LOCAL AND REAL PROPERTY TAXATION 4.
Local Taxation will be fair, uniform and just
by: Atty. Nicasio C. Cabaneiro, CPA
Outline of this Seminar
• Discuss General Principles pertinent to Local and Real
property Taxation pursuant to Rep. Act No. 7160 (Local Gov’t.
Code)
• LGC is divided into 2 parts: Local Government Taxation and
Real Property Taxation
o Local Government Taxation covers imposition of license
taxes and other burdens of provinces, cities, municipalities
and barangays
o Real Property Taxation covers a system of levy on real
property imposed on a country-wide basis
• Cite Remedies of taxpayers aggrieved by actions of
Sanggunian in the implementation of Rep. Act. No. 7160 and
other jurisprudences
Objectives of this Seminar
• Understand the inhabitants’ rights and obligations with LGUs
• Be aware of the responsibilities of Local Officials in the
effective discharge of duties to inhabitants
• Determine ways to safeguard the self-sufficiency of LGUs in
the light of the taxing powers granted by the constitution
• Know how to seek redress should inhabitants be saddled with
multiple and unreasonable impositions
• Discuss pertinent cases decided by the courts related to
remedies of taxpayers against sanctions of the Sanggunian
on ordinances issued
Sec.5 Article X of the 1982 Constitution
“Each LGU shall have the power to create its own sources of
revenue and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide consistent
with the basic policy of local autonomy.
Such taxes, fees and charges shall accrue exclusively to the
Local Governments.”
• To implement this provision, Congress enacted Rep. Act No.
7160 - Local Government Code of 1991
• ordinances
• Code was enacted on Oct. 10, 1991 and took effect on Jan.
01, 1992
• the enactment of any local tax ordinance or revenue measure
Role of Congress
• Congress cannot abolish Local Government’s power to tax as
it cannot abrogate what is expressly granted by fundamental
law
• Only authority conferred to Congress is to provide the
guidelines and limitations on the local government’s exercise
of the power to tax
• These guidelines and limitations are found in Local
Government Code of 1991
Limitations Imposed on Congress
Legislature must ensure that:
1. Taxpayer will not be overburdened with multiple and
unreasonable impositions
2. Each LGU will have its fair share of available resources
3. Resources of the National Government will not be unduly
disturbed
Manila Electric Co. vs. Province of Laguna, et.al. (G.R. No.
131359, May 5, 1999); NAPOCOR vs. City of Cabanatuan (G.R.
No. 149110, April 9, 2003)
Fundamental Principles
1. Uniform in each Local Government Unit (LGU)
2. Taxes, Fees and Charges must be:
a. Equitable and based on ability to pay
b. Levied for public purpose
c. Not excessive, unjust, oppressive or confiscatory
d. Not contrary to law, public policy, national economic policy
or in restraint of trade
e. Cannot be let to any private person
f. Progressive rate of tax (as far as practicable)
Excessive & Oppressive Taxation
 First Philippine Industrial Corp. vs. CA (G.R. No. 125948,
Dec. 29, 1998)
• Petitioner assailed the validity of the ordinance that imposes a
Local Tax while it is already paying a 3% Common Carrier’s
Tax under the Tax Code
• Court ruled that to tax again the petitioner on Gross Receipts
in its transportation of petroleum business would defeat the
purpose of LGC under Sec. 130
• This section prohibits excessive and oppressive taxation
Rule of Interpretation on Taxes
“In case of doubt, any tax ordinance or revenue measure shall be
construed strictly against the LGU enacting it, and liberally in favor
of the taxpayer.
Any tax exemption, incentive or relief granted by any LGU
pursuant to the provisions of this Code shall be construed strictly
against the person claiming it.” - Sec. 5(b) of Local Gov’t. Code
Provisions of LGC are not self-operating since local taxing
authority is limited under the ff. provisions:
• Sec. 132 – “The power to impose a tax, fee, or charge or to
generate revenue under this Code shall be exercised by the
Sanggunian of the LGU concerned through an appropriate
ordinance.”
• Sec. 54 to 59 provides for approval, review and effectivity of
• Sec. 189 directs that there must be a public hearing prior to
“Not so Inherent” Power to Tax
• Power to Tax granted to local governments has boundary or
limits
• Sec. 25 - Art. II in relation to Sec. 2 - Art. X of the Constitution
lays down the rule that taxpayers should not to be saddled
with multiple and unreasonable impositions
• Since this power is not inherent, LG’s exercise of taxing
powers must be consistent with limitations imposed by
Congress
• Power of LGU to impose tax must be anchored on an
ordinance and in accordance with the LGC
Local Taxing Power and Authority
1. Cities – Sangguniang Panlungsod
2. Provinces – Sangguniang Panlalawigan
3. Municipalities – Sangguniang Pambayan
4. Barangay - Barangay Council
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How does an Ordinance becomes a Law?
1. Must be made in writing accompanied by a note stating
why it should be approved
2. Must be posted simultaneously in at least 4 public places
within 10 days from filing
3. Written notices must be sent to affected parties
4. Must be referred to an appropriate Sanggunian Committee
5. Must prepare copies of proposed ordinance in the form it was
nd
passed on 2 reading and provide a copy to each
Sanggunian member
6. Sanggunian holds public hearing 10 days after notices are
sent or the last day of publication of proposed ordinance,
whichever is later
7. Sanggunian passes the proposed ordinance and prepares
the Minutes
8. Must be approved by majority of members present during
the meeting for an ordinance to be valid
9. Approved ordinance must be stamped with the Seal of
Sanggunian and recorded in their books
10. Must be submitted and approved by the Mayor or
Governor
11. Sanggunian can override a veto with 2/3 votes
12. Must be published in a local newspaper within 10 days of
its approval before it takes effect
(Tax ordinance will be null and void if it fails to comply with
publication requirement [Coca-Cola vs. City of Manila, G.R.
No. 156252, June 27,2006] )
13. Ordinance undergoes review
Common Limitations on Taxing Powers of LGUs
Sec. 133 – Unless otherwise provided herein, exercise of the
taxing powers of provinces, cities, municipalities and barangays
shall not extend to the levy of the following:
1. Income Tax (except when levied on banks and other Fis)
2. Documentary Stamp Tax
3. Tax on estate, inheritance, gift, legacy and other acquisitions
mortis causa
4. Customs duties, registration fees of vessel, wharfage on
wharves, tonnage dues, customs fees
Note: Opening phrase of Sec. 133, “Unless
otherwise provided herein” means that the
limitations are ABSOLUTE unless exceptions are
specifically provided
5. Taxes, fees and charges upon goods carried into or out of
territorial jurisdictions of LGUs
6. Taxes, fees or charges on agricultural and aquatic products
when sold by marginal farmers or fishermen
7. Taxes on business enterprises certified by BOI as pioneer or
non- pioneer for a period of 6 and 4 years, respectively, from
date of registration
8. Excise taxes on articles enumerated under NIRC and taxes,
fees or charges on petroleum products
9. Percentage or VAT on sales, barters, or exchange of similar
transactions on goods or services
10. Taxes on gross receipts of transportation contractors and
persons engaged in the transportation of passengers, freight
by hire and common carriers by air, land or water, except as
provided in this Code
The phrase “Except as provided in this code”
refers to authority of LGs to levy annual fixed taxes
on delivery vans of manufacturers, producers or
dealers and also on the operation and franchising
of tricycles (IRR of LGC, Art. 221[i])
Same provision is found in Rep. Act No. 7716 -
Expanded VAT Law, prohibition against taxation of
common carriers by LGUs was reinforced as
follows:
“Gross receipts of common carriers derived from
incoming and outgoing freight shall not be subject
to local taxes imposed under Rep. Act. No. 7160 –
LGC of 1991”
“Common carriers” in the Civil Code makes no
distinction as to means of transporting whether by
land, water or air. (First Phil Industrial Corp. vs CA
G.R. No. 125948, Dec. 29, 1998)
11. Taxes on premiums paid by way of reinsurance or
retrocession
12. Taxes, fees or charges for the registration of motor vehicles
and for issuance of all kinds of licenses/ permits for driving
except tricycles
13. Taxes, fees or charges on PH products actually exported,
except as provided
Sales of products from Export Processing Zones
are not subject to Local Tax but preferential rate
under Sec. 143c not exceeding ½ of rates
prescribed under Sec. 143a, b and d
14. Taxes, fees or charges on Countryside and Barangay
Business Enterprises (CBBEs) and Cooperatives registered
under RA No. 6810 and 6398
CBBEs have been replaced by Barangay Micro
Business Enterprises (BMBEs) under Rep. Act No.
9178
15. Taxes, fees or charges of any kind on the National
Government, its agencies, instrumentalities and LGUs
Property must be owned by the government or by
its unincorporated agency to be covered by the tax
exemption
TAXING POWERS OF LGUs
Part I – Local Business Taxation
 PROVINCE
 Scope of its taxing power – “Except as otherwise
provided in this Code, province may levy only the taxes,
fees and charges as provided in this article.”
Clarification on Excise Tax on Petroleum
 Petron Corp. vs. Tiangco (G.R. No. 158881, April 16, 2008)
• Court ruled that since law does not distinguish, LGUs are
prohibited from imposing not only excise tax on petroleum
products but all taxes, fees and charges
• Sec. 133[h] comprehends a wider range of subjects and
articles already covered under Excise Taxation of the Tax
Code
• While LGUs are authorized to burden other classes of goods
with “taxes, fees and charges”, specific prohibition is imposed
barring the levy of other types of taxes on petroleum products
Clarification on Taxes of Business Enterprises (BOI)
• LGUs are prohibited from taxing business enterprises certified
by BOI as Pioneer or Non-pioneer for a period of 6 and 4
years, respectively, from date of registration
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 • Grant of Income Tax Holiday (ITH) for Registered Enterprises
under E.O. 226 (Omnibus Investment Code of 1987) is
subject to the ff. rules:
o Fully-exempt – for 6 years from commercial operation for
pioneer firms and 4 years for non-pioneer firms
o Proportionate – for a period of 3 years from commercial
operation, Registered Expanding Firms shall be entitled to
ITH proportionate to their expansion under terms provided
by BOI (E.O. 226, Title III, Art. 39)
Terms on Reinsurance Premiums
• Reinsurance – Insurer procures a 3rd person to insure him
against loss or liability by reason of such original insurance
• Retrocession – Transaction where an insurer/ insurance
entity (retrocessionaire) agrees to indemnify another
insurance entity (reinsurer) against all or part of the loss that
the latter sustains under a policy of reinsurance it has issued
Clarification on Marginal Farmer
• Under Sec. 133, LGUs are prohibited to impose taxes, fees
or charges on agricultural and aquatic products when sold by
marginal farmers
• Marginal Farmer or Fisherman – individual engaged in
subsistence farming or fishing which shall be limited to sale,
barter or exchange of agricultural or marine products
produced by himself and his immediate family (LGC, Sec.
131[p])
Exceptions to Sec. 133
• Customs duties are prohibited to be imposed by LGUs except
on:
o Wharfage on wharves constructed and maintained by the
LGU concerned
o Issuance of licenses for operation of fishing vessels of 3
tons or less by municipalities (LGC, Sec. 149[b][3] and
cities (LGC, Sec. 151)
• Wharfage – fee assessed against the cargo of the vessel
engaged in foreign or domestic trade based on quantity,
weight or measure, received and/or discharged by the vessel
(LGC, Sec. 131[y])
• LGUs cannot impose taxes, fees, charges and other
impositions upon goods carried into, out of, or passing
through the territorial jurisdiction of LGUs
• Municipalities have the power to tax or impose fees on
vehicles using its roads but cannot tax the goods transported
by vehicles
• LGUs may prescribe the terms and conditions for the
imposition of toll fees on use of any public road, pier or wharf
funded and constructed by them
• Service fee imposed on vehicles using municipal roads
leading to the wharf is valid
• Sec. 133[e] of LGC prohibits the imposition (in the guise of
wharfage and all other taxes) on goods or merchandise
• So, it is irrelevant if the fees imposed are actually for police
surveillance on goods because any other form of imposition
passing through territorial jurisdiction of the municipality is
clearly prohibited
• Sec. 133[e] Palma Development Corp. vs. Municipality of
Malangas (G.R. No. 152492, Oct. 16, 2003)
• LGUs are prohibited to impose Percentage or VAT on sales
or similar transactions on goods or services except:
o By Provinces/ Cities (LGC, Secs. 136 and 140) - Taxes
on Business of Printing/ Publication and Amusement Tax
on Admission Fees
o By Municipalities/ Cities (LGC, Sec. 143) - Percentage
Taxes on gross sales of manufacturers, wholesalers,
distributors, dealers, and contractors
o While LGUs are prohibited to impose taxes, fees or other
charges on PH products actually exported, municipalities
may impose taxes on exporters of essential commodities
(LGC, Sec. 143[c] and Sec. 151)
o In the case of Steniel Mindanao Packaging Corp. vs.
City Treasurer of Davao (CTA AC No. 39, Nov. 27, 2008),
Court said that to be considered an “exporter”, it is
necessary that the business entity is engaged in
exportation of goods
o If taxpayer does not export its packaging materials but sells
them to export-oriented enterprises, it is locally taxable as
manufacturer under Sec. 143[a] of the LGC
Exclusionary Doctrine/ Principle of Pre-emption
• Where National Government elects to tax a particular area, it
withholds from the Local government the delegated power to
tax the same field
• Doctrine of Pre-emption principally rests on the intention of
Congress
• Conversely, should Congress allow municipal corporations to
cover fields of taxation it already occupies, then Doctrine of
Pre-emption will not apply
• This was ruled in the case of Victorias Milling Co. Inc. vs.
Municipality of Victorias, Negros Occidental, (G.R. No. L-
21183, Sept. 27, 1968)
• This is a jurisprudence under PD 231, LTC pursuant to 1973
Constitution
Taxing Powers of LGUs
1. Common Revenue-Raising Powers (Secs. 153-155)
2. Specific Powers (Secs. 135-143; 147-149; 151-152)
3. Community Tax (Sec. 156)
4. Residual Taxing Powers (Sec. 186)
Common Revenue-raising Power Terms
1. Toll – fee imposed on goods, or persons traveling public
roads or bridges
2. Charge – pecuniary liability, as rents or fees against
persons or property (LGC, Sec. 131[g])
3. Fee – charge fixed by law or ordinance for the regulation
or inspection of business (LGC, Sec. 131[l])
It includes charges fixed by law or agency for the services of a
public officer in the discharge of his official duties (IRR of LGC,
Art. 220[l])
Note: When public safety and welfare requires, the Sanggunian
concerned may discontinue tcollection of tolls and said facility
shall be free and open for public use (LGC, Sec. 155)
Common Revenue-raising Powers
• SC ruled that it is the right of each LG to collect fees and
charges in the exercise of its police power
• Respective Sanggunian of each LG may by ordinance impose
fees as long as these are commensurate with the cost of
supervision of the acts sought to be regulated
• This is pursuant to Sec. 153 and 155 of LGC of 1991 (RA
7160)
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Examples of Common Revenue-raising Powers
1. Reasonable fees and charges for services rendered (LGC,
Sec. 153)
2. Public utility charges for operation of public utilities owned,
operated and maintained by LGUs within their jurisdiction
(LGC, Sec. 154)
3. 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 LGU concerned
• Exception on reasonable fees and charges for services
rendered (LGC, Sec. 153):
1. Officers and enlisted men of the AFP
2. Members of PNP on mission
3. Post Office personnel delivering mail
4. Physically handicapped and disabled citizens who are 65
years or older (LGC, Sec. 155)
Specific Powers of Provinces to Impose Taxes
a. Tax on Transfer of Real Property Ownership
• Exemption from Transfer Tax has been granted to NHA
(under RA 7279), Urban Development and Housing Act of
1997 (which later became an enactment) and prevails over
LGC
• Also exempted are Sales of individual lots/ house and lots by
private sector developers of a low cost/ socialized housing
project
• Transfer Tax - based on total sale price of the property or its
FMV and not on zonal values prescribed by BIR
• Rate: Not exceeding 50% of 1% of total consideration or FMV
of property, whichever is higher
b. Tax on Business of Printing and Publication
• Imposed on business engaged in printing and/ or publication
of books, cards, posters, leaflets, handbills, certificates,
receipts, pamphlets and others of similar nature
• Receipts from printing and publication of books and other
reading materials prescribed by DECS as school text or
reference are exempted from tax
• Rate: 50% of 1% of the gross annual receipts for the
preceding calendar year.
In case of newly started business, tax shall not exceed
1/20 of 1% of the capital investment
c. Franchise Tax
• May only be imposed on cities and provinces
• Even if it is the municipality that granted the franchise, only
the province may impose and collect tax
• Sec. 197 of LGC withdrew the exemption or incentives
granted to persons whether natural or juridical including
GOCCs
• Eg. San Pablo City may impose a Franchise Tax on Meralco
City Gov’t of San Pablo vs. Meralco (G.R. No. 127708,
March 25, 1999)
• Rate: 50% of 1% of gross annual receipts for the preceding
calendar year; 1/20 of 1% of capital investment in case of
newly started business
• Art. 12 - Sec. 11 of the Constitution recognizes the power of
Congress to issue franchises for the operation of a public
utility… to citizens of the PH or to corporations organized
under the PH laws
• Franchise Tax is imposed on legislative franchises of state-
chartered corporations granted by the State
• Franchise tax is also imposed by LGUs on commercial
franchises such as McDonald’s, Wendy’s, Pizza Hut, Dunkin
Donuts, KFC, etc.
Franchise Tax Not Levied as an Ordinary
Corp.
 National Power Corp. vs. Cabanatuan City
(G.R. No. 149110, April 9, 2003)
• Franchise Tax - tax on the privilege of
transacting business and exercising a
corporate franchise granted by the state
• It is not levied on a corporation simply for
existing as a corporation, but on its exercise
of the exclusive rights or privileges granted to
it by the government
 CIR vs. Philippine Airlines Inc. (G.R. No.
160528, Oct. 9, 2006, SC stated that “franchise”
is a legislative grant to operate a public utility
• It has been ruled that to be considered a
public utility, the activity must be one of
“public use”
Franchise & Local Business Tax Imposition
 Sky Cable Corporation vs. Quezon City,
(CTA AC No. 102, February 10, 2014)
• It was ruled that simultaneous imposition of
Franchise and Local Business Tax by the
same taxing authority on the same subject
matter and for the same taxable period does
not constitute double taxation
• Business Tax was imposed for the
privilege of engaging in the business of
contracting a system of communication
• Franchise Tax was imposed for the
exercise of enjoying a franchise
d. Tax on Sand, Gravel and Other Quarry Resources
• DENR issued guidelines in the utilization and disposition of
sand and lahar materials in the mineral reservation on lahar-
affected areas such as Pampanga, Tarlac and Zambales
• DENR also provided guidelines on power of province to levy
tax for extracted lahar material ceases
• A province may levy and collect tax on sand, gravel and
others extracted only from public lands
• Sale of quarry resources from private lands is subject to
Excise Tax and VAT under Sec. 106 of the NIRC
• Rate: 10% of FMV per cubic meter of sand, gravel and other
quarry resources
Sand & Gravel Fee
 Province of Cagayan vs. Joseph Lasam
Lara (G.R. No. 188500, July 24, 2013)
• It was ruled that payment of Local Tax on
sand, gravel and quarry resources and
obtaining Business Permit from the LG are
prerequisites before one can engage in
quarrying operations
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e. Professional Tax
• Professionals who paid their Professional Tax to LGUs must
still pay the License Fee of Professional Regulation
Commission
• SGV is subject to payment of Business Tax as an
independent contractor as well as the payment of Mayor’s
Permit Fee and other regulatory fees
• General Professional Partnership (GPP) is not subject to a
Local Business Tax or other tax as a Contractor
• Partners who compose the GPP are also not subject to Local
Business Tax since they are already subject to Professional
Tax
• Amount: Php300 per profession
f. Amusement Tax
• Amusement Places include “Places of Recreation” where one
seeks admission to entertain himself by direct participation
and admission fee must be paid
• Admission fee is 10% of the gross receipts
• Amusement Places include theaters, cinemas, concert halls,
circuses and other similar places
• These places are subject to 30% Amusement Tax and
Business Tax based on Gross Receipts
Businesses Not Subject to Amusement Tax
 Pelizloy Realty Corp. vs. Province of
Benguet (G.R. No. 183137, Apr. 10, 2013)
• It was ruled that resorts, swimming pools,
bath houses, hot springs and tourist sports
are not considered among “other places of
amusement”, applying the Principle of
Ejusdem generis
• Sec.140 of the LGC mentioned “proprietors,
lessees, or operators of theaters, cinemas,
concert halls, circuses, boxing stadia, and
other places of amusement” shall be taxed at
a rate of not more than 30% of the gross
receipts from admission fees
No VAT on those covered by Amusement Tax
 CIR vs. SM Prime Holdings Inc. (G.R. No.
183505, Feb. 26, 2010)
• It was ruled that it is the intent of the
Legislature not to impose VAT on persons
already covered by Amusement Tax
• Thus, gross receipts derived from
admission tickets in showing films or movies
are subject to amusement tax and not VAT
• It was emphasized that exemption from
VAT is only limited to admission tickets
• It does not extend to purchase or lease of
cinematographic films which are subject to
VAT
Places Not Subject to Amusement Tax
• Under Sec. 125 of NIRC, the ff. places
upon which provinces/cities cannot impose
Amusement Tax (because the Tax Code
already imposes Amusement Tax) include:
o Cockpits
o Cabarets
o Night or Day clubs
o Boxing Exhibitions
o Professional Basketball Games
o Jai-Alai
o Racetracks
g. Annual Fixed Tax for Delivery Truck, Van, Manufacturer/
Producer/ Wholesaler/ Dealer/ Retailer in Certain Products
• Those who paid Annual Fixed Tax in the province may
undertake deliveries in all municipalities within that province
• Rate: Not exceeding Php500 for every delivery truck
SPECIFIC POWERS OF MUNICIPALITIES TO IMPOSE TAXES
City:
• City may levy taxes, fees and charges which the province or
municipality impose
• The rate that the city can levy may exceed the max rate
(allowed for province/ municipality) by not more than 50%
except rates of professional and amusement taxes
• Other businesses not classified in the previous slides may be
subject to Excise Tax, VAT and Percentage Tax under NIRC
• Tax Rate shall not exceed 2% of Gross Sales or Receipts of
the preceding calendar year
Municipality:
• A municipality may levy taxes, fees and charges not taxed by
the province
• Municipalities within Metro Manila Area may levy taxes at
rates which shall not exceed 50% of the max rates prescribed
under Sec. 143
• Municipalities may impose and collect reasonable charges on
business and occupation except…
those reserved to the province under Sec. 139 on the
practice of any profession commensurate with the cost of
regulation, inspection, and licensing
Barangay
• Taxes on stores/ retailers with gross sales of Php 50K in
cities and Php30K in municipalities at a rate not exceeding
1% on such gross sales or receipts
• Barangay Clearance– requirement before the city or
municipality can issue a license or permit
• Application for clearance must be acted within 7 days to issue
the license and Sangguniang Barangay may impose a fee
• Service Fee – rendered in connection with the regulation or
use of barangay-owned properties
• Service Fees are also charged to:
o Commercial breeding of fighting cocks and cockpits
o In places of recreation which charge admission fees
o On billboards, signboards, neon signs and outdoor
advertisements
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Residual Power of Local Government
• This is the power of LGU to levy taxes, fees or charges on
any subject not specifically enumerated or taxed under NIRC
• Exercise of this power is allowed provided that taxes are not
unjust, excessive, oppressive, confiscatory or contrary to
declared national policy
• It is not against any of the Fundamental Principles of Local
Taxation
• Prior Public Hearing is required before this power can be
exercised
Permit and Regulatory Fees
• Power of LGUs to impose and collect fees is provided under
Sec. 146 of the Code and Art. 233 of its Implementing Rules
and Regulations.
• Imposition of fees and charges are as follows:
o Sec. 147 Fees and Charges – LGU may impose and
collect reasonable fees on business and occupation
commensurate with the cost of regulation, inspection and
licensing before any person may engage in such
business or practice of profession
o Art. 233 (IRR) Fees and Charges – LGU may impose
and collect reasonable fees on business and occupation
provided that such fees shall only be commensurate with
the cost of issuing the license and expenses incurred in
the conduct of necessary inspection
o No fee shall be based on capital investment or gross
sales or receipts of the person or business liable
Receipts from Overseas Construction Projects Exempted
from Local Tax
• Bureau of Local Gov’t. – Finance in an opinion dated May 16,
2017 requested by Thermaprime Drilling Corp.
• Bureau reiterated that cities and municipalities have no
authority to impose and collect Local Business Tax on Gross
receipts realized by specialty contractor from its overseas
constructive projects
• Thermaprime is a corp. engaged in well drilling work that has
a principal office in Pasig City
• The co. has no branches or sales outlets but maintains
project offices in different localities in the Philippines
• It was registered as a Specialty Contractor at the Phil.
Overseas Construction Board
• The co. also offers its well drilling and construction services to
overseas clients
This is in consonance with the opinion rendered in favor
of Gulf-Asia Int’l. Corp. on May 30, 2005 that service
contract totally consummated outside PH shall not be
subject to Local Business
Local Business Tax on Toll Fees
 Manila North Tollways Corp. vs. The Municipality of
Guiguinto, Bulacan (CTA AC No. 82, Dec. 3, 2012)
• The business of Manila North Tollways Corp. is to maintain
and operate NLEX for a fee so it falls within the classification
of a “contractor” under Sec. 131(h) of the LGC
• Its liability as a contractor shall be computed on the basis of
gross receipts and not on gross revenue
Holding Company Exempted from Business Tax
 Michigan Holdings, Inc. vs. City Treasurer of Makati City
(CTA EB No.1093, June 17, 2015)
• It was ruled that a holding company is exempted from Local
Business Tax on dividend income
• While Sec.143(f) of the LGC expressly allows local taxation
on banks and other financial institutions on their dividend
income, the institutions enumerated appears exclusive and
holding company is not one of those mentioned
Holding Company Subject to Local Business Tax
• Generally, LGUs cannot levy Income Tax except on banks
and FIs
• But if the Holding Company’s Art. of Incorporation shows its
primary purpose is extensive enough to cover most of the
principal functions of a financial intermediary…
it can be treated as a Non-bank Financial Intermediary
for Local Business Tax Purposes under Sec. 143 (f) of
R.A. 7160 (Te Deum Resources, Inc. vs. Davao City
(CTA AC No. 150, Feb. 10, 2017)
Non-bank Financial Intermediary for Local Business Tax
Purposes
• CTA in Toda Holdings vs. Davao City (CTA AC No. 138,
Feb. 09, 2017) cited the basic requirements to be considered
as Financial Intermediary:
1. Entity is authorized by BSP to perform quasi-banking
activities
2. Principal functions include lending, investing or
placement of funds or evidence of indebtedness coursed
through them for their own account of for other’s account
3. Entity must perform said functions on a regular basis
and not an isolated transaction
• In the previous case, Court stated that the Corp. is not
authorized by BSP
nd rd
• The 2 and 3 requirement were not met
• While the Art. of Incorporation covers the functions of a Non-
Bank Financial Intermediary, it was not shown that these
functions are “principal” in nature as distinguished from
incidental or secondary
Power to Adjust Local Tax Rate
• LGUs shall adjust the tax rates prescribed in the code, not
often than once every 5 years but in no case to exceed 10%
of the rates fixed in the code (LGC, Sec. 191)
Power to Impose Surcharges/ Interest
• Sanggunian may impose a surcharge, not exceeding 25% of
the taxes, charges, or fees not paid on time and …
an interest rate of not more than 2% per month of the unpaid
tax, charge or fee including surcharge, but in no case shall
have the same total 36 months (LGC, Sec. 168)
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Illustration
• Mr. Taxpayer failed to pay Local Tax on his business for the
year 2016 in a total amount of Php1,000
• He was assessed by LGU on June 20, 2017
• Sanggunian imposed a 25% surcharge and a 2% interest per
month as penalties for late payment.
• How much is his total tax liability including surcharges and
interests?
Local Tax payable ------------------------------ Php 1,000
Surcharge - Php1,000 x 25% --------------- 250
Interest - Php1,000 x 2% x 6*---------------- 120
Total Local Tax Liability ------------------------- Php1,370
* The 6-month period shall be counted after January 20, 2017
Requisites for Imposition of Fees
Rates should be:
1. Within the range of rate provided by LGC
2. Uniform throughout the political subdivision
3. Fair and Reasonable to Taxpayers
LGU’s may, by ordinance:
• Grant tax exemptions or provide relief in case of natural
calamities, civil disturbance, general failure of crops
• Exemption shall be granted in the next calendar year and
only for a period of 12 months
• Grant tax incentives to new investments and for a definite
period not exceeding one year
• Tax Exemption Certificate shall be conferred through the
issuance of a non-transferable tax exemption certificate (IRR
of LGC, Art. 282)
Tax Exemptions Abolished by the LGC
• Tax Exemptions were withdrawn under Sec. 193 of the LGC
• The rule that Special Law must prevail over the provisions of
a General Law does not apply as legislative purpose to
withdraw tax privileges enjoyed under existing laws or
charters
• It is apparent from the express provisions of the LGC (City of
San Pablo, Laguna vs. Reyes (G.R. No. 127708, March 25,
1999)
• Withdrawal of tax exemptions provided in the LGC can only
affect franchises granted prior to the effectivity of the law
• Petitioner’s franchise which was granted 2 months after the
effectivity of the LGC is not covered by the said withdrawal
• “In lieu of all taxes” clause applies only to NIR Taxes and not
to Local taxes
• This clause from R.A. 7294 was rendered ineffective by the
advent of the VAT law (Smart Communications Inc. vs.
City of Davao (G.R. No. 155491, Sept. 16, 2008)
List of Entities Still Enjoying Exemption
1. Local Water Districts
2. Cooperatives duly registered under R.A. 6938
3. Non-stock and Non-profit Hospitals and Educational
Institutions
4. Business enterprises certified by BOI as Pioneer or Non-
pioneer for a period of 6 and 4 years from date of
registration
5. Business entity registered under R.A. 6810 (Countryside
and Barangay Business Enterprises
6. Printer and/or publisher of books or other reading
materials prescribed by DECS as school texts or
references as to receipts from printing or publication (IRR
of LGC, Art. 283)
Guidelines for Granting Tax Exemptions
• May be granted in cases of natural calamities, civil
disturbance, general failure of crops or adverse economic
conditions
• Grant shall be through an ordinance
• Any exemption granted to a type of business shall apply to all
businesses similarly situated
• The same may take effect only during the calendar year not
exceeding 12 months as may be provided in the ordinance
• In case of shared revenues, exemption shall only extend to
the LGU granting such exemption
Guidelines for Granting Tax Incentives
• Granted to new investments in the locality and the ordinance
shall prescribe the terms and conditions
• Grant shall be for a period not exceeding one (1) year
• Grant shall be through an ordinance passed prior to January
1 of any year
• Tax incentive granted to a type of business shall apply to all
businesses similarly situated
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Situs of Tax for Businesses
• In case a plantation is located at a place other than the place
where the factory is located, the 70% shall be divided as
follows:
o 60% to the city or municipality where factory is located
o 40% to the city or municipality where plantation is located
• If there are 2 or more factories in several locations, 70% shall
be prorated based on respective volumes of production
• Sales in Principal Office – Tax due to LG where principal
office is located
• Sales in Branches – Tax due to LG where branch office is
located
• For Businesses with Factories, Project Offices, Plants
and Plantations
o 30% of Sales recorded in Principal Office – Taxable
where principal office is located
o 70% of Sales recorded in Principal Office – Taxable
where factory, project office, plant or plantation is located
 City of Makati vs. Nippon Express Philippines Corp., (CTA
AC Case No. 76, Feb. 17, 2012)
• Court ruled that for collection of Local Taxes, revenues of
branches outside Makati should not be part of the tax base in
determining of Local Business Tax paid in Makati
• Makati City maintained that it has the authority to assess
Business Taxes on revenues not properly taxed in branches
• Assuming that there was wrong or under declaration of the
total taxable earnings in its Paranaque City branch, the tax
properly belongs to Paranaque City
• The action of the City Treasurer of Makati is impermissible
because to do so would be sanctioning upon the prerogatives
of another co-equal and autonomous local government
Civil Remedies to Enforce Collection
1. Administrative Remedy by issuance of Warrant of Distraint,
Levy or Garnishment
2. Judicial Action
• Either of these remedies may be pursued simultaneously
at the discretion of the LGU
Procedure on Distraint and Levy for Purpose of Satisfying
Local Taxes
1. Local Treasurer shall upon written notice, seize sufficient
personal property to satisfy the tax and other charges
2. Real property may be levied on or before, simultaneously, or
after distraint of personal property
• Officer posts notice in the office of LGU Chief Executive
where property is distrained and in at least 2 other public
places stating the time which is not less than 20 days
after the notice and place of sale of distrained goods
• Before the sale, goods distrained shall be reported to the
owner if all charges are paid already
3. At the time and place fixed in the notice, Officer conducting
the sale shall sell the goods distrained at public auction to the
highest bidder for cash
o Within 5 days, Officer shall report the sale to the LGU
Chief Executive
o Excess of Proceeds shall be returned to the owner of the
property sold
o If property distrained is not disposed within 120 days, it
shall be considered sold to LGU for the assessment
amount made by the committee on appraisal
o Tax Delinquencies shall be cancelled
Tax Base for Local Business Tax
 Ericsson Telecommunications Inc. vs. Pasig City (Nov. 22,
2007)
• It was ruled that imposition of Local Business Tax based on
gross revenue will result in double taxation by the same
jurisdiction
• Petitioner’s revenue for taxable year will include gross
receipts already reported during the previous year and for
which local business tax has already been paid
• SC said that the LG committed a palpable error when it
assessed the business tax of local taxpayer based its gross
revenue as reported in its AFS
• Sec. 143 of the LGC and Sec. 22e of Pasig Revenue Code
provided that tax should be based on gross receipts
Local Tax on Condo Dues
 City Treasurer of Makati vs. BA Lepanto Condominium
Corp. (Oct. 25, 2005)
• It was ruled that a condominium corp. is generally exempt
from Local Business Tax under LGC, irrespective of any local
ordinance that seeks to declare otherwise
• City Treasurer failed to prove that the corp. is engaged in
business activities beyond the statutory purpose of a condo
corp.
• Dues assessed against unit owners are to defray the
expenses of the condo project
• There is no contemplation of business and collecting tax
violates due process of law
Inaction of Treasurer on Protest of Local Taxpayer
• A taxpayer dissatisfied with Local Treasurer’s denial or
inaction on his protest over an assessment has 30 days
within which to appeal to a Court of Competent Jurisdiction
• This period is to be reckoned from taxpayer’s receipt of denial
of his protest or lapse of the 60-day period within which Local
Treasurer is required to decide the protest from the moment
of its filing
• Sec. 195 of LGC does not elaborate on how appeal is to be
made
• Remedies of reckoning from denial or inaction are considered
mutually exclusive
• Court of Competent Jurisdiction is the RTC in exercise of its
original jurisdiction and appeals therefrom must be filed with
the CTA within 30 days from receipt of the decision (Team
Pacific Corporation vs. Daza as Municipal Treasurer of
Taguig, (G.R. No. 167732, July 11, 2012)
 Bagatsing vs. Ramirez (74 SCRA 306)
• SC ruled that exhaustion of administrative remedies before
resort to judicial bodies is not an absolute rule
• This principle is disregarded when it does not provide a plain,
speedy and adequate remedy
• This may be relaxed when the application can cause great
and irreparable damage
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MERCADER
No Injunction Rule Declaratory Relief
• Unlike the Tax Reform Code of 1997 that provides the “No • Refers to judgment of a court that determines the rights of
Injunction Rule”, LTC does not prohibit an injunction against parties without ordering anything to be done or awarding
collection of local taxes under Sec. 218 damages
• To declare the nullity of a tax ordinance, it cannot be said that • Theory is that an early resolution of legal rights will resolve
damages caused to taxpayer would be irreparable against the some or all other issues on matters being disputed
gov’t. whose lifeblood comes from taxes
• Party seeking a declaratory judgment in effect makes a
• Injunction cannot be issued pending a case on tax ordinance request for an official declaration of the status of a matter in
simply because it is alleged to be unconstitutional or invalid controversy
• Until so declared, presumption is that it is valid and • An action for declaratory relief under Rule 63 of the Rules of
constitutional Court is applicable if:
• Another alternative is for taxpayer to pay the tax before an o Subject matter of controversy is an ordinance
assessment is issued by the local treasurer and then claim a o Terms and validity of ordinance is doubtful and require
refund under the conditions expressed in Sec. 196 of the judicial construction
LGC o Must be before breach, as where Petitioner paid under
protest fees imposed in an ordinance
o There is an actual justiciable controversy
Appeal to the Secretary of Justice (Sec. 187 of the LGC) o No adequate relief through other means
provides:
o Controversy ripe for adjudication
“Any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on appeal Writ of Prohibition
within thirty (30) days from effectivity thereof to the Sec. of  Benguet Electric Cooperative vs. Municipality of La
Justice who shall render a decision within sixty (60) days from Trinidad, Benguet (CTA AC No. 85, June 7, 2013)
receipt of the appeal.”
• It was ruled that taxpayer cannot seek issuance of Writ of
• Appeal shall not suspend effectivity of the ordinance, accrual Prohibition to enjoin LGU from collecting assessments which
and payment of tax became final on account of taxpayer’s failure to appeal the
• Within 30 days after receipt of decision or lapse of 60-day same with RTC within 30 days from denial of protest
period without Sec. of Justice acting upon the appeal,
aggrieved party may file appropriate proceedings with a Court
of Competent Jurisdiction
• This refers to RTC when case is resolved in exercise of its
original jurisdiction
• Any adverse decision is appealable to CTA under Rep. Act.
9282
• LGC is explicit on grant of administrative appeal to the Sec. of
Justice on questions involving legality of a tax ordinance or
revenue measure
• Appeal is available only within 30 days from effectivity of
ordinance
• When no longer available, taxpayer may not be precluded
from seeking judicial recourse such as by action for
declaratory relief
• Eg. Before an assessment is made, issued on and before
payment is made by taxpayer
• If tax has already been paid, a written claim for refund or
credit may be filed with local treasurer from whose action,
judicial recourse may be within 2 years from payment of tax
or from date the taxpayer is entitled to refund or credit (Sec.
196, LGC)
• If no action is taken by Treasurer and 2-year period is about
to lapse, taxpayer can consider such inaction as denial
• Taxpayer can initiate court action so as not to foreclose this
right by prescription

Remedies of Taxpayers
1. Remedies Prior to an Assessment
• Administrative Appeal to the Secretary of Justice
• Action for Declaratory Relief as when applicable
2. Remedies After an Assessment
• Protest of the Assessment
• An Action for Refund

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MERCADER
No Injunction Rule
 Angeles City vs. Angeles City Electric Corp. (June 29, 2010)
• Citing the Case of Valley Trading Co. vs. CFI of Isabela,
SC ruled that:
o “Unlike in NIRC, the Local Tax Code does not contain any
specific provision prohibiting injunction where local taxes
are involved but cannot negate the procedural rules under
Rule 58.”
o Under this rule, applicant is entitled to relief if performance
of the act will create injustice and prevent damage to
applicant until the merits of the case can be heard
Claim for Refund or Tax Credit
• Filing of a written claim for refund with Local Treasurer is a
condition precedent for maintaining a Court action
• If Local Treasurer does not act on written claim for refund and
2-year prescriptive period is about to expire, taxpayer should
initiate the court action for refund and consider Treasurer’s
inaction as denial of his claim for refund
• It was opined that court may entertain the appeal as long as
the case for refund is filed within the 2-year prescriptive
period and written claim for refund or credit had earlier been
submitted to Local Treasurer
When Does Local Business Tax Accrues?
• SC made a distinction between Annual Income Tax and Local
Business Tax to determine when local business tax accrues
o Income Tax - tax on income realized in 1 taxable year
but payable on the ff. year
o Local Business Tax - paid for privilege of carrying on
business in the year tax is paid
• In the year an establishment terminates its business, they
would be required to pay the difference if tax is collected
• It is based on previous year’s gross sales or receipts less
than actual tax due from current year’s gross sales or receipts
as of date of transfer or retirement (Mobil Philippines Inc.
vs. City Treasurer of Makati, (G.R. No. 154902, July 14,
2005)
Time of Payment of Local Tax
• Unless provided by LGC, Local Tax, Fees and Charges shall
be paid within the first 20 days of January or of each
subsequent quarter as the case may be
• A surcharge of 25% is imposed on any unpaid taxes and
interest at rate not exceeding 2% from the date it is due until
paid but in no case to exceed 36 months
Payment under Protest
• In cases where deficiency exists between amounts of
taxes being paid by taxpayer and computation of tax
liability by such authorities…
• It has been the recurring practice of Local Gov’t. Agencies to
compel taxpayers to “Pay under Protest” whatever tax
liabilities they may have computed
• Refusal to pay will lead to consequences such as failure to
secure necessary business permits and clearances
• Is it proper? SC ruled that City Treasurer is not compelled to
accept as full compliance a tax payment that in his
assessment is deficient and incorrect since such act requires
the exercise of judgment (Romulo D. San Juan vs. Ricardo
L. Castro, (G.R. 174617, December 27, 2007)
• Payment under Protest” can only be found under Sec. 252 of
LGC which provides that no protest shall be entertained
unless taxpayer pays the tax first. It shall be annotated on
the tax receipt the words “Paid under Protest”.
• Protest in writing must be filed within 30 days from payment
of tax to Treasurer who shall decide the protest within 60
days
• Procedure required forms part of Title 2 Chapter 6 –
Collection of Real Property Tax
• Remaining option for LGUs is to find legal support from their
respective charters, Local Revenue or Tax Ordinances
• Otherwise, LGUs are all inviting the filing of suits against
them
CTA Jurisdiction on Local Tax Cases
 City of Manila vs. SM Prime Holdings, et.al. (Feb. 04, 2014),
SC ruled that:
• Even if CTA has exclusive appellate jurisdiction over
decisions of RTC in Local Tax Cases originally decided by
them…
• There is no statement under RA 1125 nor RA 9282 which
avers that CTA has jurisdiction over Petitions for Certiorari
assailing interlocutory orders issued by RTC in Local Tax
Cases filed before it
Assailing Validity of an Ordinance
• A dissatisfied taxpayer who questions legality of a tax
ordinance is required to file his appeal to the Sec. of Justice
within 30 days from its effectivity
• In case Secretary decides the appeal, a period of 30 days is
allowed for an aggrieved party to go to court
• If Secretary does not act within 60 days, a party could already
proceed to seek relief in court
• These 3 separate periods are given for compliance as a
prerequisite before seeking redress in a competent court
• Such statutory periods are set to prevent delays and enhance
the orderly and speedy discharge of judicial functions
• For this reason, Courts construe these provisions of statutes
as mandatory (Cagayan Electric Power and Light Co. Inc.
vs. City of Cagayan de Oro, (G.R. No. 191761, November
14, 2012)
• When disputing an ordinance, there is no need to make
written protest
• Written protest is only needed when protesting against an
assessment
• Taxpayer may file a complaint assailing validity of an
ordinance and request for refund of its perceived
overpayments even without filing first a protest on payment of
taxes due under the ordinance (Jardine Davies Insurance
Brokers vs. Aliposa, (G.R. No. 118900, Feb. 27, 2003)
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 San Miguel Corp. vs. Hon. Celso Avelino and City of
Mandaue (89 SCRA 69)
• SC ruled that RTC judge has authority to pass upon validity of
a City Tax Ordinance even if its validity has been contested
before the Sec. of Justice and a decision was rendered
• Appeal from decision of Sec. of Justice cannot be construed
to deprive Courts of jurisdiction to pass upon validity of City
Tax Ordinance
• To construe that would bar what would be a proper case
cognizable by a court in exercise of its power of judicial
review
• LGC of 1991 expressly allows a party aggrieved by decision
of Sec. of Justice to file appropriate proceeding with a Court
of Competent Jurisdiction
Assailing Validity of an Ordinance (New Rule)
 Michigan Holdings, Inc. vs. City Treasurer of Makati, (CTA
AC Case No. 99, Sept. 19, 2013)
• It was ruled that any question on legality and validity of a tax
ordinance or a revenue measure implemented by LGU should
be appealed to the Secretary of Justice and not before the
Regional Trial Court
Taxpayer Remedies Against Local Tax Assessment
• Under Sec. 195 of RA 7160, Taxpayer may file a written
protest with the Treasurer within 60 days from receipt of
assessment notice
• From date of filing the protest letter, Treasurer has another 60
days to resolve the protest
• In case of denial, Taxpayer has a 30-day period from receipt
of denial to file an appeal with the Court of Competent
Jurisdiction
• Assessment becomes conclusive if a Taxpayer fails to appeal
with RTC within 30 days from lapse of 60-day period given to
the Treasurer to decide on the case
• Taxpayer must remain vigilant throughout the process
because if Treasurer failed to issue a decision on the
administrative appeal, assessment would become conclusive
• Taxpayer should file an appeal to the Court within the given
30-day period
• Taxpayer must be aware that in local tax assessment cases,
inaction of Local Treasurer is an affirmation of the validity of
assessment equaling to issuance of denial to the appeal
• Taxpayer should consider that use of the word “Appeal”
(referring to remedy available to written protests) were denied
by respective Local Treasurers under Sec. 195 of LGC since
it is a misnomer
• SC ruled that LGC does not expressly confer appellate
jurisdiction on RTC from the denial of a tax protest by a Local
Treasurer
• Per Sec. 22 of B.P. 129, Appellate Jurisdiction applies only to
cases decided by Metropolitan and Municipal Trial Courts
Proper Venue for an Appeal
 PLDT vs. Balanga City Treasurer, CTA En Banc
(June 03, 2009), SC ruled that:
• Where the act of a Public Official is the object of litigation, suit
must be filed in the RTC whose territorial jurisdiction
encompasses the place where the respondent official is
holding office
• Since it is outside territorial limits, Court has no power to
enforce its order
• It is important for a taxpayer to know the available remedies
and proper procedure
Liability of Local Gov’t. Officials for Damages
 Ormoc Sugar Co. vs. Treasurer of Ormoc City,
22 SCRA 603, SC ruled that:
• LG Officials are liable for damages on acts of its officers such
as in interest payments when collection of local taxes is
attended by arbitrariness
• Taxpayer may direct his action against the erring public
official if the latter acted with malice or inexcusable
negligence
 Philippine Match Co., Ltd. vs the City of Cebu
(G.R. No. L-30745, Jan. 18, 1978)
• The issue is whether Cebu City can tax sales of matches
which were perfected and paid for in Cebu City but were
delivered to customers outside the city
• It was ruled on appeal that Cebu City has the right to tax
since delivery to the carrier is considered delivery to the
buyer
• Court also ruled that the City Treasurer should not be held
liable for damages since he acted within scope of his
authority when he interpreted the ordinance
Period for Filing Refund Claim
 Allied Banking Corp. vs. Quezon City Local Gov’t.
(Sept. 15, 2006), SC ruled that:
• Entitlement to tax refund does not necessarily call for
automatic payment of the sum claimed
• It must be proven based on tax declarations, affidavits and
other documentary evidences
• Claim for refund of Realty Tax may be pursued under Sec.
253 of LGC within 2 years from finality of the decision
Withdrawal of Tax Incentives
• Withdrawal of Tax Exemptions provided in LGC can only
affect franchises granted prior to effectivity of the law
• Considering that taxpayer’s franchise was granted 2 months
after effectivity of said law, it was not covered by the said
withdrawal
• “In Lieu of All Taxes” clause applies only on NIR Taxes and
not to Local Taxes
• Moreover, this clause in the franchise under Rep. Act 7294
was rendered ineffective by the advent of the VAT Law
(Smart Communications Inc. vs. City of Davao, (G.R. No.
155491, Sept. 16, 2008)
Bureau of Local Gov’t. Finance
BLGF was created under EO No. 127 to perform the ff. functions:
• Assist in the formulation and implementation of policies on
Local Gov’t. Revenue Administration and Fund Management
• Exercise administrative, technical supervision and
coordination over the Treasury and Assessment Operation of
Local Gov’t.
• Develop plans and programs for improvement of Resource
Mgt. System, Collection Enforcement Mechanisms and Credit
Utilization Schemes at local levels
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MERCADER
BLGF was created under EO No. 127 to perform the ff. functions:
• Provide consultative services and technical assistance to LG
and gen. public on local taxation, real property assessment
and other matters
• Exercise line supervisions over its regional offices and local
treasury, assessment and other related matters
• Perform other functions as may be assigned by the Sec. of
Finance or Undersecretary for Domestic Operations
Guidelines for Granting Tax Exemptions
• Granted in case of natural calamities, civil disturbance, gen.
failure of crops or adverse economic conditions
• Grant shall be through an ordinance
• Any exemption granted to a type of business shall apply to all
businesses similarly situated
• Grant takes effect only during the calendar year not
exceeding 12 months as provided in the ordinance
• In case of shared revenues, relief of exemption shall only
extend to LGU granting such exemption
Double Taxation
 City of Manila vs. Coca-Cola Bottlers, Inc. (G.R. No. 181845,
August 4, 2009)
• Coca-Cola Bottlers, Inc. (CCBI) paid Local Business Tax to
City of Manila as a manufacturer but it is expressly exempted
from Business Tax under a different section applied to
businesses subject to Excise, VAT or Percentage Tax under
the Local Tax Code
• City of Manila subsequently amended the ordinance by
deleting the provision exempting businesses under a different
section in the ordinance
• This amendment was declared null and void by SC
• CCBI filed a claim for tax refund for taxes paid under the void
ordinance
• SC ruled that CCBI is entitled to refund because there was
indeed double taxation subjecting the company to both Secs.
14 and 21 of Tax Ordinance. The ff. are being imposed:
• Same Purpose – Contribute to the city revenues for
conducting business within the city
• Same Subject Matter – Privilege of doing business
within the city
• Same Taxing Jurisdiction – City of Manila
• Same Taxing Periods – Per calendar year
• Same Kind or Character – Local Business Tax imposed
on gross sales or receipts
 Super Grocers Inc. vs. Municipality of San Pedro (CTA AC
No. 86, Feb. 25, 2013)
• Petitioner challenged reclassification from “Retailer of
Essential and Non-Essential Commodities” to “Owners or
Operators of privately- owned supermarkets, shopping
centers and minimarts”
• CTA ruled that petitioner’s business activities fall under
“Retailer of Essential and Non-Essential Commodities” under
Sec. 143[c] and [d] of the LGC
• Re-classification was not allowed as it violates the limitation
under Sec. 143[h] of the LGC
CTA Jurisdiction on Local Tax Cases
• Authority to issue Writs of Certiorari involves exercise of
original jurisdiction which must be expressly conferred by
constitution or by law
• It cannot be implied from mere existence of appellate
jurisdiction
• Based on Sec. 5(1) Art. VIII of 1987 Constitution, CTA’s
power includes the right to issue Writ of Certiorari if there is a
grave abuse of discretion on part of the RTC in issuing an
Interlocutory Order
Remedies After an Assessment or Payment
• When correct tax is not paid, Local Treasurer issues Notice
of Assessment within the applicable prescriptive period
(Sec. 194, LGC) stating the nature of levy, amount of
deficiency and incremental penalties
• Taxpayer may contest assessment or pay tax before the
lapse of 60 days from receipt of assessment to prevent it from
becoming final and executory
• Local Treasurer shall decide within 60 days from date of filing
by sustaining or denying the same wholly or partly
• If protest is denied, taxpayer may file within 30 days from
receipt of denial, an appeal with the Court of Competent
Jurisdiction
Prescriptive Periods
• Assessment – Local taxes, fees or charges must be
assessed within 5 years from the date they become due
- In case of fraud, the same may be assessed
within 10 years from discovery of fraud
• Collection – may be collected within 5 years from date of
assessment by administrative action or judicial action
• Suspension of Prescriptive Period happens when:
o Treasurer is legally prevented from making the
assessment or collection
o Taxpayer requests for reinvestigation and executes a
waiver in writing before expiration of the period within
which to assess or collect
o Taxpayer is out of the country or cannot be located
DOF Dept. Circular No. 001-2015 (June 1, 2015)
• As part of govt’s effort to strengthen its overall fiscal position,
all LGUs allowed by law to retain income for operations and
working balances shall deposit in a Government Financial
Institution (GFI) with a Universal Bank License and CAMELS
rating of at least “3”
Exceptions:
1. Where no GFIs can provide necessary banking services
2. Where there are no accessible (within the 20 kilometer
radius) GFIs. DOF must be furnished a vicinity map
showing the location & distance of the GFI
3. Where security and safety are the reasons to maintain an
account (with a proposed bank)
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 TAXING POWERS OF LGUs
Part II – Real Property Taxation
INTRODUCTION
• Real Property Tax - Ad Valorem Tax assessed, levied and
collected in all provinces, cities and municipalities on land,
buildings, machineries and other improvements affixed to real
property and not specifically exempted by law
• It is one of the principal sources of revenue for the LGUs
What is a Real Property?
• Art. 415 of the NCC was applied suppletorily to RA 7160 as to
Kinds of Real Property subject to Real Property Tax. These
are as follows:
a. Real Property by Nature Eg. Land
b. Real Property by Incorporation Eg. Building
c. Real Property by Destination Eg. Underground
tanks of Gasoline Stations
Other Classifications not defined in RA 7160 but are
assessable
Fundamental Principles on Real Property
• It shall be appraised at its Current and Fair Market Value
• It shall be classified for assessment on the basis of its actual
use
• It shall be assessed on the basis of a uniform classification
within each LGU
• Appraisal, assessment, levy and collection of Real Property
Tax shall not be assigned to any person
• Appraisal and assessment of property should be equitable
Definitions on Real Property
• Assessment Level – percentage applied to the FMV to
determine the taxable value of property
• Assessed Value – FMV of Real Property multiplied by its
assessment level. It is synonymous to Taxable Value
• Commercial Land – land devoted principally for the object of
profit and not classified as agricultural, industrial, mineral,
timber or residential land
• Depreciated Value – value remaining after deducting
depreciation from the acquisition cost
• Economic Life – estimated period over which it is anticipated
that a machinery or equipment may be profitably utilized
• Residential Land – land principally devoted to habitation
• Reassessment – assigning of new assessed values to real
property as the result of a general, partial or individual
reappraisal of property
• Remaining Economic Life – period of time expressed in
years from date of appraisal to date when machinery
becomes valueless
• Remaining Value – corresponding to remaining useful life of
machinery
• Special Classes of Property – all lands, buildings and other
improvements directly and exclusively used for hospitals,
cultural or scientific purpose
- those owned and used
by local water districts, GOCC rendering public services in the
supply and distribution of water and/or generation and
transmission of electric power
• Timberland – land identified as forest or reserve area by the
government
• Memorial Park – land exclusively used as burial ground,
disposition of which is for a commercial purpose or profit
• Horticultural Land – land devoted for planting flowers and
other ornamental plants
• Marsh Land – tract of low-lying land usually under water
• Foreshore Land – strip of land along the seashore
• Machinery – embraces machines, equipment, mechanical
contrivances, instruments, appliances which may or may not
be attached permanently or temporarily to real property
• Physical Facilities – production, installation and appurtenant
service facilities, mobile, self-powered and not permanently
attached to real property will be classified as real property
provided that:
• Directly use to meet the needs of particular industry,
business or activity
• By its nature is necessary in manufacturing, mining,
logging, commercial, industrial or agricultural purposes
• Machinery for general use – including but not limited to
office equipment, F&F and other machines not directly used
to meet the needs of a particular business

• Fair Market Value – price at which a property may be sold by
a seller who is not compelled to sell and bought by a buyer
not compelled to buy
• Improvement – valuable addition made to a property or an
amelioration of its condition
- amounting to more than a mere repair or
replacement of parts involving capital expenditures and labor
- intended to enhance its value, beauty or
utility or to adapt it for a new purpose
• This shall not be considered within the definition of
machinery under this rule
• Computers, air-conditioning units and generators
directly used by the bank in operation of its business
are subject to assessment and payment of RPT (DOF
Opinion)
• Residential Machinery – machines, equipment, appliances
or apparatus permanently attached to residential land and its
improvements

• Building – immovable, more
structure, substantially adhered
superimposition, and there is
annexation
Note: Law uses the
“superimposed”
or less of a permanent
to the land and not mere
an intent of permanent
term “adhered” and not
• Machinery no longer in use – by reason of cessation of
production, the same should be transferred from taxable to
exempt roll and not subject to the payment of RPT (DOF
Opinion)

• Industrial Land – land devoted principally to industrial

activity as capital investment and not classified as
agricultural, commercial, timber, mineral or residential land
13
MERCADER
 Provincial Assessor of Agusan Del Sur vs. Filipinas Palm
Plantation Inc.
• In above case decided by SC on Oct. 05, 2016 (G.R.
183416), an issue raised for resolution was about the
definition of machinery under Sec. 199 (o) of LGC and Art.
415 (5) of the NCC
• Citing Caltex Phil Inc. vs. CBAA, it was ruled that in
determining whether machinery is a real property subject to
RPT, the definition and requirements under the LGC are
controlling
• The phrase pertaining to physical facilities for production
under Sec. 199 (o) includes road equipment and min haulers
actually, directly and exclusively used to meet its operations
in palm oil production
 Capitol Wireless Inc. vs. Prov. Treasurer of Batangas
• In above case decided on May 30, 2016 (G.R. 183416), main
issue is whether submarine or undersea communication
cables are akin to electric transmission lines
• The Court in the case of Meralco vs. Lucena City Treasurer
ruled that they are “not exempted” from Real Property Tax
and may qualify as “machinery” subject to this tax
• While Electric lines and communication cables do not directly
adhere to the soil but pass through posts or landing stations,
these are considered as “machinery” being real property by
destination
Administration, Appraisal and Assessment of Real Property
Tax
• Provinces and cities are primarily responsible for
administration of Real Property Tax
• All Real Property (taxable or exempt) shall be appraised at
Current and FMV prevailing in the locality where property is
situated
• Declaration of Real Property – all persons owning or
administering a real property shall file with Provincial/ City/
Municipal Assessor, a Sworn Statement declaring true value
of property once every 3 years during the period January 1
to June 30
• When any person required to declare real property but
refuses or fails to do so, the Provincial/ City/ Municipal
Assessor shall declare the property in the name of the default
or unknown owner
• Such declaration need not be under oath
• The fact that property was declared in the name of certain
parties for taxation purposes does not constitute evidence of
ownership (SC Decision)
• Transfer or cancellation of a Tax Declaration may be affected
only after registration of document conveying the real
property (DOF Opinion)
Property Declared for the First Time
• Real property which has not been declared when discovered
will be considered “property declared for the first time”
• Under Sec. 222 of the LGC, said property shall be assessed
with Back Taxes for not more than ten (10) years prior to date
of initial assessment
• Taxes shall be computed on the basis of applicable Schedule
of Values in force during the corresponding period
• If such taxes are paid on or before the end of the quarter ff.
the date the Notice of Assessment was received by the
owner, no interest for delinquency shall be imposed
• Otherwise, taxes shall be subject to 2% interest from date of
receipt of assessment until taxes are fully paid
Listing in the Assessment Roll
• Real Property (taxable or exempt) shall be listed in an
assessment roll prepared and maintained by the Provincial/
City/ Municipal Assessor
• Real Property shall be listed, valued and assessed in the
name of the owner, administrator or anyone who has legal
interest on the property
• Undivided Real Property of a deceased may be listed, valued
and assessed in the name of estate, heirs or devisees without
designating them individually
• Undivided Real Property other than that owned by a
deceased may be listed, valued and assessed in the name of
one or more of the co-owners provided that they shall be
liable jointly or severally for payment of tax
• Real Property of a Partnership or Corporation shall be listed
in the same manner as an individual
• Real Property owned by the Rep. of the Philippines shall be
listed, valued and assessed in the name of the possessor,
grantee or public entity if property has been acquired for
resale or lease
• Assessment of Real Property should not increase more than
once every 3 years except in new improvements
• After total/ partial destruction, major change in the use,
sudden inflation/ deflation of property values or for any
abnormal cause, Assessor may submit his assessment to
Sanggunian concerned so that Schedule of Values may be
amended (DOF Opinion)
• Cancellation/ Reduction of assessment caused by total/
partial destruction of property takes effect on the 1st day of
the quarter ff. the quarter in which total/ partial destruction
occurred
• If property is totally destroyed, only taxes due for quarters
before destruction on the basis of cancelled assessments are
collectible
• Notice of Cancellation of Assessment shall be issued
• If property is partially destroyed, only taxes due for quarters
before destruction on the basis of cancelled assessments are
collectible
• Reduced assessment shall start on the following quarter
• Revised Tax Declaration shall be prepared and issued to
cancel the tax declaration of the original assessment
Idle Land Tax
• A Province, City or Municipality within MMA may levy an
annual tax on idle lands at a rate not exceeding 5% of the
assessed value of property in addition to the basic RPT
• Idle Land covers:
a. Agricultural Lands – more than 1 hectare in area
suitable for cultivation and ½ of which remain
uncultivated
b. Lands (Other than Agricultural) – more than 1,000
sqm in area, ½ remain unutilized; tax shall apply to
residential lots
• LGU may exempt idle lands from additional levy by reason of
force majeure which prevents owner from utilizing the same
14
MERCADER
Proof of Exemption from Taxation of Real Property
• Every person by or for whom real property is declared
claiming exemption shall file with the Assessor within 30 days
from date of declaration of real property
• He must have sufficient documentary evidence in support of
such claim
• If property shall be proven as tax-exempt, the same shall be
dropped from the assessment roll
Purpose of Tax Declaration
• Enables the assessor to identify the property for purposes of
determining the assessment levels
• Does not bind the assessor when he makes his assessment.
• Does not prove ownership. It is merely an “indicium” of a
claim of ownership. (De Vera-Cruz vs. Miguel, G.R. No.
144103, Aug. 31, 2005)
 Consolidated Rural Bank [Cagayan Valley] Inc. vs. CA (G.R.
No. 132161, Jan. 17, 2005)…
Court ruled that tax declarations are good indicia of possession
in the concept of an owner for no one in his right mind would be
paying taxes for a property not in his actual or constructive
possession
Preparing Schedule of Values
• Before any general revision on real property is made, one
must prepare a Schedule of Market Values for different
classes of property
• Must be situated in the form and detail prescribed by Local
Assessment Regulation No. 1-92
• Must be submitted to the Sanggunian concerned not later
st
than the 21 of October immediately preceding the revision
on assessment prescribed in the assessment calendar
• Conduct of general revision of Real Property Assessments is
mandatory (DOF Opinion)
• Schedule of Values prepared by the City Assessor alone is
null and void
Actual Use of Real Property
• Real Property shall be classified, valued and assessed on the
basis of its actual use regardless of where located, whoever
owns it, and whoever uses it
• Appraisal and assessment are based on actual use of real
property irrespective of any previous assessments or
taxpayer’s valuations according to the taxpayer’s declaration
(SC Decision)

Exemption from Realty Tax Assessment Levels

 Camp John Hay Dev’t. Corp. vs. CBAA (Oct. 02, 2013), SC • Assessment levels to be applied to the FMV of Real Property
ruled that: in determining its assessed value shall be fixed by ordinances
• Claim for exemption from payment of realty tax does not of the Sanggunians concerned at a rate not exceeding the ff:
actually question the Assessor’s authority to collect tax but
pertains to correctness of his assessment LANDS
• Arguments involve Question of Facts that should have been
Class Assessment Level
given at the very first instance to the Local Board of
Assessment Appeals Residential 20%
Agricultural 40%
• By providing that real property not declared as tax-exempt Commercial 50%
should be included in the assessment roll Industrial 50%
Mineral 50%
• Any claim for exemption shall only be allowed when there are Timberland 20%
sufficient proofs
• If exemption is being insisted by the owner, his only recourse
is to Pay Under Protest BUILDINGS AND OTHER STRUCTURES
Residential
Based on FMV – from 0% for those not over Php175K
 NAPOCOR vs. Treasurer of Benguet 60% for those over Php10M
• In above case decided on Nov. 14, 2016 (G.R. 209303), it
was ruled that if property taxed has not been dropped from Agricultural
assessment roll, taxes must be “Paid under Protest” if Based on FMV – from 25% for those not over Php300K
exemption is insisted 50% for those over Php2M
• Tax must be paid first before the Taxpayer can question the
assessment Commercial/ Industrial
Based on FMV – from 30% for those not over Php300K
• Claim for exemption does not actually question the 80% for those over Php10M
Assessor’s authority to assess and collect taxes but it
pertains to the reasonableness of assessment Timberland
Based on FMV – from 45% for those not over Php300K
• Payment under Protest is mandatory under Sec. 252 of
70% for those over Php2M
LGC

Notification of Transfer of Real Property Ownership

• Any person who shall transfer his ownership of property must
notify the Assessor concerned within 60 days from date of
transfer
• It must be noted that Tax Declarations or Realty Tax
Payments are not conclusive evidence of property ownership
(SC Decision)

15
MERCADER
Assessment of Property Subject to Back Taxes
st
• Real Property declared for the 1 time shall be assessed for
taxes for the period during which it would have been liable but
in no case for more than 10 years prior to date of initial
assessment
• Such taxes shall be computed on the basis of applicable
Schedule of Values in force during that period
o Undeclared Real Property subject to Back Taxes shall
be classified and valued on the basis of Schedule of
Base Market Values in force during the period the
property was undeclared and unassessed
o Undeclared Buildings and Other Improvements are
exempted from the foregoing rule
Assessment Appeals
• An appeal/ petition to the Local Board of Assessment
Appeals may be made within 60 days from date of receipt of
the written assessment
• If taxpayer is not satisfied with the decision of the local board,
he may appeal to Central Board of Assessment Appeals
within 30 days after receipt of the decision
Exemptions from Real Property Tax
a. Real Property owned by the Rep. of the Philippines except
when beneficial use has been granted for consideration to a
taxable person
b. Charitable Institutions, Churches, Convents, Appurtenance,
Mosques, Non-profit or Religious Cemeteries and all lands/
buildings/ improvements used for religious, charitable or
educational purposes
c. All machinery and equipment directly used by local water
districts and GOCC engaged in the supply of water and/or
transmission of electrical power
d. All Real Property owned by duly-registered cooperatives
provided under RA 6938
e. Machinery and Equipment for pollution control and
environmental protection
Beneficial Use by Private Person
 Unimaster Conglomeration Inc., vs. Tacloban City
Government et.al. (CTA EB No. 901, August 22, 2014)
• It was ruled that when the beneficial use of real property
owned by the Republic or any of its political subdivision is
vested to a taxable person, the real property is subject to tax
• Since Province of Leyte, Privatization & Management Office
and Philippine Tourism Authority are co-owners of the hotel,
the property is subject to real property tax
• Domestic Private Corporation is the lessee of the hotel and
beneficial user of the real property
 GSIS vs. City Treasurer & City Assessor of Manila, (G.R. No.
186242, Dec. 23, 2009)
• It was ruled that when tax exemption of property of a
government instrumentality ceases on the ground, that
beneficial use has been granted for a consideration to a
taxable person
• Unpaid Tax attaches to the property and is chargeable
against the taxable person who has beneficial use and
possession of it, regardless if he is the owner or not
Meralco Not Exempt from Real Property Tax
 MERALCO vs. City Assessor & City Treasurer of Lucena
City (G.R. No. 166102, August 5, 2015)
• SC ruled that MERALCO can no longer claim exemption from
RPT for its transformers, electric posts, transmission lines,
insulators and electric meters based on its franchise
• MERALCO relies heavily in a 1964 case exempting these
properties from RPT
• With the passage of LGC of 1991, exemption privileges were
withdrawn pursuant to the last paragraph of Sec. 234 which
unequivocally withdrawn all exemptions from Realty Tax
granted to Natural & Juridical persons including GOCCs
• Tax Exemptions must be clear and unequivocal
• Taxpayer claiming an exemption must point to a specific
provision of law conferring on the taxpayer (in clear and plain
terms) the exemption from a common burden
• Any doubt on whether a tax exemption exists is resolved
against the taxpayer
• MERALCO has failed to present any express Grant of
Exemption from RPT that is valid and binding even under the
LGC
Reclaimed Properties
 Republic of the Philippines, represented by the Philippine
Reclamation Authority (PRA) (G.R. No. 191109, July 18,
2012)
• SC ruled that all reclaimed properties owned by the PRA are
exempted from real estate taxes
• Under the Administrative Code of 1987, reclaimed lands are
reserved lands for public use
• These are properties of public dominion
• Ownership of such lands remains with the State unless they
are withdrawn by law or there is a Presidential Proclamation
Realty Tax on 2 Airports
1. MANILA INTERNATIONAL AIRPORT AUTHORITY
• Exempted from Realty Tax under Sec. 234 of RA 7160
because it is a gov’t. instrumentality and Trustee of the
country
• Airport lands and buildings are of public dominion
2. MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY
• Exempted from Realty Tax pursuant to the SC’s decision
in MCIAA vs. City of Lapu-Lapu and Elena Pacaldo (G.R.
No. 181756 June 15, 2015.)
• This ruling has overturned the 1996 MCIAA ruling that it
is not exempted from realty tax, being a GOCC
• With this 2015 decision, MIAA & MCIAA were not
declared as gov’t. instrumentalities so they are exempted
from Real Estate Tax
Exemption of Charitable Institution
• Previously, the rule on tax exemption of properties used for
religious, charitable or educational purposes has been
abandoned
• This is enunciated in the Case of Herrera vs. Quezon City
Assessor
• Prevailing doctrine now is that for real property to be
exempted from Realty Tax, properties must be actually,
directly and exclusively used for religious, charitable and
educational purposes
• This is expressed in the Case of Lung Center of the Phil.
Vs. Quezon City Assessor (G.R. 144104, June 29,2004)
16
MERCADER
 • In doctrine established in “Lung Center of the Phils.’ Case” Period within which to Collect Real Property Tax
and in the case of “City Assessor of Cebu vs. Association • May be collected within 5 years from the date it becomes due
of Benevola de Cebu”, (G.R. No. 152904, June 8, 2007)
• In case of fraud or evasion of tax, action to collect tax may be
• SC ruled that exemption in favor of property used exclusively instituted within 10 years from date of discovery of fraud or
for charitable or educational purposes is not limited to intent to evade
property actually indispensable but extends to facilities which
are incidental and necessary for accomplishment of said • Period of Prescription is suspended if:
purposes o Treasurer legally prevented the collection
• Such as in the case of hospitals, schools for training nurses, o Owner of property requests for reinvestigation
home and recreational facilities of student nurses, interns and signs Waiver of Prescription
and residents o Owner of property cannot be located or is out of
the country
 Angeles University Foundation vs. Angeles City, (G.R. No.
189999, June 27, 2012)
• SC also applied the doctrine laid down in the Lung Center of Remedy of Property Owner for Realty Tax Assessment
the Phils. case that for a real property to be exempted from • A property owner questioning the assessment should first pay
RPT, it must be used directly and exclusively for religious, the tax due before his protest can be entertained
charitable and educational purposes
• Within the period prescribed by law, any person not satisfied
• It is not the use of income from real property that will with assessment of the Assessor may file an appeal with the
determine whether that property is tax-exempt Local Board of Assessment Appeals (LBAA) in the province
or city concerned
• Within 30 days from receipt, owner may elevate his appeal to
the Central Board of Assessment Appeals
Payment of Realty Taxes
• Real Property Tax may be paid in 4 equal installments:
st
1 Installment – On or before March 31
nd
2 Installment – On or before June 30
rd
3 Installment – On or before September 30
Last Installment – On or before December 31

• If Basic Realty Tax and SEF are paid in advance, a discount

not exceeding 20% of the Annual Tax due may be availed

Payment Under Protest

 Camp John Hay Dev. Corp. vs. CBAA (G.R. No. 169234, Oct.
2, 2013)
• SC ruled that “No protest shall be entertained as to an RPT
assessment unless the taxpayer first pays the tax”
• Taxpayer is required to annotate or write on tax receipts the
words “Paid under protest”
• Protest contemplated under Sec. 252 of the LGC of 1991
pertains to questions on reasonableness of the amount
assessed
• No protest is required when the taxpayer questions the
authority of the assessor to impose assessment and collect
tax
• This challenges not the amount of assessment but the validity
of increase
• If what is being challenged is the validity of increase, this is a
question of law and taxpayer may bring the matter to Court
Issuance of Writ of Possession
• It is illustrated in the case Ty vs. Trampe, 321 Phil. 81, 1995,  Republic of the Philippines (DOTC) vs. City of Mandaluyong
where taxpayer questioned the increased real estate taxes (Feb. 23, 2011), SC ruled that:
imposed by Pasig City effective from 1994, premised on legal • It is premature for RTC to issue a Writ of Possession where
question of whether or not Pres. Dec. No. 921 was repealed issue on ownership of properties derived from auction sale is
by LGC still being deliberated by CTA
• In some cases, determination of whether the issue involves a • A Writ of Possession issued at this juncture has no force and
question of fact or a question of law may be obscure effect
• Is “Payment under protest” required when the taxpayer • It is noteworthy that Writ of Possession is a mere incident in
claims exemption from payment of RPT under a specific transfer of title
provision of law or statute?

17
MERCADER
Situs of Real Property Taxation
 Sta. Lucia Realty & Dev’t. Inc. vs. Pasig City (June 15, 2011),
SC ruled that:
• While a local gov’t. is authorized to collect Realty Tax on
properties falling under its jurisdiction, it is imperative to first
show that these properties are unquestionably within its
geographical boundaries
• Local gov’t. must confirm that subject properties are situated
within their territorial jurisdiction otherwise it would be acting
beyond its powers vested by law
Real Property to Satisfy Delinquent Tax
1. Warrant of Levy is issued by the Local Treasurer (LT) and
mailed to delinquent owner. Written Notice of Levy and Warrant
are served on the assessor and Register of Deeds
2. 30 days from service of warrant, LT shall advertise sale of
property by notice in LGU Bldg. and in a visible place in the
barangay where property is located
Publication shall be once a week for 2 weeks
3. Before date of sale, owner may stop the proceedings by
payment of delinquent tax and incremental penalties
4. Sale of property may held at the main entrance of LGU Bldg.
or in any other place specified in the notice
5. The highest bidder making sufficient bid shall pay the Realty
Tax plus increments. LT reports sale to Sanggunian after 30 days
LT will deliver the COS to purchaser. Proceeds from sale in
excess of delinquent tax and increments will be remitted back to
owner
6. Within 1 year from sale, owner may redeem upon payment an
additional 2% per month on purchase price from date of sale up
to date of redemption
Delinquent owner retains possession and right to the fruits
Price paid plus 2% interest per month shall be returned to buyer
7. If there is no bidder or highest bid is insufficient to pay Realty
Tax and increments, LT shall purchase the property in behalf of
the LGU
8. Register of Deeds shall transfer title of forfeited property to
LGU without Court Order
9. Within 1 year from forfeiture, owner may redeem property by
paying to LT the full amount of tax, interest and cost of sale
otherwise, ownership shall be vested to LGU
10. 10.The Sanggunian concerned may sell by public auction
the property acquired through forfeiture.
It can be done through ordinance approved
Condonation of Realty Tax
• In case of general failure on crops, decrease in agri-based
products, calamity in any province, city or municipality the
Sanggunian concerned by ordinance may condone or reduce
wholly or partially the taxes and interest
• Tax removal or reduction may take effect for the succeeding
years in the city or municipality affected by calamity
Other Court Rulings and Decisions on Local and Real
Property Taxes
 Batangas City Treasurer vs. Pilipinas Shell Petroleum
(G.R. 187631 - 07/08/15)
Facts:
• Batangas city assessed Shell for business taxes of around
Php400m for manufacture and distibution of petroleum
products from refinery in Tabangao, Batangas city
• It is pursuant to Sec. 143(h) of LGC that allows them to
collect Business tax not to exceed 2% of gross sales or
receipts
• Shell argued that it is not liable pursuant to Sec. 133(h) that
prohibits LGC to impose tax on petroleum products and Art.
232(h) of the implementing rules of LGC which states that:
“XXX Sale of oil, gasoline and other petroleum
products shall not be subject to any local tax imposed
in this article”.
Issue: Is Shell liable to pay Business Tax to Batangas city?
Rule: SC ruled that given the clear mandate under Sec. 133(h)
and Art. 232 of the IRR of the LGC of 1991, Batangas City does
not have the right to assess & collect business taxes against
Shell
 Mactan- Cebu Int’l Airport Authority vs. Lapu-Lapu City
(G.R. 181756 - 06/15/15)
Issue: Are real properties of Mactan – Cebu International Airport
Authority subject to Real Property Tax?
Rule:
• No. Petitioner is an instrumentality of gov’t. so its properties
actually and solely used for public purpose are exempt from
Teal Property Tax
• Examples of the airport’s property include airport terminal
building, runway and lots
• The decision follows the 2006 MIAA case and not 1996
MCIAA case
• Court reiterated that MIAA/ MCIAA is not a GOCC but an
instrumentality vested with corporate powers
• As properties of public dominion being for public use,
properties of MCIAA are not subject to levy, encumbrance or
disposition
• This case cited the previous rulings of PFDA, GSIS and PPA
 Davao City Treasurer vs. Intestate Estate of Dalisay
(G.R. 207791 - 07/01/15)
Facts:
• Involves a sale at public auction by Davao City of the estate’s
properties for non-payment of Real Estate Tax
• Since there were no bidders during the auction, the city
forfeited the properties and cause annotation of declarations
of forfeiture on the corresponding TCTs of properties
• The declaration stated “Delinquent taxpayer or his
authorized representative has within 1 year from said
date of declaration of forfeiture to redeem the property.”
• Petitioner offered to redeem properties forfeited but the city
refused since the 1 year redemption period already expired
18
MERCADER
 • The reckoning of said period should be from date of forfeiture
in which the properties were taken by the city to sell to
bidders
• The estate countered that the reckoning date should be the
one stated in the declaration of forfeiture which incidentally
was belatedly issued by Davao City due to its inefficiency
• Davao City contended that the operative act of forfeiture is an
act of the Treasurer in getting the property for lack of bidders
and not the registration of any declaration of forfeiture
because said document only facilitates transfer of ownership
of property
• The city also stated the odd timing in the issuance of
declaration and its contents observably benefit the estate
Issue: What is the reckoning point in counting the one (1) year
redemption period?
Rule:
• Period to redeem must be counted from Date of Forfeiture
and not Declaration of Forfeiture
• City would suffer injustice if it will be bound by Officer’s
suspicious action
• Contrary rule would effect an extension of statutory period
due to indiscretion of scrupulous officers
• Period would become flexible because its extension would
depend not on Treasurer’s discretion but on his attitude and
work ethics
• Hence, the estate cannot redeem the property anymore since
the period of redemption had already expired
 Demaala vs. Commission on Audit (G.R. 199752 - 02/17/15)
Issue:Can an LGU impose and collect a Special Education Fund
(SEF) at less than 1%?
Rule:
• Yes. Imposition of SEF is within the taxing power of LGU and
is consistent with the constitutional principle of local
autonomy and fiscal flexibility
• Permissive language (use of the term “may”) of the LGC
provision imposing SEF supports the authority of LGU’s to
prescribe their own rates
• The 1% is a maximum rate rather than an immutable edict
 Manila Treasurer vs. China Banking Corp. (G.R. 204117 -
07/01/15)
Facts:
• CBC filed for a refund claim in the amount of Php155K with
the Manila Treasurer for taxes and fees paid under
Ordinances nos. 7988 & 8011 after these were declared
unconstitutional like in the case of Coca Cola Bottlers vs. City
of Manila
• Treasurer denied the claim prompting CBC to file a Petition
for Review with RTC Manila
• Treasurer filed a Motion for Reconsideration which was
denied
• Case was elevated to CTA Division by the Treasurer and
contended that petition should be filed with MeTC and not
RTC
• CTA did not focus on the issue of where it must be filed but
noted that Petition for Review was filed a day after the
reglementary period under Sec. 195 of LGC
• CTA ruled that assessment is final
• CBC appealed the case to CTA En Banc who affirmed the
ruling of CTA so petition was forwarded to SC
• CBC insisted on the invalidity of Treasurer’s assessment
claiming that Petition for Review with RTC was timely filed
• CBC stated that the 30-day period to appeal inaction should
be reckoned on or before Mar. 27, 2007 (the day the letter
reiterating its objection to Treasurer’s imposition was made)
and not Jan. 15, 2007 when it filed its letter questioning the
imposition
• CBC also said that assuming they were guilty of delay since it
was only a day, they should be excused
• CBC appealed the case to CTA En Banc who affirmed the
ruling of CTA so petition was forwarded to SC
• CBC insisted on the invalidity of Treasurer’s assessment
claiming that Petition for Review with RTC was timely filed
Rule:
• SC ruled that refund claim should be dismissed since it was
not filed on time and before a Court of Competent Jurisdiction
• Court is not reversing its pronouncements in the case of
Coca-Cola Bottlers Phil. Inc. vs. City of Manila
• Refund claims are exception and that each claim for refund
must be proceeded in accordance with law
• In each claim, burden is on the Taxpayer to show that he has
strictly complied with the conditions for the grant of tax refund
 City of Makati vs. Trans-Asia Power Generation Corp.
(CTA En Banc 1086 - 01/21/15)
Facts:
• Trans-Asia is engaged in the business of building, owning,
operating, selling and leasing power generation plants for
purchasing, importing and leasing telecommunication and
other kinds of equipment
• For the years 1996 to 2005, Makati City classified the corp.
as “Manufacturer/ Producer” for Local Business Tax
purpose
• In 2006, Makati City changed its classification to “Services-
Other Contractor” that resulted to increase of LBT payments
which they paid under protest and filed for refund claim
• RTC Makati ruled that the corp. is a “Manufacturer/ Producer”
since it is engaged in business of transforming fuel into
electricity and selling it to end-users
• This ruling was affirmed by the CTA Division prompting
Makati City to appeal to CTA En Banc
Rule:
• Trans-Asia is a “Manufacturer/ Producer” and not a
“Contractor”
• It buys Bunker fuel as its chief raw material and converts it
through chemical process producing electricity
• It sells electricity to Hi-Cement
• While Hi-Cement initially owned the power plant, the same
was later sold to Trans-Asia as the owner of the plant, the
latter need to operate it for a fee
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 • The receipt for the fee does not classify Trans-Asia as a
“Contractor”
• Additional undertaking is merely an aid to its primary function
as a Producer of electricity and not considered as rendered
service

 National Grid Corp. of the Phils. vs. CBAA, LBAA of

Cabanatuan (CTA En Banc 1086 - 01/21/15)
Facts:
• Taxpayer is not a GOCC but a privately-owned corp.
engaged in transmission of electricity only and not in power
generation so it should be exempted from RPT
• It alleges that use of the conjunctive word “and” under Sec.
234 of RPT Code shows the intent of law in granting
exemptions from RPT
• Taxpayer alleges that if properties are not exempted from
RPT then these must be classified as “Special Class”
Rule:
• CTA EB disagrees. To avail of special tax rate, it must be a
GOCC engaged in the generation and transmission of electric
power
• This is in accordance with use of the conjunctive word “and”
under Sec. 234 of RPT Code showing that to avail of
exemptions and Special Tax Rate of 10%, it must be a GOCC
engaged both in power generation and transmission

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