LOCAL TAXATION

LOCAL GOVERNMENT TAXATION

Local Government Units –

1. Provinces;
2. Cities;
3. Municipalities;
4. Barangays;
5. Autonomous Region of Muslim Mindanao; and
6. Cordillera Administrative Region.

These political subdivisions are called local governments. They

are considered political bodies corporate for the administration
of the affairs of the community within their respective territorial
boundaries.

The Dual Status of Local Governments

Local governments possess dual character, to wit:

(1) In their public or governmental aspect. – They are agents of

the state and for that purpose exercise by delegation a part of
the sovereignty of the state such as in the imposition and
collection of taxes, preservation of peace and order, and the
establishment of schools; and

(2) In their private or corporate aspect. – They are mere legal

entities (similar to a business corporation) performing functions
not strictly governmental. They act for their own purposes and
not as subdivisions of the state. It is in this character that they
operate, for instance, public utilities (etc. electric plants,
waterworks, etc.) and public markets.

Taxing Power of Local Governments Not Inherent

Unlike a sovereign state, local governments have no inherent

power to tax. Being mere creatures of law, they may exercise
the power only if delegated by them by the national legislature
or conferred by the Constitution.
Since the Constitution provides that: “Each local government
unit shall have the power to create its own sources of revenue
and to levy taxes, fees, and charges, subject to such limitations
and guidelines as the Congress may provide” – this gives the
LGUs the power, independently of legislation, to create their
own sources of revenue and to levy taxes to finance
governmental activities in their localities. However, such power,
is “subject to such limitations and guidelines” as may be
provided by law” (the Local Government Code).

2 Aspects of Local Taxation

1. Levy of taxes, fees, charges, and other impositions; and

2. Real property taxation.

Fundamental Principles of Local Taxation

The fundamental principles of local taxation are as follows:

(1) Taxation shall be uniform in each local government unit;

(2) Taxes, fees, charges and other impositions shall:

(a) be equitable and based as far as practicable on the

taxpayer's ability to pay;

(b) be levied and collected only for public purposes;

(c) not be unjust, excessive, oppressive, or confiscatory;

(d) not be contrary to law, public policy, national economic

policy, or in the restraint of trade;

(3) The collection of local taxes, fees, charges and other

impositions shall not be let to any private person;

(4) 
 The revenue collected shall inure solely to the benefit of,
the local government unit levying the tax, fee, charge or other
imposition unless otherwise specifically provided herein; and

(5) Each local government unit shall, as far as practicable,

evolve a progressive system of taxation.

Case: The Provincial Government of Ilocos Sur has the power to

collect quarry fees for those operating quarries along the
Amburayan River. For purposes of convenience and efficiency
of collection of these fees, the Provincial Government signed a
Memorandum of Agreement with Lam-ang Development
Corporation (LDC) for the latter to collect the quarry fees in
favor of the former. As payment for the collection services of
LDC, the company gets 10% of the total collection.

Question: Is the agreement between the Provincial

Government and LDC valid?

Answer: No. The agreement between the Provincial

Government of Ilocos Sur and LDC is void. One of the basic
principles of local taxation is that the collection of local taxes,
fees, charges and other impositions can not be let to any
private person, including domestic corporations. The Provincial
Government of Ilocos Sur can not assign this power and
authority to collect quarry fees to LDC.

Local Authority to Exercise Taxing Authority


The power to impose a tax, fee, or charge, or to generate

revenue under the LGC shall be exercised by the Sanggunian of
the local government unit concerned through an appropriate
ordinance.

Veto of Tax Ordinances

Question: May a tax ordinance be vetoed by the local chief

executives?

Answer: Yes. Tax ordinances may be vetoed by local chief

executives of the LGUs, on the ground that it is –
(a) ultra vires; or
(b) prejudicial to public welfare.

Note: The reasons for the veto must be stated in writing.

Case: The Sanggunian Barangay of Merville, Paranaque passed

a tax ordinance. The Punong Barangay vetoed the tax
measure claiming that it is prejudicial to public interest.

Question: May the Punong Barangay veto the tax measure

passed by the Sanggunian Barangay?

Answer: No. While under the Local Government Code, the

Local Chief Executives are given the power to veto tax
ordinances passed by their respective Sanggunian, the law
disallows the Punong Barangay from exercising such veto
power. Only the Local Chief Executives of the Province, City,
and Municipality may exercise such veto power.

Procedure for Approval and Effectivity of Tax Ordinances (Public

hearing, Publication, and Posting)

(a) A public hearing must be conducted prior to the

enactment of a tax ordinance;

(b) Within ten (10) days after the approval of the ordinance,
certified true copies of all tax ordinances or revenue measures
shall be published in full for three (3) consecutive days in a
newspaper of local circulation;

(c) In provinces, cities and municipalities where there are no

newspapers of local circulation, it must be posted in at least
two (2) conspicuous and publicly accessible places.

Limitations to LGUs Taxing Power

The LGUs’ taxing powers are limited to:

1. Inherent limitations;
2. Constitutional limitations; and

3. Statutory limitations or those imposed by law, particularly the

Local Government Code.

Common Limitations on the Taxing Powers of LGUs under the

Local Government Code

The following cannot be levied by the local governments:

(1) Income tax, except when levied on banks and other

financial institutions;

(2) Documentary stamp tax;

(3) Estate tax, inheritance, gifts, legacies and other


 acquisitions mortis causa, except as otherwise 
 provided;

(4) Customs duties, registration fees of vessel and wharfage on

wharves, tonnage dues, and all other kinds of customs fees,
charges and dues except wharfage on wharves constructed
and maintained by the LGU concerned;
(5) Taxes, fees or charges on goods carried into or out of, or
passing through, the territorial jurisdictions of local government
units in the guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, fees, or otherwise

(6) Taxes, fees or charges on agricultural and aquatic products

when sold by marginal farmers or fishermen;

(7) Taxes on business enterprises certified to by the Board of

Investments as pioneer or non-pioneer for a period of 6 and 4
years, respectively from the date of registration;

(8) Excise taxes on articles enumerated under the NIRC, as

amended, and taxes, fees or charges on petroleum products;

(9) Percentage or VAT on sales, barters or exchanges or similar

transactions on goods or services except as otherwise provided
herein;
(10) Taxes on the gross receipts of transportation contractors
and persons engaged in the transportation of passengers or
freight by hire and common carriers by air, land or water,
except as provided in the Code;

(11) Taxes on premiums paid by way or reinsurance or

retrocession;

(12) Taxes, fees or charges for the registration of motor vehicles

and for the issuance of all kinds of licenses or permits for the
driving thereof, except tricycles;

(13) Taxes, fees, or other charges on Philippine products

actually exported, except as otherwise provided;

(14) Taxes, fees, or charges, on Countryside and Barangay

Business Enterprises and Cooperatives duly registered under the
Cooperative Code of the Philippines; and

(15) Taxes, fees or charges of any kind on the National

Government, its agencies and instrumentalities, and local
government units.

Case: The City of Caloocan seeks to impose local business taxes

on ABCD Fuel Station, a gasoline retailing station located in
Caloocan City.

Question: May Caloocan City collect business tax from ABCD

Fuel Station:

Answer: No. The City of Caloocan is prohibited from collecting

taxes, fees, charges and other impositions on petroleum
products carried into or out of or passing through the territorial
jurisdictions of local government units pursuant to Section 133
(e) of the Code. LGUs are prohibited from imposing taxes on
any business engaged in the production, manufacture, refining,
distribution or sale of petroleum products. (BLGF Opinion No.
021-2016, 03 August 2016)
Objectives of Limiting the Taxing Powers Allocated to LGUs

While the Constitution ensures the viability and self-sufficiency of

LGUs by directly granting them general taxing powers, the
Constitution also sees fit to have such taxing power allocated
and limited to ensure that:

(1) While the LGUs are being strengthened and made more
autonomous, the taxpayers will not be overburdened or
saddled with multiple and unreasonable impositions;

(2) Each LGU will have its fair share of available resources;

(3) The resources of the national government will not be unduly

disturbed; and

(4) local taxation will be fair, uniform and just.

Scope of Taxing Powers of the LGUs, in General

LGU Scope of Taxing Authority

Provinces May levy only:
(1) Transfer of real property ownership
(2) Business of publication
(3) Franchise tax
(4) Tax on sand, gravel and other quarry
resources
(5) Professional tax
(6) Amusement tax
(7) Annual fixed tax for every 
 delivery truck
or van
Municipalities May levy taxes, fees and charges not
otherwise levied by provinces
Cities May levy taxes, fees and charges which the
province or municipality may impose
Barangays May levy only:
(1) Taxes on stores or retailers
(2) Service fees or charges
(3) Barangay clearance
(4) Other fees and charges
Note: All LGUs may also impose reasonable –

(1) service fees;

(2) rates for operation of public utilities; and
(3) toll fees and charges.

Specific Taxing Power of local government unit (LGUs)

Power Prov. Mun. City Bar.

Tax on Transfer of Real Properties X X
(imposed on the sale, donation,
barter, or any other mode of
transfer of ownership or title to real
property)
Tax on Business of Printing and X X
Publication (imposed on the
business of persons engaged in
printing, and/or publication of
books, cards, posters, leaflets,
handbills, certificates, receipts,
pamphlets, and others of similar
nature)
Franchise tax (notwithstanding any X X
exemption granted by any law or
any other special law, tax may be
imposed on business enjoying a
franchise)
Tax on sand, gravel and other X X
quarry resources (levied on
ordinary stones, gravel, earth and
other quarry resources as defined in
the NIRC, extracted from public
lands or from the beds of seas,
lakes, rivers, streams, creeks, and
other public waters within its
territorial jurisdiction
Professional tax (imposed on each X X
person engaged in the exercise of
a profession requiring government
examination
Amusement tax (Collected from X X
proprietors, lessees, or operators of
theaters, cinemas, concert halls,
circuses, boxing stadia, and other
places of amusement
Annual fixed tax for every delivery X X
truck or van of manufacturers or
producers, wholesalers of, dealers,
or retailers in, certain products
(Imposed on vehicles used for the
delivery of distilled spirits, fermented
liquors, softdrinks, cigars and
cigarettes, and other products as
may be determined by the
sanggunian, to sales outlets, or
consumers in the province, whether
directly or indirectly
Tax on Various Types of Businesses: X X
(1) Manufacturers, assemblers,
repackers, processors, brewers,
distillers, rectifiers, and
compounders of liquors, distilled
spirits, and wines or manufacturers
of any article of commerce of
whatever kind or nature
(2) Wholesalers, distributors, or
dealers in any article of commerce
of whatever kind or nature
(3) Exporters and on
manufacturers, millers, producers,
wholesalers, distributor, dealers or
retailers of essential commodities
enumerated below:
(a) Rice and corn
(b) Wheat and or cassava flour,
meat, dairy products, locally
manufactured, processed or
preserved food, sugar, salt, and
other agricultural, marine, and fresh
water products, whether in original
state or not
(c) Cooking oil and cooking gas
(d) Cement
(e) Laundry soap, detergents,
and 
 medicine
(f) Agricultural implements.
equipment and post-harvest
facilities, fertilizers, pesticides,
insecticides, herbicides and other
farm inputs;
(g) Poultry feeds and other
animal feeds;
(h) School supplies
(4) Retailers
(5) Contractors and other
independent contractors
(6) Banks and other financial
institutions
(7) Peddlers engaged in the sale of
any merchandise or article of
commerce
(8) Any business which the
sanggunian concerned may deem
proper to tax
Fees and charges on X X
regulation/licensing of business and
occupation
Fees for Sealing and Licensing of X X
Weights and Measures
Fishery Rentals, Fees and Charges X X
Community Tax X X
Tax on Gross Sales or Receipts of X
Small-Scale Stores/Retailers with
Fixed Business Establishments
Service Fees and Charges for X
services rendered in connection
with the regulations or the use of
barangay-owned properties or
facilities such as palay, copra, or
tobacco dryers
Barangay Clearance (a city or X
municipality cannot issue a permit
for business without a clearance
from the barangay concerned. The
sangguniang barangay may
impose a reasonable fee on the
clearance)
Other Fees and Charges – X
(a) On commercial breeding of
fighting cocks, cockfights, cockpits;
(b) On places of recreation which
charge admission fees;
(c) On billboards, signboards, neon

 signs, and outdoor
advertisements.
Common LGU Revenue Raising X X X X
Powers:
(1) Service Fees and Charges
(2) Public Utility Charges X X X X
(3) Toll Fees or Charges X X X X

Real Property Tax X X X

within
Metro
Mla.

Tax on Transfer of Real Property Ownership (Provinces, and

Cities)

Types of transfers:
(a) Sale;
(b) Donation or inheritance;
(c) Barter; and
(d) Any other mode of transferring ownership

Rate: Not more than 50% of 1% (Provinces) of the total

consideration involved in the acquisition of the property or of
the fair market value in case the monetary consideration
involved in the transfer is not substantial, whichever is higher.
Note: Not more than 75% of 1% for Cities (50% of the maximum
rate)

Exemption: Sale, transfer or other disposition of real property

pursuant to R.A. No. 6657 (Comprehensive Agrarian Reform
Law)

Who Pays:
(a) seller;
(b) donor;
(c) transferor; and
(d) executor or administrator.

When to Pay: within 60 days from the date of the execution of

the deed or from the date of the decedent's death.

Where to Pay: Office of the Treasurer of the concerned LGU.

Duties of Public Officers:

1. The Register of Deeds of the Province, City, concerned shall,

before registering any deed, require the presentation of the
evidence of payment of this tax.

2. The Provincial, or City Assessor in the Metro Manila Area shall

make the same requirement before cancelling an old tax
declaration and issuing a new one in place thereof

3. Notaries Public shall furnish the provincial treasurer with a

copy of any deed transferring ownership or title to any real
property within thirty (30) days from the date of notarization.

Business Taxes (Provinces, Cities, and Municipalities)

Provinces and Municipalities may imposed taxes on specific

business.

On one hand, a province may impose Tax on Business of

Printing and Publication, a Franchise Tax, a Tax on Sand, Gravel
and Other Quarry Resources as well as a Professional Tax and
Amusement tax, among others. On the other hand, a
municipality may impose a tax on business on manufacturers,
wholesalers, distributors, retailers, contractors banks and
financial institutions as well as peddlers engaged in the sale of
merchandise.

Cities and Municipalities within Metro Manila may imposed all

types of business taxes imposed by Provinces and Municipalities
even for a higher rate of 50% of the maximum rates imposed.
Case: The Sangguniang Lungsod ng Maynila decided to levy a
tax on a specific business which is not one of those business
enumerated under the Local Government Code which the
Province or Municipality may impose upon.

Question: May the local legislative body of the City of Manila

impose a business tax on any business, not otherwise specified
in the LGC?

Answer: Yes. The Sangguniang Lungsod ng Maynila may

impose a business tax it deems to tax on any business operated
within its jurisdiction, as it is not limited to those specified in the
LGC.

Question: The Municipality of Pateros is the last remaining

municipality in Metro Manila. May it impose business taxes on
those business establishments operating within its territory? How
about transfer taxes?

Answer: Yes. Pateros being a municipality within Metropolitan

Manila Area, is authorized to levy tax on businesses even for a
higher rate of 50% of the maximum rates prescribed by
Municipalities. However, it may not impose a transfer tax since
such power is only given to a city or a province.

Cities and Municipalities in the Metropolitan Manila Area may

levy a tax rate of not more than 50% of the maximum rates
provided in Section 143 on tax on businesses. However, when it
comes to Transfer Taxes for the transfer of real properties, only
the Provinces and the Cities may levy said taxes.
Note: Insofar as the imposition of Real Property Taxes is
concerned, this authority is extended to the Provinces, Cities,
and Municipalities within Metro Manila.

Question: Are homeowners’ associations subject to local

business tax (LBT) on association dues, membership fees and
other assessment/ charges collected from its members and
other entities?

Answer: No. Homeowners’ associations are not subject to LBT on

association dues, membership fees and other
assessment/charges collected from its members and other
entities. Section 18, RA No. 9904 (Magna Carta for Homeowners
and Homeowners’ Associations and For Other Purposes)
provides that “in recognition of the associations’ efforts to assist
the LGUs in providing such basic services, association dues and
income derived from rentals of their facilities shall be tax-
exempt.” As such, association dues, membership fees and
other assessment/charges collected by homeowners’
associations, regardless of whether such associations are non-
stock/non-profit or not, are exempt from LBT. However, such
exemption is subject to the condition that such income and
dues shall be used exclusively for the cleanliness, safety,
security and other basic services needed by the members,
including the maintenance of the facilities within the respective
subdivisions or villages. (BLGF Opinion, 04 August 2014)

Question: How about licenses and fees? Are homeowners’

associations subject to licenses and fees?

Answer: Yes. Homeowners’ associations are subject to

regulatory fees and charges imposed under the police powers
of the local government units, as there is no law which provides
for exemption from such fees and charges.

Rules on Payment of Business Tax

The rules on the payment of business taxes are as follows:

(a) Business taxes referred in Sec. 143 of the LGC shall be paid
for every separate or distinct establishment or place where
business subject to tax is conducted;

(b) One line of business is not exempted by being conducted

with some other businesses for which such tax has been paid;

(c) The tax on a business must be paid by the person

conducting it; and

(d) If a person operates 2 or more businesses which are taxed

under Sec. 143 of the LGC, the computation shall be based
on:


(1) combined total gross sales/receipts if subject to the

same tax rate
 ; and

(2) separate reports on gross sales/receipts if subject to

different tax rates.

Question: Are condominium corporations subject to a local

business tax?

Answer: No. Condominium corporations are not business

entities, and are thus not subject to local business tax. Even
though the corporation is empowered to levy assessments or
dues from the unit owners, these amounts are not intended for
the incurrence of profit by the corporation, but to shoulder the
multitude of necessary expenses for maintenance of the
condominium. (Yamane vs. Lepanto Condo Corp. (Oct. 23,
1995))

Basis of Business Tax

Case: Ericson Telecoms was assessed a business tax by the City

Government of Pasig based on its gross revenues as reflected
on its audited financial statements. Ericson Telecoms contested
the assessment claiming that the business tax should be based
on gross receipts not on gross revenues.
Question: What’s the basis of a business tax, gross receipts or
gross revenue?

Answer: A business tax must be based on gross receipts, it being

different from gross revenue.

Gross receipts include money or its equivalent actually or

constructively received in consideration of services rendered or
articles sold, exchanged or leased, whether actual or
constructive.

Gross revenues include accrued revenues or revenues that

were not actually or constructively received as reflected on its
audited financial reports.

The LGC specifically provides that the local business tax

payable is based on the amount of gross sales or gross receipts
of the previous taxable year which a business has to declare.
(Ericsson Telecoms vs. City of Pasig (Nov. 22, 2007).

Situs of Tax Collected
 under Sec. 150 of the LGC

The situs of local taxation shall be determined by the following 5

rules:

Rule 1: In case of persons maintaining/operating a branch or

sales outlet making the sale or transaction, the tax shall be
recorded in said branch or sales outlet and paid to the
municipality/city where the branch or sales outlet is located.

Rule 2: Where there is no branch or sales outlet in the

city/municipality where the sale is made, sale shall be recorded
in the principal office and the tax shall be paid to such
city/municipality.

Rule 3: In the case of manufacturers, contractors, producers,

and exporters having factories, project offices, plants, and
plantations, proceeds shall be allocated as follows:

(a) 30% of sales recorded in the principal office shall be made

taxable by the city/municipality where the principal office is
located; and

(b) 70% of sales shall be taxable by the city/municipality where

the factory, project office, plant, or plantation is located.

Rule 4: In case the plantation is located in a place other than

the place where the factory is located, the 70% in Rule 3 will be
divided as follows:


(a) 60% to the city/municipality where the factory is located;
and


(b) 40% to the city/municipality where the plantation is located.

Rule 5: In case of 2 or more factories, plantations, etc. in

different localities, the 70% shall be prorated among the
localities where the factories, plantations, etc. are located in
proportion to their respective volume of production.

Case: H Co. owns a hydro power plant operated and located in

S Municipality. On the other hand, it sources the water it uses in
operating its hydro power plant from the rivers of three
barangays in B Municipality. The tapping point of the electric
power transmission to the main plant is also located in B
Municipality.

Question: Is B Municipality entitled to the payment of business

taxes from H Co?

Answer: No. Section 150 of the Local Government Code,

provides that in cases where there is a factory, project office,
plant or plantation in pursuit of business, 30% of all sales
recorded in the principal office shall be taxable by the city or
municipality where the principal office is located and 70% of all
sales recorded in the principal office shall be taxable by the
city or municipality where the factory, project office, plant or
plantation is located. Thus, 30% of the total gross receipts of H
Co. recorded in the principal office shall be taxable by the
locality where such principal office is located and the
remaining 70% shall be taxable by S Municipality, where the
hydro power plant is located.

Since the operation of the hydro power plant is in S

Municipality, B Municipality may not share in the taxes, fees or
charges that H Co. is paying to S Municipality (BLGF Opinion
dated 19 February 2016).

Case: Allied Thread Co. is engaged in the business of

manufacturing sewing thread and yarn under duly registered
marks and labels. It operates its factory and maintains an office
in Pasig, Rizal and sells its products in the City of Manila through
its broker or agent, Ker & Company, Ltd. The City of Manila
passed an ordinance imposing on manufacturers, importers or
producers, doing business in the City of Manila, business taxes
based on gross sales on a graduated basis. Allied Thread Co.
questioned the validity of the business tax.

Question: Is the business tax imposed on Allied Thread valid?

Answer: Yes. The tax ordinance is valid. The tax is imposed on

the performance of an act or occupation, enjoyment of a
privilege, and hence is in the nature of an excise tax. The power
to levy such tax depends on the place in which the act is
performed or the occupation is engaged in, not upon the
location of the office. Allied Thread Co., Inc. admits that it does
business in the City of Manila through a broker or agent, Ker &
Company, Ltd. Doing business in the City of Manila is all that is
required to fall within the coverage of the ordinance. (Allied
Thread Co., Inc. v. City Mayor of Manila (1984)


Question: Where is the situs of the contract for purposes of

taxation?

Answer: It is the place of the consummation of the sale,

associated with the delivery of the things which are the subject
matter of the contract that determines the situs of the contract
for purposes of taxation, and not merely the place of the
perfection of the contract (Shell Co., Inc. v. Municipality of
Sipocot, Camarines Sur (1959).
It is not the place where the contract was perfected, but the
place of delivery which determines the taxable situs of the
property sought to be taxed.

Case: S Corp. is a domestic corporation engaged in the

business of manufacturing and selling electronic products. Its
principal office and manufacturing plant is located in
Muntinlupa City. S Corp. also sells products nationwide through
its authorized dealers who purchased products from S Corp.’s
head office in Muntinlupa City. These purchases made by the
dealers are dispatched from, invoiced, and recorded in
Muntinlupa City.

Question: To which LGU may S Corp. be held liable for local

business tax?

Answer: Under Section 150 of the Local Government Code, in

order for an entity to be liable for LBT in the city or municipality
other than where its principal office is located, certain
conditions must be met: (1) It must conduct the operations of
the business as an extension of the principal office; and (2) The
branch or sales office should likewise record the sale or
transaction.

Considering that the sales made by S Corp. to its dealers

nationwide are duly invoiced and recorded in Muntinlupa City
where its principal office is located, S Corp. is not liable for LBT in
the city or municipality where its dealers operate. The second
paragraph of Section 150 of the LGC provides – “in cases
where there is no such branch or sales outlet in the city or
municipality where the sale or transaction is made, the sale shall
be duly recorded in the principal office and the taxes shall
accrue and shall be paid to such city or municipality.” (BLGF
Opinion No. 019-2016, 03 August 2016).

Community Tax

LGU with Authority to Impose: Cities and Municipalities

Persons Liable to Pay Community Taxes:

(1) Individuals who are – 
 (a) Inhabitants of the Philippines, (b)

18 years of age or over, who is either: (i) regularly employed on
a wage or salary basis for at least 30 consecutive working days
during any calendar year; (ii) engaged in business or
occupation; (iii) owns real property with an aggregate
assessed value of P1,000 or more (iv) required by law to file an
income tax return.

(2) Juridical Persons –

(a) Every corporation no matter how created or organized;
(b) Domestic or resident foreign corporation; and
(c) Engaged in or doing business in the Philippines.

Rates:

(1) Individuals –

(a) Annual community tax of P5.00 plus annual additional tax of

P1.00 per P1,000.00 of income regardless whether from business,
exercise of profession or property;

(b) Not to exceed P5,000
 ;

(c) Husband and wife shall pay a basic tax of P5.00 each plus
additional tax based on total property owned by them and the
total gross receipts or earnings derived therefrom;

(2) Juridical Persons –

(a) Annual community tax of P500 plus annual additional tax of

not more than P10,000.00 according to the following schedule:

(i) P2.00 for every P5,000 worth of real property in the

Philippines owned during the preceding year;

(ii) P2.00 for every P5,000.00 of gross receipts derived from

business in the Philippines during the preceding year.
(b) Dividends received by a corporation from another
corporation shall be deemed part of the gross receipts or
earnings for purposes of computing additional tax.

Persons Exempt from Community Tax:

(1) Diplomatic and consular representatives; and

(2) Transient visitors who stay in the Philippines for not more than
3 months.

Where Paid: Community taxes are paid where the individual

resides, or where the principal office of the juridical entity is
located.

When Community Tax Accrues and Paid: Community taxes

accrue on the 1st day of January of each year which shall be
paid not later than the last day of February of each year.

Penalty for Non-Payment of the Community Tax: If the

community tax is unpaid within the prescribed period, an
interest of 24% shall be added per annum from the due date
until payment.

Presentation of Community Tax Certificate, When Necessary

When an individual subject to community tax:


(a) Acknowledges any document before a notary public;

(b) Takes the oath of office upon election or appointment to
any position in the government service;
(c) Receives any license, certificate, or permit from any public
authority;
(d) Pays any tax or fee;
(e) Receives any money from any public fund;
(f) Transacts other official business; and
(g) Receives any salary or wage from any person or
commission.

Question: Is the presentation of the Community Tax Certificate

required in the registration of a voter?

Answer: The presentation of certificate is not required in the

registration of a voter.

Question: May the city or municipal treasurer deputize the

barangay treasurers to collect community taxes?

Answer: Yes. The city or municipal treasurer may deputize the

barangay treasurers to collect, provided the latter is bonded.

Note: If the community tax is actually and directly collected by

the city or municipal treasurer, the community tax accrues
entirely to the general fund. However, if the community taxes
are collected through the barangay treasurers, the community
taxes collected shall be apportioned equally.

Civil Remedies by the LGU for Collection of Revenues:

General Rule: Unpaid Local Taxes serves as LGU’s Lien. Local

taxes, fees, charges and other revenues constitute a lien,
superior to all liens, charges or encumbrances in favor of any
person, enforceable by appropriate administrative or judicial
action, not only upon any property or rights therein which may
be subject to the lien but also upon property used in business,
occupation, practice of profession or calling, or exercise of
privilege with respect to which the lien is imposed.

The lien may only be extinguished upon full payment of the

delinquent local taxes fees and charges including related
surcharges and interest.

Civil Remedies –

The civil remedies of the LGUs for the collection of local taxes
are as follows:

(a) Administrative Action through –

 (1) distraint of goods, chattels, or effects, and other personal
property of whatever character, including stocks and other
securities, debts, credits, bank accounts, and interest in and
rights to personal property; and

(2) levy upon real property and interest in or rights to real

property);

(b) Judicial Action

LGU’s Simultaneous Civil Actions

Case: The City Government of Manila simultaneously levied

upon the real property of Mr. Antonio Esfandiari for unpaid
business taxes to the LGU and at the same filed a collection suit
against Mr. Enfandiari for the same unpaid taxes. Mr. Esfandiari
sought the dismissal of the collection suit filed by the City of
Manila on the ground that a levy was already made upon his
real property.

Question: Will the collection suit filed by the City of Manila

prosper?

Answer: Yes. The City of Manila may simultaneously exercise its

administrative and judicial remedies against Mr. Esfandiari.
Either of these remedies or all may be pursued concurrently or
simultaneously at the discretion of the local government unit
concerned.

Administrative Remedies/Actions

(a) Distraint of Personal Property

Procedure:
(1) Seizure of personal property;
(2) Accounting of distrained goods;
(3) Publication of time and place of sale and 
 the articles
distrained;
(4) Release of distrained property upon 
 payment prior to
sale;
 (5) Sale at Public Auction;
(6) Disposition of proceeds.

(b) Levy of real property, procedure

Procedure:
(1) Preparation of a duly authenticated 
 certificate by the
LGU Treasurer effecting 
 the levy on the real property;
(2) Service of written notice of levy to the 
 Assessor and
Register of Deeds;
(3) Annotation of the levy on the tax declaration and the
certificate of title;
(4) Publication of time and place of sale;
(5) Release of levied property upon 
 payment prior to sale;
(6) Sale at Public Auction;
(7) Disposition of proceeds.

(c) Further distraint or levy


The remedies of distraint or levy may be repeated if necessary

until the full amount due, including all expenses, is collected

Exemption of Personal Property from Distraint or Levy


The following are exempted from distraint or levy:

(1) Tools and implements necessarily used by the taxpayer in his

trade or employment;

(2) One horse, cow, carabao, or other Beast of 
 burden, such

as the delinquent taxpayer may select and necessarily used by
him in his ordinary occupation;

(3) His necessary Clothing, and that of all his family;

(4) Household furniture and utensils necessary for housekeeping

and used for that purpose by the delinquent taxpayer, such as
he may select, of a value not exceeding P10,000;

(5) Provisions, including crops, actually provided for individual

or family use sufficient for 4 months;

(6) The professional Libraries of doctors, engineers, one fishing

boat and net, not exceeding the total value of P10,000 by the
lawful use of which a fisherman earns his livelihood; and

(7) Any material or article forming part of a house or

improvement of any real property

Penalty on Local Treasurer for Failure to Issue and Execute

Warrant of Distraint or Levy

The local treasurer who fails to issue a warrant of distraint or levy

is automatically dismissed from the service after due notice and
hearing.

Judicial Remedies/Action

Procedure

A judicial action for the collection of delinquent local taxes

may be instituted as follows:

(a) An 
 ordinary civil action for the collection of delinquent

taxes, fees, charges or other revenues is filed with regular courts
of proper jurisdiction (RTC if it exceeds P300k outside MM and
P400k within MM; MTC if it does not exceed P300k outside MM
and P400k within MM);

(b) The civil action shall be filed by the local treasurer.

Question: May the Courts issue a writ of injunction to enjoin the

collection of local taxes?

Answer: Yes. The prohibition on the issuance of a writ of

injunction to enjoin the collection of taxes applies only to
national internal revenue taxes, and not to local taxes. The
Local Government Code does not contain a provision
prohibiting courts from enjoining the collection of local taxes.
Such lapse may have allowed preliminary injunction under Rule
58 of the Rules of Court where local taxes are involved.

Taxpayer’s Remedies on Local Taxation:

Periods of Assessment and Collection of local taxes, fees or

charges –

Question: What is the period of assessment of a deficient local

tax?

Answer: An assessment for the payment of a local tax

deficiency must be made within 5 years from the date the local
tax become due. 
 However, in case of fraud or intent to evade
tax the assessment must be made within 10 years from
discovery of fraud or intent to evade payment.

Question: What is the period of collection of a delinquent local

tax?

Answer: The collection of a delinquent local tax must be made

within 5 years from the date of assessment by administrative or
judicial action.

Instances When Running of Prescription Periods Suspended


The running of the prescriptive periods is suspended:

(a) When the treasurer is legally prevented from making the

assessment or collection (e.g. a TRO or injunction was issued
against the treasurer);
(b) When the taxpayer requests for reinvestigation and
executes a waiver in writing before lapse 
 of the period for
assessment or collection;
(c) When the taxpayer is out of the country or otherwise
cannot be located.

Protest of Assessment and Judicial Appeal

Procedure in Protesting an Assessment –

1. Within 60 days from the receipt of the notice of assessment,
the taxpayer may file a written protest with the local treasurer
contesting the assessment;

2. The Treasurer is given a period of 60 days within which to

decide the protest;

3. If the Treasurer denies the protest or he fails to act on the

protest within 60 days, the taxpayer shall have 30 days from the
receipt of the denial of the protest or from the lapse of the 60
day period prescribed herein within which to appeal with the
court of competent jurisdiction.

Note: If no protest is made upon receipt of the assessment or if

no appeal is made within the period of appeal upon receipt of
the decision or lapse of the period for the local treasurer to
decide, the assessment or the decision of the local treasurer
becomes final, executor and demandable.

Claim for Refund of Tax Credit for Erroneously or Illegally

Collected Tax, Fee Or Charge

The requisites of a valid claim for refund or tax credit are as

follows:

(a) A written claim for refund or credit must be filed with local
treasurer;

(b) The claim must be brought within 2 years from payment 
 of

tax, fee or charge or from the date the taxpayer became
entitled to refund or credit.
REAL PROPERTY TAXATION

The Fundamental Principles Of Real Property Taxation

The appraisal, assessment, levy and collection of real property

tax shall be guided by the following fundamental principles:

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

market value;

(b) Real property shall be classified for assessment purposes on

the basis of its “actual use” (regardless of where located,
whoever owns it, and whoever uses it);

(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.

Note: “Actual Use” refers to the purpose for which the property
is principally or predominantly utilized by the person in
possession thereof. “Usage” means direct, immediate and
actual application of the property (MCIAA v. Marcos, Sept. 11,
1996)

Nature of Real Property Tax

A real property tax has the following nature –

(1) It is a direct tax on the ownership or use of real property;

(2) It is an ad valorem tax (value is the tax base);

(3) It is proportionate because the tax is calculated on the basis

of a certain percentage of the value 
 assessed;

(4) It creates a single, indivisible obligation;

(5) It attaches on the property (i.e., a lien) and is 
 enforceable

against it;

(6) With respect to LGUs, it is levied through a delegated power.

Imposition of Real Property Tax

Coverage

It covers the following:

(a) Land
 ;
(b) Building;

(c) Machinery
 ; and
(d) Other improvements not specifically exempted.

Rate

The rate shall be as follows:

(a) Province: not exceeding 1% of the assessed value of real

property; and


(b) City or municipality within Metro Manila: not exceeding 2%

of the assessed value of real property.

LGU’s Special Levies Authorized by the LGC

1. Additional ad valorem tax on idle lands;

2. Special levy on lands benefited by LGU’s public works; and
3. Additional levy on real property for special education fund.

Special Levy on Idle Lands

A province, or city or municipality within Metro Manila may levy

an annual tax on idle lands at the rate not exceeding 5% of the
assessed value of the property in addition to the basic tax.
The special levy on idle lands cover the following:

(1) Agricultural Lands: More than 1 hectare in area suitable for

cultivation, dairying, inland fishery, and other agricultural uses,
1/2 of which remain uncultivated or unimproved.

(2) Other than Agricultural
 : More than 1,000 square meters in

area 1/2 of which remain unutilized or unimproved.

Idle lands Exempt From Special Levy

Lands exempt by reason of force majeure, civil disturbance,

natural calamity or any cause or circumstance which physically
or legally prevents improving, utilizing or cultivating the same.

Special Levy for Public Works Projects Improvements

A province, city or municipality may impose a special levy on

the lands comprised within its territorial jurisdiction specially
benefited by public works projects or improvements funded by
the local government unit concerned.

Requirements for Special Levy to Apply

(1) the special levy shall not exceed 60% of the actual cost of
such projects and improvements, including the costs of
acquiring land and such other real property in connection
therewith;

(2) the special levy shall not apply to lands exempt from basic
real property tax and the remainder of the land portions of
which have been donated to the local government unit
concerned for the construction of such projects or
improvements;

(3) The tax ordinance shall describe with reasonable accuracy

the nature, extent and location of the public works to be
undertaken, the estimated cost, the metes and bounds by
monuments and lines and the number of annual installments
which should not be less than 5 nor more than 10 years;
(4) Before the enactment of an ordinance imposing a special
levy, the sanggunian concerned 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.

How the Amount of Special Levy is Determined

The special levy authorized herein shall be apportioned,

computed, and assessed according to the assessed valuation
of the lands affected as shown by the books of the assessor
concerned, or its current assessed value as fixed by said
assessor if the property does not appear of record in his books.
Upon the effectivity of the ordinance imposing special levy, the
assessor concerned shall forthwith proceed to determine the
annual amount of special levy assessed against each parcel of
land comprised within the area especially benefited and shall
send to each landowner a written notice thereof by mail,
personal service or publication in appropriate cases.

Remedy of Taxpayer Who Disagrees with the Special Levy

Any owner of real property affected by a special levy or any

person having a legal interest therein may, upon receipt of the
written notice of assessment of the special levy may file a
protest with the Office of the Treasurer. If the protest is denied,
the taxpayer may appeal the assessment to the proper courts.

Question: Is the Sanggunian obliged to establish a uniform

percentage of lands subject to the special levy?

Answer: No. The sanggunian concerned shall not be obliged, in

the apportionment and computation of the special levy, to
establish a uniform percentage of all lands subject to the
payment of the tax for the entire district, but it may fix different
rates for different parts or sections thereof, depending on
whether such land is more or less benefited by proposed work.
Special Levy for Special Education Fund (SEF)

It is the authority of a province, or city or municipality within

Metro Manila to levy and collect an annual tax of one percent
(1%) on the assessed value of real property which shall be in
addition to the basic real property tax. The proceeds thereof
shall exclusively accrue to the Special Education Fund (SEF)
created under RA No. 5447.

Properties & Institutions Exempt from Real Property Tax

(1) Those owned by the Republic of the Philippines or any of its

political subdivisions except when beneficial use is granted for
a consideration or to a taxable person;

(2) 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;

(3) Machinery and equipment actually, directly and

exclusively used by local water utilities and GOCCs engaged in
the supply and distribution of water and/or generation and
transmission of electric power;

(4) Real property owned by duly registered Cooperatives as

provided for under Republic Act No. 6938 (Cooperative Code
of the Philippines); and

(5) Machinery and equipment used for pollution control and

environmental protection.

Case: CPI Corporation is the developer of X Resortville located

in Dasmariňas City, Cavite. On 21 July 2008, it donated the road
lots, alleys, easements and open spaces of X Resortville to the
Municipality of Dasmariňas. In a Resolution No. 056-2009, the
Municipal Mayor was authorized to sign the Deed of Donation
accepting the donation of CPI. However, the Tax Declaration
for the property was not issued to the City Government due to
non-payment of real property tax (“RPT”) from 2003 to present.
When required to pay the RPT, CPI argued that the road lots,
alleys, easements and open spaces are exempt from RPT as
they are classified for its “actual use” and that they are now
government properties for public use, pursuant to the Local
Government Code (“LGC”) and Presidential Decree (“PD”) No.
1216.

Question: Are the donated road lots, alleys, easements and

open spaces exempt from Real Property Tax?

Answer: Yes, they are exempt from RPT but only starting 2010.
The prior liability or delinquencies for RPT due on the open
spaces, road lots and alleys when it was still taxable, under the
ownership of CPI, is not extinguished and remains due. The
exemption from payment of RPT should begin only the following
year after the donation was actually made. Since the donation
was made in 2009, the RPT exemption may only be invoked
starting 2010. Thus, CPI is liable for RPT from 2003 to 2009. (BLGF
Opinion No. 29-2016 dated 7 October 2016).

Requirements for RPT Exemption of GOCCs

(1) Documentary evidence such as affidavits, by-laws,

contract, articles of incorporation;

(2) Submitted to the local Assessor; and

(3) Submitted within 30 days from date of Declaration.

Note: Failure to file an application for exemption, will render the

property to be listed in Assessment Rolls as taxable GOCCs.

Mactan Cebu International Airport Authority vs. Marcos

(11 September 1996)

Question: Is the Mactan Cebu International Airport Authority

Airport Authority exempt from RPT?
Answer: Mactan Cebu International Airport Authority Airport
Authority is a GOCC, not exempt from RPT. Congress in
amending the law specifically deleted GOCCS from the
enumeration in Sec 234 (a) of the LGC on the properties
exempt from RPT. Nothing can prevent Congress from
decreeing that even instrumentalities or agencies of the
Government performing governmental functions may be
subject to tax. Where it is done precisely to fulfill a constitutional
mandate and national policy, no one can doubt its wisdom.

Philippine Ports Authority vs. City of Iloilo (July 14, 2003)

Question: Is the PPA as a GOCC exempted from RPT?

Answer: No. PPA as a GOCC is not covered by the exemption

under the Local Government Code. PPA’s contention that the
term GOCCs covers only those not performing governmental
functions is without legal basis for it reads into the law a
distinction that is not there. It runs contrary to the clear intent of
the law to withdraw from all units of the government, including
GOCCs, their exemptions from taxes. If indeed PPA is not
subject to local taxation, PPA’s charter would not have
specifically provided for its exemption from the payment of real
property tax. Its exemption therein therefore proves that it was
only an exception to the general rule of taxability of petitioner.
Given that said privilege was withdrawn by the subsequent
passage of the LGC, its claim for exemption from RPT fails.

Manila International Airport Authority vs. CA (20 June 2006)

Question: Is the Manila International Airport Authority exempt

from RPT?

Answer: The SC ruled that MIAA's Airport Lands and Buildings are
exempt from RPT imposed by local governments.

First, MIAA is not a GOCC but an instrumentality of the National

Government and thus exempt from local taxation. Manila
International Airport Authority falls under the term
“instrumentality” outside the scope of LGC’s local taxing
powers under Sec 133 (o) –

“Sec 133 (o), LGC - LGUs not allowed to levy –

(o) taxes/fees/charges of any kind on the national

government, its agencies, instrumentalities and LGUs.”

Second, the real properties of MIAA are owned by the Republic

of the Philippines and thus exempt from RPT.

Lung Center of the Phils. vs. Quezon City (29 June 2004)

Question: Does a charitable institution lose its character and its

exemption because it derives income from patients?

Answer: No. A charitable institution does not lose its character

and its exemption simply because it derives income from
paying patients so long as the money received is devoted to
the charitable object it was intended to achieve, and no
money inures to the benefit of persons managing the institution.

Case: ABC Foundation, a charitable institution, leased its real

property to XYZ Corporation. The LGU having jurisdiction over
the real property assessed ABC Foundation of real property
taxes?

Question: Are properties of the charitable institution leased to

private entities exempt from RPT?

Answer: No. A property leased to private entities is not exempt

from RPT, as it is not actually, directly and exclusively used for
charitable purposes. However, portions of the land occupied
by the hospital and portions used for its patients, whether
paying or non-paying, are exempt from real property taxes.

Condonation and Reduction of Real Property Tax and Interest

Case: In 2009, Governor Dimaculangan decided to condone
and reduce the real property taxes in his province by issuing an
executive order hoping that such act will help him win a re-
election in the upcoming elections in 2010.

Question: Does the Local Chief Executive have the power to

condone or reduce real property taxes?

Answer: No. The power to condone or reduce real property tax

and interest may only be exercised by the:

(1) the Sanggunian of any province, city or municipality

through an ordinance, in case of a general failure of crops or
substantial decrease in the price of agricultural or agri-based
products, or calamity for the succeeding year or years in the
city or municipality affected by the calamity; and

(2) the President, when public interest so requires, for any year
in any province or city or a municipality within the Metropolitan
Manila Area

Note: Executive Oder No. 173 (Oct. 31, 2014)

Exercising the power of the President to condone or reduce RPT

and interest under Sec. 277 of the LGC, President Benigno
Simeon Aquino issued EO 173 and ordered the reduction and
condonation of real property taxes as well as interest and
penalties assessed on the power generation facilities of IPPs
that have BOT contracts with GOCCs.

Administration of Real Property Tax

Declaration of Real Property


The value of the real property may be made by the following:

(a) Declaration by the Owner or Administrator –

(b) Declaration by Any Person
 Acquiring Real Property or

Making Improvements 
 Thereon –
(c) Declaration by the Provincial or City or Municipal Assessor –
Declaration by the Owner or Administrator –

(1) Prepare a sworn statement declaring the true value of the

property which shall be the current and fair market value of the
property.

(2) It must contain a sufficient description of the property to

enable the assessor or his deputy to identify the same for
assessment purposes

(3) The declaration must be filed with the assessor once every
three (3) years during the period from January 1 to June 30.

Declaration by Any Person
 Acquiring Real Property or Making

Improvements 
 Thereon –

The sworn statement declaring the true value of the property

must be filed to the provincial, city or municipal assessor within
sixty (60) days after the acquisition or upon completion or
occupancy of the improvement, whichever comes earlier.

Declaration by the Provincial or City or Municipal Assessor –

When the person required to file the sworn declaration refuses

or fails to make such declaration, the provincial, city or
municipal assessor shall declare the property in the name of the
defaulting owner.

Duty of Person Transferring Ownership Over a Real Property

Any person who shall transfer real property ownership to

another shall notify the provincial, city or municipal assessor
within 60 days from the date of such transfer. The notification
shall include the following information:

(a) the mode of transfer;

(b) the description of the property transferred; and
(c) the name and address of the transferee.
Listing of Real Property in the Assessment Rolls

The LGC requires the local assessor to maintain an assessment

roll wherein all real property, whether taxable or exempt,
located within the territorial jurisdiction of the LGU, are listed as
follows:

(a) Real property, in general, shall be listed, valued and

assessed in the name of the owner or administrator, or anyone
having legal interest in the property;

(b) For undivided real property, it may be listed in the name of

the estate or of the heirs and devisees, or in the name of one or
more co-owners;

(c) For real property of a corporation, partnership or

association, they are listed in the same manner as an individual.

(d) For real property owned by the Republic of the Philippines,

its instrumentalities, political subdivision, the beneficial use has
been granted to a taxable person, it shall be listed in the name
of the possessor, grantee or of the public entity if such property
has been acquired or held for resale or lease.

Appraisal and Valuation of Real Properties

Land is appraised and valuated as follows:

(1) The assessor of the province, city or municipality or his

deputy may summon the owners or persons having legal
interest therein and witnesses, administer oaths, and take
deposition concerning the property, its ownership, amount,
nature, and value;

(2) Before any general revision of property assessment is made,

there shall be prepared a schedule of FMV by the provincial,
city or municipal assessors, which shall be published in a
newspaper of general circulation or in the absence thereof,
shall be posted in the provincial capitol, city or municipal hall
and in two other conspicuous public places therein.

Classification of Lands for RPT Purposes

Lands are classified as follows:

(1) Residential;
(2) Agricultural;
(3) Commercial;
(4) Industrial;
(5) Mineral;
(6) Timberland; and
(7) Special – all lands, buildings and other improvements
actually, directly and exclusively used for hospitals, cultural, or
scientific purposes, and those owned and used by local water
districts, and GOCCs rendering essential public services in the
supply and distribution of water and/or generation and
transmission of electric power.

Appraisal and Assessment of Machineries

Brand New The FMV is the acquisition cost.

If the machinery is imported, the acquisition
cost includes freight, insurance, bank and
other charges, brokerage, arrastre and
handling, duties and taxes, plus cost of inland
transportation, handling, and installation
charges at the present site.
All Other FMV is determined by dividing the remaining
Cases economic life of the machinery by its
estimated economic life and multiplied by the
replacement/reproduction cost.
Depreciation Rate – not exceeding 5% of its original cost or
Allowance replacement cost, for each year of use.
The remaining value for all kinds of machinery
shall be fixed at not less than 20% of such
original, replacement or reproduction cost for
so long as the machinery is useful and in
operation.
Assessment of Real Property:

Establishment of Assessment Levels –

“Assessment Level” is the percentage applied to the fair market

value to determine the taxable value of the property.
Assessment levels shall be fixed by ordinances of the
sanggunian at rates not exceeding those prescribed in Sec.
218, LGC.

General Revisions Of Assessments And Property Classification

The local assessor shall undertake a general revision of real

property assessments every three (3) years.

Date of Effectivity of Assessment or Reassessment

All assessments or reassessments made after the first (1st) day of

January of any year shall take effect on the first (1st) day of
January of the succeeding year.

Exceptions: Reassessments due to –

(1) partial or total destruction;
(2) major change in actual use;
(3) great and sudden inflation or deflation of real property
values;
(4) gross illegality of the assessment when made; or
(5) any other abnormal cause

shall be made within 90 days from the date of any cause and
shall take effect at the beginning of the quarter next following
the reassessment.
Assessment of Property Subject to Back Taxes

Real property declared for the first 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 the date of initial
assessment.
Notification of New or Revised Assessment

Question: What are the requirements for new or revised

assessments to be valid?

Answer: When real property is assessed for the first time or when
an existing assessment is increased or decreased, the local
assessor shall within 30 days give written notice of the new or
revised assessment to the person in whose name the property is
being declared.

Notice may be given personally or by registered mail or

through the assistance of the Punong Barangay to the last
known address of the person to be served.

Collection of Real Property Tax

Remedies of LGUs for Collection of Real Property Tax

1. Administrative
 Remedies

a. Local Government’s Lien;

b. Levy on Real Properties; and
c. Purchase by LGU for Want of Bidder.

2. Judicial 
 Remedy

a. Collection by Civil Action

Administrative
 Remedies

a. Local Government’s Lien

The basic real property tax shall constitute a lien on the property
subject to tax, superior to all liens, charges or encumbrances in
favor of any person, irrespective of the owner or possessor
thereof, enforceable by administrative or judicial action and
may only be extinguished upon payment of the tax and the
related interests and expenses.

b. Levy on Real Properties

Upon the failure to pay the tax when due, the local treasurer
shall issue a warrant levying the real property subject to tax. The
warrant shall include a duly authenticated certificate showing
the name of the owner or person having legal interest therein,
description of the property, amount of the tax due and interest
thereon.

Procedural Requirements for Warrant of Levy:

(1) The warrant must be mailed or served to owner or person

having legal interest in the property;

(2) The written notice of levy must be mailed or served to the

Assessor and the Register of Deeds where the property is
located; and

(3) The Register of Deeds must annotate the levy on the tax
declaration and certificate of title.

Note: Failure of the local treasurer to issue/execute the warrant

of levy within 1 year from the time the tax becomes delinquent
or within 30 days from the date of the issuance of the warrant of
levy shall be a ground for his dismissal from service.

c. Purchase by LGU for Want of Bidder

When (1) There is no bidder; or

Available (2) The highest bid is for an amount insufficient
to pay the real property tax and the related
interest and costs of sale
Duty of the The local treasurer conducting the sale shall
Local Treasurer purchase the property in behalf of the LGU to
satisfy the claim and within 2 years thereafter
shall make a report of his proceedings.
Redemption The owner of the real property has the right to
Period redeem the property within 1 year from the
 date of forfeiture

2. Judicial 
 Remedy

The LGU may also enforce the collection by civil action in any
court of competent jurisdiction.

Note: No criminal action is available to LGUs in enforcing

payment of RPTs.

Prescriptive Period for Collection of RPT

The civil action for collection must be filed by local treasurer

within 5 years from the date the real property tax become due.
However, in case of fraud or intent to evade tax the assessment
must be made within 10 years from discovery of fraud or intent
to evade payment.

Summary of LGU’s Collection of RPT

Date of Real property tax for any year shall accrue on

Accrual the first day of January.
Notice for On or before the 31st of January or on any
Collection date prescribed, the local treasurer shall post
the notice of the dates when the tax may be
paid without interest at a conspicuous and
publicly accessible place at the city or
municipal hall.
The notice shall also be published in a
newspaper of general circulation in the locality
once a week for 2 consecutive weeks.
Prescriptive (a) Within 5 years from the date they become
Periods for due;
Collection (b) Within 10 years from discovery of fraud, in
case there is fraud or intent to evade.
Instances for (1) When the local treasurer is legally
Suspension of prevented to collect tax;
Prescriptive (2) When the owner or property requests for
Period reinvestigation and writes a waiver before
expiration of period to collect; and
 (3) When the owner of property is out of the
country or cannot be located.
Collecting The local treasurer, however, he may deputize
Authority the barangay treasurer to collect all taxes upon
filing of a bond.

Taxpayer’s Remedies on Assessment

1. Administrative Remedies (LBAA & CBAA)

(a) Appeal to the Local Board of Assessment Appeals
(LBAA); and
(b) Appeal to the Central Board of Assessment Appeals
(CBAA).

2. Judicial Remedies (CTA En Banc & Supreme Court)

(a) Appeal to the CTA En Banc; and
(b) Appeal to the Supreme Court.

Administrative and Judicial Remedies and Procedure:

(a) Appeal of the Assessor’s Property Assessments to the Local

Board of Assessment Appeals (LBAA)

(1) Any owner or person having legal interest in the property

who is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may,
within 60 days from the date of receipt of the written notice
of assessment, appeal to the LBAA by filing a petition under
oath in the form prescribed for the purpose, together with
copies of the tax declarations and such affidavits or
documents submitted in support of the appeal.


(2) The LBAA shall decide the appeal within 120 days from the
date of receipt of such appeal
 .

(b) Appeal to the Central Board of Assessment Appeals (CBAA)

(1) Within 30 days from receipt of the decision of LBAA, the

owner may appeal to the CBAA;
 (2) The CBAA shall decide the appeal within 60 days from the
submission of the documents
 .
(c) Appeal to the CTA En Banc

If the CBAA denies the appeal, the taxpayer must appeal to the
CTA En Banc through a Petition for Review within 30 days from
the receipt of the decision of CBAA.

(d) Appeal to the Supreme Court

If the CTA En Banc denies the petition, the taxpayer must

appeal to the SC within 15 days from receipt of decision of the
CTA En Banc

Fels Energy v. Province of Batangas (Feb. 16, 2007)

Question: What is the last action of the local assessor that will
give the owner of the real property the right to appeal to the
LBAA?

Answer: Under Section 226 of R.A. No 7160, the last action of the
local assessor on a particular assessment shall be the written
notice of assessment. It is this written notice of assessment which
gives the owner of the property the right to appeal to the LBAA.

Note: The procedure likewise does not permit the property

owner the remedy of filing a motion for reconsideration before
the local assessor.

Victorias Milling v. CTA (Mar. 13, 1968)

Question: What is the effect of the owner’s failure to appeal the

assessment made by the local assessor?

Answer: The failure to appeal within the statutory period renders

the assessment final, demandable, and unappealable.

Effect of Appeal on the Payment of RPT

Question: What is the effect of the appeal on the assessments

on the payment of the RPT?

Answer: An appeal on assessments of real property shall not

suspend the collection of the corresponding realty taxes on the
property involved as assessed by the provincial or city assessor
without prejudice to the subsequent readjustment depending
upon the final outcome of the appeal.

Taxpayer’s Remedies on Collection of Real Property Tax

1. Administrative Remedies (Treasurer, LBAA & CBAA)

(a) Payment of RPT under protest;

(b) Written protest with the Local Treasurer;
(c) Appeal to the Local Board of Assessment Appeals (LBAA);
(d) Appeal to Central Board of Assessment Appeals (CBAA).

2. Judicial Remedies (CTA En Banc & Supreme Court)

(a) Appeal to the CTA En Banc; and

(b) Appeal to the Supreme Court.

Administrative and Judicial Procedure –

(1) The taxpayer must pay under protest the real property tax
assessment;

(2) The taxpayer must file a written protest with local treasurer

within 30 days from payment of the tax;

(3) The local treasurer shall decide the protest within 60 days
from receipt of the payment under protest;

(4) If the local treasurer denies the protest or fails to act within
60 days, the taxpayer must appeal to the LBAA within 60 days
from the date of receipt of denial of protest or upon lapse of 60
days to decide by:

(a) by filing a petition under oath in the form prescribed for

the purpose; and
 (b) by submitting copies of tax declarations and other
affidavits or documents to support the petition;

(5) The LBAA shall decide the appeal within 120 days from the
date of receipt of such appeal;

(6) If the LBAA denies the appeal, the taxpayer must appeal to
the CBAA within 30 days from the receipt of the decision of
LBAA;

(7) If the CBAA denies the appeal, the taxpayer must appeal to
the CTA En Banc through a Petition for Review within 30 days
from the receipt of the decision of CBAA;

(8) If the CTA En Banc denies the petition, the taxpayer must
appeal to the SC within 15 days from receipt of decision of the
CTA En Banc.

Meralco v. Nelia Barlis (G.R. No. 114231, May 18, 2001):

Question: May the trial court issue a writ of prohibition to set

aside a warrant of garnishment without the taxpayer paying
under protest?

Answer: No. The trial court has no jurisdiction to issue a writ of

prohibition which seeks to set aside the warrant of garnishment
over petitioner’s bank deposit in satisfaction of real property
taxes without paying first under protest the tax assessed and
without exhausting available administrative remedies.

Other Judicial
 Remedies of the Taxpayer

The taxpayer may also avail of the following judicial remedies:

(1) by questioning the legality of a tax ordinance; and

(2) by assailing the validity of a tax sale before the courts.

How to Question the Legality of a Tax Ordinance

(a) Any question on the constitutionality or legality of a tax
ordinance may be raised on appeal within 30 days from its
effectivity to the Secretary of Justice who shall render a
decision within 60 days from the date of receipt of the appeal.

(b) The appeal shall not have the effect of suspending the
effectivity of the tax ordinance and the accrual and payment
of the tax.

(c) Within 30 days after receipt of the decision or the lapse of

the 60-day period without the Secretary of Justice acting upon
the appeal, the aggrieved party may file appropriate
proceedings with a court of competent jurisdiction (n.b.
Regional Trial Court).

How to Assail the Validity of a Tax Sale Before the Courts

No court shall entertain any action assailing the validity of any

sale at public auction until the taxpayer shall have deposited
with the court the amount for which the real property was sold,
together with interest of 2 percent per month from the date of
sale to the time of the institution of the action.

National Power Corporation vs. The Provincial Treasurer of

Benguet, et al (G.R. No. 209303, 14 November, 2016)

Case: National Power Corporation (NPC) was assessed for RPT

on properties located within the Binga Hydro-Electric Power
Plant. The Treasurer of Benguet demanded payment of the RPT
from NPC. NPC challenged before the LBAA the legality of the
assessment and collection of RPT from it. NPC asserts that its
properties are exempt from RPT under the LGC. However, for
failure to pay under protest, NPC’s appeal was dismissed. NPC
claims that it is under no obligation to pay under protest the
assessed RPT since it is contesting the very authority of the
Municipal and Provincial Assessors and Treasurers to assess and
collect RPT from it.

Question: Is NPC’s payment of the RPT under protest a condition

prior to appeal to LBAA?
Answer: Yes. When a taxpayer or real property owner questions
the excessiveness or reasonableness of the assessment, Section
252 of the LGC directs that the taxpayer should first pay the tax
due before his protest can be entertained.

It is only after the taxpayer has paid the tax due that he may file
a protest in writing within 30 days from payment of the tax to
the Provincial or Municipal Treasurer, who shall decide the
protest within 60 days from receipt. The local treasurer is not
obliged to entertain the protest unless the tax due has been
paid.

The non-payment of the RPT under protest by NPC is fatal and

renders its appeal to the LBAA defective.