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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)
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.
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.
Whyisordinanceimportantintheimpositionoflocaltaxes?
TheLGUonlygaveac eilingofrates.Thepurposeoftheordinanceistofixtheratewherethe
personisheldliable.
AfterpublichearingtheremustbeaPUBLICATION.
CTAEnbanc:DecisionoftheRTCinvolvinglocaltaxANDDecisionofCentralBoardof
AssessmentAppealinvolvingrealestatetax.
PaymentUnderProtestisonlyapplicableinREalestateTax(notapplicableinLocalTax,NIRC,
Tariff)
(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
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
(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
(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
(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:
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.
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).
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
SECTION234.ExemptionsfromRealPropertyTax.Thefollowingareexemptedfrom
paymentoftherealpropertytax:
(a)RealpropertyownedbytheRepublicofthePhilippinesoranyofitspoliticals ubdivisions
exceptwhenthebeneficialusethereofhasbeengranted,forc onsiderationorotherwise,toa
taxablepersonDoctrineofBeneficialUserRule(NinoyAquinoInternationalAirportCase)
(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.
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SECTION246.DateofAccrualofTax.Therealpropertytaxforanyyears hallaccrueonthe
firstdayofJanuaryandfromthatdateits hallc onstitutealienonthepropertywhichs hallbe
superiortoanyotherlien,m ortgage,orencumbranceofanykindwhatsoever,ands hallbe
extinguishedonlyuponthepaymentofthedelinquenttax.
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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.