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YanyanDeVera

TaxationLawReviewNotes
LOCALTAXATION
Source:LocalG overnmentCode
January1.1992e ffectivitydate

Isthegrantofthepoweroftaxationinherentforbothnationalandlocalgovernment?
A: No. It is inherent in the National but not in the Local Government since the latter is merely a
States agency to carry out in detail the objects if the government. The LGU can only imposes
taxeswhenitisgrantedbythe
a. Constitution e.g. LGUs taxation power outside autonomous region (SEction5,Article
10,1987Constitution)
b. Legislation by Congress e.g. LGUs taxation power within the autonomous region (
Section20,Article10)

ISareale statetaxalocaltax?No.BEcauseareale statetaxbelongstoadifferenttitle


undertheLGC.O nlythoseintitleonearelocaltaxes
Canthenationalgovernmentreale statetax?No.itcannotbefoundundertheNIRC

PROBLEM:WhatifsabiniM AyorErap,lahatngpangetmagbabayadng1%oftheirgross
income.Isthisv alid?
Answer: the power to impose tax in the LGU belongs to the Sanggunian. BAsis:
SECTION 129. Power to Create Source of Revenue Each local government unit shall
exercise its power to create its own sources of revenue and to levy taxes, fees, and charges
subject to the provisions herein, consistent with the basic policy of local autonomy.Suchtaxes,
fees,andc hargess hallaccrueexclusivelytothelocalgovernmentunits.

What is requiredisORDINANCEnotRESOLUTION.Ordinance haspermanentCharacter


unlike resolution which is temporary. BASIS: SECTION 186. Power To Levy Other Taxes,
Fees or Charges. Local government units may exercise the power to levy taxes, fees or
charges on any base or subject not otherwisespecificallyenumeratedhereinortaxedunderthe
provisions of the National Internal Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatoryorcontrarytodeclarednationalpolicy:Provided,further,Thattheordinance levying
such taxes, fees or charges shall not be enacted without any prior public hearing conducted
forthepurpose.

ISPUBLICHEARINGREQUIREDtoIMPOSETAX?
Answer:Itdepends.IFcongress,publichearingisnotrequired.IfLGCpublichearing
isrequired.

ISnoticetoaffectedtaxpayersrequiredbeforeataxordinancecanbepassed?
Answer: General Rule: only ordinance and public hearing ExCEPTIOn: in case of levy of
special assessment.ITis aform ofREalestatetaxSECTION186.PowerToLevyOtherTaxes,
Fees or Charges. Local government units may exercise the power to levy taxes, fees or
charges on any base or subject not otherwisespecificallyenumeratedhereinortaxedunderthe
provisions of the National Internal Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared national policy: Provided, further,Thattheordinancelevying
such taxes, fees or charges shall not be enacted without any prior public hearingconductedfor
thepurpose.

SECTION187.ProcedureforApprovalandEffectivityofTaxordinancesandRevenue
MeasuresMandatoryPublicHearings.Theprocedureforapprovaloflocaltaxordinancesand
revenuem easuress hallbeinaccordancewiththeprovisionsofthisCode:Provided,Thatpublic
hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further,
Thatany question on the constitutionality or legality of tax ordinances or revenuemeasures may
be raised on appeal within thirty (30) days from the effectivity thereof totheSecretaryofJustice
who shall render a decision within sixty (60) days from the date of receipt of the appeal:
Provided, however, That such appeal shallnothavetheeffectofsuspendingtheeffectivityofthe
ordinance and the accrual and payment ofthetax,fee,orchargeleviedtherein:Provided,finally,
Thatwithinthirty(30)days afterreceiptofthedecisionorthelapseofthesixtydayperiodwithout
the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate
proceedingswithac ourtofc ompetentjurisdiction.

SECTION 188. Publication of Tax ordinances and Revenue Measures. Within ten (10)
daysafter their approval, certified true copies of all provincial, city, and municipal tax ordinances
orrevenue shall be published in full for three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and municipalities where there are no
newspapers of local circulation, the same may be posted in at least two (2) conspicuous and
publiclyaccessibleplaces.

SECTION189.FurnishingofCopiesofTaxordinancesandRevenueM easures.Copies
ofall
provincial,c ity,andm unicipalandBarangaytaxordinancesandrevenuem easuress hallbe
furnishedtherespectivelocaltreasurersforpublicdissemination.

SECTION242.PublicationofProposedO rdinanceImposingaSpecialLevy. Beforethe


ofanimposingas peciallevy,theSanggunianc oncerneds hallc onductapublichearingthereon
notifyinwritingtheownersoftherealpropertytobeaffectedorthepersonshavinglegalinterest
thereinastothedateandplacethereofandaffordthelattertheopportunitytoexpresstheir
positionsorobjectionsrelativetotheproposedordinance.

Whyisordinanceimportantintheimpositionoflocaltaxes?
TheLGUonlygaveac eilingofrates.Thepurposeoftheordinanceistofixtheratewherethe
personisheldliable.

AfterpublichearingtheremustbeaPUBLICATION.

WhentochallengethelegalityorconstitutionalityoftheO rdinance?W ithin30daysfrom


effectivityoftheordinance(afterpublication)fileanappealbeforeintheSecretaryofJustice
However,thefilingofanappealwillnotstopthee ffectivityoftheordinance.T he
secretaryofJusticewilldecidewithin60days.Inc aseofadversedecision.Fileanappealwithin
30daysbeforethec ourtofc ompetentjurisdictionwhichistheRTC.(INCAPABLEof
PECUNIARYESTIMATION)Inc aseofAdversedecision:GototheCTAEnbanc(localtax)

CTAEnbanc:DecisionoftheRTCinvolvinglocaltaxANDDecisionofCentralBoardof
AssessmentAppealinvolvingrealestatetax.

PaymentUnderProtestisonlyapplicableinREalestateTax(notapplicableinLocalTax,NIRC,
Tariff)

SECTION 152. Scope of TaxingPowers.TheBarangays maylevytaxes,fees,andcharges,


asprovidedinthisArticle,whichs hallexclusivelyaccruetothem:
(a) Taxes On stores or retailers with fixed business establishments with gross sales or
receipts of the preceding calendar year of Fifty Thousand pesos (P50,000.00) or less, in the
case of cities and Thirty thousand pesos (P30,000.00)orless,inthecaseofmunicipalities,ata
ratenotexceedingonepercent(1%)ons uchgrosss alesorreceipts.

(b) Service Fees or Charges Barangays may collect reasonable fees orcharges forservices
rendered in connection with the regulation or the use of Barangayowned properties or service
facilitiess uchaspalay,c opra,ortobaccodryers.

(c) Barangay Clearance No city or municipality may issue any license or permit for any
business or activity unless aclearanceis firstobtainedfrom theBarangaywheresuchbusiness
or activity is located or conducted. For suchclearance,theSangguniangBarangaymayimpose
a reasonable fee. The application for clearance shall be acted upon within seven (7) working
days from the filing thereof. In the event that the clearance is not issued within the said period,
thec ityorm unicipalitym ayissuethes aidlicenseorpermit.

(d) Other Fees and Charges The Barangay may levy reasonable fees and charges: (1) On
commercial breeding of fighting cocks, cockfighting an cockpits (2) On places of recreation
which charge admission fees and (3) On billboards, signboards, neon signs, and outdoor
advertisements.ArticleFive.CommonRevenueRaisingPowers

OnlytheMunicipalityc animposeBusinessTax.Provincec animposetaxonpublicationand


printing.CAnaCityimposebusinesstax?Becauseithasthepowertoimposetaxthata
Municipalityc animpose.

SECTION170.CollectionofLocalRevenuesbyTreasurer. Alllocaltaxes,fees,and
chargess hallbec ollectedbytheprovincial,c ity,m unicipal,orBarangaytreasurer,ortheirduly
authorizeddeputies.Theprovincial,c ityorm unicipaltreasurerm aydesignatetheBarangay
treasurerashisdeputytoc ollectlocaltaxes,fees,orc harges.Inc aseabondisrequiredforthe
purpose,theprovincial,c ityorm unicipalgovernments hallpaythepremiumsthereoninaddition
tothepremiumsofbondthatm ayberequiredunderthisCode.

RelatetheaboveprovisiontoSEction130(C)

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities,andBarangayss hallnotextendtothelevyofthefollowing:

(32)Incometax,e xceptwhenleviedonbanksandotherfinancialinstitutions

(33)Documentarys tamptax

(34) Taxes onestates,inheritance,gifts,legacies andotheracquisitions mortis causa,exceptas


otherwiseprovidedherein

(35) Customs duties, registration fees vessels and wharfage onwharves,tonnagedues,andall


other kinds of customs fees, charges and dues except wharfage on wharves constructed and
maintainedbythelocalgovernmentunitc oncerned

(36) Taxes, fee and charges and other impositions upon goods carriedintooroutof,orpassing
through,theterritorialjurisdictions oflocalgovernmentunits intheguiseofcharges forwharfage,
tolls for bridges or otherwise, or other taxes,fees orcharges inanyform whatsoeveruponsuch
goodsorm erchandise

(37) Taxes, fees, or charges on agricultural and aquatic products when sold by marginal
farmersorfishermen

(38) Taxes on business enterprises certified to by the Board of Investments as pioneer or


nonpioneer for a period of six (6) and (4) four years, respectively from the date of registration
(39) Excise taxes on articles enumerated under the National Internal Revenue Code, as
amended,andtaxes,feesorc hargesonpetroleumproducts

(40) Percentage or value added tax(VAT)onsales,barters orexchanges orsimilartransactions


ongoodsors ervicesexceptasotherwiseprovidedherein

(41) Taxes on the gross receipts of transaction contractors and persons engaged in the
transportation of passengers or freight byhireandcommoncarriers byair,landorwater,except
asprovidedinthisCode

(42)Taxesonpremiumpaidbywayorreinsuranceorretrocession

(43) Taxes, fees or charges for the registration of motorvehicleandfortheissuanceofallkinds


oflicensesorpermitsforthedrivingthereof,excepttricycles

(44) Taxes, fees or charges on Philippine products actually exported, except as otherwise
providedherein

(45) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
cooperatives duly registeredunderR.A.No.6810andRepublic ActNumberedSixtyninehundred
thirtyeight (R.A. No. 6938) otherwise known as the "Cooperatives Code of the Philippines"
respectivelyand

(46) Taxes, fees or charges, of any kind on the National Government, its agencies and
instrumentalities, and local government units. CHAPTER 2. Specific Provisions on the Taxing
and

RealPropertyTaxation

Note:TakenoteofArticle415oftheCivilCode:

Art. 415. The following are immovable property:


(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are attached to thelandorformanintegralpartofan
immovable;
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object;
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed inbuildingsoronlands
by the owner of the immovable in such a manner that it reveals the intention to attach them
permanently to the tenements;
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried oninabuildingoronapieceofland,andwhichtenddirectlyto
meet the needs of the said industry or works;
(6) Animal houses, pigeonhouses,beehives,fishpondsorbreedingplacesofsimilarnature,incasetheir
owner has placed them or preserves them with the intentiontohavethempermanentlyattachedtothe
land, and forming a permanent part of it; the animals in these places are included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of thebed,andwaterseither
running or stagnant;
(9) Docks and structures which, though floating, are intended by their nature andobjecttoremainata
fixed place on a river, lake, or coast;
(10) Contracts for public works, and servitudes and other real rights over immovable property.

4kindsofrealpropertytax:
1. Realestatetaxproper
2. Speciallevyoneducationalfund
3. Additionallevyforidlelands
4. Additionallevyfors pecialassessment

SECTION198.FundamentalPrinciples.Theappraisal,assessment,levyandc ollectionof
realpropertytaxs hallbeguidedbythefollowingfundamentalprinciples:
(a)Realpropertys hallbeappraisedatitscurrentandfairm arketvalue
(b)Realpropertys hallbec lassifiedforassessmentpurposesonthebasisofitsactualuse
(c)Realpropertys hallbeassessedonthebasisofauniformclassificationw ithineachlocal
governmentunit
(d)Theappraisal,assessment,levyandc ollectionofrealpropertytaxs hallnotbelettoany
privatepersonand
(e)Theappraisalandassessmentofrealpropertys hallbeequitable.

Atty:Capuno:Correlate198ato201and217

SECTION201.AppraisalofRealProperty.Allrealproperty,whethertaxableorexempt,s hall
beappraisedatthecurrentandfairm arketvalueprevailinginthelocalityw herethe
propertyissituated.TheDepartmentofFinances hallpromulgatethenecessaryrulesand
regulationsforthec lassification,appraisal,andassessmentofrealpropertypursuanttothe
provisionsofthisCode.

SECTION217.ActualUseofRealPropertyasBasisforAssessment.Realpropertys hall
bec lassified,valuedandassessedonthebasisofitsactualuseregardlessofwherelocated,
whoeverownsit,andwhoeverusesit.

Atty.Capuno:Areale statetaxandaspeciallevypertainstoALLT YPESofREAL


PROPERTYwhileIdlelandsandspecialassessmentspertainsonlytoLAND

SECTION232.PowertoLevyRealPropertyTax.Aprovinceorcityoram unicipality
withintheM etropolitanM anilaAreamaylevyanannualadv aloremtaxonrealproperty
suchasland,building,m achinery,andotherimprovementnothereinafters pecificallyexempted.

SECTION235.AdditionalLevyonRealPropertyfortheSpecialEducationFund.A
provinceorc ity,oram unicipalityw
ithintheMetropolitanManilaArea,m aylevyandcollectan
annualtaxofonepercent(1%)ontheassessedvalueofrealpropertywhichs hallbein
additiontothebasicrealpropertytax.Theproceedsthereofs hallexclusivelyaccruetothe
SpecialEducationFund(SEF).

SECTION240.SpecialLevybyLocalG overnmentUnits.Aprovince,cityorm unicipality


mayas peciallevyonthelandsc omprisedwithinitsterritorialjurisdictions peciallybenefitedby
publicworksprojectsorimprovementsfundedbythelocalgovernmentunitc oncerned:
Provided,however,Thatthes peciallevys hallnotexceeds ixtypercent(60%)oftheactualc ost
ofs uchprojectsandimprovements,includingthec ostsofacquiringlandands uchotherreal
propertyinc onnectiontherewith:Provided,further,Thatthes peciallevys hallnotapplytolands
exemptfrombasicrealpropertytaxandtheremainderofthelandportionsofwhichhavebeen
donatedtothelocalgovernmentunitc oncernedforthec onstructionofs uchprojectsor
improvements.

SECTION236.AdditionalAdValoremTaxonIdleLands.Aprovinceorcity,ora
municipalitytheM etropolitanM anilaArea,m aylevyanannualtaxonidlelandsattherate
note xceedingfivepercent(5%)oftheassessedvalueofthepropertywhichs hallbein
additiontothebasicrealpropertytax.

RealPropertyTaximposable:
Province1%
City2%
MunicipalitywithinMetroManila2%
MunicipalityoutsideMetroNO

Education
ProvinceYes
CityYes
MunicipalitywithinMetroYes
MunicipalityoutsideMetroNo

Idlelands
Provinceyes,
Cityyes,5%
MunicipalitywithinMetroyes
MunicipalityoutsideMetroManilaNo

SpecialAssessment
Provinceyes,6%
Cityyes
MunicipalitywithinMetroyes
MunicipalityoutsideMetroManilayes

Note:Notallthosepublicc orporationsc animposethosetaxes,accordingtoSir,tignanm okung


saannakaregisteryungproperty.IfitisRegisteredinTheMunicipalREgisterofDeedsthen
suchm unicipalityc animposethetax.

SECTION234.ExemptionsfromRealPropertyTax.Thefollowingareexemptedfrom
paymentoftherealpropertytax:
(a)RealpropertyownedbytheRepublicofthePhilippinesoranyofitspoliticals ubdivisions
exceptwhenthebeneficialusethereofhasbeengranted,forc onsiderationorotherwise,toa
taxablepersonDoctrineofBeneficialUserRule(NinoyAquinoInternationalAirportCase)

(b)Charitableinstitutions,c hurches,parsonagesorc onventsappurtenantthereto,m osques,


nonprofitorreligiousc emeteriesandalllands,buildings,andimprovementsactually,directly,and
exclusivelyusedforreligious,c haritableoreducationalpurposes

(c)Allm achineriesandequipmentthatareactually,directlyandexclusivelyusedbylocalwater
districtsandgovernmentownedorcontrolledc orporationsengagedinthes upplyand
distributionofwaterand/orgenerationandtransmissionofelectricpower

(d)Allrealpropertyownedbydulyregisteredc ooperativesasprovidedforunderR.A.No.6938
and
(e)Machineryandequipmentusedforpollutionc ontrolandenvironmentalprotection.Exceptas
providedherein,anyexemptionfrompaymentofrealpropertytaxpreviouslygrantedto,or
presentlyenjoyedby,allpersons,whethernaturalorjuridical,includingallgovernmentownedor
controlledc orporationsareherebywithdrawnupontheeffectivityofthisCode.

______________________________________________________________________________

PROBLEM:O nJan.1,m eronrealpropertybuildingandlandownedbyPinkSisters.O nJuly1


theyleasedbothlandandbuildingtoABCc orporation.Ginawaniyangc ommercials pace.
InassessedngLGUs iABC.ABCrefusedbecausethepropertyisexempted.
ISSUE:IsABCLiabletotax?
RULING:No.Basis:SEction246tignanm okungsinoangmayactualusekungkelansya
nagaccrue:D(January1)

PROBLEMW hatifthisisthec asethebuildingandlandisownedbyXYZc orporationonJan.


OnJuly1theyleasedittoMonks,TheLGUassessedthem
ISSUE:istheIndianMonksliable?
RULING:YEs.BAsis:Section246SInoangmayactualusekungkelansyanagaccrue:D

SECTION246.DateofAccrualofTax.Therealpropertytaxforanyyears hallaccrueonthe
firstdayofJanuaryandfromthatdateits hallc onstitutealienonthepropertywhichs hallbe
superiortoanyotherlien,m ortgage,orencumbranceofanykindwhatsoever,ands hallbe
extinguishedonlyuponthepaymentofthedelinquenttax.

______________________________________________________________________________

Ifyouw anttochallengetheassessment:gototheTreasurerbutpayfirst.

SECTION252.PaymentUnderProtest.
(a)Noprotests hallbeentertainedunlessthetaxpayerfirstpaysthetax.Theres hallbe
annotatedonthetaxreceiptsthewords"paidunderprotest".Theprotestinwritingm ustbefiled
withinthirty(30)days frompaymentofthetaxtotheprovincial,c itytreasurerorm unicipal
treasurer,inthec aseofam unicipalitywithinMetropolitanManilaArea,whos halldecidethe
protestwithins ixty(60)daysfromreceipt.
(b)Thetaxoraportionthereofpaidunderprotest,s hallbeheldintrustbythetreasurer
concerned.
(d)Intheeventthattheprotestisfinallydecidedinfavorofthetaxpayer,theamountorportionof
thetaxprotesteds hallberefundedtotheprotestant,orappliedastaxc reditagainsthisexisting
orfuturetaxliability.
(e)Intheeventthattheprotestisdeniedoruponthelapseofthes ixtydayperiodprescribedin
subparagraph(a),thetaxpayerm ayavailoftheremediesasprovidedforinChapter3,TitleII,
BookIIofthisCode.

Ifyouwanttoc hallengetheREvenueRegulation,W herewillyougo?


Basis:Section4NIRC:
Kungtalokas aSEcretaryofFinancewherewillyougo?CTA

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