REAL PROPERTY TAXATION HANDOUT

1. GOVERNING LAW

2. NATURE OF REAL PROPERTY TAXES-NATIONAL OR LOCAL?

1. Direct tax whose burden could not be shifted by the one who pays to other persons

2. Ad valorem tax based on the assessed value of the property

3. Local tax

4. Imposed on use and not ownership

5. Progressive in character pending to a certain extent on the use and value of the property

6. Indivisible single obligation

3. FUNDAMENTAL PRINCIPLES

Section 198 of the Local Government Code

SECTION 198. Fundamental Principles. - The appraisal, assessment, levy and collection of real
property tax shall be guided by the following fundamental principles:

(a) Real property shall be appraised at its current and fair market value;

(b) Real property shall be classified for assessment purposes on the basis of its actual use;

(c) Real property shall be assessed on the basis of a uniform classification within each local
government unit;

(d) The appraisal, assessment, levy and collection of real property tax shall not be let to any
private person; and

(e) The appraisal and assessment of real property shall be equitable.

Case:

Allied Banking Corporation v Quezon City G.R. No. 154126 (2006)

Facts:

The SC, in its Decision, promulgated Sec. 3 of the Q.C. Ord. No. 357 S. Of 1995 which provides
that real estate tax shall be based on the actual amount reflected in the deed of conveyance or
the current approved zonal valuation of the BRI prevailing at the time of sale, cession, transfer
and conveyance, whichever is higher as null and void ab initio being ultra vires to the LGC and
its IRR and Local Assessment Regulations No. 1-92. Petitioner filed a motion for clarification
contending that the return of the real property tax erroneously collected and paid is a necessary
consequence to the invalidation of the ordinance, hence there is no need to claim for a refund
since the return of the collected tax should be automatic.

Issue: WON it is still necessary that the taxpayer file a claim for refund after an ordinance
connected to payment of real property tax is invalidated by the SC.

Held:

Yes. Entitlement to a tax refund does not necessarily call for the automatic payment of the sum
claimed.12 The amount of the claim being a factual matter, it must still be proven in the normal
course and in accordance with the administrative procedure for obtaining a refund of real
property taxes, as provided under the Local Government Code.

Under Section 253 of the Local Government Code, the claim for refund or credit for taxes must
be filed before the city treasurer13 who shall decide the claim based on the tax declarations,
affidavits, documents and other documentary evidence to be presented by petitioner.

SEC. 253. Repayment of Excessive Collections. – When an assessment of basic real property tax,
or any other tax levied under this Title, is found to be illegal or erroneous and the tax is
accordingly reduced or adjusted, the taxpayer may file a written claim for refund or credit for
taxes and interests with the provincial or city treasurer within two (2) years from the date the
taxpayer is entitled to such reduction or adjustment.

The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60)
days from receipt thereof. In case the claim for tax refund or credit is denied, the taxpayer may
avail of the remedies provided in Chapter 3, Title Two, Book II of this Code.

Note: i can’t find a copy of the local assessment reg 1-92

4. PROPERTIES COVERED

a. Article 415 of the New Civil Code

Article 415 of the New Civil Code states:

Article 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part
of an immovable;

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;

(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or
on lands by the owner of the immovable in such a manner that it reveals the intention to attach
them permanently to the tenements;

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works;

(6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in
case their owner has placed them or preserves them with the intention to have them
permanently attached to the land, and forming a permanent part of it; the animals in these
places are included;

(7) Fertilizer actually used on a piece of land;

(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters
either running or stagnant;

(9) Docks and structures which, though floating, are intended by their nature and object to
remain at a fixed place on a river, lake, or coast;

(10) Contracts for public works, and servitudes and other real rights over immovable property.
(334a)

Cases:

CALTEX (PHILIPPINES) INC., vs. CENTRAL BOARD OF ASSESSMENT APPEALS and CITY
ASSESSOR OF PASAY G.R. No. L-50466 (1982)

We hold that the said equipment and machinery, as appurtenances to the gas station building
or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary
to the operation of the gas station, for without them the gas station would be useless, and
which have been attached or affixed permanently to the gas station site or embedded therein,
are taxable improvements and machinery within the meaning of the Assessment Law and the
Real Property Tax Code.

STA. LUCIA REALTY & DEVELOPMENT, INC v CITY OF PASIG (2011)

1. While a local government unit is authorized under several laws to collect real estate tax on
properties falling under its territorial jurisdiction, it is imperative to first show that these
properties are unquestionably within its geographical boundaries.

The importance of drawing with precise strokes the territorial boundaries of a local unit of
government cannot be overemphasized. The boundaries must be clear for they define the
limits of the territorial jurisdiction of a local government unit. It can legitimately exercise
powers of government only within the limits of its territorial jurisdiction. Beyond these
limits, its acts are ultra vires. Needless to state, any uncertainty in the boundaries of local
government units will sow costly conflicts in the exercise of governmental powers which
ultimately will prejudice the people's welfare. This is the evil sought to be avoided by the Local
Government Code in requiring that the land area of a local government unit must be spelled out
in metes and bounds, with technical descriptions. (Mariano, Jr. v. Commission on Elections)

2. While a Transfer Certificate of Title is conclusive evidence of ownership and location, reliance
on the face of the TCT is not enough as the statements therein may still be attacked as when
there is a boundary dispute case over the location of the property.

CAPITOL WIRELESS, INC., Petitioner, vs. THE PROVINCIAL TREASURER OF BATANGAS, THE
PROVINCIAL ASSESSOR OF BATANGAS, THE MUNICIPAL TREASURER AND ASSESSOR OF
NASUGBU, BATANGAS, Respondents.

Submarine or undersea communications cables are akin to electric transmission lines which this
Court has recently declared in Manila Electric Company v. City Assessor and City Treasurer of
Lucena City, 37 as "no longer exempted from real prope1iy tax" and may qualify as "machinery"
subject to real property tax under the Local Government Code. To the extent that the
equipment's location is determinable to be within the taxing authority's jurisdiction, the Court
sees no reason to distinguish between submarine cables used for communications and aerial or
underground wires or lines used for electric transmission, so that both pieces of property do not
merit a different treatment in the aspect of real property taxation. Both electric lines and
communications cables, in the strictest sense, are not directly adhered to the soil but pass
through posts, relays or landing stations, but both may be classified under the term "machinery"
as real property under Article 415(5)38 of the Civil Code for the simple reason that such pieces of
equipment serve the owner's business or tend to meet the needs of his industry or works that
are on real estate. Even objects in or on a body of water may be classified as such, as "waters" is
classified as an immovable under Article 415(8)39 of the Code. A classic example is a boathouse
which, by its nature, is a vessel and, therefore, a personal property but, if it is tied to the shore
and used as a residence, and since it floats on waters which is immovable, is considered real
property. Besides, the Court has already held that "it is a familiar phenomenon to see things
classed as real property for purposes of taxation which on general principle might be considered
personal property.”

Thus, absent any showing from Capwire of any express grant of an exemption for its lines and
cables from real property taxation, then this interpretation applies and Capwire's submarine
cable may be held subject to real property tax.

5. PROPERTIES EXEMPT

a. Section 234 of the Local Government Code

SECTION 234. Exemptions from Real Property Tax. - The following are exempted from
payment of the real property tax:

(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;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,

nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly,
and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or - controlled corporations engaged in the supply and
distribution of water and/or 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 environmental 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 government-
owned or -controlled corporations are hereby withdrawn upon the effectivity of this Code.

b. Section 238 of the Local Government Code

SECTION 238. Idle Lands Exempt from Tax. - A province or city or a municipality within the
Metropolitan Manila Area may exempt idle lands from the additional levy by reason of force
majeure, civil disturbance, natural calamity or any cause or circumstance which physically or
legally prevents the owner of the property or person having legal interest therein from
improving, utilizing or cultivating the same.
c. Constitutional Exemptions

6. May Local Government Units grant exemption?

Local government units may, through ordinances duly approved, grant tax exemptions,
incentives or reliefs under such terms and conditions as they may deem necessary. [Sec.
192, LGC]

SECTION 192. Authority to Grant Tax Exemption Privileges. - Local government units may,
through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms
and conditions, as they may deem necessary.

7. Who are liable for the Real Property Taxes?

The concept of ownership vs. Use

Real property taxation is based on use and not on ownership and this rule must be applied in
real property tax exemptions. The usage of the property and not the ownership is the
determining factor whether or not the property is taxable. (Lung Center of the Phils. vs. Quezon
City, 433 SCRA 119 [2004]).

Sources: (to be arranged)

The Local Government Code of 1991

Supreme Court of the Philippines website (http://sc.judiciary.gov.ph)

University of Santo Tomas Taxation Bar Exam Reviewer 2017