fee.
5. Receives any money from any public fund.
6. Transacts other official business.
7. Receives any salary or wage from any person or corporation with whom such transaction
is made or business done or from whom any salary or wage is received to require such
individual to exhibit the community tax certificate.
For corporations:
When, through its authorized officers, any corporation subject to the community tax receives any
license, certificate, or permit from any public authority, pays any tax or fee, receives money from public
funds, or transacts other official business, it shall be the duty of the public official with whom such
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transaction is made or business done, to require such corporation to exhibit the community tax
certificate.
Precisely because of those instances class, mao na nga kinahanglan ka mubayad ug CTC.
Lets say for example, you have a business, before you can register your business and transact official
transactions, there is a need to get CTC whether individual or corporation.
Before you can take licensure examination, you have to get CTC.
When you become lawyers, later on, before your notarization or notary commission will be renewed,
you have to get CTC.
The next question is, pila ang amount sa CTC nga pwedi e collect ni city or ni municipality?
Individuals
Annual community tax of P5 + annual additional tax of P1 per P1,000 of income regardless of whether
from business, exercise of profession or property in which no case it shall exceed 5000php.
Usually if youre familiar with, dib a you receive salary kung empleyado ka, dib a e withhold man na sa
employer nimo, and unsa ang evidence of withholding ni employer? The presentation of the BIR form
2316. Sa bottom ana, naai requirement for you to get a CTC based on your annual gross receipt as an
employee. So mao to ang basehan. If your annual gross receipt, is lets say for example, 1M you divide
that by 1000. 1M /1thou plus 5 so you will be paying 1005.
Basta minimum is 5pesos.
Who are individuals liable to pay the community tax?
Individuals who are:

Inhabitants of the Phils whether citizen or not
18 years or over
Either: 1. Regularly employed on a wage or salary basis for at least 3 consecutive working days during
any calendar year
2. Engaged in business or occupation
3. Owns real property with an aggregate assessed value of P1k or more
4. Is required by law to file an income tax return
So those individuals are required to pay at least 5pesos and an annual additional tax of 1peso for
every 1thou of income but in no case shall exceed 5000pesos
Juridical persons
Annual community tax of P500 + annual additional tax of not more than P10,000 according to the
following schedule:
P2 for every P5,000 worth of real property in the Phils owned during the preceding year based P2 for
every P5,000 of gross receipts derived from business in the Phils during the preceding year.
Dividends received by a corporation from another corporation shall be deemed part of the gross
receipts or earnings for purposes of computing additional tax
Kinsa nga juridical person ang required to get CTC?
Every corporation no matter how created or organized
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Whether domestic or resident foreign
Engaged in or doing business in the Phils
TAKE NOTE: if youre a non resident foreign corp youre not necessarily mandated to get the CTC.
Because of course, if non resident foreign corp ka, it means youre not doing business in the country,
you don’t have official dealings or transactions here. So no apparent need to pay community tax. But
the moment you establish a branch or you do business in the country, then that is the time,as a
corporate entity you may be required to get the CTC.
Who are exempted to pay the CTC?
1. Diplomatic and consular representatives

2. Transient visitors who stay in the Phils for not more than 3 years
Holders of tourist visas not exceeding 3yrs.
Where should you pay CT?

Where individual resides, or where the principal office of the juridical entity is located.
When should you pay the CT?

The community tax shall accrue on the first (1st) day of January of each year which shall be paid not
later than the last day of February of each year. If a person reaches the age of eighteen (18) years or
otherwise loses the benefit of exemption on or before the last day of June, he shall be liable for the
community tax on the day he reaches such age or upon the day the exemption ends.
However, if a person reaches the age of eighteen (18) years or loses the benefit of exemption on or
before the last day of March, he shall have twenty (20) days to pay the community tax without
becoming delinquent. Persons who come to reside in the Philippines or reach the age of eighteen (18)
years on or after the first (1st) day of July of any year, or who cease to belong to an exempt class on
or after the same date, shall not be subject to the community tax for that year.
Corporations established and organized on or before the last day of June shall be liable for the
community tax for that year. But corporations established and organized on or before the last day of
March shall have twenty (20) days within which to pay the community tax without becoming
delinquent. Corporations established and organized on or after the first day of July shall not be subject
to the community tax for that year. If the tax is not paid within the time prescribed above, there shall be
added to the unpaid amount an interest of twenty-four percent (24%) per annum from the due date
until it is paid.
If delinquent, pila ang penalty e impose in connection with community tax?

If unpaid within the prescribed period, an interest of 24% shall be added per annum from the due date
until payment.
The imposition of CT, it maybe imposed by a city or municipality pero pwedi ang collection of a
community tax is delegated to a brgy?
What provision is that? Sec 164 of lgc. Where it states that the city or municipal treasurer may
deputize its brgy treasurer to collect CT in their respective jurisdiction.
If a treasurer is deputized to collect the CT, what are the requirements before the treasurer will
be deputized?
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It must be bonded. There must be a bond because ang usual situation sa una, e deputize si brgy
treasurer pero idagan so there must be a bond before the treasurer may be deputized.
And if the brgy treasurer is deputized, how will the proceeds in the collection of the CT be
apportioned?
Must be shared equally by the brgy and municipality or the city. So 50-50.
SITUS OF LOCAL TAX
Ngano kinahanglan ta makahibaw asa ang situs ang local tax?

for purposes of collection para makabalo ta kinsa ang naai right na mucollect, is it the province, city or
municipality. This is provided under sec 150.
and the thing that you need to remember here or ascertain here is if the business or the entity has
branch or sales office which is considered as an extension of the principal office of the main or head
office of the business.
How do we know asa ang principal office or main office? All we need to do is check the articles of
incorporation or the GIS of the company, The city or municipality specifically provided there is
considered the principal office of business.
But if there is branch or sales office or warehouse, as a rule, all the sales made in that locality shall be
recorded in the said branch or sales office or warehouse and the tax shall be payable to the city or
municipality where the same is located.
What is the rule of there is no branch, sales office, or warehouse in the locality?
Then of course, it shall accrue in the city or municipality where the principal office is located.
Essentially, what is the rule when it comes to allocation? because walai problema kung branch sales
office nya principal office all generating the sales. But the problem there is what if kani akong
business, my principal office is here in cebu city, dri ang baligya mahitabo but my warehouse is
located in consolacion and I have a plantation in Danao which does not at all generate any sales. But
all the wastes in my production, g deal ni consolacion. So medjo unfair. So the LGC provides a rule on
allocation if there is a non revenue generating factory or warehouse, or plantation located in another
locality.
So what is the rule,
1. If there is a branch, sales office or warehouse which generates a sale, the sale is recorded in
the location of the branch, sales, office or warehouse based on the amount of the gross sales
generated by the office or warehouse separate from the sales generated by the principal office.
2. If there is NO branch, sales office or warehouse, the sale is recorded in the principal place of
business.
Pasabot ddto ka nag negosyo kay wala man kay lain branch.
Now the problem comes in if you have a principal place, but you also have a factory, project office, a
plantation located in another locality, remember, kung muingon ka factory, project office, a plantation,
these are non revenue generating activities, so what is the allocation rule?
70-30.
70% of the gross sale should be recorded in the place where the factory, project office, a plantation is
located.
30% can be reported in the locality where the principal office is located.
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Now what if lahi ang location ni factory, lahi sd ang location ni plantation but lahi sd imo baligyaan? In
that case automatic the total gross receipts nimo, 30% of it will be reported to the principal place of
business.
But the 70% will be divided between location of your plantation and location of your factory.
How to divided? 60-40.
60% where the factory is located
40% where the plantation is located
Nganong mas dako ang where the factory is located? Mas mudeal man si local govt with garbage and
possible pollutants coming from factory as compared to plantation.
If there are two or more factories and plantation in different facilities?

So kani daghan. But what if duha ka factory nya duh aka plantation?
What is the rule?
We still follow the 60-40.
But we will have to pro rate the 70% on some basis. And the usual basis is the volume of production.
So kung duh aka factory, pro rate the 60% based on the volume of production of those two factories
located in different localities. Again walai problema kung located in the same locality.
Then duha ka plantation located in different localities, the 40% will be prorated based on the volume
of production/harvest in the two plantations in different localities.
Sale by routes, trucks, vans or vehicles

In this case we have to ascertain if naa bai branch or sales office or warehouse.
So in that case, the Sales will be reported in the place where the source branch/sales/office/
warehouse is located and the local business tax will be paid therein.
If there is no branch or sales office, then the local tax will be imposed in the place where you withdraw
the items sold by route, van truck or by the vehicle.
When we refer to the scope of the local taxing power, we divide it into two. You have local taxes and
real property taxes. We have also discussed on the general principles, fundamental principles, as well
as common limitations when it comes to the taxing power of the LGU. What you need to remember is
that the power of the LGU to impose tax is not an inherent power that’s why it is covered with several
limitations. Foremost of these limitations is the exclusionary rule or the pre-emption rule na if a
particular subject matter or activity is already subjected to tax by the national government, it can no
longer be taxed by the local government. And we have also discussed as to kinsa ang mu-impose or
mu-levy sa local tax. We said that it is imposed by the Sanggunian or by the legislative division of the
LGU. So because of that, it is not really complete or absolute delegation by the legislature of the
power to tax because still, even if LGU, it is the legislative unit of the LGU who can impose the tax.
When it comes to the levy of a local tax, it must be through ordinance, not just a mere resolution. The
power to impose or to levy tax carries with it the power to grant exemptions. Stated OW, you cannot
grant any exemption if you are not the imposing or levying authority to that particular tax.
When we say remedies of the LGU, these are the ways by which the LGU can collect the local tax.
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TOPIC: REMEDIES | REAL PROPERTY TAX
Remedies of the LGU

1. Extra-Judicial Remedies
a) Local Government’s Lien – same under the NIRC. The local government holds a superior lien
over the property of a taxpayer who fails to pay the tax.
b) Distraint – pertains to personal property
c) Levy – pertains to real property
d) Compromise
2. Judicial remedies
a) Court Action – against the taxpayer; that may be commenced by the LGU; basta local tax, it is
commenced or filed before regular courts; so it’s either MTC or RTC, depending kung pila ang
amount na gi-claim ni LGU. As to the appellate power, na discuss na nah natu sa CTA. Diba sa
national tax we said man that if the amount is 1M or more, automatic the tax collection case or
criminal violation case will be commenced before the CTA. But for local taxes, even if it exceeds
1M, you do not go to the CTA. If exceeding 1M, you go to the RTC in its original jurisdiction. If
pildi sa RTC, si CTA in division ang naay exclusive appellate jurisdiction. If the action
commenced by the LGU was originally filed before the MTC, the appellate there will be RTC.
And if pildi kas RTC, si CTA en banc na ang naay exclusive appellate jurisdiction because that is
a decision by the RTC in its appellate jurisdiction.
b) Declaratory Relief – these are usually directed by the LGU against a higher division or
department of the government. For example, declaratory relief against the Department of
Finance or the BIR. I-file ni nimu if di ka sure if you have the right or you have the obligation or if
you are covered in this particular law. To make it sure if covered ba ka or if maka-avail ba kas
benefit from that law, then you ask the court to interpret the applicability of that particular statute.
c) Injunction – pertaining to a particular national office in the government; stoppage; restraining a
particular party from pursuing an action
Remedies of the Taxpayer
1. Administrative Remedies
▪ Before Assessment – before you receive an assessment from the treasurer’s office but there is
already an ordinance levying or imposing the tax.
a) Question the Constitutionality – there is an express provision under the LGC as to the
process. When pwede nimu i-raise? Within 30 days after the effectivity of the ordinance, a
taxpayer may question the constitutionality thereof before the Secretary of Justice, not the
Secretary of Finance because this has nothing to do with the CMTA or NIRC. The SOJ is given
60 days to decide on that question. Upon the lapse of the 60-day period or upon the receipt of
the adverse decision or interpretation of the SOJ, unsa ang recourse ni taxpayer? File an
appeal to the competent court (RTC) within 30 days from the receipt of the adverse decision or
after the lapse of the 60-day period. From the SOJ, you do not go to the Office of the Pres. You
might read in some cases na niagi pa sa Office of the Pres, pero usually, as provided under the
LGC, diretso ka before the competent court then follow na the usual process if ever adverse
ang decision ni RTC. If after assessment, you failed to question it within 30 days after the
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effectivity of the ordinance, wala na ba kay remedy? Naa pa. After assessment, you can file a
protest. (discussed below)
b) Declaratory Relief – di sya sure if covered ba sya or unsa; we follow here Rules of Court
▪ After Assessment
a) Protest – Take note when it comes to filing of the protest on local tax assessment, payment is
not necessary. Pwede protest lang before you pay. But then again, unsa ang consequence ana
in reality? Theoretically, pwede walay payment but in reality man gud, ang consequence is
pwede di ma-release ang business permit nimu. For example, if you’re questioning the validity
of the assessment of your local business tax, so di ka ma-releasean ug business permit. And
that is good for a year. So it could be disadvantageous on the part of the taxpayer. Mao nah
ang uban, it’s either they pay with protest or they pay without protest.
b) Claim for refund or credit – if you pay without protest but you realized that it’s erroneous,
then you can claim for refund or credit within 2 years from the date of payment. Gi-copy ra
gihapon sa NIRC.
c) Redemption – What if wa ka nibayad, wa sad ka niprotest, so ang nahitabu, the local
government levied your real property. Remember, that’s one of the extra-judicial remedies sa
government. After levy or distraint, the next course of action is sale (public auction) so
gibaligya. Naa ba kay gitawag na right of redemption under the LGC? The answer is yes. And
the right of redemption is within a period of 1 yr gihapon, same under the NIRC but different
ang start sa counting of the 1-yr period. Ang LGC gi-copy sa NIRC prior to its amendment in
1997. So, pagka-amend sa 1997, there are some provisions na na-change na wa na-change
sa LGC. So, when do we start counting the 1-yr period to redeem under the LGC? From the
date of sale or forfeiture. If you recall sa NIRC, that is 1 yr from the registration of the certificate
of sale before the Register of Deeds. So, it’s different here under the LGC.
2. Judicial Remedies
a) Court Action
b) Declaratory Relief – against the LGU
c) Injunction - this is different also as compared to the NIRC because sa NIRC when it
comes to national taxes, we said na as a rule, it cannot be enjoined or it cannot be stopped
following the lifeblood doctrine except if an injunction is issued as an ancillary action by the
CTA. But in this case, pwede ba nimu i-enjoin si LGU in the collection by filing kadto bitaw
prelimary injunction or TRO, kadtong mga special civil actions before the regular courts?
The answer is yes. And if you recall, mao nang gibuhat ni BDO before against the city
government of Cebu.
Procedure for Local Distraint or Levy
Tax constitutes a lien superior to all liens and may only be extinguished upon payment of the tax and
charges (Sec. 173, LGC)
If you recall, kadto bitaw concurrence and preference of credit, diba isa ni sa mga superior liens
insofar as government is concerned. Tax ni nga utang ni taxpayer na preferred si government before
payment or distribution to private entities.
Time for payment of local taxes expires:

If the time for payment of local tax expires, the LGU may either distrain your personal property or levy
your real property.
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▪ Distraint – Local treasurer shall, upon written notice, seize sufficient personal property to satisfy
the tax and charges. Officer posts notice in office of LGU Chief Executive where the property is
distrained and in at least 2 public places specifying the time which is not be less than 20 days after
the notice and place of sale, and distrained goods.
Again, when it comes to distraint of personal property, written notice will be sent by the LT to the
taxpayer for the seizure of the personal property.
▪ Levy – real property may be levied on, before, simultaneously, or after distraint of personal
property. Same procedure for levy under RPT except that publication 1:3 for local taxes and 1:2 for
real property taxes.
Sa levy, again, there is a warrant issued; i-notify si Registrar of Deeds and then it can be done
simultaneously prior to a distraint. Di kelangan na mag-una ang distraint or levy basta the purpose
is ma-seize nah ni government, ibaligya, then the proceeds will be used to settle the tax liability.
What if the proceeds exceed the tax liability? The balance will be returned to the owner. What’s the
procedure for levy? We will discuss this in detail under real property tax. The difference lang is that
there is a requirement for publication. 1:3 for local tax and 1:2 for real property tax. What do we
mean by this? Kung ang rason sa levy is wala nakabayad sa local tax, publication once a week for
3 consecutive weeks. If ang rason sa levy is wala nakabayad sa RPT, take note RPT is a tax on the
property mao mas dali, 1:2 – once a week publication for 2 consecutive weeks lang then after that,
sale na dayun or sending na dayun of notice of auction or sale.if
Distraint
▪ At the time and place for distraint, the officer conducting the sale shall sell the distrained goods or
effects at public auction to the highest bidder for cash.
▪ Within 5 days, the LT shall report such sale to the local chief executive. Excess of proceeds shall
be returned to the owner of the property sold.
▪ If property distrained is not disposed within 120 days, it shall be considered sold to the LGU for the
amount of the assessment made by the Committee on Appraisal; the tax delinquencies shall be
cancelled.
▪ If proceeds of the sale are insufficient, other properties may be distrained until full amount due,
including all expenses, is collected.
If distraint, the officer posts office in the LGU chief executive where the property is distrained and in at
least 2 public places, specifying the time which is not less than 20 days after the notice and place of
sale or the 20-day notice gihapon of the distrained goods. If you notice, kani na distraint, unsa ni?
Actual distraint or constructive? Kay diba sa NIRC diba duha to ato gi-discuss, actual if delinquent
then constructive whether delinquent or not. But under the LGC, naa bay provision for constructive
distraint? Wala, ang gi-discuss ra basically sa codal provision kay actual distraint. Ang difference lang
sad under the NIRC is that of course, given naman ni, sale then the property will be given to the
highest bidder, within 5 days lang, the LT shall report the sale to the local executive in the case of
distraint. But unlike NIRC, naay provision under the LGC na if the personal property is not sold via
distraint within 120 days, it shall be considered sold to the LGU for the amount of the assessment
made by the Committee on Appraisal and the tax delinquency shall be cancelled. This presupposes a
situation diba na kung di nah mahalin ang ref nimu, ang TV nimu or ang aircon nimu, considered
gipalit ni LGU. And of course, if the proceeds of the sale are insufficient, other properties may be
distrained until full amount due including all expenses is covered.
Protest
1. Protest (within 60 days from receipt of notice of assessment)
2. LT decides within 60 days from filing of the protest
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3. Appeal to the court of competent jurisdiction within 30 days from: (1) receipt of the denial of the
protest; or (2) from the lapse of the 60-day period
The remedy of taxpayer to file protest. Asa nimu i-file? Before the office of the LT. So pildi ka, appeal
to the court of competent jurisdiction. But strictly, it is not really an appeal but it is more of you have to
commence an action before either RTC or MTC, depending on the amount involved. Same as in
NIRC, the protest must be in writing but the difference is that sa NIRC, you have to specify if it is
request for reconsideration or request for reinvestigation. But in the LGC, there is no such
requirement. You just file a protest. But then again, dapat ang protest nimu, you cite gihapon the legal
as well as the factual basis. Pero pwede ba ka mu-ingon na the assessment is void because it has no
legal or factual basis? The answer is no because walay Sec. 228 requirement under the LGC. As a
matter of fact, when we say assessment by the LT, it is just a piece of paper na naka-specify ang year
then pila ang bayranan nimu and pila ang surcharge, pila ang tax then total at the bottom. Di pareha
sa BIR na medyo strict. And if you ask me nganu wa kaayoy jurisprudence di pareha sa BIR na halos
every quarter naa pertaining to assessment, sa LGU man gud, it can enter into compromise and
besides, kung ikaw negosyante ka, asa man ka mu-compromise ka or ma-release ang business
permit nimu because you are fighting until you reach the SC? Mao nang at the lower level pa lang,
nahuman na. And besides, ang tagal ni LT usually is only 3 yrs, ok kung nagdugay ang Mayor or ang
Gov diha pero it changes baya every 3 yrs. Mao nah nga kung ako negosyante, suportaan naku ang
pikas para favorable inig compromise naku next period. So unlike sa BIR na 6 yrs or beyond 6 yrs pa
jud kung maayo si Commissioner.
For the local tax period and the manner of payment of the local tax, that’s provided under Sec. 165. So
the tax period, as always, is calendar year, Jan-Dec. Such taxes, fees and charges may be paid in
quarterly basis. Take note na ‘may’ so meaning directory lang. At the end of the day, tan-awn nimu sa
ordinance or sa revenue code ni province or city if they allow quarterly basis because based on my
dealings (limited lang sad), walay gibutang nila na quarterly installment basis. But there is that
provision under the LGC.
Accrual of tax (Sec. 166)

It shall accrue on the first day of January of each year. If there is a new ordinance, either imposing a
new local tax or adjusting the rate of the local tax, it shall take effect on the 1st day of the quarter next
following the effectivity of the ordinance. Mao nah nga ang time of payment under Sec 167 is within
first 20 days of January because considered ni-accrue na nah siya by Jan 1. Pero don’t get confused,
muingon mu na sir that’s for this year pero nganu ang basehan namu kay ang gross sales/receipts the
previous yr? Because again, advance. Mao nah ang point is ni-accrue, dili based on your actual gross
sales/receipts during the year, kumbaga dili cash basis, accrual basis.
Pwede ba i-extend ang time of payment?

It can be extended under meritorious cases or justifiable reason, provided it does not exceed 6 months
like especially if the LGU is in a state of calamity. The extension, however, should be through an
ordinance gihapon passed by the Sanggunian.
Surcharges, penalties, unpaid taxes, fees or charges. (Sec. 168)

Surcharge not exceeding 25%; naa bay 50% on findings of fraud? Wala, it is only 25%. But take note,
the surcharge is mu-compund because the surcharge is multiplied to the amount of tax, fees or
charges, including the surcharge. So meaning to say, kung wa ka nibayad this year, gi-imposean kag
25%, the following yr, kanang 25% mutubo nasad nah ug another 25%, so there is cascading or
accumulation of the tax. But the good thing is under the LGC, limited lang nah na scenario for a period
of 36 months or 3 yrs. So good for 3 yrs lang. Pero if you’d ask me if na-implement ba jud sya, it is
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difficult really to check because as what I’ve said, system-generated ang computation so kelangan pa
jud nimu tagsa2xon and tan-awn nimu ug nafollow ba ang 36-month limit on the imposition of
surcharges. Usually baya ang maglihok lang natu inig-adto sa City Hall kay kani rang mga messenger
ug paralegal who are not really conscious on that.
Interest
For the interest, ang interest sa NIRC 12% diba pero duha ka-kind of interest, deficiency and
delinquency. For local taxation, wala nay delinquency ug deficiency; different na sad ang rate.
Unfortunately, gi-copy sad ang rate sa NIRC before 1997 amendment. It’s 2% per month from the date
it is due until it is paid but in no case shall the total interest exceed 36 months (so 24% in a year).
So calendar year, accrues first day of the year, must be paid on or before Jan 20, may be extended
not exceeding 6 months, surcharge 25%, interest 2%, both must not exceed 36 months. Ang rule is on
or before Jan 20, pero if dili business day ang Jan 20, mag-declare nah si LGU na imove niya for
example to Jan 21 via ordinance. But generally, Jan 20.
Who collects local taxes?

it is collected by the treasurer, either the provincial, the city, the municipal or the barangay treasurer.
Ang kaning local business tax na pwede i-collect ni munisipyo or ni city, pwede ba ni i-delegate ang
collection to the barangay treasurer? The answer is yes to collect tax, fees or charges but in such
case, a bond must be posted and there must be premiums paid by the LT.
For the remedy of the taxpayer, naa pay isa na wa natu na mention na important remedy, which
pwede nimu iraise in your protest – to raise or allege prescription of the period to assess or to collect.
For the prescriptive period of assessment, for the assessment of the local taxes, fees or charges, it is
5 years from the date they became due. Kung muingon ta from the date they became due, generally
kanus-a ni? Jan 20. So just add 5 years except if installment ang gina-allow ni LGU. If there is fraud or
intent to evade payment of taxes, fees or charges, that 5-yr period to assess is extended to 10 years
from the date of the discovery of the falsity or fraud. Prescriptive period to collect, that’s within 5 years
from the date of assessment by admin or judicial action and no such action shall be instituted after the
expiration of the period. So dali ra hinumduman basically, 5:5 ang assessment ug collection. Mao sad
nah ang prescriptive period before sa NIRC. But when the NIRC was amended in 1997, ang
prescriptive period to assess, gi-lower down to 3 yrs nya under Sec. 203, wa na gispecify kung pila ka
yrs ang prescriptive period to collect. Mao to gidiscuss natu diba na by inference, under Sec 222, and
because 5 yrs ang local tax, so we use prescriptive period to collect which is 5 yrs. May the running of
the prescriptive period to assess/collect be suspended? The answer is yes and that’s provided under
Sec. 194:
1) The treasurer is legally prevented from making the assessment of collection;
And when we say legal prevention, it means to say injunction or a TRO issued against the
treasurer
2) The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of
the period within which to assess or collect; and
3) The taxpayer is out of the country or otherwise cannot be located.
Real Property Tax Declaration

Definitions
▪ Real Property Taxation – a direct tax on ownership of lands and buildings or other improvements
thereon payable regardless of whether the property is used or not, although the value may vary in
accordance with such factor.
▪ Real Property – subject to the definition given by Art 415 of the Civil Code.
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▪ Improvement – valuable addition made to a property or an amelioration in its condition amounting
to a more than a mere replacement of parts.
▪ Machinery – embraces machines, equipment, mechanical contrivances, instruments, appliances or
apparatus which may or may not be attached permanently or temporarily to the real property
including. Physical facilities for production, 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 thee needs of a particular industry
or service activity.
This is a type of local tax. The difference lang is kadtong mga local taxes na na-discuss na pertain
more on the tax on the conduct of the business. RPT, on the other hand, is a tax on your ownership of
your real property. What’s the composition of real property? Under the LGC, it covers the real
property based on the definition under the NCC, improvements as well as machineries. RPT again is
a tax on ownership of lands, buildings or other improvements payable regardless of whether the
property is used or not although the value may vary in accordance with such factor. Keyword here is
ownership. So if you do not own the land, building or other improvement, you should not be paying
the RPT. Pero you might ask na if lessee, di ba sya liable to pay RPT? The answer is yes because
that is the responsibility of the lessor-owner. Pero pwede ba nah ipass on ni lessor sa imuha by virtue
of a lease contract? The answer is yes, kung mu-agree ka. But the point is si lessor-owner ang
statutory taxpayer.
Now, coverage of this RPT is the real property as defined under Art. 415, NCC. Diba 415 is not really a
definition but more like an enumeration as to what are considered real properties in its strict sense.
And in this article, we’ve learned diba na if a machinery is permanently attached to the land or to a
building or if something is attached to it and if you remove it, it will damage that real property, then it is
considered also as real property. Kana, subject ba sad nah to RPT? The answer is yes. But is it limited
to that definition? The answer is no because in the LGC, RPT covers both the improvement as well as
machineries, WON permanently attached to the real property, as long as it is actually directly and
exclusively used to meet the needs of a particular industry. When we say improvements, these are
valuable additions. Duha kapossible situations para ma-consider na as improvement subject to RPT.
(1) It must increase the value of the RPT or (2) it prolongs the useful life of the real property to more
than 1 yr.
If nagtukod ka diha sa land nimu ug building, automatic apil na ang building as part of real property. If
inside the warehouse or factory, there are machineries, even if they are not attached but actually
directly and exclusively used to meet the needs of particular industry, those machineries can also be
subject to RPT. So, in short, kung muingon ta machinery, WON permanently attached.
Characteristics of a real property tax (DAPIL)

1. Direct tax on the ownership of real property.
Take note ownership, so RPT is different from tax on transfer of real property. Kinsa gale to ang
maka-collect sa tax on transfer of real property, whether gratuitous or onerous? Si province.
Different sila kay ang isa sa ownership, WON you transfer it. Ang isa, bayaran lang nimu if you
transfer ownership (gratuitous, onerous, inter vivos, mortis causa). And more so, lahi sad ni syas
CGT. For the CGT… (TBC by Alex)
2. Ad valorem tax. The value is based on the tax base.
3. Proportionate – the tax is calculated on the basis of a certain percentage of the value assessed.
4. Indivisible single obligation.
5. Local tax
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Ang kato bayaran lang to nimo if you transfer the ownership either gratuitous, onerous or mortis
causa. More so, lahi sad ni siya sa capital gains tax (CGT). Sa CGT what is the rule? Remember diba
it was 6% but kato na tax unsa to na tax?It’s not on your ownership nor is it about your transfer, the
CGT is based on the gain mao bitaw na nga income tax si CGT. Be careful on CGT, kato bitaw sale
of shares of stocks diba 15% naman to if listed and not traded or not listed and not traded, however
that presupposes that the corporation is a domestic corporation. Otherwise if the corporation is a
foreign one for example I am a Filipino and I have a shares in the corporation based in the US, I
transfer those shares of course I don’t pay 15%. I follow whatever is the rule in US. However since I
am a resident citizen, whatever income I gain from that transaction, I will report it subject to ordinary
income tax which is 0-35%.
It came out in this year’s bar exam. Ang gidiscuss jud nato is for the real property and that the CGT
muapply jud na when the property sold is within the Philippines. If it is outside the Philippines, then
you don’t subject it to CGT but instead to ordinary income tax. Ang nigawas kay sale of shares of
stocks outside the Philippines and the question was subject ba to CGT. Of course in that case, dili
kay dili man na domestic corporation.
Kani diba this covers machinery?So ang issue karon is what if I sell machinery, and I sold land,
building and machinery. If we are talking of real property tax, the land, building and machinery could
be subject to real property tax. But it is different for CGT because the CGT covers only land and
building but does not cover machinery. So even the machinery you sold is a capital asset, then
subject to ordinary income tax. (Take note daw of this rule)
So as a rule real property tax covers land, building and machinery but CGT covers only land and
building.
Other than a direct tax on the ownership, it is also an ad valorem tax because the value is based on
the tax base. Basically ang tanawn nimo diri class is the fair market value of the real property and
multiply it with the real property tax rate. Fair market value is determined by the assessor, two offices
are involved here: Office of the City/Provincial/Municipality Assessor and The Office of the Treasurer.
Unlike sa katong local business tax, nga si treasurer ang primarily involved. Unsay gamit ni assessor?
Basically to ascertain the fair market value of properties within the jurisdiction of the LGU. Now once
the fair market value is determined, it will be multiplied with the so called assessment level. Ang
kaning assessment level expressly provided under the LGC. It would depend on the classification of
the property if residential, agricultural, commercial, timberland, etc.
So naay assessment level let’s say for example 50% of the FMV or 60% of the FMV which is worth
P10M. 60% of that P10M would be the assessed value, and once you get the assessed value,
imultiply na with the real property tax rate.
Characteristics of Real Property Tax (continuation)
3. It is proportionate because the tax is calculated on the basis of a certain percentage of

the value assessed.  
Take note unlike local business tax, if you recall local business taxes for wholesaler,
manufacturer those types of taxes are progressive and then eventually becomes digressive
when it reaches the maximum. Such is not the case for real property tax which rate is fixed ,
there is a fixed rate pero proportionate siya because it would depend upon the fair market
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value and sa assessment level/classification of your property. So if your property is commercial
then that means mas mahal ang bayaran na real property tax as compared to an agricultural or
residential property. So that would still be based on your ability to pay.
4. It creates a single, indivisible obligation
So this tax attaches to the property itself, we don’t care who is actually in possession of the
property basta kung naay unpaid real property tax, the LGU can go after the property itself.
5. It is a local tax and may be collected by the province, cities and municipalities within Metro
Manila
Who has the power to levy real property tax? You have province, cities and municipalities lang
in Metro Manila. Sa local tax that we discussed diba lahi lahi ang power ni province, barangay,
municipality and city. And we said that powerful si city because makacollect siya ug local taxes
collectible by the province and the municipality. But for real property tax kay uniform, ang
makaimpose lang (walay labot ang municipalities outside Manila) are provinces and cities.
Naa pa bay municipalities in Metro Manila? The last time I know is Pateros but city na daw ang
Pateros.
Extent of the Power to Levy (BE-IS)
➡ Basic real property tax
How much is the basic real property tax? It is either 2% or 1%.
If province, the basic real property tax must not exceed 1% of the assessed value (FMV *
assessment level depending on classification of property)
If city or municipality within Metro Manila, basic real property tax not exceeding 2%.
Pwede pa ba na mudako? Yes, kay pwede na dungagan ni LGU with the following items:
➡ 1% additional real estate tax to finance the Special Education Fund
The tax will be for the Local Education Board and;
➡ 5% additional ad valorem tax on idle lands
When is your land considered an idle land so you can be subjected to 5% additional ad
valorem tax?
Lands covered
1. Agricultural lands
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More than 1 hectare in area suitable for cultivation, dairying, inland fishery, and other
agricultural uses, 1⁄2 of which remain uncultivated or unimproved.
Not considered idle lands: 

(a) Agricultural lands planted to permanent or perennial crops
with at least 50 trees to a hectare 

(b) Lands actually used for grazing purposes
2. Other than agricultural lands
More than 1,000 sqm in area, 1⁄2 of which remain unutilized or unimproved.  
Atty: The purpose here is to encourage cultivation and improvement.  
3. Residential lots in subdivisions
Provided, the ownership of which has been transferred to individual owners, who shall
be liable for the additional tax.
So if you have these types of lands and you don’t want them to be classified as idle
lands, what can you do?
(Same provision)
Not considered idle lands: 

(a) Agricultural lands planted to permanent or perennial crops with at least 50 trees to a
hectare 
(b) Lands actually used for grazing purposes
So if you use your land for grazing area or for cultivation they are no longer considered
as idle lands. Mao na ang uban class, na if they own this agricultural land, ifence na
nila if undeveloped.
➡ Special levy or special assessments (may be imposed even by municipalities outside Metro
Manila ) on lands comprised within its territorial jurisdiction specially benefited by
publuc works, projects or improvements funded by the local government unit
concerned.
If you recall, general principles of taxation, katong gidistinguish nato ang tax versus
license, tax versus special assessment. We said that special assessment is not a type of tax if
you look at it, this is imposed by the local government unit to recover the cost of a public
improvement. The special assessment unlike tax which you levy it against all individuals
similarly situated, special assessment selected ang imposition – only imposed upon those who
benefited from the government project.
Up to a maximum of 60% ang pwede maimpose ni local government of the cost of the project
or improvement which should be funded by the local government. If not funded by the local
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government but the DPWH or the National Government, the LGU has no right to collect special
levy or assessment.
Take note that if the LGU imposes special levy or assessment, same with the business taxes,
it must be imposed still by the Sanggunian through the passage of an ordinance. But the issue
now is kailangan ba ang public hearing? Public hearing we said is required in the passage of
local business taxes since without it it is a violation of due process.But if it is real property tax
ordinance, public hearing is not mandatory because unsa pa may ihearing nimo na 1.
Provided na ang rate under the LGC; 2. Provided na ang assessment level again sa LGC; 3.
FMV already ascertained by the assessor and 4. the assessor in determining the FMV will
have to do inspection and confirm with the owners located in the area. Kumbaga ang buhaton
na lang nimo is to just follow the formula and collect it.
But different for special assessment from LGU kay mandatory ang public hearing…sir libog ko
nganong real property tax man ni niya special assessment?Again class the special
assessment is just an addition to the real property tax, so if RPT lang ang icollect nimo without
the levy, no need ang hearing, it is not mandatory. But if the Sanggunian will impose the
special levy, those affected should be heard out in a public hearing.
Common ni siya if naay project ang LGU like a plaza or public market or feeder road and ang
area where they pass through will be benefited kay niincrease ang value sa land. So to recover
the cost of it then impose a maximum of 60%. So if for example it is 10M then 60% of that
would be for special levy. Only to those properties benefited.
The local government can also impose the so called socialized housing tax or an additional of
1/2%/0.5% of the assessed value. So if you look at it, basically kung city for example, basic 2%
+ 1% + socialized housing tax of 0.5% then that is equal to 3.5% real property tax. Ang kani
ang ad valorem on idle lands kay case to case man ni, dili pwede nimo iapply to all those who
own real properties.
And the 60% sa special assessment dili na to each landowner but idivide na and then and next
question is when bayaran – sabutan sad na kay dili man pwede na within the calendar year
irecover.
Fundamental Principles Governing Real Property Taxation (FEU-UP)
1. Real property shall be appraised at the current fair market value;
This is the work of the assessor’s office and this can be adjusted every three years according
to the LGC. Usually when the local government will adjust the FMV, there is notice to the public
thru publication.
2. Real property shall be classified for assessment purposes on the basis of actual use.
Meaning to say that even if the owner of the real property is exempted from real property tax,
but if the beneficial use is given to the taxable person or entity then subject to real property
tax. Remember tong mga non-stock, non-profit educational institutions, exempted from real
property tax but if that institution leases it for commercial operation then following the Lung
Center case, it should be subject to real property tax.
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3. Real property shall be assessed on the basis of the uniform classification within each
LGU;
4. The appraisal, assessment, levy and collection of real property tax shall not be left to
any private person
5. The appraisal and assessment of real property shall be equitable.
Exemptions from the Real Property Tax (Memorize for the Bar)
➡ Sec. 234.
a. Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person;
If the real property is owned say for example by the province of Cebu but the province does not
use it but leased to SM as a commercial establishment. So even if the owner is exempted, real
property tax would have to be collected. Apil diri ang government instrumentality, walay labot
ang GOCCs and by now you should already know the difference between the two.
GOCC – acts as a private corporation it is just that the majority shareholder thereof is the
government. The GOCC exempted from tax lang are the the GOCCs engaged in the supply
and distribution of water and generation and transmission of electric power, all other GOCCs
are subject to real property tax.
b. Charitable institutions, churches, parsonages or convents appurtenant thereto,

mosques, non-profit or religious cemeteries and all lands, buildings and improvements
actually, directly and exclusively used for religious, charitable or educational purposes.
This is a constitutional provision. But then again the beneficial use must be complied with and
must not be given to a taxable entity. Guideline nato on how to define this actually, directly and
exclusively requirement is the Lung Center case – it is not principally used. The point is the
use must be exclusive.So if it is not used for religious, charitable or educational, then subject
to RPT.
c. All machineries and equipment that are actually, directly and exclusively used by (1.)
local water districts and government owned and controlled corporations engaged in the
(2.) supply and distribution of water and/or (3.) generation and transmission of electric
power;
d. All real property owned by duly registered cooperatives as provided for under R.A. No.
6938 and
e. Machinery and equipment used for pollution control and environment protection.
Except as provided herein; any exemption from payment of real property tax previously
granted to or presently enjoyed by all persons whether natural or juridical, including all
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government-owned or controlled corporations are hereby withdrawn upon the effectivity
of this Code
Here are some jurisprudences applying to the first exemption:
Philippine Fisheries Development Authority (PFDA) vs. CBAA:
PFDA operating the Lucena Fishing Port Complex is an instrumentality of the

government. PFDA is not a GOCC for even if it has capital stocks , it is not divided into
shares of stocks. It has no stockholders or voting shares. It also has no members so it
cannot be a non-stock corporation.
And because PFDA is an instrumentality of the government, it is exempt from real

property tax. SC explained that it is not a GOCC for it has no capital stocks and has no
shares of stocks, no holding shares and no members also.
Manila International Airport Authority (MIAA) vs. CA
A GOCC must be organized as a stock or non-stock corporation. MIAA is not organized

as a stock or non-stock corporation. Its charter mandates that MIAA must remit 20% of its
annual gross operating income to the national treasury. It is a government instrumentality
vested with corporate powers by its charter. Hence airport and buildings are of public dominion.
How about Mactan Cebu International Airport? In 2015, it was finally declared as an
instrumentality of the government and not a GOCC.
What are some other entities of the government na declared as instrumentality and
exempt from RPT?
You have the Philippine Ports Authority, UP they are also an instrumentality of the government.
Bangko Sentral, GSIS are also included.
Procedure in the administration of the RPT
Step 1 – Declaration of Real Property
a.) Declaration by the Owner or Administrator

For newly-acquired property: 
The owner or the administrator must file in the assessor’s office within 60 days from the
date of transfer, a Sworn Statement containing the:
1. Fair Market Value  
2. Description of the property  
For improvements of the property:  

The owner or administrator must file within 60 days upon completion or occupation,
whichever comes earlier, a Sworn Statement containing the:
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1. Fair Market Value  
2. Description of the property
b.) Declaration by Provincial/City/Municipal Assessor
Under the LGC, other than the declarations made by the owner or the administrator, the
Register of Deeds is also mandated to inform the assessor if there was transfer of the
property and the buyer/transferee of the property is also mandated to inform the
assessor and even the assessor under Sec. 204 is empowered to declare the property
for RPT purposes. Only when the person fails or refuses to make a declaration within
the prescribed time and no oath of the assessor is required.
Sir what if exempted ko kay kumbento man ko, pwede ba nimo buhaton? No, you still
need to declare but if you want to allege nga you are exempt then present proof of
exemption within 30 days from the date of declaration of the property. Kung exempted
ka unsay advantage kung ikaw mismo ang mudeclare? Makabalo ka when to reckon
the 30 day period when you present proof of exemption. It is different if gideclare sa
assessor mismo kay naa na kay tax declaration nganha and maginspection baya ang
assessor so posible na mulapse ang 30 day period to present proof of your exemption.
Now what if you declared the property for the first time but it was there for a long period
of time? If declared for the first time, as a rule, real property shall be assessed for
back taxes but not for more than 10 years . The tax shall be based on the
applicable schedule of values enforced during the corresponding period.
Step 2: Listing of Real Property in the Assessment Roll
So na declare na ang properties, next step is the listing of the properties in the
assessment roll to be done by the assessor.
Step 3: Appraisal and Valuation of Real Property
After the listing comes the appraisal and valuation of the real property. If it is land,
the assessor may summon the owner of the real properties affected and may take
depositions just to ascertain kung pila ang FMV valuation. Pero karon class, dili na
kaau ni common because there are formulas naman for appraisal – like kinsa ang
tapad nimo diha na property.
Assessor prepares then a schedule of fair market value for different classes of
property –land, building, machinery and the Sanggunian will act an ordinance
basically approving the updated or the new fair market value and the schedule of
the fair market value is then published in a newspaper of general circulation.
For machinery, the FMV is either the acquisition cost or if not brand new then the ratio
of the remaining economic life/estimated economic life x replacement cost. When we
say economic life, this is the life when you expect to have an inflow to benefit from that
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particular property. The moment that the cost of maintaining that property becomes
higher tha your benefit, then wala na nay economic life, useful life na lang.
Step 4: Determining Assessed Value
Then we go to determining the assessed value. Diba you already have the schedule
of the assessed value as determined by the assessor. Just multiply the FMV with the
assessment level as provided by the LGC. Once you get the assessed value, you
multiply it with the tax rate katong basic 1% or not exceeding 2% plus special education
fund plus socialized housing fund so you will get the total real property tax.
Again the FMV may be revised every three years except if there is reassessment due
to
• partial or total destruction,
• major change in actual use
• great and sudden inflation or deflation of real property values
• gross illegality of the assessment when made and
• any other abnormal cause
When it comes to the requirement of public hearing, imposition of real property tax do not necessarily
mandate public hearing except if the Sanggunian decides to impose special levy or special
assessment.
Offices involved when it comes to the imposition of real property tax, we have the office of the
Provincial/ city/ municipal assessor and the treasurer's office.
So we go to the procedure.
Procedure in the administration of RPT

Step 1: Declaration by owner or administrator (Sec. 202- 203)
As a rule, it is self declaration so it must be declared by the owner or acquirer of the property upon
acquisition of the property.
• For newly acquired property

a. Must file with the assessor within 60 days from the date of transfer
b. A sworn statement containing the fair market value and description of the property
• For improvement of property
a. Must file within 60 days upon completion or occupation (whichever comes earlier)
b. Sworn statement containing the fair market value and description of the property
2. Declaration by Provincial/ City/ Municipal assessor (Sec. 204)
When: only when the person under Sec. 202 refuses or falls to make a declaration within a prescribed
time.
• No oath by the assessor is required
In case the owner or the administrator will not declare it then the assessor also has the right ot make a
declaration within a prescribed time and in such case there is no need for sworn statement.
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Other than the owner, administrator or the assessor, the register of deeds and even the buyer or
transferee of the property are also obliged or mandated to report this ownership of real properties to
the city assessor.
Notes: Proof of exemption of Real Property from Taxation (Sec. 206)

Who: By any person or for whom real property is declared. Claim for exemption must be filed with the
assessor together with sufficient documentary evidence to support claim.
When: within 30 days from the date of declaration of property
If you are exempted from real property taxation it is not automatic so you have to present of your
exemption.
Based on experience, it is more organizational test because in NIRC there are two tests,
organizational and operational test. But when it comes to proof of exemption of real property it must be
proven within 30 days from the date of the declaration of the property.
If property declared for the first time (Sec. 222)

If declared for the first time, real property shall be assessed for back taxes
a. For not more than 10 years prior to date of initial assessment.
b. Taxes shall be computed on the basis of the applicable schedule of values in force during the
corresponding period.
This is also known as the amoroso/amorosa in bisaya.
Step 2: Listing of Real Properties in the Assessment Rolls (Sec. 205, 207)
All declarations of real property made under the provisions of this Title shall be kept and filed under a
uniform classification system to be established by the provincial, city or municipal assessor.
Step 3: Appraisal and Valuation of Real Property (Sec. 212- 214, 224- 225)
Determination of Fair Market Value (FMV)
For Land
1. The assessor of the city or province may summon the owner of the properties to be affected
and may take their depositions concerning the property, its ownership, amount, nature and
value. (Sec. 213, LGC)
2. Assessor prepares a schedule of FMV for different classes of properties.
3. Sanggunian enacts an ordinance
4. The schedule of FMV is published in a newspaper of general circulation in the province, city or
municipality concerned or in the absence thereof, shall be posted in the provincial capitol, city
or municipal hall and in two other conspicuous public places therein (Sec. 212, LGC)
Essentially, the assessor will determine the FMV of the property.

So of the property is declared for the first time then the assessor can require the owner to declare how
much is the acquisition cost or the valuation of the property and the assessor is even given the power
to take depositions.
But of course, if it is already an adjustment to the FMV there is already formulation there nga buhaton
ni assessor taking into consideration the developments in the area. Dili na kinahanglan ipatawag pa si
owner pero there is a requisite na if a new fair market value will be adopted by the LGU it must be
enacted of an ordinance by the Sanggunian. So initial FMV there must be an ordinance when they
increase the FMV, there must be another ordinance passed increasing the FMV.
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Kapila ang extent sa pag increase sa FMV?
Under the LGC, the LGU is given 3 years, once every three years, to adjust the fair market valuation
except when they are extra ordinary happenings or circumstances. As a requisite within 90 days from
the happening of that extra ordinary circumstance, revaluation of the FMV can be done but generally
its every 3 years.
For Machinery
1. For brand new machinery: FMV is the acquisition cost
2. In all other cases:
FMV= Remaining eco. Life x Replacement cost
Estimated eco. Life
Step 4: Determine Assessed Value

• Procedure
1. Take the schedule of FMV
2. Assessed Value= FMV x Assessment Level
3. Tax= Assessed value x Tax rate
So we now have the list of the FMV, how are we going to compute the real property tax?
To compute the RPT, we need ot get the assessed value. Assessed value this is just the product of
your fair market value times the assessment level.
What is this assessment level?
This is provided by the LGC. This basically depends on the classification of the land, If it is residential,
commercial or industrial. naay nakabutang sa LGC na 60% of the FMV or 50% of the FMV.
So once you have the assessed value, we now multiply it with the tax rate which basic rate or the
additional or special rate.
So kung province mao to ang not exceeding 1% plus 1.5 so 2.5. so now we get the real property tax.
But of course when it comes to real property tax assessment , we don't expect the assessor to detail
the computation. Automatic na na sa system like we discussed na although the imposition of the
surcharge of imposition of interest is max of 36 months but really you have to check if it being
observed by the local government unit because automatic ra na naa dayun figure.
Step 5: Payment and Collection of Tax

• When: January of every year and such will constitute as superior lien. (Sec. 246)
As a rule payment and collection of real property tax is every January and such will constitute as
superior lien.
• How:
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a. Basic real property tax in 4 equal instalments (March 31. June 30, September 30, December
30)
Depends if gi-adopt sa ordinance.
b. Special levy- governed by ordinance
Not necessary na mu- accrue siya by January. There is a public hearing. So there is an agreement if
when it is paid.
• Interest for late payment
a. Two percent (2%) for each month on unpaid amount until the delinquent amount is paid
b. Provided in no case shall the total interst exceed thirty- six (36) months.
Delinquent amount presupposes that there is an assessment and there was already a demand letter
coming from the office of the treasurer. So in 1 year 24% kay 2% times 12. but of course limited ra to
36 months or 3 years.
• For advance and Prompt payment
a. Advance payment- discount not exceeding 20% of annual tax (Sec. 251, LCG)
This is the maximum.
b. Prompt Payment- discount not exceeding 10% of annual tax due (Art. 342 IRR)
• Who collects: the provincial, city, municipal or barangay treasurer
• Period to collect: (Sec. 270)

a. Within five (5) years from the date they become due
b. Within ten (10) years fomr discovery of fraud, in cases there is fraud or intent to evade
This is different from local business tax. Because we have the period to assess and we have the
prescriptive period to collect. Pila gani to ang prescriptive period to assess? 5 years diba and it can go
up to 10 years if there is intent to defraud. However with RPT, diretso na period to collect which is 5
years from the date it become due. Meaning, you don’t need an assessment in so far as real property
taxation is concerned. all that the treasurer will do is check the declaration, check the classification of
your property.
Now if sa local business tax kay January 20 man although it may be extended if 20 is not a business
day. Ang RPT is not necessarily January 20 sad basta mu accrue siya in advance for that year. But for
when it is exactly paid it depends on the Sanggunian.
Suspension of Precriptive Period: (Sec. 270)

1. Local treasurer is legally prevented to collect tax.
So you prevent the treasurer by injunction or TRO
2. The owner or property requests for reinvestigation and writes a waiver before expiration of
period to collect
3. The owner of property is out of the country or cannot be located
Classification of property
Because I’ve mentioned awhile ago that the assessment level will depend on the classification of your
property on whether it is residential, industrial, commercial.
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Are there specific definition of this property?
Yes provided under 215, LGC. (CAR-MITS)
1. Commercial land
A land is considered a commercial land when it is devoted principally for the object of profit and is not
classified as agricultural, industrial, mineral, timber or residential land.
2. Agricultural Land
(a) A land devoted principally on planting of trees, raising of crops, livestock or poultry, etc. including
inland fishing and similar aquaculture activities and other agricultural activities
(b) Not classified as industrial, mineral, commercial, timber or residential land
3. Residential Land
When the property is principally devoted for habitation.
4. Mineral Land
Land in which minerals, metallic or non-metallic, exist in sufficient quantity or grade to justify the
necessary expenditures to extract and utilize such minerals.
5. Industrial Land
Land devoted principally in industrial activity, as capital investment and not classified as residential,
mineral, agricultural or commercial, timber land.
6. Timber Land
Forest, reserved area.
7. Special Land
All lands, buildings and other improvements actually, directly and exclusively used for hospital, cultural
or scientific purposes, and those owned by local water districts and other GOCCs rendering essential
public services in the supply and distribution of water and electricity.
What is this special classes of land?
These are the properties owned by those exempt from real property taxation like owned sa republic of
the Philippines.
The classification is not necessarily the declaration of the owner but rather it is the actual use. So if it
was initially declared as agricultural but then after 3 years na inspection si assessor unya daghan na
ug balay the LGU can reclassify. The LGU has that power to reclassify it into residential through the
passage of what we call a zoning ordinance.
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Did i mention kadtung problem sa non-stock non-profit educational institution na initially exempt ang
nakatatak sa tax dec nila but it when it was inspected several years after it became commercial.
unfortunately when the new tax dec was issued wala na na carry over ang exempt.
Does the LGU has the power to reclassify?
Yes. through zoning ordinance. Take note the passage of a zoning ordinance is an exercise of the
police power of the LGU. For example muana ka na dapat residential kay balay man ni nako but if ang
tapad nimo kay commercial establishments then that entire zone is classified as commercial area.
Remedies
For the government remedies, we have the local government’s lien over the property if you failed to
pay the real property tax.
Then we have the prescriptive period to assess which is 5 years from the date they became due or
within 10 years upon the discovery of fraud or intent to evade.
For civil remedies, we divide it in two, either administrative action or judicial action.
For the administrative action we have the distraint under sec. 254, LGC and levy on real property.
For the levy on real property the procedure is detailed from Sec. 258-265, LGC. The difference lang
from the levy of real property in connection with delinquency in real property tax is that the publication
is 1:2, once a week for two consecutive weeks. Take note this publication is not enough, personal
notice is still required.
Redemption it may still be exercised in connection with the levied property. It is exercised 1 year from
the date of sale. Provided the taxpayer will pay the amount of the tax plus interest, cost and expense
of the sale, plus 2% interest per month from the date of sale to the date of redemption.
For judicial action
The local government can institute or file a tax collection case against the taxpayer before the civil
courts of competent jurisdiction not before the CTA even if the claim of the LGU exceeds 1 million. We
follow the jurisdictional amounts for MTC and RTC.
Taxpayer’s remedies
More or less the same with local business taxes. The taxpayer can question the validity of the
ordinance within 30 days from the effectivity of the ordinance raise it before the secretary of the states
the sec. of justice is given 60 days to decide upon the lapse of the 60 day period or upon the receipt of
the adverse decision. The taxpayer can file a case before courts of competent jurisdiction and not
before the office of the president.
Unsa ang usual ground nimo to question the constitutionality of an ordinance?
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The usual ground is lack of the mandatory public hearing. Mao to you need to remember unsa nga
ordinance kinahanglan ug public hearing. Again if it is the passage of local business tax, mandatory. If
it is passage of special levy, then mandatory. But if it just real property, it is not necessary.
If there is already an assessment pwede ba ko mu protest?
Yes,
But is it required that you must pay with protest?
Yes as provided under section 252, LGC, no protest shall be paid unless the taxpayer paid with a
stamp paid under protest.
What is your action then? When you pay under protest, asa ka mu appeal?
Within 30 days, you go to the local treasurer and the local treasurer is given 60 days from receipt of
your protest to decide on your protest. So if mudaog ka eventually you can file for claim for credit or
refund.
If the local treasurer decides adverse to you or the 60 day period has lapsed, within 30 days you go up
to the local board of assessment appeals and the LBAA is given 120 days to decide only our protest.
If adverse ang decision ni LBAA or the 120 day period has lapsed already within 30 days appeal to the
CBAA or central board of assessment appeals. There is no period for the CBAA to decide on your
protest. Maghuwat jud ka na maka recieve ka ug decision from the CBAA.
If adverse ang decision ni CBAA, within 30 days you go the CTA en banc because that is a decision of
the CBAA in its appellate jurisdiction.
If pildi ka, then we follow the usual judicial process. You file a motion for recon or new trial within 15
days. If denied then file a petition for review within 15 days from receipt under rule 45 to the SC.
Take note ang jurisdiction ni CBAA, please read lang sec. 230 and the LBAA sec. 229. Please read
through lang the composition of the LBAA and CBAA and their functions.
------END-----
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Taxation II – Atty.

Kim Aranas SMLP | SDB | KDA | AC | JT

TOPIC: INFORMER’S REWARD | CTA

(di favorite: types of dutiable goods; remedies when it comes to customs)

TOPIC : JURISDICTION OF THE CTA | LOCAL TAXATION

Relevant Provision: Section 2, Rule 4

Exclusive original jurisdiction of the CTA in division:

Relevant provision: Sec 3, Rule 4 (b) & (c)

How about the exclusive appellate jurisdiction of the CTA in division?

Relevant provision: Sec. 3, Rule 4 (a)

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed

So let us go to criminal cases

If less than 1 million - regular courts, so either RTC or MTC.

Criminal Violation started with RTC.

If sa CTA in division na pildi ka, what do you file?

A motion reconsideration or motion for new trial within 15 days.

Criminal Violation started with MTC

What if it was decided by the RTC in its appellate jurisdiction?

Ngano naapil man si agriculture and trade industry?

We move on to local taxation

Our primary reference is the Local Government Code.

Legal Foundation of Local Taxing Power

We go first to the division of the local government units.

Four divisions of LGUs:

This Real Property taxes unya ra nato i-discuss.

Sources of local funds

We also have the so called (di madungog).

1. Levied for a public purpose.

What do you mean by that?

So local taxing authority, kinsa ang naay authority to impose tax?

It is exercised by the sangguniang of the LGU through the passage of ordinances.

When we say Sanggunian:

Province- Sanggunian Panlalawigan

What are the powers of the sanggunian?

1. Impose local taxes

Section 516, LGC

Power to adjust Local Tax Rates

Section 191, LGC

What do we mean by this?

So can they increase that 0.5%?

Yes, once every 5 years.

To Grant local tax exemption

Section 192, LGC

When it comes to the grant of tax exemption, what is the rule?

The rule is basically is it may only be granted on cases of:

On the grant of tax incentives

For the rest they are subject na to local taxes.

Tax November 30, 2018 1st hour

On the grant of tax exemptions or tax reliefs

What is this shared revenue?

Incentive- this is more to encourage investors to come in their locality.

On the grant of tax incentives

Mandated ba mu follow si local government?

How about PEZA? Is it exempted from local taxation?

General rule: it is lifted.

How about local taxes?

What do we mean by common revenue raising powers?

1. Service fees and charges

Section 153, LGC

What are the examples of this?

2. Public utility charges