III.

Local Government Code of 1991, as amended

A. Local government taxation
1. Fundamental principles

Which of the following statements is NOT a test of a valid ordinance? (2012 BAR)
a) It must not contravene the Constitution or any statute;
b) It must not be unfair or oppressive;
c) It must not be partial or discriminatory;
d) It may prohibit or regulate trade.

SUGGESTED ANSWER:
d) It may prohibit or regulate trade.
To be valid, an ordinance must not prohibit but may regulate trade. (Magtajas v. Pryce Properties Corporation, Inc., G.R. No. 111097, July 20, 1994).

2. Nature and source of taxing power

What is the nature of the taxing power of the provinces, municipalities and cities? How will the local government units be able to
exercise their taxing powers?

SUGGESTED ANSWER:
The taxing power of the provinces, municipalities and cities is directly conferred by the Constitution by giving them the authority to
create their own sources of revenue. The local government units do not exercise the power to tax as an inherent power or by a valid
delegation of the power by Congress, but pursuant to a direct authority conferred by the Constitution. (Mactan Cebu
International Airport Authority v. Marcos, 261 SCRA 667 [1996]; NPC v. City of Cabanatuan, 401 SCRA 259 [2003]).

The local government units exercise the power to tax by levying taxes, fees and charges consistent with the basic policy of local autonomy, and to
assess and collect all these taxes, fees and charges which will exclusively accrue to them. The local government units are authorized to pass tax
ordinances (levy) and to pursue actions for the assessment and collection of the taxes imposed in said ordinances. (Section 129, and 132, Local
Government Code). (BAR 2007)

Which of the following propositions may now be untenable:

1. The court should construe a law granting tax exemption strictly against the taxpayer.

2. The court should construe a law granting a municipal corporation the power to tax most strictly.

3. The Court of Tax Appeals has jurisdiction over decisions of the Customs Commissioner in cases involving liability for customs
duties.

4. The Court of Appeals has jurisdiction to review decisions of the Court of Tax Appeals. 5. The Supreme Court has jurisdiction to
review decisions of the Court of Appeals.

Justify your answer or choice briefly. (5%)

SUGGESTED ANSWER:
2. The court should construe a law granting a municipal corporation the power to tax most strictly.

This proposition is now untenable. The basic rationale for the grant of tax power to local government units is to safeguard their viability and self-
sufficiency by directly granting them general and broad tax powers (Manila Electric Company). Province of Laguna et. al 306 SCRA 750 [1999).
Considering that inasmuch as the power to tax may be exercised by local legislative bodies, no longer by valid congressional delegation but by direct
authority conferred by the Constitution, in interpreting statutory provisions on municipal fiscal powers, doubts will, therefore, have to be resolved in
favor of municipal corporations (City Government of San Pablo, Laguna v. Reyes, 305 SCRA 353 (1999]). This means that the court must adopt a
liberal construction of a law granting a municipal corporation the power to tax.

Note:
Of the examinee chose proposition no. 4 as his answer, it should be given full credit considering that the present CTA Act (R.A. No. 9282) has made
the CTA a coequal judicial body of the Court of Appeals. The question “Which of the following propositions may now be untenable" may lead the
examinee to choose a proposition which is untenable on the basis of the new law despite the cut-off date adopted by the Bar Examination Committee.
R.A. No. 9282 was passed on March 30, 2004. (BAR 2004)

Congress, after much public hearing and consultations with various sectors of society, came to the conclusion that it will be good for
the country to have only one system of taxation by centralizing the imposition and collection of all taxes in the national government.
Accordingly, it is thinking of passing a law that would abolish the taxing power of all local government units. In your opinion, would
such a law be valid under the present Constitution? Explain your answer. (5%)

SUGGESTED ANSWER:
No. The law centralizing the imposition and collection of all taxes in the national government would contravene the Constitution which mandates
that : . . . "Each local government unit shall have the power to create their own sources of revenue and to levy taxes, fees, and charges subject to
such guidelines and limitations as Congress may provide consistent with the basic policy of local autonomy." It is clear that Congress can only give
the guidelines and limitations on the exercise by the local governments of the power to tax but what was granted by the fundamental law cannot be
withdrawn by Congress. (BAR 2001)

a. Grant of local taxing power under the local government code

b. Authority to prescribe penalties for tax violations
c. Authority to grant local tax exemptions

May the deficiency business tax be paid in installments without surcharge and interest? Explain. (3%)

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SUGGESTED ANSWER:
Yes. Local government units may, through ordinances duly approved, grant reliefs to taxpayers under such terms and conditions as they may deem
necessary. Such reliefs may take the form of condonation or extension of time for payment or non-imposition of surcharge or interest. (Section 192,
LGC). Accordingly, the deficiency business taxes may be paid in installment without surcharge and interest through the passage of an ordinance for
that purpose. (BAR 2008)

d. Withdrawal of exemptions
e. Authority to adjust local tax rates
f. Residual taxing power of local governments
g. Authority to issue local tax ordinances

Prior to the enactment of the Local Government Code, consumer's cooperatives registered under the Cooperative Development Act
enjoyed exemption from all taxes imposed by a local government. With the Local Government Code’s withdrawal of exemptions, could
these cooperatives continue to enjoy such exemption? (2011 Bar Question)

(A) Yes, because the Local Government Code, a general law, could not amend a special law such as the Cooperative Development
Act.
(B) No, Congress has not by the majority vote of all its members granted exemption to consumers' cooperatives.
(C) No, the exemption has been withdrawn to level the playing field for all taxpayers and preserve the LGUs' financial position.
(D) Yes, their exemption is specifically mentioned among those not withdrawn by the Local Government Code.

SUGGESTED ANSWER:
(D) Yes, their exemption is specifically mentioned among those not withdrawn by the Local Government Code.

Taxing power of local government units shall NOT extend to the following taxes, except one: (2012 BAR)
a) Income tax on banks and other financial institutions;
b) Taxes of any kind on the national government, its agencies and instrumentalities, and local government units;
c) Taxes on agricultural and aquatic products when sold by the marginal farmers or fishermen;
d) Excise taxes on articles enumerated under the National Internal Revenue Code.

SUGGESTED ANSWER:
a) Income tax on banks and other financial institutions Section 186, RA 7160.

In order to raise revenue for the repair and maintenance of the newly constructed City Hall of Makati, the City Mayor ordered the
collection of P1.00, called “elevator tax", every time a person rides any of the high-tech elevators in the city hall during the hours of
8:00 a.m. to 10:00 a.m. and 4:00 p.m. to 6:00 p.m. Is the “elevator tax" a valid imposition? Explain.

SUGGESTED ANSWER:

No. The imposition of a tax, fee or charge or the generation of revenue under the Local Government Code shall be exercised by the Sanggunian of the
local government unit concerned through an appropriate ordinance (Section 132 of the Local Government Code). The city mayor alone could not
order the collection of the tax; as such, the “elevator tax” is an invalid imposition. (BAR 2003)

An Ordinance was passed by the Provincial Board of a Province in the North, increasing the rate of basic real property tax from
0.006% to 1 % of the assessed value of the real property effective January 1, 2000. Residents of the municipalities of the said
province protested the Ordinance on the ground that no public hearing was conducted and, therefore, any increase in the rate of real
property tax is void.

Is there merit in the protest? Explain your answer. (2%)

SUGGESTED ANSWER:
The protest is devoid of merit. No public hearing is required before the enactment of a local tax ordinance levying the basic real property tax (Art.
324, LGC Regulations).

ALTERNATIVE ANSWER:
Yes, there is merit in the protest provided that sufficient proof could be introduced for the non-observance of public hearing. By implication, the
Supreme Court recognized that public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes.
Although it was concluded by the highest tribunal that presumption of validity of a tax ordinance can not be overcome by bare assertions of
procedural defects on its / enactment, it would seem that if the taxpayer had presented evidence to support the allegation that no public hearing was
conducted, the Court should have ruled that the tax ordinance is invalid. (Belen Figuerres v. Court of Appeals, GRNo. 119172, March 25,1999). (BAR
2002)

3. Local taxing authority

a. Power to create revenues exercised through Local Government Units

In order to raise revenue for the repair and maintenance of the newly constructed City Hall of Makati, the City Mayor ordered the
collection of P1.00, called “elevator tax", every time a person rides any of the high-tech elevators in the city hall during the hours of
8:00 a.m. to 10:00 a.m. and 4:00 p.m. to 6:00 p.m. Is the “elevator tax" a valid imposition? Explain.

SUGGESTED ANSWER:
No. The imposition of a tax, fee or charge or the generation of revenue under the Local Government Code shall be exercised by the Sanggunian of the
local government unit concerned through an appropriate ordinance (Section 132 of the Local Government Code). The city mayor alone could not
order the collection of the tax; as such, the “elevator tax” is an invalid imposition. (BAR 2003)

b. Procedure for approval and effectivity of tax ordinances

An Ordinance was passed by the Provincial Board of a Province in the North, increasing the rate of basic real property tax from

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0.006% to 1 % of the assessed value of the real property effective January 1, 2000. Residents of the municipalities of the said
province protested the Ordinance on the ground that no public hearing was conducted and, therefore, any increase in the rate of real
property tax is void.

Is there merit in the protest? Explain your answer. (2%)

SUGGESTED ANSWER:
The protest is devoid of merit. No public hearing is required before the enactment of a local tax ordinance levying the basic real property tax (Art.
324, LGC Regulations).

ALTERNATIVE ANSWER:
Yes, there is merit in the protest provided that sufficient proof could be introduced for the non-observance of public hearing. By implication, the
Supreme Court recognized that public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes.
Although it was concluded by the highest tribunal that presumption of validity of a tax ordinance cannot be overcome by bare assertions of procedural
defects on its / enactment, it would seem that if the taxpayer had presented evidence to support the allegation that no public hearing was conducted,
the Court should have ruled that the tax ordinance is invalid. (Belen Figuerres v. Court of Appeals, GR No. 119172, March 25,1999). (BAR 2002)

4. Scope of taxing power

5. Specific taxing power of Local Government Units
a. Taxing powers of provinces
i. Tax on transfer of real property ownership
ii. Tax on business of printing and publication
iii. Franchise tax

The Local Government Code took effect on January 1, 1992.

PLDT’s legislative franchise was granted sometime before 1992. Its franchise provides that PLDT will only pay 3% franchise tax in lieu
of all taxes. The legislative franchises of Smart and Globe Telecoms were granted in 1998. Their legislative franchises state that they
will pay only 5% franchise tax in lieu of all taxes.

The Province of Zamboanga del Norte passed an ordinance in 1997 that imposes a local franchise tax on all telecommunication
companies operating within the province. The tax is 50% of 1% of the gross annual receipts of the preceding calendar year based on
the incoming receipts, or receipts realized, within its territorial jurisdiction.

Is the ordinance valid? Are PLDT, Smart and Globe liable to pay franchise taxes? Reason briefly.

SUGGESTED ANSWER:
The ordinance is valid. The Local Government Code explicitly authorizes provincial governments, notwithstanding any law or other special law, to
impose a tax on business enjoying a franchise at the rate of 50% of 1% based on the gross annual receipts during the preceding year within the
province. (Section 137, LGC).

PLDT is liable to the franchise tax levied by the province of Zamboanga del Norte. The tax exemption privileges on franchises granted before the
passage of the Local Government Code are effectively repealed by the latter law. (PLDT v. City of Davao, 363 SCRA 522 12001J).

Smart and Globe, however, are not liable to the franchise tax imposed under the provincial ordinance. The legislative franchises of Smart and Globe
were granted in 1998, long after the Local Government Code took effect. Congress is deemed to have been aware of the provisions of the earlier law.
When it granted the exemption. Accordingly, the latest will of the legislature to grant tax exemption must be granted. (BAR 2007)

iv. Tax on sand, gravel and other quarry services

v. Professional tax

What is the tax base for the imposition by the province of professional taxes? (2011 Bar Question)
(A) That which Congress determined.
(B) The pertinent provision of the local Government Code.
(C) The reasonable classification made by the provincial sanggunian.
(D) That which the Dept. of Interior and Local Government determined.
SUGGESTED ANSWER:
(C) The reasonable classification made by the provincial sanggunian.

The City of Manila enacted Ordinance No. 55-66 which imposes a municipal occupation tax on persons practicing various professions
in the city. Among those subjected to the occupation tax were lawyers. Atty. Mariano Batas, who has a law office in Manila, pays the
ordinance-imposed occupation tax under protest. He goes to court to assail the validity of the ordinance for being discriminatory.
Decide with reasons. (3%)

SUGGESTED ANSWER:
The ordinance is valid. The tax imposed by the ordinance is in the nature of a professional tax which is authorized by law to be imposed by cities
(Section 151 in relation to Section 139, LGC). The ordinance is not discriminatory because the City Council has the power to select the subjects of
taxation and impose the same tax on those belonging to the same class. The authority given by law to cities is to impose a professional tax only on
persons engaged in the practice of their profession requiring government examination and lawyers are included within that class of professionals.
(BAR 2009)

Mr. Fermin, a resident of Quezon City, is a Certified Public Accountant- Lawyer engaged in the Practice of his two professions. He has
his main office in Makati City and maintains a branch office in Pasig City. Mr. Fermin pays his professional tax as a CPA in Makati City
and his professional tax as a lawyer in Pasig City.

May Makati City, where he has his main office, require him to pay his professional tax as a lawyer? Explain.

May Quezon City, where he has his residence and where he also practices his two professions, go after him for the payment of his

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professional tax as a CPA and a lawyer? Explain. (5%)

SUGGESTED ANSWER:
No. Mr. Fermin is given the option to pay either in the city where he practices his profession or where he maintains his principal office in case he
practices his profession in several places. The professional tax paid as a lawyer in Pasig City, a place where he practices his profession, will entitle
him to practice his profession in any part of the Philippines without being subjected to any other national or local tax, license, or fee for the practice
of such profession. (Sec. 139 in relation to 151, Local Government Code).

No. The professional tax shall be paid only once for every taxable year and the payment shall be made either in the city where he practices his
profession or where he maintains his principal office. The city of residence cannot require him to pay his professional taxes. (Sec. 139 in relation to
Sec. 151, Local Government Code). (BAR 2005)

vi. Amusement tax

vii. Tax on delivery truck/van

b. Taxing powers of cities

Ferremaro, Inc., a manufacturer of handcrafted shoes, maintains its principal office in Cubao, Quezon City. It has branches/sales
offices in Cebu and Davao. Its factory is located in Marikina City where most of its workers live. Its principal office in Quezon City is
also a sales office.

Sales of finished products for calendar year 2009 in the amount of P10 million were made at the following locations:

1) Cebu branch 25%

2) Davao branch 15%
3) Quezon City branch 60% Total 100%

Where should the applicable local taxes on the shoes be paid? Explain. (2010 Bar Question)

SUGGESTED ANWER:
Under the LGC, the manufacturers maintaining a branch or sales outlet shall record the sale in the branch or sales outlet making the sale and pay the
tax in the city or municipality where the branch or sales outlet is located. Since Ferremaro, Inc., maintains one factory, the sales recorded in the
principal office shall be allocated and 30% of said sales are taxable in the place where the principal office is located while the 70% is taxable in the
place where the factory is located.

Hence, 25% of total sales or Php 2.5M shall be taxed in Cebu and 15% of total sales or Php 1.5M shall be taxed in Davao. For the remaining 60%
sales amounting to Php 6.0M which is recorded in the principal office, 30% thereof or Php 1.8M is taxable in Quezon City where the principal office is
located and 70% or Php 4.2M is taxable in Marikina City where the factory is located.

XYZ Shipping Corporation is a branch of an international shipping line with voyages between Manila and the West Coast of the U.S.
The company’s vessels load and unload cargoes at the Port of Manila, albeit it does not have a branch or sales office in Manila. All the
bills of lading and invoices are issued by the branch office in Makati which is also the company’s principal office.

The City of Manila enacted an ordinance levying a 2% tax on gross receipts of shipping lines using the Port of Manila.

Can the City Government of Manila legally impose said levy on the corporation? Explain. (2010 Bar Question)

SUGGESTED ANSWER:
No, Manila cannot legally levy the 2% Gross Receipts Tax on thi shipping line because taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight by hire and common carriers by air, and or water is beyond the taxing powers of the
local government units.

The City Government of Manila may NOT impose:

a) Basic real property tax at 2% of the assessed value of real property;
b) Additional levy on real property for the special education fund at 1% of the assessed value of real property;
c) Additional ad valorem tax on idle lands at a rate not exceeding 5% of the assessed value;
d) Special levy on lands within its territory specially benefited by public works projects or improvements funded by it at 80% of
the actual cost of the projects or improvements.

SUGGESTED ANSWER:
d) Special levy on lands within its territory specially benefited by public works projects or improvements funded by it at 80% of the actual cost of the
projects or improvements Section 240, RA 7160.

ABC Corporation is registered as a holding company and has an office in the City of Makati. It has no actual business operations. It
invested in another company and its earnings are limited to dividends from this investment, interests on its bank deposits, and foreign
exchange gains from its foreign currency account. The City of Makati assessed ABC Corporation as a contractor or one that sells
services for a fee. Is the City of Makati correct? (2013 Bar Question)

SUGGESTED ANSWER:
The City of Makati is wrong in assessing ABC Corp. as a contractor.

First, ABC Corp. is not a contractor as defined in Section 131(h) of Republic Act No. 7160 or the Local Government Code (LGC). This provision defines
a contractor as a person, natural or juridical, not subject to professional tax under the LGC, but whose activity consists essentially of the sale of all
kinds of services for a fee, regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties
of such contractor or his employees.

In the given problem, ABC Corp. is merely a holding company whose earnings are limited to dividends, interests on bank deposits and foreign
exchange gains from foreign currency account. Evidently, ABC Corp. is not engaged in the sale of services for a fee.

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Second, Section 186 of LGC provides that local government units cannot levy taxes, fees or charges on any base or subject tax under the provisions
of the NIRC.

In the given problem, ABC Corp.’s dividends, interest income and foreign exchange gains from foreign currency account are already subject to final
income tax under the NIRC, specifically, Sections 27(D)(4), 27(D)(1), 32(A), respectively. Consequently, the City of Makati cannot levy from ABC
Corp. taxes on these incomes.

c. Taxing powers of municipalities

The Municipality of Malolos passed an ordinance imposing a tax on any sale or transfer of real property located within the municipality
at a rate of one-fourth (1/4) of one percentum (1%) of the total consideration of such transaction. X sold a parcel of land in Malolos
which he inherited from his deceased parents and refused to pay the aforesaid tax. He instead filed appropriate case asking that the
ordinance be declared null and void since such a tax can only be collected by the national government, as in fact he has paid BIR the
required capital gains tax. The Municipality countered that under the Constitution, each local government is vested with the power to
create its own sources of revenue and to levy taxes, and it imposed the subject tax in the exercise of said constitutional authority.
Resolve the controversy.

ANSWER:
The ordinance passed by the Municipality of Malolos imposing a tax on the sale or transfer of real property is void. The Local Tax Code only allows
provinces and cities to impose a tax on the transfer of ownership of real property (Sec. 7 and Sec. 23, Local Tax Code). Municipalities are prohibited
from imposing said tax that provinces are specifically authorized to levy. (Sec. 22, Local Tax Code)

While it is true that the Constitution has given broad powers of taxation to local government units, this delegation, however, is subject to such
limitations as may be provided by law (Sec. 5, Art X, 1987 Constitution). (BAR 1991)

i. Tax on various types of businesses

ii. Ceiling on business tax impossible on municipalities within Metro Manila
iii. Tax on retirement on business

How are retiring businesses taxed under the Local Government Code? (2%)

SUGGESTED ANSWER:
Retiring business under the LGC are taxed on their gross sales or gross receipts in the current year and not on the preceding year. If the tax paid in
the current year is less than the tax due on gross sales or receipts of the current year, the difference shall be paid before the business is considered
officially retired (Sec. 145, LGC).

iv. Rules on payment of business tax

What is the basis for the computation of business tax on contractors under the local government code? (2%)

SUGGESTED ANSWER:
The business tax on contractors is a graduated annual fixed tax based on the gross receipts for the preceding calendar year. However, when the
gross receipts amount to P2 million or more, the business tax on contractors is imposed as a percentage tax at the rate of 50% of 1% (Sec. 143(e),
LGC).

v. Fees and charges for regulation & licensing

The Sangguniang Bayan of the Municipality of Sampaloc, Quezon, passed an ordinance imposing a storage fee of ten centavos (PO.
10) for every 100 kilos of copra deposited in any bodega within the Municipality’s jurisdiction. The Metropolitan Manufacturing
Corporation (MMC), with principal office in Makati, is engaged in the manufacture of soap, edible oil, margarine, and other coconut oil-
based products. It has a warehouse in Sampaloc, Quezon, used as storage space for the copra purchased in Sampaloc and nearby
towns before the same is shipped to Makati. MMC goes to court to challenge the validity of the ordinance, demanding the refund of the
storage fees it paid under protest.

Is the ordinance valid? Explain your answer. (4%)

SUGGESTED ANSWER:
Yes. The municipality is authorized to impose reasonable fees and charges as a regulatory measure in an amount commensurate with the cost of
regulation, inspection and licensing (Section 147, LGC). In the case at bar, the storage of copra in any warehouse within the municipality can be the
proper subject of regulation pursuant to the police power granted to municipalities under the Revised Administrative Code or the “general welfare
clause”. A warehouse used for keeping or storing copra is an establishment likely to endanger the public safety or likely to give rise to conflagration
because the oil content of the copra, when ignited, is difficult to put under control by water and the use of chemicals is necessary to put out the fire.
It is, thus, reasonable that the Municipality impose storage fees for its own surveillance and lookout (Procter & Gamble Philippine Manufacturing
Corporation v. Municipality of Jagna, Province of Bohol, 94 SCRA 894 [1979]). (BAR 2009)

The City of Manila enacted an ordinance, imposing a 5% tax on gross receipts on rentals of space in privately- owned public markets.
BAT Corporation questioned the validity of the ordinance, stating that the tax is an income tax, which cannot be imposed by the city
government. Do you agree with the position of BAT Corporation? Explain. (5%)

SUGGESTED ANSWER:
No. The tax imposed is not an income tax but a license tax or fee for the regulation of the business in which the taxpayers are engaged, that is the
leasing of spaces in privately-owned public markets. (Progressive Development Corporation v. Quezon City, 172 SCRA 629 [1989]). The income tax
imposed under the National Internal Revenue Code which preempts the imposition by the City is one which is imposed on the privilege enjoyed by a
taxpayer in earning income and not a tax on business. (BAR 2008)

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vi. Situs of tax collected

Which statement is correct? (2012 BAR)

a) Legislative acts passed by the municipal council in the exercise of its

lawmaking authority are denominated as resolutions and ordinances;
b) Legislative acts passed by the municipal council in the exercise of its
lawmaking authority are denominated as resolutions;
c) Legislative acts passed by the municipal council in the exercise of its
lawmaking authority are denominated as ordinances;
d) Both ordinances and resolutions are solemn and formal acts.

SUGGESTED ANSWER:
c) Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as ordinances
Section 2227, Revised Administrative Code of 1917.

One of the local government units below does NOT have the power to impose real property tax: (2012 BAR)
a) Bacoor, Cavite;
b) Davao City;
c) Tarlac Province;
d) Malabon, Metro Manila.

SUGGESTED ANSWER:
a) Bacoor, Cavite Section 200, RA 7160.
[Note: The answer above is premised on the belief that Bacoor is a municipality and the LGC does not vest municipalities with the power to impose
real property taxes, except for municipalities within the Metropolitan Manila area. However, Bacoor is already a city hence, can no longer be a correct
choice. Since the question did not provide for the CORRECT answer, it should be treated as a bonus.]

d. Taxing powers of barangays

After the province has constructed a barangay road, the Sangguniang Panglalawigan may impose a special levy upon the lands
specifically benefitted by the road up to an amount not to exceed: (2011 Bar Question)

(A) 60% of the actual cost of the road without giving any portion to the barangay.
(B) 100% of the actual project cost without giving any portion to the barangay.
(C) 100% of the actual project cost, keeping 60% for the province and giving 40% to the barangay.
(D) 60% of the actual cost, dividing the same between the province and the barangay.

SUGGESTED ANSWER:
(A) 60% of the actual cost of the road without giving any portion to the barangay.

e. Common revenue raising powers

i. Service fees and charges
ii. Public utility charges
iii. Toll fees or charges

f. Community tax

6. Common limitations on the taxing powers of LGUs

Pheleco is a power generation and distribution company operating mainly from the City of Taguig. It owns electric poles which it also
rents out to other companies that use poles such as telephone and cable companies. Taguig passed an ordinance imposing a fee
equivalent to 1% of the annual rental for these poles. Pheleco questioned 'the legality of the ordinance on the ground that it imposes
an income tax which local government units (LGUs) are prohibited from imposing.

Rule on the validity of the ordinance. (1%)(2013 Bar Question)

(A) The ordinance is void; the fee is based on rental income and is therefore a tax on income.
(B) The ordinance is valid as a legitimate exercise of police power to regulate electric poles.
(C) The ordinance is void; 1% of annual rental is excessive and oppressive.
(D) The ordinance is valid; an LGU may impose a tax on income.

SUGGESTED ANSWER:
(A) The ordinance is void; the fee is based on rental income and is therefore a tax on income.
The Sec. 32(A)(5) of the NIRC includes “rents” in the enumeration of taxable income. Under Section 133 of the LGC, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend to the levy of income tax except when levied on banks and other financial
institutions.

In accordance with the Local Government Code (LGC), the Sangguniang Panglungsod (SP) of Baguio City enacted Tax Ordinance No.
19, Series of 2014, imposing a P50.00 tax on all the tourists and travellers going to Baguio City. In imposing the local tax, the SP
reasoned that the tax collected will be used to maintain the cleanliness of Baguio City and for the beautification of its tourist
attractions. (D) is punishable by administrative penalty only.

Claiming the tax to be unjust, Baguio Travellers Association (BTA), an association of travel agencies in Baguio City, filed a petition for

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declaratory relief before the Regional Trial Court (RTC) because BTA was apprehensive that tourists might cancel their bookings with
BTA’s member agencies. BTA also prayed for the issuance of a Temporary Restraining Order (TRO) to enjoin Baguio City from
enforcing the local tax on their customers and on all tourists going to Baguio City.

The RTC issued a TRO enjoining Baguio City from imposing the local tax. Aggrieved, Baguio City filed a petition for certiorari before the
Supreme Court (SC) seeking to set aside the TRO issued by the RTC on the ground that collection of taxes cannot be enjoined. Will the
petition prosper? (2014 Bar Question)

SUGGESTED ANSWER :
No, the petition for certiorari filed by Baguio City will not prosper. As stated in Valley Trading Co., Inc. v. CFI of Isabela (G.R. No. L-49529, March 31,
1989) and Angeles City v. Angeles City Electric Corporation (G.R. No. 166134, June 29, 2010), the prohibition on the issuance of an order or writ
enjoining the collection of taxes applies only to national internal revenue taxes, and not to local taxes. Unlike the NIRC, there is no express provision
in the Local Government Code which prohibits courts from enjoining the collection of such taxes. Therefore, the RTC was properly vested with
authority to issue the assailed TRO enjoining Baguio City from imposing the local tax.

In 2014, M City approved an ordinance levying customs duties and fees on goods coming into the territorial jurisdiction of the city.
Said city ordinance was duly published on February 15, 2014 with effectivity date on March 1, 2014.

a. Is there a ground for opposing said ordinance?

b. What is the proper procedural remedy and applicable time periods for challenging the ordinance? (2015 Bar Question)

SUGGESTED ANSWER:
a. Yes, on the ground that the ordinance is ultra-vires. The taxing powers of local government units, such as M City, cannot extend to the levy of
taxes, fees and charges already imposed by the national government, and this include, among others, the levy of customs duties under the Tariff and
Customs Code.

b. Any question on the constitutionality or legality of tax ordinances may be raised on appeal within thirty (30) days from the effectivity to the
Secretary of Justice. The Secretary of Justice shall render a decision within sixty (60) days from the date of receipt of the appeal. Thereafter, within
thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file the appropriate proceedings with the Regional Trial Court.

XYZ Shipping Corporation is a branch of an international shipping line with voyages between Manila and the West Coast of the U.S.
The company’s vessels load and unload cargoes at the Port of Manila, albeit it does not have a branch or sales office in Manila. All the
bills of lading and invoices are issued by the branch office in Makati which is also the company’s principal office.

The City of Manila enacted an ordinance levying a 2% tax on gross receipts of shipping lines using the Port of Manila.

Can the City Government of Manila legally impose said levy on the corporation? Explain. (3%)

SUGGESTED ANSWER:
No, Manila cannot legally levy the 2% Gross Receipts Tax on the shipping line, because taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water is a limitation on the exercise of
taxing powers by local government units (Sec, 133(f), LGC).

The Municipality of Argao, Province of Cebu passed a tax ordinance requiring all professionals practicing in the municipality to pay a
tax equivalent to two (2%) percent of their gross income. A certified true copy of the ordinance was sent to the Secretary of Finance
for review on 1 March 1989 and was received by him on the same day. On 15 August 1989, even as the tax ordinance remained
unacted upon by the Secretary of Finance, the municipality started collecting the tax in question. The members of the Philippine Bar in
the municipality questioned the legality of the ordinance and sought the suspension of the collection of the tax but the municipality
argued that since the Secretary has not taken any action on the ordinance for more than one hundred twenty days after his receipt
thereof, the legality of the ordinance can no longer be questioned and insisted on the collection of the tax.

Is the tax ordinance in question legal?

ANSWER:
No. the tax ordinance is not legal as the Local Tax Code allows provinces and cities, to the exclusion of municipalities, to impose an annual occupation
tax on all persons engaged in the exercise or practice of their profession or calling in specified amounts which in the case of lawyers is P75.00 per
annum (Secs. 11 and 12 in relation to Sec. 23, Local Tax Code). A person authorized to practice his profession or calling shall pay the tax to the
province where he practices his profession or calling or maintains his office.

No local government unit can impose a tax on income (Sec. 5, Local Tax Code).

Is the Municipality correct in insisting on collecting the tax?

ANSWER:
No, the Municipality was incorrect in insisting on the collection of the tax. Once the tax on occupation is paid as stated in paragraph (a), above, the
lawyer is entitled to practice his profession or calling in all parts of the Philippines without being subject to any other national or local tax, license or
fee for the practice of such profession or calling.

Will the inaction of the Secretary of Finance bar the professionals in the Municipality from questioning the legality of that ordinance?

ANSWER:
The inaction of the Secretary of Finance does not bar the professionals in the Municipality from questioning the legality of the ordinance. While it is
true that the Secretary of Finance may himself suspend the tax ordinance within a 120-day period from receipt thereof, his failure to do so, however,
has no preclusive effect on taxpayers who may be adversely affected by the ordinance. (BAR 1991)

7. Collection of business tax

a. Tax period and manner of payment

Page 7 of 18
MNO Corporation was organized on July 1, 2006, to engage in trading of school supplies, with principal place of business in Cubao,
Quezon City. Its books of accounts and income statement showing gross sales as follows:

July 1, 2006 to December 31,

2006 P 5,000,000
January 1, 2007 to June 30, 2007 P10,000,000
JULY 1, 2007 TO DECEMBER 31,
2007 PI 5,000,000

Since MNO Corporation adopted fiscal year ending June 30 as its taxable year for income tax purposes, it paid its 2% business tax for
fiscal year ending June 30, City Treasurer assessed the corporation for deficiency business tax for 2007 based on gross sales of P25
million alleging that local business taxes shall be computed based on calendar year.

Is the position of the city treasurer tenable? Explain. (3%)

SUGGESTED ANSWER:
Yes. The tax period for local taxes is generally the calendar year. (Section 165, LGC). (BAR 2008)

b. Accrual of tax

What is the basis for the computation of business tax on contractors under the Local Government Code? (2010 Bar Question)

SUGGESTED ANSWER:
The business tax on contractors is a graduated annual fixed tax based on the gross receipts for the preceding calendar year. If the gross receipts
amount to more than Php
2.0 Million the business is subject to a percentage tax at the rate of 50% of 1%.

How are retiring businesses taxed under the Local Government Code? (2010 Bar Question)

SUGGESTED ANSWER:
They are taxed on their sales or gross receipts in the current year and not on the preceding year. If the tax paid in the current year is less than the
tax due on gross sales or receipts of the current year, the difference shall be paid before the business is considered officially retired.

c. Time of payment
d. Penalties on unpaid taxes, fees or charges
e. Authority of treasurer in collection and inspection of books

8. Taxpayer’s remedies
a. Judicial

X, a taxpayer who believes that an ordinance passed by the City Council of Pasay is unconstitutional for being discriminatory against
him, want to know from you, his tax lawyer, whether or not he can file an appeal. In the affirmative, he asks you where such appeal
should be made: the Secretary of Finance, or the Secretary of Justice, or the Court of Tax Appeals, or the regular courts. What would
your advice be to your client, X?

SUGGESTED ANSWER:
The appeal should be made with the Secretary of Justice. Any question on the constitutionality or legality of a tax ordinance may be raised on appeal
with the Secretary of Justice within 30 days from the effectivity thereof. (Sec. 187, LGC; Hagonoy Market Vendor Association v. Municipality of
Hagonoy, 376 SCRA 376 [ 2002]). (BAR 2003)

b. Administrative

The Municipality of Argao, Province of Cebu passed a tax ordinance requiring all professionals practicing in the municipality to pay a
tax equivalent to two (2%) percent of their gross income. A certified true copy of the ordinance was sent to the Secretary of Finance
for review on 1 March 1989 and was received by him on the same day. On 15 August 1989, even as the tax ordinance remained
unacted upon by the Secretary of Finance, the municipality started collecting the tax in question. The members of the Philippine Bar in
the municipality questioned the legality of the ordinance and sought the suspension of the collection of the tax but the municipality
argued that since the Secretary has not taken any action on the ordinance for more than one hundred twenty days after his receipt
thereof, the legality of the ordinance can no longer be questioned and insisted on the collection of the tax.

What remedies are available to the taxpayer to enable him to question the legality of that ordinance?

ANSWER:
The taxpayer may pursue his remedies either administratively or Judicially. He may, as the case warrants, file a formal protest with the Secretary of
Finance or query with the Provincial Fiscal whose opinion is appealable to the Secretary of Justice whose decision may be contested in the proper
court. The other remedy would be to file a special civil action for declaratory relief (if circumstances still warrant) or to pay the tax and thereafter to
file an action for refund within six (6) years after such payment.

ALTERNATIVE ANSWER:
On the basis of the facts of the problem. It would appear that the administrative remedy is no longer available since there is already an attempt to
enforce collection. The only remedy of the taxpayer is to pay the tax and sue for its recovery in the ordinary court. (BAR 1991)

c. Periods of assessment and collection of local taxes, fees or charges

d. Protest of assessment

On May 15, 2009, La Manga Trading Corporation received a deficiency business tax assessment of PI,500,000.00 from the Pasay City
Treasurer. On June 30, 2009, the corporation contested the assessment by filing a written protest with the City Treasurer. On October

Page 8 of 18
10, 2009, the corporation received a collection letter from the City Treasurer, drawing it to file on October 25, 2009 an appeal against
the assessment before the Pasay Regional Trial Court (RTC).

A. Was the protest of the corporation filed on time? Explain. (3%)

SUGGESTED ANSWER:
The protest was filed on time. The taxpayer has the right to protest an assessment within 60 days from receipt thereof (Sec. 195, LGC).

B. Was the appeal with the Pasay RTC filed on time? Explain. (3%)

SUGGESTED ANSWER:
The appeal was not filed on time. When an assessment is protested, the treasurer has 60 days within which to The taxpayer has 30 days from receipt
of the denial of the protest or from the lapse of the 60-day period decide, whichever comes first, otherwise the assessment becomes conclusive and
unappeallable. Since no decision on the protest was made, the taxpayer should have appealed to the RTC within 30 days from the lapse of the period
to decide the protest (Sec. 195, LGC).

Doña Evelina, a rich widow engaged in the business of currency exchange, was assessed a considerable amount of local business
taxes by the City Government of Bagnet by virtue of Tax Ordinance No. 24. Despite her objections thereto, Doña Evelina paid the
taxes. Nevertheless, unsatisfied with said Tax Ordinance, Doña Evelina, through her counsel Atty. ELP, filed a written claim for
recovery of said local business taxes and contested the assessment. Her claim was denied, and so Atty. ELP elevated her case to the
Regional Trial Court (RTC).

The RTC declared Tax Ordinance No. 24 null and void and without legal effect for having been enacted in violation of the public ation
requirement of tax ordinances and revenue measures under the Local Government Code (LGC) and on the ground of double taxation.
On appeal, the Court of Tax Appeals (CTA) affirmed the decision of the RTC. No motion for reconsideration was filed and the decision
became final and executory. (4%)

(A) If you are Atty. ELP, what advice will you give Doña Evelina so that she can recover the subject local business taxes?

(B) If Doña Evelina eventually recovers the local business taxes, must the same be considered as income taxable by the national
government? (2014 Bar Question)

SUGGESTED ANSWER :
(A) Move for the execution of the judgment which has already become final.

(B) Yes, subject to the tax benefit rule. The local business tax paid is a business- connected tax hence, deductible from gross income. If at the time
of its deduction it resulted to a tax benefit to Dona Evelina, then the recovery will form part of gross income to the extent of the tax benefit on the
previous deduction (Section 34(C)(1), NIRC).

c. Claim for refund of tax credit for erroneously or illegally collected tax, fee or charge

Where the real property tax assessment is erroneous, the remedy of the property owner is: (2012 BAR)
a) To file a claim for refund in the Court of Tax Appeals if he has paid the tax, within thirty (30) days from date of payment;
b) To file an appeal with the Provincial Board of Assessment Appeals within thirty
(30) days from receipt of the assessment;
c) To file an appeal with the Provincial Board of Assessment Appeals within sixty
(60) days from receipt of the assessment;
d) To file an appeal with the Provincial Board of Assessment Appeals within sixty
(60) days from receipt of the assessment and playing the assessed tax under protest.

SUGGESTED ANSWER:
c) To file an appeal with the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the assessment;
Section 226, RA 7160.

9. Civil remedies by the LGU for collection of revenues

a. Local government’s lien for delinquent taxes, fees or charges
b. Civil remedies, in general

Give the remedies available to local government units to enforce the collection of taxes, fees, and charges?

ANSWER:
The remedies available to the local government units to enforce collection of taxes, fees, and charges are:

A. Administrative remedies of distraint of personal property of whatever kind whether tangible or intangible, and levy of real property and interest
therein; and

B. Judicial remedy by institution of an ordinary civil action for collection with the regular courts of proper jurisdiction. (BAR 1997)

i. Administrative action

ii. Judicial action

Which statement on prescriptive periods is true? (2012 BAR)

a) The prescriptive periods to assess taxes in the National Internal Revenue Code and the Local Government Code are the same;
b) Local taxes shall be assessed within five (5) years from the date they became due;
c) Action for the collection of local taxes may be instituted after the expiration of the period to assess and to collect the tax;
d) Local taxes may be assessed within ten (10) years from discovery of the underpayment of tax which does not constitute fraud.

Page 9 of 18
SUGGESTED ANSWER:
b) Local taxes shall be assessed within five (5) years from the date they became due; Section 194, RA 7160.

B. Real property taxation

Anktryd, Inc., bought a parcel of land in 2009 for P7 million as part of its inventory of real properties. In 2010, it sold the land for P12
million which was its zonal valuation. In the same year, it incurred a loss of P6 million for selling another parcel of land in its
inventory. These were the only transactions it had in its real estate business. Which of the following is the applicable tax treatment?
(2011 Bar Question)

(A) Anktryd shall be subject to a tax of 6% of P12 million.

(B) Anktryd could deduct its P6 million loss from its P5 million gain.
(C) Anktryd's gain of P5 million shall be subject to the holding period.
(D) Anktryd's P6 million loss could not be deducted from its P5 million gain.

SUGGESTED ANSWER:
(B) Anktryd could deduct its P6 million loss from its P5 million gain.

1. Fundamental principles

Give at least two (2) fundamental principles governing real property taxation, which are limitations on the taxing power of local
governments insofar as the levying of the realty tax is concerned. (2%)

SUGGESTED ANSWER:
Two (2) fundamental principles governing real property taxation are:
1. The appraisal must be at the current and fair market value; and
2. Classification for assessment must be on the basis of actual use. (Sec. 198, Local Government Code)

ALTERNATIVE ANSWER:
The examinee should be given credit if he chooses the above two (2) or any two (2) of those enumerated below:
- Assessment must be on the basis of uniform classification;
- Appraisal, assessment, levy and collection shall not be let to private persons; and
- Appraisal and assessment must be equitable. (Sec. 198, Local Government Code) (BAR 2000)

State the fundamental principles underlying real property taxation in the Philippines.

ANSWER:
The following are the fundamental principles governing real property taxation:

A. Real property shall be appraised at its current and fair market value;
B. Real property shall be classified for assessment purposes on the basis of its actual use:
C. Real property shall be assessed on the basis of a uniform classification within each local government unit;
D. The appraisal, assessment, levy, and collection of real property tax shall not be let to any private person; and
E. The appraisal and assessment of real property shall be equitable. (BAR 1997)

2. Nature of real property tax

3. Imposition of real property tax

Under Article 415 of the Civil Code, in order for machinery and equipment to be considered real property, the pieces must be placed by
the owner of the land and, in addition, must tend to directly meet the needs of the industry or works carried on by the owner. Oil
companies install underground tanks in the gasoline stations located on land leased by the oil companies from the owners of the land
where the gasoline stations [are] located. Are those underground tanks, which were not placed there by the owner of the land but
which were instead placed there by the lessee of the land, considered real property for purposes of real property taxation under the
local Government Code? Explain.

SUGGESTED ANSWER:
Yes. The properties are considered as necessary fixtures of the gasoline station, without which the gasoline station would be useless. Machinery and
equipment installed by the lessee of leased land is not real property for purposes of execution of a final judgment only. They are considered as real
property for real property tax purposes as “other improvements to affixed or attached real property under the Assessment Law and the Real Property
Tax Code. (Cattex v. Central Board of Assessment Appeals, 114 SCRA 296 [1982]). (BAR 2003)

Aside from the basic real estate tax, give three (3) other taxes which may be imposed by provincial and city governments as well as
by municipalities in the Metro Manila area. (3%)

SUGGESTED ANSWER:
The following real property taxes aside from the basic real property tax may be imposed by provincial and city governments as well as by
municipalities in the Metro Manila area:
- Additional levy on real property for the Special Education Fund (Sec. 235, LGC);
- Additional Ad-valorem tax on Idle lands (Sec. 236, LGC); and
- Special levy (Sec, 240),

Note:
The question is susceptible to dual interpretation because it is asking for three other taxes and not three other real property taxes. Accordingly, an
alternative answer should be considered and given full credit.

ALTERNATIVE ANSWER:
The following taxes, aside from basic real estate tax, may be imposed by Provincial Government:

Page 10 of 18
 - Printer’s or publisher’s tax
- Franchise Tax
- Professional tax

City Government - may levy taxes which the province or municipality are authorized to levy (Sec. 151, LGC)
- Printer’s or publisher’s tax
- Franchise tax
- Professional tax

Municipalities in the Metro Manila Area - may levy taxes at rates which shall not exceed by 50% the maximum rates prescribed in the Local
Government Code.
- Annual fixed tax on manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers and compounders of liquors, distilled
spirits, and wines or manufacture of any article of commerce of whatever kind or nature;
- Annual fixed tax on wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature;
- Percentage tax on retailers

Note:
Other taxes may comprise the enumeration because many other taxes are authorized to be imposed by LGUs. (BAR 2002)

Under Article 415 of the Civil Code, in order for machinery and equipment to be considered real property, they must be placed by the
owner of the land and, in addition, must tend to directly meet the needs of the industry or works carried on by the owner. Oil
companies, such as Caltex and Shell, install underground tanks in the gasoline stations located on land leased by the oil companies
from others. Are those underground tanks which were not placed there by the owner of the land but which were instead placed there
by the lessee of the land, considered real property for purposes of real property taxation under the Local Government Code? Explain
your answer. (5%)

SUGGESTED ANSWER:
Yes. The underground tanks although installed by the lessee. Shell and Caltex, are considered as real property for purposes of the imposition of real
property taxes. It is only for purposes of executing a final judgment that these machinery and equipment, installed by the lessee on a leased land,
would not be considered as real property. But in the imposition of the real property tax, the underground tanks are taxable as necessary fixtures of
the gasoline station without which the gasoline station would not be operational. (Caltex Phils., Inc v. CBAA, 114 SCRA 296). (BAR 2001)

May local governments impose an annual realty tax in addition to the basic real property tax on idle or vacant lots located in
residential subdivisions within their respective territorial jurisdictions? (3%)

SUGGESTED ANSWER:
Not all local government units may do so. Only provinces, cities, and municipalities within the Metro Manila area (Sec. 232, Local Government
Code),may impose an ad valorem tax not exceeding five percent (5%) of the assessed value (Sec.236, Ibid.) of idle or vacant residential lots in a
subdivision, duly approved by proper authorities regardless of area. (Sec. 237, Ibid.) (BAR 2000)

In view of the street widening and cementing of roads and the improvement of drainage and sewers in the district of Ermita, the City
Council of the City of Manila passed an ordinance imposing and collecting a special levy on lands in the district. Jose Reyes, a
landowner and resident of Ermita, submitted a protest against the special levy fifteen (15) days after the last publication of the
ordinance alleging that the special levy was exorbitant since the rate thereof was more than the maximum rate of two (2%) percent
of the assessed value of the real properties allowed by Section 39 of P.D. 464, as amended.

Assuming that Jose Reyes is able to prove that the rate of the special levy is more than the aforesaid percentage limitation of 2%, will
his protest prosper?

ANSWER:
The special levy under the Real Property Tax Code on lands, specially benefited by the proposed infrastructure, may not exceed sixty per cent (60%)
of the cost of said improvement. All lands comprised within the district benefited are subject to the special levy except lands exempt from the real
property tax (Sec. 47. RPT). The protest shall be filed not later than 30 days after the publication of the ordinance and may be submitted to the City
Sanggunian signed by a majority of the landowners affected by the proposed work. If no such protest is filed in the manner above specified, the city
ordinance shall become final and effective. The levy imposed under the ordinance should be within the limit of sixty percent (60%) of the total cost of
the proposed improvement. The rate of two percent (2%) of the assessed value under Sec. 39 of P.D. 464refers to the real property tax and not to
special levies. (BAR 1991)

a) Power to levy real property tax

A city outside of metro manila plans to enact an ordinance that will impose a special levy on idle lands located in residential
subdivisions within its territorialjurisdiction in addition to the basic real property tax. If the lot owners of a subdivision located in the
said city seek your legal advice on the matter, what would your advice be? Discuss. (5%)

SUGGESTED ANSWER:
My advice would be that the city's plan to enact an ordinance that will impose such special levy on idle lands is not legally allowed, unless these lands
are specially benefited by a public works projects or improvements funded by the city government. (Sec. 240, Local Government Code). I will likewise
advise them that before the city council could enact an ordinance imposing a special levy, it shall conduct a public hearing thereon; notify in writing
the owners of the real property to be affected or the persons having legal interest therein as to the date and place thereof and afford the latter the
opportunity to express their positions or objections relative to the proposed ordinance. (Sec. 242, Local Government Code).

ANOTHER SUGGESTED ANSWER:

I would advise the lot owners that the imposition is valid because a city, even if it is outside Metro Manila, may levy an annual tax on idle lands at the
rate not exceeding five percent (5%) of the assessed value of the property which shall be in addition to the basic real property tax. (Sec. 236, Local
Gov't. Code) I would likewise advise them that the levy may apply to residential lots, regardless of land area, in subdivisions duly approved by
proper authorities, the ownership of which has been transferred to individual owners, who shall be liable for the additional tax. (last par., Sec. 237,
ibid.)

Page 11 of 18
Finally, I would advise them to construct or place improvements on their idle lands by making valuable additions to the property or ameliorations in
the land’s conditions so the lands would not be considered as idle. (Sec. 199(m), ibid.) In this manner their properties would not be subject to the ad
valorem tax on idle lands.

Note:
The special levy referred to in the problem might be interpreted by the examinee in two ways: (l) An additional Ad valorem tax on idle lands (Sec.
236, LGC) or: (2) Special levy by Local Government Units (Sec. 240, LGC). This is so because both provisions fall under Chapter V of the local
Government Code dealing with Real Property Taxation. The caption or heading used in Chapter V upon which both impositions fall is "Special Levies
on Real Property”. Hence, it is requested that any of foregoing suggested answers should be given full credit. (BAR 2005)

b) Exemption from real property tax

A inherited a two-storey building in Makati from his father, a real estate broker in the ‘bOs. A group of Tibetan monks approached A
and offered to lease the building in order to use it as a venue for their Buddhist rituals and ceremonies. A accepted the rental of PI
million for the whole year.

The following year, the City Assessor issued an assessment against A for non- payment of real property taxes.

Is the assessor justified in assessing A’s deficiency real property taxes? Explain. (3%)

SUGGESTED ANSWER:
No. The property is exempt from real property tax by virtue of the beneficial use thereof by the Tibetan monks for their religious rituals and
ceremonies. A property that is actually, directly and exclusively used for religious purposes is exempt from the real property tax (Sec. 234, LGC; Sec.
28(3), Article IV, Phil. Constitution). The test of exemption from the tax is not ownership but the beneficial use of the property (City of Baguio v.
Busuego, L-29772, Sept. 18, 1980).

A municipality may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement only if:
(2011 Bar Question)
(A) the real property is within the Metropolitan Manila Area.
(B) the real property is located in the municipality.
(C) the DILG authorizes it to do so.
(D) the power is delegated to it by the province.

SUGGESTED ANSWER:
(A) the real property is within the Metropolitan Manila Area.

Real property owned by the national government is exempt from real property taxation unless the national government: (2011 Bar
Question)
(A) transfers it for the use of a local government unit.
(B) leases the real property to a business establishment.
(C) gratuitously allows its use for educational purposes by a school established for profit.
(D) sells the property to a government-owned non-profit corporation.

SUGGESTED ANSWER:
(B) leases the real property to a business establishment.

The Manila International Airport Authority (MIAA) is exempt from real property tax. Which statement below is NOT correct? (2012
BAR)
a) MIAA is not a government-owned or controlled corporation because it is not organized as a stock or non-stock corporation;
b) MIAA is a government instrumentality vested with corporate powers and performing essential public services;
c) MIAA is not a taxable entity because the real property is owned by the Republic of the Philippines and the beneficial use of such
property has not been granted to a private entity;
d) MIAA is a government-owned or controlled corporation because it is required to meet the test of economic viability.

SUGGESTED ANSWER:
d) MIAA is a government-owned or controlled corporation because it is required to meet the test of economic viability.
MIAA v. City of Pasay. G.R. No. 163072, April 2, 2009.

For purposes of real property taxes, the tax rates are applied on: (2012 BAR)
a) Zonal values; b) Fair market value; c) Assessed values; d) Reproduction values.

SUGGESTED ANSWER:
c) Assessed values Section 233, RA 7160.

What properties are exempt from the real property tax? 5% SUGGESTED ANSWER:
The following properties are exempt from the real property tax:

Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted for
consideration or otherwise to a taxable person;

Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries, and all lands, buildings,
and improvements actually, directly and exclusively used for religious, charitable or educational purposes;

All machineries and equipment that are actually, directly and exclusively used by local water utilities and government-owned or controlled
corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

All real property owned by duly registered cooperatives as provided for under R.A. 6938; and

Page 12 of 18
Machinery and equipment used for pollution control and environmental protection. [Sec. 234, LGC] (BAR 2006)

The Constitution provides “charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and non-profit
cemeteries and all lands, buildings, and improvements actually, directly and exclusively used for religious, charitable or educational
purposes shall be exempt from taxation." This provision exempts charitable institutions and religious institutions from what kind of
taxes? Choose the best answer. Explain. 5%

A. from all kinds of taxes, i.e., income, VAT, customs duties, local taxes and real property tax
B. from income tax only
C. from value-added tax only
D. from real property tax only
E. from capital gains tax only

SUGGESTED ANSWER:
I choose (d), from real property tax only. This is the connotation of the phrase “and all lands, buildings and improvements" thereby limiting the
exemption to real property taxes only (CIRv. CA, 298 SCRA 83 [1998]; Lladoc v. Commissioner, 14 SCRA 292 [1967];
Hodges v. Municipal Board of Iloilo City, 19 SCRA 28 [1965]). (BAR 2006)

The Roman Catholic Church owns a 2-hectare lot in a town in Tarlac province. The southern side and middle part are occupied by the
Church and a convent, the eastern side by a school run by the Church itself, the southeastern side by some commercial
establishments, while the rest of the property, in particular the northwestern side, is idle or unoccupied.

May the Church claim tax exemption on the entire land? Decide with reasons. (5%)

SUGGESTED ANSWER:
No. The portions of the land occupied and used by the church, convent and school run by the church are exempt from real property taxes while the
portion of the land occupied by commercial establishments and the portion, which is idle, are subject to real property taxes. The “usage” of the
property and not the “ownership" is the determining factor whether or not the property is taxable. [Lung Center of the Philippines v. Q.C., 433 SCRA
119 (2004)]. (BAR 2005)

Under the Local Government Code, what properties are exempt from real property taxes? (5%)

SUGGESTED ANSWER:
The following properties are exempt from real property taxes: (Sec. 234, LGC).

1. Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person;
2. All lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes by charitable
institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries;
3. All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled
corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;
4. All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
5. Machinery and equipment used for pollution control and environmental protection. (BAR 2002)

Article VII, Section 28 (3) of the 1987 Philippine Constitution provides that charitable institutions, churches and personages or
covenants appurtenant thereto, mosques, non-profit cemeteries and all lands, buildings and improvements actually, directly and
exclusively used for religious, charitable or educational purposes shall be exempt from taxation.

To what kind of tax does this exemption apply? (2%)

SUGGESTED ANSWER:
This exemption applies only to property taxes. What is exempted is not the institution itself but the lands, buildings and improvements actually,
directly and exclusively used for religious, charitable and educational purposes. (Commissioner of Internal Revenue
v. Court of Appeals, et aL, G.R. No. 124043, October 14, 1998). (

Is proof of actual use necessary for tax exemption purposes under the Constitution? (3%)

SUGGESTED ANSWER:
Yes, because tax exemptions are strictly construed against the taxpayer. There must be evidence to show that the taxpayer has complied with the
requirements for exemption. Furthermore, real property taxation is based on use and not on ownership, hence the same rule must also be applied for
real property tax exemptions. BAR 2000)

The Constitution exempts from taxation charitable institutions, churches, parsonages or convents appurtenant thereto, mosques and
non-profit cemeteries and lands, buildings and improvements actually, directly and exclusively used for religious, charitable and
educational purposes.

4. Appraisal and assessment of real property tax

a. Rule on appraisal of real property at fair market value
b. Declaration of real property
c. Listing of real property in assessment rolls
d. Preparation of schedules of fair market value
i. Authority of assessor to take evidence
ii. Amendment of schedule of fair market value
e. Classes of real property
f. Actual use of property as basis of assessment

Q: Mr. Jose Castillo is a resident Filipino Citizen. He purchased a parcel of land in Makati City in 1970 at a consideration of P1 Million.
In 2011, the land, which remained undeveloped and idle, had a fair market value of P20Million. Mr. Antonio Ayala, another Filipino

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citizen, is very much interested in the property and he offered to buy the same for P20 Million. The Assessor of Makati City re-
assessed in 2011 the property at P10 Million.

a. When is Mr. Castillo liable for real property tax on the land beginning 2011 or beginning 2012? Explain your answer.
b. Is Mr. Castillo liable for income tax in 2011 based on the offer to buy by Mr. Ayala? Explain your answer.
c. Should Mr. Castillo agree to sell the land to Mr. Ayala in 2012 for P20 Million, subject to the condition as stated in The Deed of
Sale that the buyer shall assume the capital gains tax thereon, how much is the income tax due on the transaction and when must
the tax return be filed and the tax be paid by the taxpayer? Explain your answer. (2012)

Suggested Answer:
a. Mr. Castillo shall be liable to the real property tax based on the re-assessment beginning 2012. All re-assessment made after the first day of any
year shall take effect on the first day of January of the succeeding year (Sec. 221, LGC).
b. NO. Mr. Castillo is not liable for income tax in 2011 because no income is realized by him during that year. Tax liability for income tax attaches
only if there is a gain realized resulting from a closed and complete transaction (Madrigal v. Rafferty, G.R. No. L-12287, August 7, 1918).
b. He shall be liable to pay 6% capital gains tax (CGT) based on the Gross Selling Price of the Property which is 20 Million plus the GCT
assumed by the buyer. He should file the return within 30 days from date of the sale (date of notarization) and shall pay the tax as he files
the return (Sec. 24(D), NIRC).

ALTERNATIVE ANSWER:
c. The income tax due on the transaction is P1,276,595.74 which is computed as 6% of the Gross Selling Price (GSP). The tax based of the 6%
capital gains tax (CGT) is the higher between the GSP and the fair market value (FMV). The GSP is 20 Million plus the CGT to be assumed by the
buyer, following the doctrine of constructive receipt of income or a total of P21,276,595.74, which amount is higher than the FMV of P20 Million.

Republic Power Corporation (RPC) is a government- owned and controlled corporation engaged in the supply, generation and
transmission of electric power. In 2005, in order to provide electricity to Southern Tagalog provinces, RPC entered into an agreement
with Jethro Energy Corporation (JEC), for the lease of JEC’s power barges which shall be berthed at the port of Batangas City. The
contract provides that JEC shall own the power barges and the fixtures, fittings, machinery, and equipment therein, all of which JEC
shall supply at its own cost, and that JEC shall operate, manage and maintain the power barges for the purpose of converting the fuel
of RPC into electricity. The contract also stipulates that all real estate taxes and assessments, rates and other charges, in respect of
the power barges, shall be for the account of RPC.

In 2007, JEC received an assessment of real property taxes on the power barges from the Assessor of Batangas City. JEC sought
reconsideration of the assessment on the ground that the power barges are exempt from real estate taxes under Section 234 [c] of
R.A. 7160 as they are actually, directly and exclusively used by RPC, a government-owned and controlled corporation. Furthermore,
even assuming that the power barges are subject to real property tax, RPC should be held liable therefore, in accordance with the
terms of the lease agreement. Is the contention of JEC correct? Explain your answer. (4%)

SUGGESTED ANSWER:
The contention of JEC is not correct. The owner of the power barges is JEC which is required to operate, manage and maintain the power barges for
the purpose the claim that RPC, a government-owned and controlled corporation engaged in the supply, generation and transmission of electric
power, is the actual, direct and exclusive user of the barge, hence, does not fall within the purview of the exempting provision of Section 234[c] of
R.A. 7160. Likewise, the argument that RPC should be liable to the real property taxes consonant with the contract is devoid of merit. The liability for
the payment of the real estate taxes is determined by law and not by the agreement of the parties (FELS Energy Inc. P. The Province of Batangas,
516 SCRA 186 [2007]). (BAR 2009)

The real property of Mr. and Mrs Angeles, situated in a commercial area in front of the public market, was declared in their Tax
Declaration as residential because it had been used by them as their family residence from the time of its construction in 1990.
However, since January 1997, when the spouses left for the United States to stay there permanently with their children, the property
has been rented to a single proprietor engaged in the sale of appliances and agri-products. The Provincial Assessor reclassified the
property as commercial for tax purposes starting January 1998. Mr. and Mrs Angeles appealed to the Local Board of Assessment
Appeals, contending that the Tax Declaration previously classifying their property as residential is binding.

How should the appeal be decided? (5%)

SUGGESTED ANSWER:
The appeal should be decided against Mr. and Mrs. Angeles. The law focuses on the actual use of the property for classification, valuation and
assessment purposes regardless of ownership. Section 217 of the Local Government Code provides that “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 if’.

Whenever the decision of the Collector of Customs is adverse to the government, it is automatically elevated to the Commissioner for review and, if it
is affirmed by him, it is automatically elevated to the Secretary of Finance for review. (BAR 2002)

g. Assessment of real property

i. Assessment levels
ii. General revisions of assessments and property classification
iii. Date of effectivity of assessment or reassessment
iv. Assessment of property subject to back taxes
v. Notification of new or revised assessment
h. Appraisal and assessment of machinery

The appraisal, assessment, levy and collection of real property tax shall be guided by the following principles. Which statement does
NOT belong here? (2012 BAR)
a) Real property shall be appraised at its current and fair market value;
b) Real property shall be classified for assessment purposes on the basis of its actual use;
c) Real property shall be assessed on the basis of a uniform classification within each local political subdivision;
d) The appraisal and assessment of real property shall be based on audited financial statements of the owner.

SUGGESTED ANSWER:

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d) The appraisal and assessment of real property shall be based on audited financial statements of the owner.
Section 198, RA 7160.

5. Collection of real property tax

a) Date of accrual of real property tax and special levies
b) Collection of tax
(i) Collecting authority
(ii) Duty of assessor to furnish local treasurer with assessment rolls
(iii) Notice of time for collection of tax
c) Periods within which to collect real property tax
d) Special rules on payment
(i) Payment of real property tax in installments
(ii) Interests on unpaid real property tax
(iii) Condonation of real property tax
e) Remedies of LGUs for collection of real property tax

Quezon City published on January 30, 2006 a list of delinquent real property taxpayers in 2 newspapers of general circulation and
posted this in the main lobby of the City Hall. The notice requires all owners of real properties in the list to pay the real property tax
due within 30 days from the date of publication, otherwise the properties listed shall be sold at public auction.

Joachin is one of those named in the list. He purchased a real property in 1996 but failed to register the document of saile with the
Register of Deeds and secure a new real property tax declaration in his name. He alleged that the auction sale of his property is
void for lack of due process considering that the City Treasurer did not send him personal notice. For his part, the City Treasurer
maintains that the publication and posting of notice are sufficient compliance with the requirements of the law.

If you were the judge, how will you resolve this issue? 2.5%

Assuming Joachin is a registered owner, will your answer be the same? 2.5%

SUGGESTED ANSWER:
I will resolve the issue in favor of the City Treasurer. For purposes of the real property tax, the registered owner of the property is deemed the
taxpayer. Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings relative to a tax sale (Talusan v. Tayag
and Hernandez, 356 SCRA 263 [2001]). Not being the registered owner of the property, Joachin cannot claim to have been deprived of such notice, in
fact, he was not entitled to it. He brought the misfortune upon himself, because he did not register the Deed of Sale with the Register of Deeds upon
its execution or secure a tax declaration in his name. He did not take the necessary steps to protect and legitimize his interest. The auction sale of his
property is, therefore, valid.

No, my answer will not be the same. The law requires that a notice of the auction sale must be properly sent to the registered owner. A mere
publication of the notice of delinquency would not suffice, considering that the procedure in tax sales is in personam. An auction sale, although
preceded by advertisement and publication but without an actual notice to the delinquent taxpayer, is void. (Tan Bantegui, 473 SCRA 663 [2005];
Estate of Mercedes Jacob v. CA, 283 SCRA 474 [19971). (BAR 2006)

ii) Local government’s lien

iii) Remedies in general

Ms. Edna Dinoso is the registered owner of a residential lot with a two-story house situated in Naga City. The lot with an area of328
sq. meter is described and covered by TCT No. 4739 of the Registry of Deeds of Naga City.

On September 12. 1977, a 115 sq. meter portion of Edna’s property was expropriated by the Republic of the Philippines for the sum of
P6.700.00 representing the assessed value of the aforesaid portion: This amount was deposited by the Government in Edna’s account.

For almost ten (10) years, Edna failed to pay her real estate taxes on the same property. Thus, on November 5, 1977, her property
was sold at public auction by the City Treasurer of Naga City to satisfy her real estate tax delinquencies amounting to P5,800.00. The
highest bidder for the property was Angel Chua. Edna was not present at the public auction although she later admitted having
received the notice of hearing for the petition for entry of a new certificate of title by Angel Chua. (Both the auction sale and the final
bill of sale were annotated at the back of TCT No. 4739 by the Register of Deeds.)

On March 15, 1979, Edna filed a complaint to annul the auction sale which was denied by the CFI Judge of Naga City. In fact, the CFI
Judge ordered the TCT # 4739 of Edna be cancelled and that a new title be issued to Angel Chua.

On appeal, the Court of Appeals affirmed the CFI decision in toto. Edna then elevated the case to the Supreme Court citing several
grave errors of law, among which are:

1. That her tax delinquencies (involving P5,800.00) for non-payment of real estate taxes were offset by the sum of P6,700.00which
the government of the Philippines owed her. She claims that her tax delinquencies have been extinguished by legal compensation:
2. That the price of P5,800.00 paid by Angel Chua was grossly inadequate and that because of its inadequacy, the same is
tantamount to deprivation of property without due process of law;
3. That the public auction made on her property is void.

Discuss the merits of the appeal.

ANSWER:
1. The decision of the Court of Appeals affirming the CFI decision must be affirmed.

On the procedural aspect, it has not been shown, as required under the Real Property Tax Code that plaintiff has paid the amount for which the real
property has been sold plus interest.

On the claim of extinction of tax liability by legal compensation, there is jurisprudence to the effect that the doctrine of equitable recoupment does

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not apply in this Jurisdiction. Assuming it does, the facts of the case bear out that the Government does not owe the plaintiff any amount.

2. On the claim that the price for the property was grossly inadequate, the Real Property Tax Code specifically mentions that the sale of real
property at public auction is “to satisfy all the taxes and penalties due and costs of sale" (Sec. 73). Thus, the selling price is based not on the fair
market value of the property sold at public auction but the amount of real property taxes due thereon. In any case, the delinquent taxpayer is given
one year from the date of registration of the sale within which to redeem the property by paying the taxes due plus costs and interest. On the claim
that the public auction made on the property is void, the Real Property Tax Code provides (Sec. 83,2nd par.) that a court shall not declare a sale
invalid due to irregularities in the proceedings unless such irregularities have impaired the substantial rights of the taxpayer. In the case at bar, the
plaintiff received a notice of hearing for the petition for entry of a new certificate of title during which she could have questioned any irregularity in
the conduct of the sale. (BAR 1992)

iv) Resale of real estate taken for taxes, fees or charges

v) Further levy until full payment of amount due

6. Refund or credit of real property tax

a. Payment under protest
b. Repayment of excessive collections

Apparently the law does not provide for the refund of real property taxes that have been collected as a result of an erroneous or
illegal assessment by the provincial or city assessor. What should be done in such instance to avoid an injustice? (2011 Bar Question)
(A) Question the legality of the no-refund rule before the Supreme Court.
(B) Enact a new ordinance amending the erroneous or illegal assessment to correct the error.
(C) Subsequent adjustment in tax computation and the application of the excess payment to future real property tax liabilities.
(D) Pass a new ordinance providing for the refund of real property taxes that have been erroneously or illegally collected.

SUGGESTED ANSWER:
C) Subsequent adjustment in tax computation and the application of the excess payment to future real property tax liabilities.

7. Taxpayer’s remedies
a) Contesting an assessment of value of real property

Madam X owns real property in Caloocan City. On July 1, 2014, she received a notice of assessment from the City Assessor, informing
her of a deficiency tax on her property. She wants to contest the assessment. (4%)

(A) What are the administrative remedies available to Madam X in order to contest the assessment and their respective prescriptive
periods?

(B) May Madam X refuse to pay the deficiency tax assessment during the pendency of her appeal? (2014 Bar Question)

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SUGGESTED ANSWER :

(A) The administrative remedies available to Madam X to contest the assessment and their respective prescriptive periods are as follows:
1. Pay the deficiency real property tax under protest (Section 252, LGC);
2. File the protest with the local treasurer – The protest in writing muse be filed within thirty (30) days from payment of the tax to the
provincial, city, or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60)
days from receipt (Section 252, LGC);
3. Appeal to the LBAA – If protest is denied or upon the lapse of the 60-day period for the treasurer to decide, the taxpayer may appeal
to the LBAA within 60 days and the case decided within 120 days (Section 226 & 229, LGC)
4. Appeal to the CBAA – If not satisfied with the decision of the LBAA, appeal to the CBAA within 30 days from receipt of a copy of the
decision (Section 229(c), LGC).

(B) No. The payment of the deficiency tax is a condition before she can protest the deficiency assessment. It is the decision on the protest or
inaction thereon that gives her the right to appeal. This means that she cannot refuse to pay the deficiency tax assessment during the pendency of
the appeal because it is the payment itself which gives rise to the remedy. The law provides that no protest (which is the beginning of the disputation
process) shall be entertained unless the taxpayer first pays the tax (Section 252, LGC).

i. Appeal to the Local Board of Assessment Appeals

ii. Appeal to the Central Board of Assessment Appeal

A Co., a Philippine corporation. Is the owner of machinery, equipment and fixtures located at its plant in Muntinlupa City. The City
Assessor characterized all these properties as real properties subject to the real property tax. A Co. appealed the matter to the
Muntinlupa Board of Assessment Appeals. The Board ruled in favor of the City. In accordance with RA 1125 (An Act creating the Court
of Tax Appeals). A Co. brought a petition for review before the CTA to appeal the decision of the City Board of Assessment Appeals.

Is the Petition of Review proper? Explain. (5%)

SUGGESTED ANSWER:
No. The CTA is devoid of jurisdiction to entertain appeals from the decision of the City Board of Assessment Appeals. Said decision is instead
appealable to the Central Board of Assessment Appeals, which under the Local Government Code, has appellate jurisdiction over decisions of Local
Board of Assessment Appeals. (Caltex Phils. Inc. v. Central Board of Assessment Appeals, L- 50466. May 31, 1982) (BAR 1999)

iii. Effect of payment of tax

b. Payment of real property tax under protest

On February 13, 1969, X obtained a loan of P800.000.00 from the GSIS secured by the mortgage of a parcel of land including its
improvements. X failed to pay the loan. The lot was foreclosed and sold at public auction to the GSIS as the highest bidder. X failed to
redeem the lot and the GSIS consolidated its title to the lot in 1977. In 1979, however, the GSIS allowed X to repurchase the lot. After
assessment by the City Assessor, the City Treasurer of Manila required X to pay the real estate taxes due on the lot for the years 1977
and 1978. X paid under protest. On September 5, 1979, X sent a demand letter to the City Treasurer for refund. The demand was
refused.

X then filed with the Regional Trial Court a complaint against the City of Manila for a “sum of money and/or recovery of real estate
taxes paid under protest." The City questioned the jurisdiction of the Court. Decide.

ANSWER:

Section 62 of the Real Property Tax Code provides that: "Sec. 62.Payment under protest. —
When a taxpayer desires for any reason to pay his tax under protest, he shall indicate the amount or portion thereof he is contesting and such protest
shall be annotated on the tax receipts by writing thereon the words ‘paid under protest.' Verbal protests shall be confirmed in writing, with a
statement of the ground, therefor, within thirty days. The tax may be paid under protest, and in such case it shall be the duty of the Provincial, City
or Municipal Treasurers to annotate the ground or grounds therefor on the receipt.

In case of payments under protest, the amount or portion of the tax contested shall be held in trust by the treasurer and the difference shall be
treated as revenue.

In the event that the protest is finally decided in favor of the government the amount or portion of the tax held in trust by the treasurer shall accrue
to the revenue account, but if the protest shall be decided finally in favor of the protestant. the amount or portion of the tax protested or applied as
tax credit to any other existing or future tax liability of the said protestant." (Emphasis Supplied)

If the owner is not satisfied with the action of the provincial or city assessors in the assessment of his property, he may file an appeal to the Board of
Assessment Appeals of the province on city, within sixty (60) days from the receipt of the decision (Section 30 of the Real Property Tax Code).

If the owner is not satisfied with the decision of the Board of Assessment Appeals, he may appeal the said decision to the Central Board of
Assessment Appeals within thirty (30) days after the receipt of the decision (Sections 34 and 36 of the Real Property Tax Code).

As enunciated in the case of Victorias Milling Co., Inc., vs. Court of Tax Appeals 22 SCRA 1008, 1001 (1968):

"It Is settled in our Jurisdiction that where an assessment is illegal and void, the remedy of a taxpayer, who has already paid the realty tax under
protest, is to sue for refund in the competent court of first instance. On the other hand, where the assessment is merely erroneous, his recourse is to
file an appeal in the Provincial Board of Assessment Appeals within 60 days from receipt of the assessment."

In view of the foregoing, the legal recourse of X is to appeal the decision of the City Treasurer to the Board of Assessment appeal, and not to file an
action for sum of money and/or recovery of real estate taxes. Hence, the Regional Trial Court has jurisdiction over the complaint filed by X.

ALTERNATIVE ANSWERS:
The Regional Trial Court has Jurisdiction. It has been held that the regular courts have jurisdiction over actions for refund of real estate taxes paid
under protest on the ground of solution indebiti

The RTC does not have jurisdiction over the matter. Section 30 of PD. No. 464 (The Real Property Tax Code) prescribes the proper remedy of the
taxpayer. It requires X, who is not satisfied with the action of the city assessor, to appeal his case to the Local Board of Assessment Appeal within

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sixty days from date or receipt by X of the written notice denying his request for refund of real property taxes paid. (BAR 1993)

(i) File protest with local treasurer

(ii) Appeal to the Local Board of Assessment Appeals
(iii) Appeal to the Central Board of Assessment Appeals
(iv) Appeal to the CTA
(v) Appeal to the Supreme Court

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