1. What is the extent of the taxing
What are the common limitations
power of the LGU?
Answer:
Sec. 120 provides that 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. Such taxes, fees, and
charges shall accrue exclusively to the
local government units.
2. Can the LGU impose penalties for
the non-payment of taxes?
Answer:
Yes. Under Section 516, the sanggunian
of a local government unit is authorized
to prescribe fines or other penalties for
violation of tax ordinances but in no
case shall such fines be less than One
thousand pesos (P1,000.00) no more
than Five thousand pesos (P5,000.00)
nor shall imprisonments be less than
one (1) month nor more than six (6)
months. Such fine or other penalty, or
both, shall be imposed at the discretion
of the court. The sanggunian barangay
may prescribe a fine of not less than
One hundred pesos (P100.00) nor more
than One thousand pesos (P1,000.00).
3. What is your understanding of
pre-emption or exclusionary rule
Answer:
Preemption in taxation refers to an
instance wherein the National
Government elects to tax a particular
area, impliedly withholding from the
local government the delegated power
to tax the same field. This doctrine
principally rests upon the intention of
Congress. Conversely, should
Congress allow municipal corporations
to cover fields of taxation it already
occupies then the doctrine of pre-
emption will not apply.
4. Is there pre-emption between the
NIRC and the LGC
5.
of the exercising power of the
LGU?
Answer:
Sec. 133 of the LGC prescribes a
number of statutory limitations on the
local taxing power. Known as “common
limitations” because they apply to all
local government units i.e. provinces,
cities, municipalities and barangays,
these are actually taxes or impositions
which said Code excludes from the
taxing power of LGUs.
These are:
a. Income tax except when levied
on banks and other financial
institutions;
b. Documentary stamp tax;
c. Taxes on estates, inheritance,
gifts, legacies and other
acquisition mortis causa except
as otherwise provided in the
LGC;
d. Custom duties, registration fees
of vessels 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;
e. Taxes, fees, and charges and
other impositions upon good
carried into or out of, or passing
through, the territorial
jurisdictions of the LGU 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;
f. Taxes, fees or charges on
agricultural and aquatic products
when sold by marginal farmers or
fishermen;
g. Taxes on business enterprises
certified by the Board of
Investments as pioneer or non-
 pioneer for a period of six (6) and
four (4) years, respectively, from
the date of registration.
h. Excise taxes on articles
enumerated under the NIRC, as
amended, and taxes, fees or
charges on petroleum products;
i. Percentage or value-added tax
(VAT) on sales, barters or
exchanges or similar transactions
on goods or services except as
otherwise provided herein;
j. 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 the LGC;
k. Taxes on premiums paid by way
of reinsurance or retrocession;
l. 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 tricycle,
m. Taxes, fees or other charges on
Philippine products actually
exported, except as otherwise
provided in the LGC
n. Taxes, fees or charges on
countryside and barangay
business enterprises and
cooperatives duly registered
under RA 6810 and RA 6938,
otherwise known as the Magna
Carta for Countryside and
Barangay Business Enterprises”
and “Cooperatives Code of the
Philippines,” respectively; and
o. Taxes, fees or charges of any
kind on the National Government,
its agencies and
instrumentalities, and LGUs
These excluded impositions may be
classified into the following categories:
1. Taxes, which are levied under the
NIRC. These are pre-empted
taxes except in some cases.
2. TFC, which are imposed under
the Tariff and Customs Code and
other special laws. Preemption
applies in this instance also.
3. TFC, where the imposition of
which contravenes existing
governmental policies or which
are violative of the fundamental
principles of taxation.
4. TFC imposed under special laws
Fundamental Principles of Local Taxing
Power
1. Principles which are either
inherent of constitutional
limitations on the taxing power, in
general –
a. Uniformity of taxation
b. Equitability and progressivity
of taxation;
c. Public purpose of taxes; and
d. Taxes must accrue
exclusively to the benefit of
the LGU.
2. Principles which are statutory in
origin –
a. Local taxes must not be unjust,
excessive, oppressive or
confiscatory;
b. They must not be contrary to law,
public policy, national economic
policy or in restraint of trade; and
c. The collection of local taxes,
fees, charges and other
impositions shall in no case be let
to any private person.
6. Who is authorized to collect local
taxes? May that officer can also
compromise?
Answer:
Under Section 170, all local TFC shall
be collected by the provincial, city,
municipal, or barangay treasurer, or
their duly authorized deputies.
The provincial, city or municipal
treasurer may designate the barangay
treasurer as his deputy to collect local
TFC. In case a bond is required for the
purpose, the provincial, city or municipal
government shall pay the premiums
thereon in addition to the premiums of
bond that may be required under this
Code.
General Rule. No
Exception. Under Section 148 on fees
for sealing and licencing of weights and
measures, the sanggunian concerned
may authorize the municipal treasure to
settle an offense not involving the
commission of fraud before a case
therefor is filed in court, upon payment
of a compromise penalty of not less than
two hundred pesos (P200.00)
7. Assessment of Local taxes (hindi
alam yun buong question)
8. Statute of limitation of collection
and assessment of the taxes, fees
and charges (TFC)
Answer:
Under Sec. 194 of the LGC, the
following are the statute of limitations in
Local Taxation:
a. Prescriptive Period of
Assessment. Local TFC shall be
assessed within 5 years from the
date they become. No action for
collection of such TFC whether
administrative or judicial shall be
instituted after the expiration of
such period.
b. Prescriptive Period of Collection.
Local TFC may be collected
within 5 years from the date of
assessment by administrative or
judicial action. No such action
shall be instituted after the
expiration of such period.
c. Suspension of the Running of the
Prescriptive Period. The running
of the periods of prescription
stated above shall be suspended
for the time during which
(1) the treasurer is legally
prevented from making the
assessment or collection of
the tax;
(2) the taxpayer requests for a
reinvestigation and executes
waiver in writing before the
expiration of the period within
which to collect; and
(3) the taxpayer is out of the
country or otherwise cannot
be located
9. Scope of the taxing power of the
LGUs
10. Do barangay have taxing power?
Answer:
Yes. Barangay may levy TFC, as
provided in Article 4, Title 1, Book 4 of
the LGC, which shall exclusively accrue
to them:
1. Taxes. On stores or retailers with
fixed business establishments
with gross sales or receipts of the
preceding calendar year of
P50,000.00 or less, in the case of
cities and P30,000.00 or less, in
the case of municipalities, at a
rate of not exceeding 1% on the
gross sales or receipts.
2. Service Fees or Charges BRGY
may collect reasonable fees or
charges for services rendered in
connection with the regulation or
the use of barangay-owned
properties or served facilities
such as palay, copra, or tobacco
dryers.
3. Barangay Clearance. No city or
municipality may issue any
licence or permit for any business
or activity unless a clearance is
first obtained from the barangay
where such business or activity is
located or conducted. For such
clearance , the sangguniang
 barangay may impose a
reasonable fee. The application
for clearance shall be acted upon
within 7 working days from the
filing thereof. In the event that the
clearance is not issued within the
said period, the city or
municipality may issue the said
license or permit.
4. Other fees and charges. The
barangay may levy reasonable
fees and charges:
a. On commercial breeding fighting
cocks, cockfights and cockpits;
b. On places of recreation which
charge admission fees; and
c. On billboards, signboards, neon
sign, and outdoor
advertisements.
11. What are the requisites for a valid
ordinance?
Answer:
An ordinance to be valid, it must not
only be within the corporate powers of
the local government unit to enact and
must be passed according to the
procedure prescribed by law, it must
also conform to the following
substantive requirements:
a. must not contravene the
Constitution or any statute;
b. must not be fair or oppressive;
c. must not be partial or
discriminatory;
d. must not prohibit by may regulate
trade;
e. must not be unreasonable; and
f. must be general and consistent
with public policy
The following are the important
requirements that govern the enactment
of local tax ordinances:
a. The LGC mandates that the
procedure for the approval of
local tax ordinances and revenue
measures should be in
accordance with the provisions of
said Code, meaning to say, the
procedure applicable to local
government ordinances, in
general, shall also apply to tax
ordinances – Sec 187.
The procedural details bearing on
local ordinances in general relate
to matters like the necessity of a
quorum in various sanggunian or
local legislative councils,
submission for approval of the
ordinance to the local chief
executive , the matter of veto and
overriding the same as well as
their publication and effectivity –
Secs 54, 55 abd 59.
b. Public hearings are required
before nay local tax ordinance
may be enacted – Sec 187.
c. Within 10days after their
approval, certified copies of all
provincial, city and municipal tax
ordinances or revenue measures
are published in full for 3
consecutive days in a newspaper
of local circulation.
However, in provinces, cities,
municipalities and barangays
where there are no newpapers of
local circulation, the same may
be posted in at least 2
conspicuous and publicly
accessible places – Sec 188
d. Copies of all provincial, city,
municipal and barangay tax
ordinances and revenue
measures shall be furnished to
the respective local treasurers for
public dissemination – Sec 189.
LOCAL TAXATION
 Consti Basis
- Art. X, Sec. 5: Each local government
unit shall have the power to create its
own sources of revenues and to levy
taxes, fees and charges subject to
such guidelines and limitations as the
 Congress may provide, consistent  Common Limitations on Taxing
with the basic policy of local Power of LGUS
autonomy. Such taxes, fees and - Taxing of LGUs shall not extend to
charges shall accrue exclusively to levy of ff:
the local governments. 1. Income tax, except when levied on
 Provided that taxes, fees, or banks and other financial
charges shall not be unjust, institutions;
excessive, oppressive, 2. Documentary stamp tax
confiscatory or contrary to 3. Taxes on estates, inheritance,
declared national policy gifts, and other acquisitions mortis
 Provided that the causa
ordinance levying such 4. Customs duties and all other kinds
TFC shall not be enacted of customs fees, except wharfage
without any prior public on wharves constructed and
hearing conducted for the maintained by the LGU
purpose 5. TFCOI upon goods carried into or
 Fundamental principles out of territorial jurisdictions of
a. Taxes shall be uniform in each LGU
LGU; 6. TFC on agricultural and aquatic
b. TFC and other impositions shall products sold
be equitable, for public purpose, 7. Taxes on business enterprises
not confiscatory and not be certified to by Board of
contrary to law; Investments
c. Collection of local TFCOI shall not 8. Excise taxes on articles
be let to ant private person; enumeration in NIRC
d. The revenue collected shall inure 9. Percentage or VAT on sales or
solely to the benefit of the LGU similar transactions
levying; and 10. Taxes on gross receipts of
e. Each LGU shall evolve a transportation
progressive system of taxation 11. Taxes on premiums paid
 The power to impose TFC and to 12. TFC for registration of motor
generate revenue under the Code vehicles and issuance of all kinds
shall be exercised by the Sanggunian of licenses
of the LGU concerned through an 13. TFC on PH products exported
appropriate ordinance 14. TFC on cooperatives and
 Dissatisfied taxpayer question validity enterprises
1. File appeal to Sec of Justice within 30 15. TFC on any kind of National
days from effectivity Government
1.1. In case Sec decided the  Taxation is the rule and exemption is
appeal, 30 days for the the exception
aggrieved party to go to court - Intention to make an exemption must
1.2. If Sec did not act on the be expressed in clear and
appeal, 60 days after the party unambiguous terms
can already go to court - Burden is on person claiming
 Public hearings are required to be  Kinds of Franchise Tax
conducted prior to enactment of 1. Franchise tax in lieu of all other taxes-
ordinance imposing taxes based on special laws/ special
- However, in accordance with franchises
presumption of validity in favor of 2. Local franchise tax under Sec. 137 of
ordinance, legality should be upheld LGC- rate not exceeding 50% of 1%
in the absence of evidences against of gross annual receipts for preceding
 Burden of proof is on party calendar year
asserting unconstitutionality
 Upon effectivity of LGC on Jan. 1,
1992, all exemptions granted before
are revoked except those mentioned
in Sec. 193
 Transfer Taxes (Tax on Real
Property)
1. Province- may impose 50% of 1% of
FMV or total consideration involved
on a sale or any other mode of
transferring ownership
2. City- may exceed maximum rates
allowed for province by not more than
50%
3. Municipality- cannot impose transfer
tax on real properties
 Common Revenue-Raising Powers
1. Service Fees and Charges
2. Public Utility Charges
3. Toll Fees or Charges
 Cities or municipalities may levy a
community tax
- Persons liable:
1. Individuals (18 or over):
 Regularly employed for at least 30
consecutive working days during
any calendar year
 Engaged in business
 Own real property with an
aggregate assessed value of
1000php
 Required by law to file income tax
return
 5php- annual community
tax
 1php- plus for every
1000php
 Not to exceed 5000php
2. Juridical persons
 Domestic corporation
 Resident foreign doing business
 500php- annual community tax
plus
 2php- for every 5000php worth
of real property owned during
the preceding year
 2php- for every 5000php of
gross receipts derived from
business during the preceding
year
3. Persons exempted
 Diplomatic and consular
representatives
 Transient visitors staying not more
than 3 months in Philippines
- Place of Payment
1. Place of residence of individual
2. Place where principal office of
juridical entity is located
- Community tax certificate shall be
issued to every person or corporation
upon payment
 Professional Tax
- Province may levy annual
professional tax engaged in practice
of profession requiring government
examination at amount to be
determined by sangguniang
panlalawigan in no case shall exceed
300php
- Every person authorized to practice
profession shall pay professional tax
to:
 Province where he practices
profession
 Where he maintains his principal
office in case of several places
 Those employed shall pay tax on
his profession before employment
and annually thereafter
 Professional tax shall be paid on
31st of January. Any person first
beginning to practice after
January shall pay the full tax
before engaging. Government
professional are exempted
 Person subject shall write the
number of official receipt issued to
him
TAX ORDINANCE
 Procedure for Approval
1. Public hearings
2. Appeal, if any, must be made
within 30 days from effectivity to
the Sec of Justice
3. Such appeal shall not have effect
of suspending effectivity of
ordinance
4. Within 30 days after receipt of
decision or lapse of 60days with
the Sec acting, aggrieved can file
with the court
5. File declaratory relief under Rule
63 of ROC
 6. Within 10 days after approval,  Taxes imposed by Provinces and
CTC of tax ordinances shall be Cities
published in 3 consecutive days in 1. Tax on transfer of real property
newspaper of general circulation 2. Tax on business of printing and
 Attempt to enforce void tax ordinance publication
shall be sufficient ground for 3. Franchise tax
administrative sanctions 4. Tax on sand, gravel and other quarry
 LGUs may, through ordinance, grant resources
tax exemptions, incentives or reliefs 5. Professional tax
6. Amusement tax
REAL PROPERTY TAXATION
7. Annual fixed tax for every trucks or
 Direct tax on ownership of lands and producers of certain products
buildings or other improvements  Municipalities may only impose
thereon taxes not imposed by provinces
 Imposition of real property tax is on  Barangays can levy taxes:
LGUs 1. Taxes on stores with gross sales not
 Exemptions from Real Property Tax exceeding 50k for cities and 30k for
1. Real property owned by RP and its municipalities- at rate not exceeding
political subdivision 1%
2. Charitable institutions and all lands, 2. Service fees or charges in connection
buildings and improvements ade with regulation or use of barangay-
used for religious, charitable or owned properties or service facilities
educational purposes 3. Barangay clearance for a reasonable
3. Local water districts fee
4. All real property owned by duly 4. Other fees and charges- commercial
registered cooperatives under RA breeding of cocks, places of
6938 recreation and billboard
5. Machinery and equipment used for advertisements
environmental protection
 LGUs may levy an annual ad valorem
tax on real properties:
1. Province
2. City
3. Municipality within Metro Manila
 Kinds of Real Property Tax
1. Real estate tax
 Province- rate not exceeding 1%
of assessed value of real property
 Metro Manila- rate not exceeding
2% of assessed value of real
property
2. Additional levy on education fund
 Province, City, Metro Manila- not
exceeding 1% of assessed value
3. Additional levy on idle funds
 Province, City, Metro Manila- not
exceeding 5% of assessed value
 May exempt by reason of force
majeure
4. Additional levy on public works
 Province, City, Municipality- not
exceeding 60% of actual cost