University of Santo Tomas – Legazpi

College of Law
Taxation 2

REQUIREMENTS FOR THE COMPLETION OF TAXATION 2

RUDY G. ALVAREZ JR.

LAW 3D
rudyalvarez016@gmail.com

1. Study the following areas and provide for the salient points of discussion and be able to discuss briefly.
For the cases, provide the ruling that is related to the topic.

LOCAL AND REAL PROPERTY TAXATION Republic Act No. 7160,

Local Government Code (LGC) of 1991, as amended
Implementing Rules and Regulations of the LGC

LOCAL TAXATION
I. PRELIMINARY MATTERS AND GENERAL PROVISION
i. Power to Tax of Local Government Units
a. Sec. 5 Art. X, 1987 Constitution: Each local government unit shall have the
power to create its own sources of revenues to levy taxes, fees, and charges
subject to such guidelines and limitations as the congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees and charges
shall accrue exclusively to the local governments.

b. Sec. 129, LGC: Each local government unit shall exercise its power to create
its own sources of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local autonomy. Such taxes,
fees and charges shall accrue exclusively to the local government units

Sec. 5 Art. X, 1987 Constitution (compare with 1935 and 1973 provisions)
The grant to local government of the power to tax was not explicitly declared
under the 1935 Constitution, this delegation was made through a statute
authorizing such power. However, as the new Constitution was amended in 1987,
a specific provision regarding this matter was inserted. Hence, in our jurisdiction,
it may be exercised by local legislative bodies, no longer merely by virtue of a
valid delegation but pursuant to direct authority conferred by the Constitution.
Under the latter, the exercise of the power may be subject to such guidelines and
limitations as the Congress may provide which, however, must be consistent with
the basic policy of local autonomy.

1. PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., vs.

MUNICIPALITY OF TANAUAN, LEYTE,
RULING: The power of taxation may be delegated to local governments on
matters of local concern. By necessary implication, the legislative power to create
political corporations for purposes of local self-government carries with it the
power to confer on such local governmental agencies the power to tax. The
plenary nature of the taxing power thus delegated, contrary to plaintiff-
appellant’s pretense, would not suffice to invalidate the said law as confiscatory
and oppressive. In delegating the authority, the State is not limited to the exact
measure of that which is exercised by itself. When it is said that the taxing power
may be delegated to municipalities and the like, it is meant taxes there may be
delegated such measure of power to impose and collect taxes as the legislature
may deem expedient. Thus, municipalities may be permitted to tax subjects which
for reasons of public policy the State has not deemed wise to tax for more general
purposes.
Delegation of taxing power to local governments may not be assailed on the
ground of double taxation. There is no validity to the assertion that the delegated
authority can be declared unconstitutional on the theory of double taxation. It
must be observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be exercised. Moreover,
double taxation, in general, is not forbidden by our fundamental law, since We
have not adopted as part thereof the injunction against double taxation found in
the Constitution of the United States and some states of the Union. Double
taxation becomes obnoxious only where the taxpayer is taxed twice for the
benefit of the same governmental entity or by the same jurisdiction for the same
purpose, but not in a case where one tax is imposed by the State and the other by
the city of municipality.

2.
G.R. No. 120082. September 11, 1996
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY vs. HON. FERDINAND
J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial Court,
Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor, HON.
TOMAS R. OSMEÑA, and EUSTAQUIO B. CESA, respondents.
RULING: As a general rule, the power to tax is an incident of sovereignty and is
unlimited in its range, acknowledging in its very nature no limits, so that security
against its abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency who are to pay it. Nevertheless, effective
limitations thereon may be imposed by the people through their Constitutions.
Our Constitution, for instance, provides that the rule of taxation shall be uniform
and equitable and Congress shall evolve a progressive system of taxation. So
potent indeed is the power that it was once opined that “the power to tax involves
the power to destroy.”
The power to tax is primarily vested in the Congress but in our jurisdiction, it may
be exercised by local legislative bodies, no longer merely by virtue of a valid
delegation but pursuant to direct authority conferred by the Constitution. Under
the latter, the exercise of the power may be subject to such guidelines and
limitations as the Congress may provide which, however, must be consistent with
the basic policy of local autonomy.

3.
G.R. No. 131359. May 5, 1999
MANILA ELECTRIC COMPANY, petitioner, vs. PROVINCE OF LAGUNA and
BENITO R. BALAZO, in his capacity as Provincial Treasurer of Laguna,
respondents.
RULING: Local governments do not have the inherent power to tax except to the
extent that such power might be delegated to them either by the basic law or by
statute.—Prefatorily, it might be well to recall that local governments do not have
the inherent power to tax except to the extent that such power might be
delegated to them either by the basic law or by statute. Presently, under Article X
of the 1987 Constitution, a general delegation of that power has been given in
favor of local government units.
Under the regime of the 1935 Constitution no similar delegation of tax powers
was provided, and local government units instead derived their tax powers under
a limited statutory authority. Whereas, then, the delegation of tax powers granted
at that time by statute to local governments was confined and defined (outside of
which the power was deemed withheld), the present constitutional rule (starting
with the 1973 Constitution), however, would broadly confer such tax powers
subject only to specific exceptions that the law might prescribe.

4.
G.R. No. 149110. April 9, 2003
NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN,
respondent.
RULING: The power to tax is no longer vested exclusively on Congress.—In recent
years, the increasing social challenges of the times expanded the scope of state
activity, and taxation has become a tool to realize social justice and the equitable
distribution of wealth, economic progress and the protection of local industries as
well as public welfare and similar objectives. Taxation assumes even greater
significance with the ratification of the 1987 Constitution. Thenceforth, the power
to tax is no longer vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges pursuant to Article X,
section 5 of the 1987 Constitution.
One of the most significant provisions of the LGC is the removal of the blanket
exclusion of instrumentalities and agencies of the national government from the
coverage of local taxation. Although as a general rule, LGUs cannot impose taxes,
fees or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e., when specific provisions
of the LGC authorize the LGUs to impose taxes, fees or charges on the
aforementioned entities, viz.: “Section 133. Common Limitations on the Taxing
Powers of the Local Government Units.—Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following: x x x (o) Taxes, fees, or charges of any
kind on the National Government, its agencies and instrumentalities, and local
government units.”

5.
G.R. No. 162015. March 6, 2006
THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY TREASURER OF
QUEZON CITY, DR. VICTOR B. ENRIGA, petitioners, vs. BAYAN
TELECOMMUNICATIONS, INC., respondent.
RULING: The power to tax is primarily vested in the Congress; however, in our
jurisdiction, it may be exercised by local legislative bodies, no longer merely by
virtue of a valid delegation as before, but pursuant to direct authority conferred
by Section 5, Article X of the Constitution.—Bayantel’s posture is well-taken.
While the system of local government taxation has changed with the onset of the
1987 Constitution, the power of local government units to tax is still limited. As
we explained in Mactan Cebu International Airport Authority: Under the latter,
the exercise of the power may be subject to such guidelines and limitations as the
Congress may provide which, however, must be consistent with the basic policy of
local autonomy.
The Supreme Court has upheld the power of Congress to grant exemptions over
the power of local government units to impose taxes.—In Philippine Long
Distance Telephone Company, Inc. (PLDT) vs. City of Davao, 363 SCRA 522
(2001), this Court has upheld the power of Congress to grant exemptions over the
power of local government units to impose taxes. There, the Court wrote: Indeed,
the grant of taxing powers to local government units under the Constitution and
the LGC does not affect the power of Congress to grant exemptions to certain
persons, pursuant to a declared national policy. The legal effect of the
constitutional grant to local governments simply means that in interpreting
statutory provisions on municipal taxing powers, doubts must be resolved in
favor of municipal corporations.

6.
G.R. No. 203754, June 16, 2015
FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES, Petitioner, vs.
COLON HERITAGE REALTY CORPORATION, operator of Oriente Group
Theaters, represented by ISIDORO A. CANIZARES, Respondent.
RULING: The power of taxation, being an essential and inherent attribute of
sovereignty, belongs, as a matter of right, to every independent government, and
needs no express conferment by the people before it can be exercised. It is purely
legislative and, thus, cannot be delegated to the executive and judicial branches of
government without running afoul to the theory of separation of powers. It,
however, can be delegated to municipal corporations, consistent with the
principle that legislative powers may be delegated to local governments in
respect of matters of local concern. The authority of provinces, cities, and
municipalities to create their own sources of revenue and to levy taxes, therefore,
is not inherent and may be exercised only to the extent that such power might be
delegated to them either by the basic law or by statute.

c. Local Taxing Authority (Sec. 132)

SEC. 132 of the LGC states that, the power to impose a tax, fee, or charge or to
generate revenue under this Code shall be exercised by the sanggunian of the
local government unit concerned through an appropriate ordinance.
This provision states that the power of the LGU’s to impose taxes,
fees, or charge shall be exercised by their respective sanggunians, therefore, it
cannot be delegated to any other entities. Furthermore, the law also states that
every tax levied must pursuant to a valid ordinance.

c. Local Taxing Authority (Sec. 132): The power to impose a tax, fee, or
change or to generate revenue under this code shall be exercised by the
Sanggunian of the local government unit concerned through appropriate
ordinance
1. Sangguniang Panlalawigan – for provinces
2.Sangguniang Panlungsod- for cities
3. Sangguniang bayan – for municipalities
4. Barangay Council- for barangays or barrios

G.R. No. 158881. April 16, 2008

PETRON CORPORATION, petitioner, vs. MAYOR TOBIAS M. TIANGCO, and
MUNICIPAL TREASURER MANUEL T. ENRIQUEZ of the MUNICIPALITY OF
NAVOTAS, METRO MANILA, respondents.
RULING: Section 133 prescribes the limitations on the capacity of local
government units to exercise their taxing powers otherwise granted to them
under the Local Government Code (LGC).
Apparently, paragraph (h) of the Section mentions two kinds of taxes which
cannot be imposed by local government units, namely: “excise taxes on articles
enumerated under the National Internal Revenue Code [(NIRC)], as amended”;
and “taxes, fees or charges on petroleum products.”
Congress has the constitutional authority to impose limitations on the power to
tax of local government units and Section 133 of the Local Government Code
(LGC) is one such limitation. Indeed, the provision is the explicit statutory
impediment to the enjoyment of absolute taxing power by local government units,
not to mention the reality that such power is a delegated power. To cite one
example, under Section 133(g), local government units are disallowed from
levying business taxes on “business enterprises certified to by the Board of
Investments as pioneer or non-pioneer for a period of six (6) and (4) four years,
respectively from the date of registration.”

d. Procedure for Approval of and Effectivity of Tax Ordinances (Sec. 187)

The procedure applicable to local government ordinances in general should be
observed (Sec. 187, LGC).

The following procedural details must be complied with:

a. Necessity of a quorum;
b. Submission for approval by the local chief executive;
c. The matter of veto and overriding the same;
d. Publication and effectivity (Secs. 54, 55, and 59, LGC).

2. Public hearings are required before any local tax ordinance is enacted (Sec.
187, LGC).
3. Within 10 days after their approval, publication in full for 3 consecutive days in
a newspaper of general circulation. In the absence of such newspaper in the
province, city or municipality, then the ordinance may be posted in at least two
conspicuous and publicly accessible places (Sec. 188 & 189, LGC).

G.R. No. 137621. February 6, 2002

HAGONOY MARKET VENDOR ASSOCIATION, petitioner, vs.
MUNICIPALITY OF HAGONOY, BULACAN, respondent.
RULING: An appeal of a tax ordinance or revenue measure should
be made to the Secretary of Justice within thirty (30) days from
effectivity of the ordinance and even during its pendency, the
effectivity of the assailed ordinance shall not be suspended.— In the
case at bar, Municipal Ordinance No. 28 took effect in October 1996.
Petitioner filed its appeal only in December 1997, more than a year
after the effectivity of the ordinance in 1996. Clearly, the Secretary
of Justice correctly dismissed it for being time-barred.
The timeframe fixed by law for parties to avail of their legal
remedies before competent courts is not a “mere technicality” that
can be easily brushed aside—the periods stated in Section 187 of the
Local Government Code are mandatoryOrdinance No. 28 is a
revenue measure adopted by the municipality of Hagonoy to fix and
collect public market stall rentals. Being its lifeblood, collection of
revenues by the government is of paramount importance. The funds
for the operation of its agencies and provision of basic services to its
inhabitants are largely derived from its revenues and collections.
Thus, it is essential that the validity of revenue measures is not left
uncertain for a considerable length of time. Hence, the law provided
a time limit for an aggrieved party to assail the legality of revenue
measures and tax ordinances.
Public hearings are conducted by legislative bodies to allow
interested parties to ventilate their views on a proposed law or
ordinance, but these views are not binding on the legislative
bodies—parties who participate in public hearings to give their
opinions on a proposed ordinance should not expect that their views
 would be patronized by their lawmakers.—Petitioner cannot gripe
that there was practically no public hearing conducted as its
objections to the proposed measure were not considered by the
Sangguniang Bayan. To be sure, public hearings are conducted by
legislative bodies to allow interested parties to ventilate their views
on a proposed law or ordinance. These views, however, are not
binding on the legislative body and it is not compelled by law to
adopt the same. Sanggunian members are elected by the people to
make laws that will promote the general interest of their
constituents. They are mandated to use their discretion and best
judgment in serving the people. Parties who participate in public
hearings to give their opinions on a proposed ordinance should not
expect that their views would be patronized by their lawmakers.

e. Publication (Sec. 188):

1. Within the (10) days after their approval certified true copies of all tax
ordinances or revenue shall be.
i. published for three (3) consecutive days in a newspaper of local
circulation.
ii. posted in at least two (2) conspicuous and publicly accessible
places here there are no newspaper of local circulation.

The requirement of publication in full for 3 consecutive days is mandatory for a

tax ordinance to be valid. The tax ordinance will be null and void if it fails to
comply with such publication requirement.

ii. Other Preliminary Matters

a. Residual Powers of LGUs -Power to Levy Other Taxes, Fees or Charges
(Sec.186): LGUs may exercise the power to levy, taxes, fees or charges on any
base or subject not otherwise specifically enumerated in the LGC or taxed
under the provisions of the NIRC.

Limitations of the Residual Taxing Power:

1. Constitutional limitations on taxing power,
2. Common limitations on the taxing power of local government units as
prescribed in Sec. 133 of the LGC.
3. Fundamental principles governing the exercise of the taxing power by
local governments as prescribes under sec. 130 of the LGC particularly
the requirement that they must not be unjust, excessive, oppressive of
confiscatory
4. The requirement prescribed in Sec 186 of the LGC, which directs that
the ordinance levying such residual taxes shall not be enacted without
any prior public hearing conducted for the purpose; and
5. The principle of pre-emption.

b. Doctrine of Pre-emption or Exclusionary Rule: Where the National

Governement elects to tax a particular area, it impliedly withholds from the
local government the delegated power to tax the same field. This doctrine
principally rests on the intention of the congress. Conversely, should the
congress allow municipal corporations to cover fields of taxation it already
occupies then the doctrine or pre-emption will not apply

No. L-21183. September 27, 1968.

VICTORIAS MILLING CO., INC., plaintiff-appellant, vs. THE
MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL,
defendant-appellant.
RULING: Doctrine of preemption; When not applicable.—What can be said
at most is that the national government has preempted the f ield of
percentage taxation. Section 1 of C. A. 472, while granting municipalities
power to levy taxes, expressly removes from them the power to exact
"percentage taxes". It is correct to say that preemption in the matter of
taxation simply refers to an instance where the national government elects
to tax a particular area, impliedly withholding from the local government the
delegated power to tax the same field. This doctrine primarily rests upon
the intention of Congress. Conversely, should Congress allow municipal
corporations to cover fields of taxation it already occupies, then the doctrine
of preemption will not apply. In the case at bar, Section 4 (1) of C. A. 472
clearly and specifically allows municipal councils to tax persons engaged in
"the same businesses or occupation" on which "fixed internal revenue
privilege taxes" are "regularly imposed by the Government".
Ordinance No. 1, Series of 1956, held valid; Case at bar.—In the case at
bar, Ordinance No. 1 was approved by the municipality of Victorias on
September 22, 1956 by way of an amendment to two municipal ordinances
separately imposing license taxes on operators of sugar centrals and sugar
ref ineries. The changes were: with respect to sugar centrals, by increasing
the rates of license taxes; and so to sugar refineries, by increasing the rates
of license taxes as well as the range of graduated schedule of annual output
capacity. In the absence of sufficient proof that license taxes are
unreasonable, the presumption of validity subsists. A cash sur-plus alone
cannot stop a municipality from enacting a revenue ordinance increasing
license taxes in anticipation of municipal needs. Discretion to determine the
amount of revenue required for the needs of the municipality is lodged with
the municipal authorities. Judicial intervention steps in only when there is a
flagrant, oppressive and excessive abuse of power by said municipal
authorities. Said Ordinance No. 1, series of 1956, is not discriminatory. The
ordinance does not single out Victorias as the only object of the ordinance.
Said ordinance is made to apply to any sugar central or sugar refinery which
may happen to operate in the municipality. So it is, that the fact that
plaintiff is actually the sole operator of a sugar central and a sugar refinery
does not make the ordinance discriminatory (Cf. also Shell Co. of P.I. v.
Vaño, 94 Phil. 389 and Ormoc Sugar Co., Inc. v. Mun. Board of Ormoc City,
L-24322, July 21, 1967) We, accordingly, rule that Ordinance No. 1, series
of 1956, of the Municipality of Victorias, was promulgated not in the
exercise of the municipality's regulatory power but as a revenue measure—
tax on occupation or business. The authority to impose such tax is backed
by the express grant of power in Section 1 of C.A. No. 472.

iii. Scope of taxing powers (Sec. 128):

1. Local Taxation- imposition of license taxes, fees and other impositions,
including community tax as a means to create its own sources of revenue
2. Real property taxation- system of levy on real property imposed on a country
wide basis but authorizing the local governments to vary the rates of taxation,
to a limited extend and within certain parameters.

iv. Fundamental Principles (Sec. 130)

1. Taxation shall be uniform in each LGU.
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as much as possible on the taxpayer’s ability to
pay.
b. Be levied and collected for public purposes.
c. Not ne unjust, excessive, oppressive or confiscatory and
d. Not be contrary to law, public policy, national economic policy, or in
restrain trade.
3. Collection of local taxes and other impositions shall not be left to any Private
persons.
4. Revenues collected under LGC shall inure solely to the benefit of , and subject
to disposition by the LGU levying the tax or other impositions unless otherwise
specifically provided therein; and
5. Each LGu shall, as far as practicable, evolve a Progressive system of Taxation.

v. Common Limitations

a. Income Tax - Correlate with Sec. 143 (f): Income tax, except when levied
on banks and other financial institutions. Cities and municipalities may impose
business taxes on taxes and other financial institutions.
b. Documentary Stamp Tax
c. Transfer Taxes - Correlate with Sec. 135: Taxes on estate, inheritance, gifts,
legacies and other acquisitions mortis causa. Except otherwise provided by the
Code. However, transfers made pursuant to R.A. no. 6657 shall be exempt from
tax on transfer
d. Customs Duties, registration fees of vessels and wharfage on wharves,
tonnage dues and all other kinds of custom fees, charges and dues;
Exception:
a. Wharfage on wharves constructed and maintained by the
local government unit concerned
 b. Issuance of licenses for the operation of fishing vessels of 3
tons or less by municipalities.
e. Taxes, Fees and Charges (TFC) on Goods Passing Through the Territorial
Jurisdiction of LGUs - Correlate with Sec. 155: Carried into or out of or passing through,
the territorial jurisdiction of LGUs in the guise of charges for wharfage, tolls for bridges or
otherwise.
LGu’s may prescribe the terms and conditions for the imposition of toll fees or
charges for the use imposition of toll fees or charges for the use of any public road, pier or
wharf funded and constructed by them. A service fee imposed on vehicles using municipal
road leading wharf to the wharf is thus valid. However ,Sec 133 prohibits the imposition, in
the guise of wharfage, of fees – as well as all other taxes or charges in any form
whatsoever- on goods or merchandise.

G. R. No. L-9319
AGUSTIN PANALIGAN, CASIMIRO SEBOLINO, EPIFANIA UDTUJAN, VALENTIN
CAMPOSANO, ANGELES GUANTERO, EsTEBAN JUNTILLA, ClRIACA DE GALAGAR,
MARCOS SAMSON, RAMON HERNANDEZ OR ARANDES, EPIFANIO PABILONA and
PEDRO RODRIGUEZ, petitioners and appellees, vs. THE CITY OF TACLOBAN and THE
CITY TREASURER OF THE CITY OF TACLOBAN, respondents and appellants.
RULING: An act or ordinance imposing a license or license tax under the police power as a
means of regulation is valid only when it is within the limits of such power and is intended
for regulation; otherwise, it is invalid as where the license or tax is unnecessarily imposed
on an occupation or business not inherently subject to police regulation (Southwest Utility
Ice Co. vs. Liebmann, 52 F. 2d 349), for an act or ordinance imposing a license or license
tax for revenue purposes, under the guise of a police or regulatory measure, is invalid.
Granting arguendo that the respondent City enacted the questioned ordinances in virtue of
its police power and that in the exercise of the same a municipal corporation has the right
to grant licenses and impose license fees (City of Birmingham vs. Hood-McPherson Realty
Co., 172 So. 114 108 ALR 1140), yet such power may be restricted by statutory provisions,
and nowhere in the Charter of the City of Tacloban (Republic Act No. 760, enacted long
after the effectivity of the Revised Administrative Code), can be found; any specific
provision bestowing on the Municipal Board the power to impose tax or fees of any kind
on goods, merchandise or commodities destined to be exported from that City to other
parts of the country. Therefore, Section 2287 of the Revised Administrative Code
aforequoted, which takes away from the municipal council (or board) the power to impose
export taxes, remains to be the rule on the matter.

G.R. No. 152492. October 16, 2003.

PALMA DEVELOPMENT CORPORATION, petitioner, vs. MUNICIPALITY OF
MALANGAS, ZAMBOANGA DEL SUR, respondent.
RULING:
By express language of Sections 153 and 155 of RA No. 7160, local government units,
through their Sanggunian, may prescribe the terms and conditions for the imposition of
toll fees or charges for the use of any public road, pier or wharf funded and constructed by
them. A service fee imposed on vehicles using municipal roads leading to the wharf is thus
valid. However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of
wharfage, of fees as well as all other taxes or charges in any form whatsoever on goods or
merchandise. It is therefore irrelevant if the fees imposed are actually for police
surveillance on the goods, because any other form of imposition on goods passing through
the territorial jurisdiction of the municipality is clearly prohibited by Section 133(e).
A wharfage does not lose its basic character by being labeled as a service fee “for police
surveillance on all goods.”—Under Section 131 (y) of RA No. 7160, wharfage is defined as
“a fee assessed against the cargo of a vessel engaged in foreign or domestic trade based on
quantity, weight, or measure received and/or discharged by vessel.” It is apparent that a
wharfage does not lose its basic character by being labeled as a service fee “for police
surveillance on all goods.”
In accordance with the Local Government Code of 1991, a municipal ordinance imposing
fees on goods that pass through the issuing municipality’s territory is null and void.

f. TFC on products sold by marginal farmers of fishermen - Definition of

Marginalized Fishermen (Sec. 122): Refers to an individual engaged in the subsistence
farming or fishing which shall be limited to the sale, barter, or exchange of agricultural or
marine products produced by himself and his immediate family.

Gr.No. L-70684. October 10, 1986.*

CITY OF CEBU and/or CITY COUNCIL OF THE CITY OF CEBU,
composed of Hon. FLORENCIO S. UROT, RAYMUNDO A. CRYSTAL,
BIENVENIDO B. TUDTUD, JOSE V. CUENCO, PABLO U. ABELLA,
GEORGE M. BALADJAY, ARTURO L. ABELLANA, JESUS S. GABUYA, and
MARIO R. VELOSO, petitioners, vs. HON.
RULING: The City of Cebu may not impose an additional amusement tax on
top of that already imposed as would make the City’s amusement tax higher
than that of the Province of Cebu.—Under Section 13 of the Local Tax Code,
the province is authorized to impose an amusement tax of 20% or 30%
depending on the amount paid for admission. But under secs. 57 and 65 (G)
of its Tax Ordinance No. 1 now in question, petitioner Cebu City is authorized
to impose an additional P0.05 amusement tax (on top of the amusement tax
the city is admittedly authorized to impose under section 23 of the Local Tax
Code). In effect, Cebu City will have a higher rate of amusement tax than
Cebu province. This disparity in rates is precisely what is proscribed by the
second paragraph of section 23 earlier quoted. The said section speaks of
“uniform for the city and the province or municipality.” Hence, what is
required is uniformity of amusement taxes between the province and the
city; not uniformity of the rates on the same subject.
Multiple permit fees for engaging in the same business is unreasonable and
oppressive.—As correctly observed by respondent Court, the law (Section
36) contemplates a single fee for the issuance of a permit to engage in any
business or occupation. But Sec. 74 (Q) of Tax Ordinance No. 1 imposes
another permit fee on foods and drugs establishments. As a result, the
taxpayer will have to pay another permit fee for conducting the same
business in the same city. Such multiple imposition of permit fees is
unreasonable and oppressive and is definitely not sanctioned by the Local
Tax Code. The Court finds the sheriff’s storage fees imposed in Cebu City’s
tax ordinance as excessive and confiscatory.
Fish is an agricultural product and an inspection fee is not allowed to be
imposed thereon under the Local Tax Code, whether in its original form or
not.—The aforequoted provision prohibits a local government from imposing
an inspection fee on agricultural products and fish is an agricultural product.
Contrary to the claim of petitioners, under Section 102 of City Ordinance No.
1 a fisherman selling his fish within the city has to pay the inspection fee of
P0.03 for every kilo of fish sold. Furthermore, the imposition of the tax will
definitely restrict the free flow of fresh fish to Cebu City because the price of
fish will have to increase.
A local government cannot impose a specific tax on a product, like beer,
which is already subject to a national specific tax as per P.D. 426.—This
power to tax articles subject to specific tax which was expressly granted to
cities by the original provisions of section 24, was deleted in the
amendment. The said section 24, as it now reads, merely grants the city the
power to “levy any tax, fee or other imposition not specifically enumerated
or otherwise provided for” in the Local Tax Code. The amendment evinces
the intent of the lawmaker to remove such taxing authority (on articles
already subject to the national specific tax) from the cities like Cebu City.

g. Taxes on BOI-registered enterprises: The grant of income tax holiday for registered
enterprses under E.O no. 226 is subject to following rules
Fully exempt: for 6 years from commercial operation for pioneer firms ad 4 years
for non-pioneer firms.
Proportionate- for a period of 3 years from commercial operation, registered
expanding firms shall be entitled to exemption firms shall be entitled to exemption from
income tax levied by the national government proportionate to their expansion under such
terms and conditions as the board may determine.

h. Excise taxes under the NIRC/TFC on Petroleum Products:

a. Excise taxes on articles enumerated under NIRC- only excise taxes are
prohibited. There should be a mirror image between the goods sought to be taxed by the
LGU and the goods either under ad valorem tax or specific tax.
b. Taxes, fees, or charges on petroleum products- all kinds of taxes are prohibited.
Since the law does not distinguish, LGUs are prohibited from imposing not only excise taxes
on petroleum products, but all taxes, fees, and charges

G.R. No. 158881. April 16, 2008

PETRON CORPORATION, petitioner, vs. MAYOR TOBIAS M. TIANGCO, and MUNICIPAL
TREASURER MANUEL T. ENRIQUEZ of the MUNICIPALITY OF NAVOTAS, METRO
MANILA, respondents.
RULING: Section 133 prescribes the limitations on the capacity of local government units
to exercise their taxing powers otherwise granted to them under the Local Government
Code (LGC).
Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be
imposed by local government units, namely: “excise taxes on articles enumerated under
the National Internal Revenue Code [(NIRC)], as amended”; and “taxes, fees or charges on
petroleum products.”
Congress has the constitutional authority to impose limitations on the power to tax of local
government units and Section 133 of the Local Government Code (LGC) is one such
limitation. Indeed, the provision is the explicit statutory impediment to the enjoyment of
absolute taxing power by local government units, not to mention the reality that such
power is a delegated power. To cite one example, under Section 133(g), local government
units are disallowed from levying business taxes on “business enterprises certified to by
the Board of Investments as pioneer or non-pioneer for a period of six (6) and (4) four
years, respectively from the date of registration.”

G.R. No. 126232. November 27, 1998.*

THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE CHAVES, and
MANUEL DJ SIAYNGCO in their capacity as PROVINCIAL GOVERNOR, PROVINCIAL
TREASURER, PROVINCIAL LEGAL ADVISER, respectively, petitioners, vs. THE
HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH DIVISION), REPUBLIC
CEMENT CORPORATION, respondents.
RULING: A province has no authority to impose taxes on stones, sand, gravel, earth and
other quarry resources extracted from private lands. A province may not levy excise taxes
on articles already taxed by the National Internal Revenue Code. The Court of Appeals
erred in ruling that a province can impose only the taxes specifically mentioned under the
Local Government Code. As correctly pointed out by petitioners, Section 186 allows a
province to levy taxes other than those specifically enumerated under the Code, subject to
the conditions specified therein. This finding, nevertheless, affords cold comfort to
petitioners as they are still prohibited from imposing taxes on stones, sand, gravel, earth
and other quarry resources extracted from private lands. The tax imposed by the Province
of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise of an
activity.
It is clearly apparent from the above provision that the National Internal Revenue Code
levies a tax on all quarry resources, regardless of origin, whether extracted from public or
private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel,
earth and other quarry resources, as the same are already taxed under the National
Internal Revenue Code. The province can, however, impose a tax on stones, sand, gravel,
earth and other quarry resources extracted from public land because it is expressly
empowered to do so under the Local Government Code. As to stones, sand, gravel, earth
and other quarry resources extracted from private land, however, it may not do so,
because of the limitation provided by Section 133 of the Code in relation to Section 151 of
the National Internal Revenue Code.

G.R. No. 187631. July 8, 2015.

BATANGAS CITY, MARIA TERESA GERON, in her capacity as City Treasurer of
Batangas City and TEODULFO A. DEGUITO, in his capacity as City Legal Officer of
Batangas City, petitioners, vs. PILIPINAS SHELL PETROLEUM CORPORATION,
respondent.
RULING: Although the power to tax is inherent in the State, the same is not true for local
government units (LGUs) because although the mandate to impose taxes granted to LGUs
is categorical and long established in the 1987 Philippine Constitution, the same is not all
encompassing as it is subject to limitations as explicitly stated in Section 5, Article X of the
1987 Constitution.
In the 1987 Philippine Constitution, the same is not all encompassing as it is subject to
limitations as explicitly stated in Section 5, Article X of the 1987 Constitution, viz.:
SECTION 5. Each local government unit shall have the power to create its own sources of
revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as
the Congress may provide, consistent with the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to the local governments. In the consolidated
cases of City of Manila, et al. v. Hon. Colet and Malaysian Airline System; Maersk-Filipinas,
Inc., et al. v. City of Manila, et al.; Eastern Shipping Lines, Inc. v. City Council of Manila, et
al.; William Lines, Inc., et al. v. Regional Trial Court of Manila, et al.; PNOC Shipping and
Transport Corporation v. Hon. Nabong, et al.; Maersk-Filipinas, Inc., et al. v. City of Manila,
et al., and with Intervenors William Lines, Inc., et al.; Cosco Container Lines and HEUNG-A
Shipping Co., Ltd., et al. v. City of Manila; Sulpicio Lines, Inc. v. Regional Trial Court of
Manila, et al.; Association of International Shipping Lines, Inc. v. City of Manila, et al.;
Dongnama Shipping Co., Ltd., et al. v. Court of Appeals, et al., 744 SCRA 265 (2014), this
Court expounded that the LGUs’ power to tax is subject to the limitations set forth under
Section 133 of the LGC.
Although petroleum products are subject to excise tax, the same is specifically excluded
from the broad power granted to local government units (LGUs) under Section 143(h) of
the Local Government Code (LGC) to impose business taxes.—Section 133(h) clearly
specifies the two kinds of taxes which cannot be imposed by LGUs: (1) excise taxes on
articles enumerated under the NIRC, as amended; and (2) taxes, fees or charges on
petroleum products. Indisputably, the power of LGUs to impose business taxes derives
from Section 143 of the LGC. However, the same is subject to the explicit statutory
impediment provided for under Section 133(h) of the same Code which prohibits LGUs
from imposing “taxes, fees or charges on petroleum products.” It can, therefore, be
deduced that although petroleum products are subject to excise tax, the same is
specifically excluded from the broad power granted to LGUs under Section 143(h) of the
LGC to impose business taxes.

i. Percentage taxes and VAT: on sales barters, o exchanges or similar

transactions on good or services. Except when otherwise provided by the code.
By provinces/cities:
a. Tax on business of printing and publication- shall not exceed 50% of 1 % (or 0.5%
of their gross receipts or in case of newly started business, the rate shall not exceed 1/20 of
1% of the capital investment
b. Amusement tax- shall not exceed 10% of gross receipts from admission fees.

By municipalities
a. Manufacturer- gross sales of 6.5M or more, percentage tax not exceeding 37.5% of
1% based on the preceding year’s sales
b. Wholesalers, distributors, dealers- sale receipts for the preceding calendar year of
2m or more, percentage tax not exceeding 50% of 1%(or .05%) on the gross sales or
receipts

Contractors- gross receipts of 2m or more, percentage tax not exceeding 50% on the
gross sale or receipts.

GR No. L-31156. February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC.,
plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN, LEYTE, THE
MUNICIPAL MAYOR, ET AL., defendants-appellees.
RULING: A municipal ordinance which imposes a tax of P0.01 for every
gallon of soft drinks produced in the municipality does not partake of a
percentage tax.
The imposition of “a tax of one centavo (P0.01) on each gallon (128
flued ounces, U.S.) of volume capacity” on all soft drinks produced or
manufactured under Ordinance No. 27 does not partake of the nature of
a percentage tax on sales, or other taxes in any form based thereon. The
tax is levied on the produce (whether sold or not) and not on the sales.
The volume capacity of the taxpayer’s production of soft drinks is
considered solely for purposes of determining the tax rate on the
products, but there is no set ratio between the volume of sales and the
amount of the tax.

GR. No. L-28138. August 13, 1986

MATALIN COCONUT CO., INC., petitioner-appellee, vs. THE
MUNICIPAL COUNCIL OF MALABANG, LANAO DEL SUR, AMIR M.
BALINDONG and HADJI PANGILAMUN MANALOCON, MUNICIPAL
MAYOR and MUNICIPAL TREASURER OF MALABANG, LANAO DEL
SUR, respondents-appellants. PURAKAN PLANTATION COMPANY,
intervenor-appellee.
RULING: In an action for declaratory relief assailing the validity of a
municipal tax ordinance, the court, in deciding that the ordinance is void,
is authorized to require a refund of taxes paid thereunder without
necessity of converting the proceeding into an ordinary action there
having been no alleged violation of the ordinance yet.—Under Sec. 6 of
Rule 64, the action for declaratory relief may be converted into an
ordinary action and the parties allowed to file such pleadings as may be
necessary or proper, if before the final termination of the case “a breach
or violation of an . . . ordinance, should take place.” In the present case,
no breach or violation of the ordinance occurred. The petitioner decided
to pay “under protest” the fees imposed by the ordinance. Such payment
did not affect the case; the declaratory relief action was still proper
because the applicability of the ordinance to future transactions still
remained to be resolved, although the matter could also be threshed out
in an ordinary suit for the recovery of taxes paid (Shell Co. of the
Philippines, Ltd. vs. Municipality of Sipocot, L-12680, March 20, 1959).
In its petition for declaratory relief, petitioner-appellee alleged that by
reason of the enforcement of the municipal ordinance by respondents it
was forced to pay under protest the fees imposed pursuant to the said
ordinance, and accordingly, one of the reliefs prayed for by the petitioner
was that the respondents be ordered to refund all the amounts it paid to
respondent Municipal Treasurer during the pendency of the case. The
inclusion of said allegation and prayer in the petitioner was not objected
to by the respondents in their answer. During the trial, evidence of the
payments made by the petitioner was introduced. Respondents were
thus fully aware of the petitioner’s claim for refund and of what would
happen if the ordinance were to be declared invalid by the court.
A fixed tax denominated as a “police inspection fee” of P.30 per sack of
cassava starch shipped out of the municipality is void where it is not for
a public purpose, just and uniform because the police do nothing but
count the number of cassava sacks shipped out.—However, the tax
imposed under the ordinance can be stricken down on another ground.
According to Section 2 of the abovementioned Act, the tax levied must
be “for public purposes, just and uniform” (Italics supplied.) As correctly
held by the trial court, the so-called “police inspection fee” levied by the
ordinance is “unjust and unreasonable.”

G.R. No. 183137. April 10, 2013

PELIZLOY REALTY CORPORATION, represented herein by its
President, GREGORY K. LOY, petitioner, vs. THE PROVINCE OF
BENGUET, respondent.
RULING: The power to tax “is an attribute of sovereignty,” and as such,
inheres in the State. Such, however, is not true for provinces, cities,
municipalities and barangays as they are not the sovereign; rather, they
are mere “territorial and political subdivisions of the Republic of the
Philippines.” The rule governing the taxing power of provinces, cities,
municipalities and barangays is summarized in Icard v. City Council of
Baguio: It is settled that a municipal corporation unlike a sovereign state
is clothed with no inherent power of taxation. The charter or statute
must plainly show an intent to confer that power or the municipality,
cannot assume it. And the power when granted is to be construed in
strictissimi juris. Any doubt or ambiguity arising out of the term used in
granting that power must be resolved against the municipality.
Inferences, implications, deductions—all these—have no place in the
interpretation of the taxing power of a municipal corporation.
The power of a province to tax is limited to the extent that such power is
delegated to it either by the Constitution or by statute. Section 5, Article
X of the 1987 Constitution is clear on this point: Section 5. Each local
government unit shall have the power to create its own sources of
revenues and to levy taxes, fees and charges subject to such guidelines
and limitations as the Congress may provide, consistent with the basic
policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local governments.
Section 130 provides for the following fundamental principles governing
the taxing powers of LGUs: 1. Taxation shall be uniform in each LGU. 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 in no case be let to
any private person. 4. The revenue collected pursuant to the provisions
of the LGC shall inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge or other imposition
unless otherwise specifically provided by the LGC. 5. Each LGU shall, as
far as practicable, evolve a progressive system of taxation.
In Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc.,
503 SCRA 398 (2006), the Supreme Court defined percentage tax as a
“tax measured by a certain percentage of the gross selling price or gross
value in money of goods sold, bartered or imported; or of the gross
receipts or earnings derived by any person engaged in the sale of
services.” Also, Republic Act No. 8424, otherwise known as the National
Internal Revenue Code (NIRC), in Section 125, Title V, lists amusement
taxes as among the (other) percentage taxes which are levied regardless
of whether or not a taxpayer is already liable to pay value-added tax
(VAT).
Provinces are not barred from levying amusement taxes even if
amusement taxes are a form of percentage taxes.

j. Taxes on transportation contractors and common carriers: The transport of good

and cargoes by transportation contractor, person who transport for hire and common
carriers is subject to 12% VAT.
The transportation of passengers by transportation contractors, person who transport
for hire and common carriers is subject to 3% tax on their quarterly gross receipts

G.R. No. 125948. December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS,
HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in
her official capacity as City Treasurer of Batangas, respondents.
RULING: It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called “common carrier’s tax.” Petitioner is already paying three (3%)
percent common carrier’s tax on its gross sales/earnings under the National Internal
Revenue Code. To tax petitioner again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the Local Government Code.

k. Taxes on premiums:
Reinsurance- one by which an insurer procures a third person to insure him
against loss or liability by reason of such original insurance.
Retrocession- transaction whereby one insurance entity agrees to indemnify
another insurance entity against all or part of the loss that the latter sustains under a policy
or policies of reinsurance that it has issued

l. TFC for registration of motor vehicles and issuance of licenses for driving -
Correlate with Sec. 458 (3)(vi) of the LGV and Art. 99(a)(3)(vi) of the IRR of the LGC:
Subject to the guidelines of DOTC, municipalities and cities can regulate the operation of
tricycles and grant franchises for the operation thereof within their territorial jurisdiction

G.R. No. 131512. January 20, 2000

LAND TRANSPORTATION OFFICE [LTO], represented by Assistant
Secretary Manuel F. Bruan, LTO Regional Office, Region X
represented by its Regional Director, Timoteo A. Garcia; and LTO
Butuan represented by Rosita G. Sadiaga, its Registrar,
petitioners, vs. CITY OF BUTUAN, represented in this case by
Democrito D. Plaza II, City Mayor, respondent.
RULING: Registration and licensing functions are vested in the Land
Transportation Office while franchising and regulatory responsibilities had
been vested in the Land Transportation Franchising and Regulatory Board.
LGUs indubitably now have the power to regulate the operation of
tricycles-for-hire and to grant franchises for the operation thereof. The
power of LGUs to regulate the operation of tricycles and to grant
franchises for the operation thereof is still subject to the guidelines
prescribed by the Department of Transportation and Communications. In
compliance therewith, the Department of Transportation and
Communications (“DOTC”) issued “Guidelines to Implement the Devolution
of LTFRBs Franchising Authority over Tricycles-For-Hire to Local
Government units pursuant to the Local Government Code.”
Such as can be gleaned from the explicit language of the statute, as well
as the corresponding guidelines issued by DOTC, the newly delegated
powers pertain to the franchising and regulatory powers theretofore
exercised by the LTFRB and not to the functions of the LTO relative to the
registration of motor vehicles and issuance of licenses for the driving
thereof. Clearly unaffected by the Local Government Code are the powers
of LTO under R.A. No. 4136 requiring the registration of all kinds of motor
vehicles “used or operated on or upon any public highway” in the country.

m. Taxes, Fees, or Charges on Philippine Products Actually Exported -

Correlate with Sec. 143 (c): Except when otherwise provided by the Code(i.e.,
municipalities may impose taxes on importers of essential commodities.

n. TFC on CBBEs under RA No. 6810 and RA 6983

o.TFC on the National Government, its agencies and instrumentalities and LGUs
(To be discussed together with Secs.232 and 234 on Real Property Tax)- In section
234(A), there is the exception to the exemption clause which taxes the national
government when the beneficial use of its real properties is given to a taxable entity.

G.R. No. 169836. July 31, 2007

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF
APPEALS, OFFICE OF THE PRESIDENT, DEPARTMENT OF FINANCE and the CITY
OF ILOILO, respondents.
RULING: The Court rules that the Authority is not a GOCC but an instrumentality of the
national government which is generally exempt from payment of real property tax.
However, said exemption does not apply to the portions of the IFPC which the
Authority leased to private entities. With respect to these properties, the Authority is
liable to pay real property tax. Nonetheless, the IFPC, being a property of public
dominion cannot be sold at public auction to satisfy the tax delinquency. On the basis
of the parameters set in the MIAA case, the Authority should be classified as an
instrumentality of the national government. As such, it is generally exempt from
payment of real property tax, except those portions which have been leased to private
entities.
Same; Applying Section 234(a) of the Local Government Code, the Court ruled that
when an instrumentality of the national government grants to a taxable person the
beneficial use of a real property owned by the Republic, said instrumentality becomes
liable to pay real property tax. Thus, while MIAA was held to be an instrumentality of
the national government which is generally exempt from local taxes, it was at the same
time declared liable to pay real property taxes on the airport lands and buildings which
it leased to private persons. It was held that the real property tax assessments and
notices of delinquencies issued by the City of Pasay to MIAA are void except those
pertaining to portions of the airport which are leased to private parties.
The real property tax assessments issued by the City of Iloilo should be upheld only
with respect to the portions leased to private persons. In case the Authority fails to pay
the real property taxes due thereon, said portions cannot be sold at public auction to
satisfy the tax delinquency. In Chavez v. Public Estates Authority, 384 SCRA 152 it was
held that reclaimed lands are lands of the public domain and cannot, without
Congressional fiat, be subject of a sale, public or private.
G.R. No. 120082. September 11, 1996
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON.
FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial
Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor, HON.
TOMAS R. OSMEÑA, and EUSTAQUIO B. CESA, respondents.
RULING: “Agency” and “Instrumentality,” Explained.—An “agency” of the Government
refers to “any of the various units of the Government, including a department, bureau,
office, instrumentality, or government-owned or controlled corporation, or a local
government or a distinct unit therein;” while an “instrumentality” refers to “any agency
of the National Government, not integrated within the department framework, vested
with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered institutions and
government-owned and controlled corporations.”

G.R. No. 155650. July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. COURT OF
APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY
TREASURER OF PARAÑAQUE, respondents.
RULING: MIAA’s Airport Lands and Buildings are exempt from real estate tax imposed
by local governments.— First, MIAA is not a government-owned or controlled
corporation but an instrumentality of the National Government and thus exempt from
local taxation. Second, the real properties of MIAA are owned by the Republic of the
Philippines and thus exempt from real estate tax.
While there is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax, MIAA is not a government-owned or controlled
corporation; A government-owned or controlled corporation must be “organized as a
stock or non-stock corporation,” of which MIAA is neither; MIAA is not a stock
corporation because it has no capital stock divided into shares
Manila International Airport Authority (MIAA) is a government instrumentality vested
with corporate powers to perform efficiently its governmental functions
A government instrumentality like MIAA falls under Section 133(o) of the Local
Government Code, which states: SEC. 133. Common Limitations on the Taxing Powers
of Local Government Units.—Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not extend to the
levy of the following: x x x x (o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local government units. (Emphasis
and italics supplied) Section 133(o) recognizes the basic principle that local
governments cannot tax the national government, which historically merely delegated
to local governments the power to tax. While the 1987 Constitution now includes
taxation as one of the powers of local governments, local governments may only
exercise such power “subject to such guidelines and limitations as the Congress may
provide.”
By express mandate of the Local Government Code, local governments cannot impose
any kind of tax on national government instrumentalities like the MIAA. Local
governments are devoid of power to tax the national government, its agencies and
instrumentalities. The taxing powers of local governments do not extend to the
national government, its agencies and instrumentalities, “[u]nless otherwise provided
in this Code” as stated in the saving clause of Section 133. The saving clause refers to
Section 234(a) on the exception to the exemption from real estate tax of real property
owned by the Republic.

G.R. No. 163072. April 2, 2009.*

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. CITY OF PASAY,
SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY
TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, respondents.
RULING: MIAA is not a government-owned or controlled corporation but a
government instrumentality which is exempt from any kind of tax from the local
governments. Indeed, the exercise of the taxing power of local government units is
subject to the limitations enumerated in Section 133 of the Local Government Code.
Under Section 133(o) of the Local Government Code, local government units have no
power to tax instrumentalities of the national government like the MIAA. Hence, MIAA
is not liable to pay real property tax for the NAIA Pasay properties.
The airport lands and buildings of MIAA are properties of public dominion intended for
public use, and as such are exempt from real property tax under Section 234(a) of the
Local Government Code. However, under the same provision, if MIAA leases its real
property to a taxable person, the specific property leased becomes subject to real
property tax. In this case, only those portions of the NAIA Pasay properties which are
leased to taxable persons like private parties are subject to real property tax by the City
of Pasay.

G.R. No. 127383. August 18, 2005

THE CITY OF DAVAO, CITY TREASURER AND THE CITY ASSESSOR OF DAVAO CITY,
petitioners, vs. THE REGIONAL TRIAL COURT, BRANCH XII, DAVAO CITY AND THE
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), respondents.
RULING: The Court, in ruling Mactan-Cebu International Airport Authority (MCIAA)
non-exempt from realty taxes, considered that Section 133 of the Local Government
Code qualified the exemption of the National Government, its agencies and
instrumentalities from local taxation with the phrase “unless otherwise provided
herein.”
Section 133 was not intended to be so absolute a prohibition on the power of LGUs to
tax the National Government, its agencies and instrumentalities, as evidenced by these
cited provisions which “otherwise provided.” But what was the extent of the limitation
under Section 133? This is how the Court, in a discussion of far-reaching consequence,
 defined the parameters in Mactan: The foregoing sections of the LGC speak of: (a) the
limitations on the taxing powers of local government units and the exceptions to such
limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of
exceptions or provisos in these sections, as shown by the following clauses: (1) “unless
otherwise provided herein” in the opening paragraph of Section 133; (2) “Unless
otherwise provided in this Code” in Section 193; (3) “not hereafter specifically
exempted” in Section 232; and (4) “Except as provided herein” in the last paragraph of
Section 234.
This Court, in Mactan, acknowledged that under Section 133, instrumentalities
were generally exempt from all forms of local government taxation, unless
otherwise provided in the Code. On the other hand, Section 232 “otherwise
provides” insofar as it allowed local government units to levy an ad valorem real
property tax, irrespective of who owned the property. At the same time, the
imposition of real property taxes under Section 232 is in turn qualified by the
phrase “not hereinafter specifically exempted.” The exemptions from real
property taxes are enumerated in Section 234, which specifically states that only
real properties owned “by the Republic of the Philippines or any of its political
subdivisions” are exempted from the payment of the tax. Clearly,
instrumentalities or GOCCs do not fall within the exceptions under Section 234.

II. TAXING AND OTHER REVENUE RASING POWERS OF LGUs

i. Provinces
a. Local Transfer Tax (Sec. 135)- Sale, donation, barter, or any other mode of
transferring ownership or title of real property. Tax rate is not more than
50% of 1%(0.5). The total consideration involved or of the fair market value
in case the monetary consideration involved in the transfer is not substantial
whichever is higher. Person liable to pay is the seller, donor, transferor,
executor, or administrator. Within 60 days from the date of the execution of
the deed from date of the decedent’s death/

b. Business Tax on Printing and Publication (Sec. 136)- of books, cards,

posters etc. Tax rate is not more than 50% of 1% or in case of newly started
business not more than 1/20 of 1 % the tax base is the gross annual receipts
for the preceding year or in case of newly started business capital investment.
Printing of DEped/Ched/Tesda prescribed texts or references are exempted.

c. Franchise Tax (Sec. 137)- Tax rate is not more than 50% of 1% or in case of
newly started business not more than 1/20 of 1 % the tax base is the gross annual
receipts for the preceding year or in case of newly started business capital
investment. It shall be based on gross receipts precisely because it is a tax on
business rather than on persons or property.

G.R. No. 149110. April 9, 2003

NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN,
respondent.
RULING: Section 131 (m) of the LGC defines a “franchise” as “a right or privilege,
affected with public interest which is conferred upon private persons or
corporations, under such terms and conditions as the government and its political
subdivisions may impose in the interest of the public welfare, security and safety.”
On the other hand, section 131 (d) of the LGC defines “business” as “trade or
commercial activity regularly engaged in as means of livelihood or with a view to
profit.” Petitioner claims that it is not engaged in an activity for profit, in as much
as its charter specifically provides that it is a “non-profit organization.”
One of the most significant provisions of the LGC is the removal of the blanket
exclusion of instrumentalities and agencies of the national government from the
coverage of local taxation. Although as a general rule, LGUs cannot impose taxes,
fees or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e., when specific provisions
of the LGC authorize the LGUs to impose taxes, fees or charges on the
aforementioned entities
As commonly used, a franchise tax is “a tax on the privilege of transacting
business in the state and exercising corporate franchises granted by the state.” It
is not levied on the corporation simply for existing as a corporation, upon its
property or its income, but on its exercise of the rights or privileges granted to it
by the government. Hence, a corporation need not pay franchise tax from the time
it ceased to do business and exercise its franchise. It is within this context that the
phrase “tax on businesses enjoying a franchise” in section 137 of the LGC should
be interpreted and understood. Verily, to determine whether the petitioner is
covered by the franchise tax in question, the following requisites should concur:
(1) that petitioner has a “franchise” in the sense of a secondary or special
franchise; and (2) that it is exercising its rights or privileges under this franchise
within the territory of the respondent city government.

G.R. No. 166408. October 6, 2008

QUEZON CITY and THE CITY TREASURER OF QUEZON CITY, petitioners, vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
RULING: Taxes are what civilized people pay for civilized society. They are the
lifeblood of the nation. Thus, statutes granting tax exemptions are construed
stricissimi juris against the taxpayer and liberally in favor of the taxing authority.
A claim of tax exemption must be clearly shown and based on language in law too
plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the
exception. The burden of proof rests upon the party claiming the exemption to
prove that it is in fact covered by the exemption so claimed.
The basis for the rule on strict construction to statutory provisions granting tax
exemptions or deductions is to minimize differential treatment and foster
impartiality, fairness and equality of treatment among taxpayers. He who claims
an exemption from his share of common burden must justify his claim that the
legislature intended to exempt him by unmistakable terms. For exemptions from
taxation are not favored in law, nor are they presumed. They must be expressed in
the clearest and most unambiguous language and not left to mere implications. It
has been held that “exemptions are never presumed, the burden is on the
claimant to establish clearly his right to exemption and cannot be made out of
inference or implications but must be laid beyond reasonable doubt. In other
words, since taxation is the rule and exemption the exception, the intention to
make an exemption ought to be expressed in clear and unambiguous terms.
Section 8 of R.A. No. 7966 imposes on ABS-CBN a franchise tax equivalent to three
(3) percent of all gross receipts of the radio/television business transacted under
the franchise and the franchise tax shall be “in lieu of all taxes” on the franchise or
earnings thereof. The “in lieu of all taxes” provision in the franchise of ABS-CBN
does not expressly provide what kind of taxes ABS-CBN is exempted from. It is not
clear whether the exemption would include both local, whether municipal, city or
provincial, and national tax. What is clear is that ABS-CBN shall be liable to pay
three (3) percent franchise tax and income taxes under Title II of the NIRC. But
whether the “in lieu of all taxes provision” would include exemption from local tax
is not unequivocal. As adverted to earlier, the right to exemption from local
franchise tax must be clearly established and cannot be made out of inference or
implications but must be laid beyond reasonable doubt. Verily, the uncertainty in
the “in lieu of all taxes” provision should be construed against ABS-CBN. ABS-CBN
has the burden to prove that it is in fact covered by the exemption so claimed.
ABS-CBN miserably failed in this regard.

G.R. No. 192945. September 5, 2012

CITY OF IRIGA, petitioner, vs. CAMARINES SUR III ELECTRIC COOPERATIVE,
INC. (CASURECO III), respondent.
RULING: The power of the local government units to impose and collect taxes is
derived from the Constitution itself which grants them “the power to create its
own sources of revenues and to levy taxes, fees and charges subject to such
guidelines and limitation as the Congress may provide.” This explicit
constitutional grant of power to tax is consistent with the basic policy of local
autonomy and decentralization of governance. With this power, local government
units have the fiscal mechanisms to raise the funds needed to deliver basic
services to their constituents and break the culture of dependence on the national
government. Thus, consistent with these objectives, the LGC was enacted granting
the local government units, like petitioner, the power to impose and collect
franchise tax.
In National Power Corporation v. City of Cabanatuan, 401 SCRA 259 (2003), the
Court declared that “a franchise tax is ‘a tax on the privilege of transacting
business in the state and exercising corporate franchises granted by the state.’ ” It
is not levied on the corporation simply for existing as a corporation, upon its
property or its income, but on its exercise of the rights or privileges granted to it
by the government. “It is within this context that the phrase tax on businesses
enjoying a franchise in Section 137 of the LGC should be interpreted and
understood.”
To be liable for local franchise tax, the following requisites should concur: (1) that
one has a “franchise” in the sense of a secondary or special franchise; and (2) that
it is exercising its rights or privileges under this franchise within the territory of
the pertinent local government unit. Franchise tax shall be based on gross receipts
precisely because it is a tax on business, rather than on persons or property. Since
it partakes of the nature of an excise tax, the situs of taxation is the place where
the privilege is exercised, in this case in the City of Iriga, where CASURECO III has
its principal office and from where it operates, regardless of the place where its
services or products are delivered. Hence, franchise tax covers all gross receipts
from Iriga City and the Rinconada area.

G.R. No. 155491. September 16, 2008

SMART COMMUNICATIONS, INC., petitioner, vs. THE CITY OF DAVAO,
represented herein by its Mayor HON. RODRIGO R. DUTERTE, and the
SANGGUNIANG PANLUNGSOD OF DAVAO CITY, respondents.
RULING: The grant of tax exemption by R.A. No. 7294 is not to be interpreted
from a consideration of a single portion or of isolated words or clauses, but from a
general view of the act as a whole. The “in lieu of all taxes” clause in Smart’s
franchise is put in issue before the Court. In order to ascertain its meaning,
consistent with fundamentals of statutory construction, all the words in the
statute must be considered. Every part of the statute must be construed with
reference to the context.
The uncertainty in the “in lieu of all taxes” clause in R.A. No. 7294 on whether
Smart is exempted from both local and national franchise tax must be construed
strictly against Smart which claims the exemption—in the instant case, the “in lieu
of all taxes” clause applies only to national internal revenue taxes and not to local
taxes. Smart has the burden of proving that, aside from the imposed 3% franchise
tax, Congress intended it to be exempted from all kinds of franchise taxes—
whether local or national. However, Smart failed in this regard. Tax exemptions
are never presumed and are strictly construed against the taxpayer and liberally
in favor of the taxing authority. They can only be given force when the grant is
clear and categorical. The surrender of the power to tax, when claimed, must be
clearly shown by a language that will admit of no reasonable construction
consistent with the reservation of the power. If the intention of the legislature is
open to doubt, then the intention of the legislature must be resolved in favor of
the State. In this case, the doubt must be resolved in favor of the City of Davao.
Hence, the “in lieu of all taxes” clause applies only to national internal revenue
taxes and not to local taxes.

d. Tax on Sand, Gravel and Quarry Resources (Sec. 138)- Extraction of

ordinary stones gravel, sand, earth and other quarry resources as defined under
NIRC. Tax rate not more than 10%. Distribution of tax proceed;province 30%,
Component city of municipality where resources extracted 30% an barangay
where resources extracted 40%.

MUNICIPALITY OF SAN FERNANDO, LA UNION represented by Mayor

LORENZO L. DACANAY, plaintiffappellee, (respondent) us. MAYOR
TIMOTEO STA. ROMANA, MUNICIPAL TREASURER and their authorized
Agents of Luna, La Union and the MUNICIPALITY OF LUNA, LA UNION,
defendants-appellants (petitioners).
Mines and Mining; Taxation; Local Governments; Authority to impose taxes
and fees for extraction of sand and gravel belongs to the Province, not to the
municipality where they are found.—Under the above-quoted provisions of the
Local Tax Code, there is no question that the authority to impose the license
fees in dispute, properly belongs to the province concerned and not to the
Municipality of Luna which is specifically prohibited under Section 22 of the
same Code "from levying taxes, fees and charges that the province or city is
authorized to levy in this Code." On the other hand, the Municipality of San
Fernando cannot extract sand and gravel from the Municipality of Luna
without paying the corresponding taxes or fees that may be imposed by the
province of La Union.

G.R. No. 126232. November 27, 1998

THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE
CHAVES, and MANUEL DJ SIAYNGCO in their capacity as PROVINCIAL
GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL LEGAL ADVISER,
respectively, petitioners, vs. THE HONORABLE COURT OF APPEALS
(FORMER SPECIAL 12TH DIVISION), REPUBLIC CEMENT CORPORATION,
respondents.
RULING: A province has no authority to impose taxes on stones, sand, gravel,
earth and other quarry resources extracted from private lands.
A province may not levy excise taxes on articles already taxed by the National
Internal Revenue Code.—The Court of Appeals erred in ruling that a province
can impose only the taxes specifically mentioned under the Local Government
Code. As correctly pointed out by petitioners, Section 186 allows a province to
levy taxes other than those specifically enumerated under the Code, subject to
the conditions specified therein. This finding, nevertheless, affords cold
comfort to petitioners as they are still prohibited from imposing taxes on
stones, sand, gravel, earth and other quarry resources extracted from private
lands. The tax imposed by the Province of Bulacan is an excise tax, being a tax
upon the performance, carrying on, or exercise of an activity.
It is clearly apparent from the above provision that the National Internal
Revenue Code levies a tax on all quarry resources, regardless of origin,
whether extracted from public or private land. Thus, a province may not
ordinarily impose taxes on stones, sand, gravel, earth and other quarry
resources, as the same are already taxed under the National Internal Revenue
Code. The province can, however, impose a tax on stones, sand, gravel, earth
and other quarry resources extracted from public land because it is expressly
empowered to do so under the Local Government Code. As to stones, sand,
gravel, earth and other quarry resources extracted from private land, however,
it may not do so, because of the limitation provided by Section 133 of the Code
in relation to Section 151 of the National Internal Revenue Code.

e. Professional Tax (Sec. 139), Definition of Professionals (Sec. 238 (f) IRR
of the LGC), Professional practices his profession in several places (Sec.
228
(b) IRR of LGC)- The professionals subject to the professional tax are only those
who passed the bar examinations, or any board or other examinations that the PRC
conducts. A lawyer who is concurrently a Certified Public Accountant (CPA) must
pay both the professional tax imposed on lawyers and on CPAs if he is to practice
both professions. Tax rate not exceed 300k.

f. Amusement Tax (Sec. 140) as amended by RA No. 9640 dated May 21,
2009-
Amusement is a pleasurable diversion and entertainment. It is synonymous to
relaxation avocation, pastime or fun.
Ownership, lease or operation of theaters, cinemas, concert halls, circuses, boxing
stadium and other places of amusement. Tax rate is not more than 10%. The tax
base is gross receipts from admission fees. Operas, concerts, dramas, recitals,
painting and art exhibitions, flower shows, musical programs, literary and
oratorical presentation are exempted. Tax shall be shared equally by the province
and municipality where such amusement places are located.

G.R. No. 183137. April 10, 2013

PELIZLOY REALTY CORPORATION, represented herein by its President,
GREGORY K. LOY, petitioner, vs. THE PROVINCE OF BENGUET, respondent.
RULING: Amusement taxes are fixed at a certain percentage of the gross receipts
incurred by certain specified establishments. Thus, applying the definition in CIR
v. Citytrust and drawing from the treatment of amusement taxes by the NIRC,
amusement taxes are percentage taxes as correctly argued by Pelizloy. However,
provinces are not barred from levying amusement taxes even if amusement taxes
are a form of percentage taxes. Section 133 (i) of the LGC prohibits the levy of
percentage taxes “except as otherwise provided” by the LGC.
Section 140, Local Government Code (R.A. No. 7160) expressly allows for the
imposition by provinces of amusement taxes on “the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other
places of amusement.” However, resorts, swimming pools, bath houses, hot
springs, and tourist spots are not among those places expressly mentioned by
Section 140 of the Local Government Code as being subject to amusement taxes.
Thus, the determination of whether amusement taxes may be levied on
admissions to resorts, swimming pools, bath houses, hot springs, and tourist spots
hinges on whether the phrase ‘other places of amusement’ encompasses resorts,
swimming pools, bath houses, hot springs, and tourist spots.

G.R. No. 180235. January 20, 2016

ALTA VISTA GOLF AND COUNTRY CLUB, petitioner, vs. THE CITY OF CEBU,
HON. MAYOR TOMAS R. OSMEÑA, in his capacity as Mayor of Cebu, and
TERESITA C. CAMARILLO, in her capacity as the City Treasurer, respondents.
 RULING: The Local Government Code authorizes the imposition by local
government units of amusement tax under Section 140, which provides: Sec. 140.
Amusement Tax.—(a) The province may levy an amusement tax to be collected
from the proprietors, lessees, or operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement at a rate of not more than
thirty percent (30%) of the gross receipts from admission fees. (b) In the case of
theaters or cinemas, the tax shall first be deducted and withheld by their
proprietors, lessees, or operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors, lessees, or operators and the
distributors of the cinematographic films. (c) The holding of operas, concerts,
dramas, recitals, painting, and art exhibitions, flower shows, musical programs,
literary and oratorical presentations, except pop, rock, or similar concerts shall be
exempt from the payment of the tax hereon imposed. (d) The sangguniang
panlalawigan may prescribe the time, manner, terms and conditions for the
payment of tax. In case of fraud or failure to pay the tax, the sangguniang
panlalawigan may impose such surcharges, interests and penalties as it may deem
appropriate. (e) The proceeds from the amusement tax shall be shared equally by
the province and the municipality where such amusement places are located.
Amusement places,” as defined in Section 131(c) of the Local Government Code,
“include theaters, cinemas, concert halls, circuses and other places of amusement
where one seeks admission to entertain oneself by seeing or viewing the show or
performance.” The pronouncements of the Court in Pelizloy Realty Corporation v.
The Province of Benguet, 695 SCRA 491 (2013), are of particular significance to
this case. The Court, in Pelizloy Realty, declared null and void the second
paragraph of Article X, Section 59 of the Benguet Provincial Code, insofar as it
imposes amusement taxes on admission fees to resorts, swimming pools, bath
houses, hot springs, and tourist spots. Applying the principle of ejusdem generis,
as well as the ruling in the Philippine Basketball Association v. Court of Appeals,
337 SCRA 358 (2000), case, the Court expounded on the authority of local
government units to impose amusement tax under Section 140, in relation to
Section 131(c), of the Local Government Code.
Uniformity of taxation, like the kindred concept of equal protection, requires that
all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities.—In light of Pelizloy Realty, a golf course cannot be
considered a place of amusement. As petitioner asserted, people do not enter a
golf course to see or view a show or performance. Petitioner also, as proprietor or
operator of the golf course, does not actively display, stage, or present a show or
performance. People go to a golf course to engage themselves in a physical sport
activity, i.e., to play golf; the same reason why people go to a gym or court to play
badminton or tennis or to a shooting range for target practice, yet there is no
showing herein that such gym, court, or shooting range is similarly considered an
amusement place subject to amusement tax. There is no basis for singling out golf
courses for amusement tax purposes from other places where people go to play
sports. This is in contravention of one of the fundamental principles of local
taxation: that the “[t]axation shall be uniform in each local government unit.”
Uniformity of taxation, like the kindred concept of equal protection, requires that
all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities.

g. Annual Fixed Tax on Delivery Trucks / Vans (Sec. 141)- Use by

manufacturer producer, wholesalers, dealers, retailers of truck, van, vehicle in the
delivery or distribution of distilled spirits, fermented liquors, softdrinks, cigar and
other products determined by the SP. Tax rate does not exceed 500k.

ii. Municipalities
a. Business Taxes (Sec. 143)- Gives the enumeration of specific business
activities and their responding tax rates. The tax rates given by the LGC are
the maximum rates that sangguinian can impose by an ordinance. Local
business taxes are based on gross receipts.
Gross receipts- includes money or its equivalent actually or constructively
received in consideration of services rendered or articles, sold, exchanged or
leased, whether actual or constructive.
Condominium corporation are generally exempt from local business taxation
under the LGC, irrespective of any local ordinance that seeks to declare
otherwise. They are prohibited from doing activities for profit under the
Condominium Code, hence they are not business under the LGC.

G.R. No. 176667. November 22, 2007.*

ERICSSON TELECOMMUNICATIONS, INC., petitioner, vs. CITY OF PASIG,
represented by its City Mayor, Hon. Vicente P. Eusebio, et al., ** respondent.
RULING: “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. Constructive receipt occurs
when the money consideration or its equivalent is placed at the control of the
person who rendered the service without restrictions by the payor.
Municipal Corporations; The imposition of local business tax based on gross
revenue inevitably results in double taxation—taxing of the same person twice by
the same jurisdiction over the same thing inasmuch as petitioner’s revenue or
income for a taxable year will definitely include its gross receipts already
reported during the previous year and for which local business tax has already
been paid. In petitioner’s case, its audited financial statements reflect income or
revenue which accrued to it during the taxable period although not yet actually or
constructively received or paid. This is because petitioner uses the accrual
method of accounting, where income is reportable when all the events have
occurred that fix the taxpayer’s right to receive the income, and the amount can be
determined with reasonable accuracy; the right to receive income, and not the
actual receipt, determines when to include the amount in gross income.
Thus, respondent committed a palpable error when it assessed petitioner’s local
business tax based on its gross revenue as reported in its audited financial
statements, as Section 143 of the Local Government Code and Section 22(e) of the
Pasig Revenue Code clearly provide that the tax should be computed based on
gross receipts.

G.R. No. 154993. October 25, 2005

LUZ R. YAMANE, in her capacity as the CITY TREASURER OF MAKATI CITY,
petitioner, vs. BA LEPANTO CONDOMINIUM CORPORATION, respondent.
RULING: The most well-known mode of local government taxation is perhaps the
real property tax, which is governed by Title II, Book II of the Code, and which
bears no application in this case. A different set of provisions, found under Title I
of Book II, governs other taxes imposable by local government units, including
business taxes. Under Section 151 of the Code, cities such as Makati are
authorized to levy the same taxes fees and charges as provinces and
municipalities. It is in Article II, Title II, Book II of the Code, governing municipal
taxes, where the provisions on business taxation relevant to this petition may be
found.

G.R. No. 181845. August 4, 2009

THE CITY OF MANILA, LIBERTY M. TOLEDO, in her capacity as THE
TREASURER OF MANILA and JOSEPH SANTIAGO, in his capacity as the CHIEF
OF THE LICENSE DIVISION OF CITY OF MANILA, petitioners, vs. COCA-COLA
BOTTLERS PHILIPPINES, INC., respondent.
RULING: Double taxation means taxing the same property twice when it should
be taxed only once, that is, “taxing the same person twice by the same jurisdiction
for the same thing”; Otherwise described as “direct duplicate taxation,” the two
taxes must be imposed on the same subject matter, for the same purpose, by the
same taxing authority, within the same jurisdiction, during the same taxing
period, and the taxes must be of the same kind or character.—Petitioners
obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794,
to their own detriment. Said exempting proviso was precisely included in said
section so as to avoid double taxation. It is obnoxious when the taxpayer is taxed
twice, when it should be but once.
Using the aforementioned test, the Court finds that there is indeed double taxation
if respondent is subjected to the taxes under both Sections 14 and 21 of Tax
Ordinance No. 7794, since these are being imposed: (1) on the same subject
matter—the privilege of doing business in the City of Manila; (2) for the same
purpose—to make persons conducting business within the City of Manila
contribute to city revenues; (3) by the same taxing authority—petitioner City of
Manila; (4) within the same taxing jurisdiction—within the territorial jurisdiction
of the City of Manila; (5) for the same taxing periods—per calendar year; and (6)
of the same kind or character—a local business tax imposed on gross sales or
receipts of the business.
It is apparent from a perusal of Section 143 of the Local Government Code—the
very source of the power of municipalities and cities to impose a local business
tax—that when a municipality or city has already imposed a business tax on
manufacturers, etc. of liquors, distilled spirits, wines, and any other article of
commerce, pursuant to Section 143(a) of the Local Government Code (LGC), said
municipality or city may no longer subject the same manufacturers, etc. to a
business tax under Section 143(h) of the same Code.—The distinction petitioners
attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance
No. 7794 is specious.
Section 143(h) may be imposed only on businesses that are subject to excise tax,
VAT, or percentage tax under the NIRC, and that are “not otherwise specified in
preceding paragraphs.” In the same way, businesses such as respondent’s, already
subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which
is based on Section 143(a) of the LGC], can no longer be made liable for local
business tax under Section 21 of the same Tax Ordinance [which is based on
Section 143(h) of the LGC].

ALABANG SUPERMARKET CORPORATION VS CITY GOVERNMENT OF

MUNTINLUPA
CTA EB 386 February 12, 2009

Doctrine: On Tax Refund and Tax Credit: The reckoning periods for the filing of a
claim for refund in Sec 196 of the LGC should be interpreted so as to accomplish
the evident purpose viz the settlement of the rights of the taxpayer vis-a-vis the
government, at the earliest opportunity. The phrase “from the date the taxpayer
becomes entitled to a refund or credit” in Sec 196 should not be interpreted to
mean the finality of the decision of a court declaring the tax measure void, even
without a timely claim for refund.
A taxpayer who believes that he has paid a tax imposed under a void ordinance
should timely exhaust administrative remedies before resorting to the filing of a
judicial claim or timely question its constitutionality and legality. Petitioner's
failure to file the appropriate administrative claim for refund for the period
December 16, 2000 to September 2002, cannot be countenanced. More so,
since it has been able to file a timely administrative claim for the 3% business tax
it paid covering January 2, 1999 to December 15, 2000. It is clearly aware of the
requirements for the filing of an administrative claim set forth by law. Its
manifest error cannot be cured at this point.

G.R. No. 191761. November 14, 2012.*

CAGAYAN ELECTRIC POWER AND LIGHT CO., INC., petitioner, vs. CITY OF
CAGAYAN DE ORO, respondent.
RULING: Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees, and charges subject to such guidelines
and limitations as the Congress may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
government.”
The Local Government Code withdrew tax exemption privileges previously given
to natural or juridical persons, and granted local government units the power to
impose franchise tax. It is hornbook doctrine that tax exemptions are strictly
construed against the claimant. For this reason, tax exemptions must be based on
clear legal provisions. The separate opinion in PLDT v. City of Davao is applicable
to the present case, thus: Tax exemptions must be clear and unequivocal. A
taxpayer claiming a tax exemption must point to a specific provision of law
conferring on the taxpayer, in clear and plain terms, exemption from a common
burden. Any doubt whether a tax exemption exists is resolved against the
taxpayer. Tax exemptions cannot arise by mere implication, much less by an
implied re-enactment of a repealed tax exemption clause.
Franchise Tax; Section 151 of the Local Government Code states that, subject to
certain exceptions, a city may exceed by “not more than 50%” the tax rates
allowed to provinces and municipalities. A province may impose a franchise tax at
a rate “not exceeding 50% of 1% of the gross annual receipts.” A municipality may
impose a business tax at a rate not exceeding “two percent of gross sales or
receipts.”—CEPALCO is mistaken when it states that a city can impose a tax up to
only one-half of what the province or city may impose. A more circumspect
reading of the Local Government Code could have prevented this error.
Value-Added Tax; More importantly, because “any person, who in the course of
trade or business leases goods or properties shall be subject to the value-added
tax,” the imposable tax rate should not exceed two percent of gross receipts of the
lease of poles of the preceding calendar year. Section 143(h) states that “on any
business subject to value-added tax under the National Internal Revenue Code, as
amended, the rate of tax shall not exceed two percent (2%) of gross sales or
receipts of the preceding calendar year” from the lease of goods or properties.
Hence, the 10% tax rate imposed by Ordinance No. 9503-2005 clearly violates
Section 143(h) of the Local Government Code.
b. Catch all provision – Sec. 143 - On any business, not otherwise specified in
the preceding paragraphs, which the sanggunian concerned may deem proper to
tax: Provided, That on any business subject to the excise, value-added or
percentage tax under the National Internal Revenue Code, as amended, the rate of
tax shall not exceed two percent (2%) of gross sales or receipts of the preceding
calendar year. The sanggunian concerned may prescribe a schedule of graduated
tax rates but in no case to exceed the rates prescribed herein

Section 143(h)- gives the sanggunian the authority to tax whatever it pleases, as
long as it does not go against the limitations set about in the other provisions of
LGC
 Rates of Tax within Metropolitan Manila (Sec. 144)- The municipalities
within the Metropolitan Manila Area may levy taxes at rates which shall not
exceed by fifty percent (50%) the maximum rates prescribed in the
preceding Section,

d. Retirement of Business (Sec. 145)- A business subject to tax pursuant to

the preceding sections shall, upon termination thereof, submit a sworn statement
of its gross sales or receipts for the current year. If the tax paid during the year be
less than the tax due on said gross sales or receipts of the current year, the
difference shall be paid before the business is considered officially retired

G.R. No. 154092. July 14, 2005

MOBIL PHILIPPINES, INC., petitioner, vs. THE CITY TREASURER OF MAKATI
and the CHIEF OF THE LICENSE DIVISION OF THE CITY OF MAKATI,
respondents.
RULING: Business taxes imposed in the exercise of police power for regulatory
purposes are paid for the privilege of carrying on a business in the year the tax
was paid. It is paid at the beginning of the year as a fee to allow the business to
operate for the rest of the year. It is deemed a prerequisite to the conduct of
business. Income tax, on the other hand, is a tax on all yearly profits arising from
property, professions, trades or offices, or as a tax on a person’s income,
emoluments, profits and the like. It is tax on income, whether net or gross
realized in one taxable year. It is due on or before the 15th day of the 4th month
following the close of the taxpayer’s taxable year and is generally regarded as an
excise tax, levied upon the right of a person or entity to receive income or profits.

e. Payment of Business Taxes (Sec. 146)- (a) The taxes imposed under
Section 143 shall be payable for every separate or distinct establishment or place
where business subject to the tax is conducted and one line of business does not
become exempt by being conducted with some other business for which such tax
has been paid. The tax on a business must be paid by the person conducting the
same.cralaw

(b) In cases where a person conducts or operates two (2) or more of the
businesses mentioned in Section 143 of this Code which are subject to the same
rate of tax, the tax shall be computed on the combined total gross sales or receipts
of the said two (2) or more related businesses.

(c) In cases where a person conducts or operates two (2) or more businesses
mentioned in Section 143 of this Code which are subject to different rates of tax,
the gross sales or receipts of each business shall be separately reported for the
purpose of computing the tax due from each business.

f. Situs of Tax (Sec. 150) – Where to pay business tax?-

a. With branch or sales office or warehouse- All sales made in the locality
where the branch or office or warehouse is located. The tax shall be payable to
the city or municipality where the same is located.
b. Where there is no branch or sales office or warehouse -The
municipality where the sale or transaction is made. The sale shall be recorded in
the principal office along with the sales made by said principal office
The tax shall accrue to the city or municipality where said principal office is
located
C. Where there is a factory, project office, plant or plantation in pursuit of
business- All sales shall be recorded in the principal office/ If plantation is at a
place other than where the factory is located/ If manufacturer, contractor, etc.
has two or more factories, project offices, plants or plantations located in
different localities. - Of all sales recorded in the principal office.
1. 30% taxable to the city or municipality where the principal office is located.
2. 70% taxable to the city or municipality where the factory, plant, etc. is located.
The 70% (above) shall be divided as follows:
1. 60% to the city or municipality where the factory is.
2. 40% to the city or municipality where the plantation is located. .
The 70% shall be prorated among the localities where such factories, project
offices, plants and plantations are located based on their respective volumes of
production.

[No. L-12680. March 20, 1959.]

THE SHELL COMPANY OF THE PHILIPPINES, LTD., plaintiff and .appellant vs.
MUNICIPALITY OF SIPOCOT, CAMARINES SUR, ET AL., defendants and
appellees.
RULING: It is evident that delivery to the carrier is not considered by the parties
as amounting to a delivery to the consumer within the meaning of Article 1423 of
the Civil Code of the Philippines; here the carrier is merely an agent of the
appellant company. Accordingly, these sales should not be subjected to additional
tax, being transactions effected outside the municipality's territorial limits.
Appellee questions the propriety of this action for declaratory relief, contending
that the issue had become moot on account of the payments made by the
company to the municipality pursuant to the tax ordinance. This contention is
incorrect for even if payment was so made on any particular sales,uncertainty on
the applicability of the ordinance to future sales would still remain. Shell
Company of the Philippines, Ltd. vs. Municipality of Sipocot, Camarines Sur, et al.,
105 Phil. 1263, No. L-12680 March 20, 1959

No. L-30745. January 18, 1978

PHILIPPINE MATCH CO., LTD., plaintiff-appellant, vs. THE CITY OF CEBU and
JESUS E. ZABATE, Acting City Treasurer, defendants-appellees.
RULING: The city can validly tax the sales of matches to customers outside of the
city as long as the orders were booked and paid for in the company’s branch
office in the city. Those matches can be regarded as sold in the city, as
contemplated in the ordinance, because the matches were delivered to the carrier
in Cebu City. Generally, delivery to the carrier is delivery to the buyer. A different
interpretation would defeat the tax ordinance in question or encourage tax
evasion through the simple expedient of arranging for the delivery of the matches
at the outskirts of the city although the purchases were effected and paid for in
the company’s branch office in the city. The municipal board of Cebu City is
empowered “to provide for the levy and collection of taxes for general and special
purposes in accordance with law.”
The taxing power of cities, municipalities and municipal districts may be used (1)
“upon any person engaged in any occupation or business, or exercising any
privilege” therein; (2) for services rendered by those political subdivisions or
rendered in connection with any business, profession or occupation being
conducted therein, and (3) to levy, for public purposes, just and uniform taxes,
licenses or fees.
The prohibition against the imposition of percentage taxes (formerly provided for
in section 1 of Commonwealth Act No. 472) refers to municipalities and
municipal districts but not to chartered cities.

No. L-52019. August 19, 1988.

ILOILO BOTTLERS, INC., plaintiff-appellee, vs. CITY OF ILOILO, defendant-
appellant.
RULING: This Court has always recognized that the right to manufacture implies
the right to sell/distribute the manufactured products. Hence, for tax purposes, a
manufacturer does not necessarily become engaged in the separate business of
selling simply because it sells the products it manufactures. In certain cases,
however, a manufacturer may also be considered as engaged in the separate
business of selling its products. In determining whether a manufacturer is
engaged in the separate business of selling, the company’s marketing system
must be considered.
In the case at bar, the company distributed its softdrinks by means of a fleet of
delivery trucks which went directly to customers in the different places in Iloilo
province. Sales transactions with customers were entered into and sales were
perfected and consummated by route salesmen. Truck sales were made
independently of transactions in the main office. The delivery trucks were not
used solely for the purpose of delivering softdrinks previously sold at Pavia. They
served as selling units. They were what were called, until recently, “rolling
 stores”. The delivery trucks were therefore much the same as the stores and
warehouses under the second marketing system. Iloilo Bottlers, Inc. thus falls
under the second category above. That is, the corporation was engaged in the
separate business of selling or distributing softdrinks, independently of its
business of bottling them.
The tax imposed under Ordinance No. 5 is an excise tax. It is a tax on the privilege
of distributing, manufacturing or bottling softdrinks. Being an excise tax, it can be
levied by the taxing authority only when the acts, privileges or businesses are
done or performed within the jurisdiction of said authority [Commissioner of
Internal Revenue v. British Overseas Airways Corp. and Court of Tax Appeals, G.R.
Nos. 65773-74, April 30, 1987, 149 SCRA 395, 410.] Specifically, the situs of the
act of distributing, bottling or manufacturing softdrinks must be within city
limits, before an entity engaged in any of the activities may be taxed in Iloilo City.

g. Fees and Charges (Sec. 147)- The municipality may impose and collect
such reasonable fees and charges on business and occupation.
Exception: Professional taxes reserved for provinces on the practice of any
profession or calling, commensurate with the cost of regulation, inspection and
licensing before any person may engage in such business or occupation, or
practice such profession or calling

h. Others (Sec. 148 and Sec. 149)- Fees for sealing and licensing of weights and
measures. Fishery rentals , fees and charges.

iii. Cities (Sec. 151)- Except as otherwise provided in the LGC, the city may levy the taxes,
fees and charges which the province or municipality may impose.
a. The taxes, fees and charges levied and collected by highly urbanized and
independent component cities shall accrue to them an distributed in
accordance with the provisions of the code.
b. The rate of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than 50%

iv. Barangay
a. Tax on retailers (Sec. 152 a)- Gross sales receipts for preceding calendar
year of
- P50,000 or less (for barangay in the cities); and
- P30,000 or less (for barangay in municipalities
Not exceeding 1% of such gross sales or receipts

b. Service Fees or Charges (Sec. 152 b)- Services rendered in connection with
the regulation or the use of barangay-owned properties; or Service facilities
such as palay, copra, or tobacco dryers. Reasonable fees or charges

c. Barangay Clearance (Sec. 152 c)- Reasonable fee as the Sanggunian Barangay
may impose

d. Other Fees (Sec. 152 b)- Commercial breeding of fighting cocks, cockfights
and cockpits. Places of recreation which charge admission fees .Billboards,
signboards, neon signs and outdoor advertisements. Reasonable fees and
charges as the barangay may levy.

v. Common Revenue Raising Powers

a. Service Fees and Charges (Sec. 154)- LGUs may impose and collect such
reasonable fees and charges for services rendered.
b. Public Utility Charges (Sec. 155)- LGUs may fix the rates for the operation of
public utilities owned, operated, and maintained by them within their
jurisdiction.
c. Toll Fees or Charges (Sec. 156)- The sanggunian concerned may prescribe the
terms and conditions and fix the rates for the imposition of toll fees or charges for
the use of any public road, pier, or wharf, waterway, bridge, ferry or
telecommunication system funded and constructed by the LGU concerned
vi. Other Matters
a. Public Hearings Necessary? (Art. 324 IRR of the LGC vs. Sec. 187)- Yes,
public hearings are required before any local tax ordinance is enacted.

G.R. No. 119172. March 25, 1999

BELEN C. FIGUERRES, petitioner, vs. COURT OF APPEALS, CITY ASSESSOR OF
MANDALUYONG, CITY TREASURER OF MANDALUYONG, and SANGGUNIANG
BAYAN OF MANDALUYONG, respondents.
RULING: Petitioner is right in contending that public hearings are required to be
conducted prior to the enactment of an ordinance imposing real property taxes.
R.A. No. 7160, Sec.186 provides that an ordinance levying taxes, fees, or charges
“shall not be enacted without any prior public hearing conducted for the
purpose.” An ordinance imposing real property taxes (such as Ordinance Nos.
119 and 135) must be posted or published as required by R.A. No. 7160, Sec.188.

In the absence of proof that the ordinances were not enacted in accordance with
such regulations, said ordinances must be presumed to have been enacted in
accordance with such regulations.

ALABANG SUPERMARKET CORPORATION VS CITY GOVERNMENT OF

MUNTINLUPA
CTA EB 386 February 12, 2009

Doctrine: On Tax Refund and Tax Credit: The reckoning periods for the filing of a
claim for refund in Sec 196 of the LGC should be interpreted so as to accomplish
the evident purpose viz the settlement of the rights of the taxpayer vis-a-vis the
government, at the earliest opportunity. The phrase “from the date the taxpayer
becomes entitled to a refund or credit” in Sec 196 should not be interpreted to
mean the finality of the decision of a court declaring the tax measure void, even
without a timely claim for refund.
A taxpayer who believes that he has paid a tax imposed under a void ordinance
should timely exhaust administrative remedies before resorting to the filing of a
judicial claim or timely question its constitutionality and legality. Petitioner's
failure to file the appropriate administrative claim for refund for the period
December 16, 2000 to September 2002, cannot be countenanced. More so,
since it has been able to file a timely administrative claim for the 3% business tax
it paid covering January 2, 1999 to December 15, 2000. It is clearly aware of the
requirements for the filing of an administrative claim set forth by law. Its
manifest error cannot be cured at this point.

G.R. No. 211093. June 6, 2017

MINDANAO SHOPPING DESTINATION CORPORATION, ACE HARDWARE
PHILS., INC., INTERNATIONAL TOYWORLD, INC., STAR APPLIANCE CENTER,
INC., SURPLUS MARKETING CORPORATION, WATSONS PERSONAL CARE
STORES (PHILS.), INC., and SUPERVALUE, INC., petitioners, vs. HON.
RODRIGO R. DUTERTE, in his capacity as Mayor of Davao City, HON. SARA
DUTERTE, Vice Mayor of Davao City, in her capacity as Presiding Officer of
the Sangguniang Panlungsod, and THE SANGGUNIANG PANLUNGSOD (CITY
COUNCIL) NG DAVAO, respondents.
RULING: Ordinances; Equal Protection of the Law; An ordinance based on
reasonable classification does not violate the constitutional guaranty of the equal
protection of the law.—Based on the foregoing, Davao City merely implemented
the LGC, albeit it resulted in — an increase in retailer’s tax liability — which
nevertheless is not covered by Section 191 of the LGC. In any case, an ordinance
based on reasonable classification does not violate the constitutional guaranty of
the equal protection of the law. The requirements for a valid and reasonable
classification are: (1) it must rest on substantial distinctions; (2) it must be
germane to the purpose of the law; (3) it must not be limited to existing
conditions only; and (4) it must apply equally to all members of the same class.
 For the purpose of rectifying the erroneous classification of wholesaler and
retailer in the old ordinance in order to conform to the classification and the tax
rates as imposed by the LGC is neither invalid nor unreasonable. The
differentiation of wholesaler and retailer conforms to the practical dictates of
justice and equity and is not discriminatory within the meaning of the
Constitution. It is inherent in the power to tax that a State is free to select the
subjects of taxation. Inequities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional limitation.
Presumption of Validity; Settled is the rule that every law, in this case an
ordinance, is presumed valid. To strike down a law as unconstitutional, petitioner
has the burden to prove a clear and unequivocal breach of the Constitution, which
petitioner miserably failed to do.

c. Authority to Adjust Tax Rates (Sec. 191)- LGUs have the power to adjust
local tax rates provided that the adjustment of the tax rates as prescribed
herein should not be oftener than once every 5 years, and in no case shall such
adjustment exceed 10% of the rates fixed under the LGC

d. Authority to Grant Tax Exemptions (Sec. 192) - LGUs may, through

ordinances duly approved, grant tax exemptions, incentives or reliefs under
such terms and conditions as they may deem necessary.

The power to grant tax exemptions, tax incentives and tax reliefs shall not
apply to regulatory fees which are levied under the police power of the LGU.

G.R. No. 143867. August 22, 2001

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., petitioner, vs.
CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as the City
Treasurer of Davao, respondents.
RULING: The Tax Code provision withdrawing the tax exemption was not
construed as prohibiting future grants of exemptions from all taxes.—The trial
court held that, under these provisions, all exemptions granted to all persons,
whether natural and juridical, including those which in the future might be
granted, are withdrawn unless the law granting the exemption expressly
states that the exemption also applies to local taxes. We disagree. Sec. 137
does not state that it covers future exemptions. In Philippine Airlines, Inc. v.
Edu, where a provision of the Tax Code enacted on June 27, 1968 (R.A. 5431)
withdrew the exemption enjoyed by PAL, it was held that a subsequent
amendment of PAL’s franchise, exempting it from all other taxes except that
imposed by its franchise, again entitled PAL to exemption from the date of the
enactment of such amendment.
Indeed, the grant of taxing powers to local government units under the
Constitution and the LGC does not affect the power of Congress to grant
exemptions to certain persons, pursuant to a declared national policy. The
legal effect of the constitutional grant to local governments simply means that
in interpreting statutory provisions on municipal taxing powers, doubts must
be resolved in favor of municipal corporations.

G.R. No. 149110. April 9, 2003

NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN,
respondent.
RULING: In its specific sense, a franchise may refer to a general or primary
franchise, or to a special or secondary franchise. The former relates to the
right to exist as a corporation, by virtue of duly approved articles of
incorporation, or a charter pursuant to a special law creating the corporation.
The right under a primary or general franchise is vested in the individuals
who compose the corporation and not in the corporation itself. On the other
hand, the latter refers to the right or privileges conferred upon an existing
corporation such as the right to use the streets of a municipality to lay pipes of
tracks, erect poles or string wires. The rights under a secondary or special
franchise are vested in the corporation and may ordinarily be conveyed or
 mortgaged under a general power granted to a corporation to dispose of its
property, except such special or secondary franchises as are charged with a
public use.
As commonly used, a franchise tax is “a tax on the privilege of transacting
business in the state and exercising corporate franchises granted by the state.”
It is not levied on the corporation simply for existing as a corporation, upon its
property or its income, but on its exercise of the rights or privileges granted to
it by the government. Hence, a corporation need not pay franchise tax from
the time it ceased to do business and exercise its franchise. It is within this
context that the phrase “tax on businesses enjoying a franchise” in section 137
of the LGC should be interpreted and understood. Verily, to determine
whether the petitioner is covered by the franchise tax in question, the
following requisites should concur: (1) that petitioner has a “franchise” in the
sense of a secondary or special franchise; and (2) that it is exercising its rights
or privileges under this franchise within the territory of the respondent city
government.

e. Withdrawal of Tax Exemption Privileges (Sec. 193)- Tax exemptions or

incentives granted to or enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations are hereby
withdrawn upon the effectivity of the Local Government Code.
Except- Local water districts, cooperative under R,A 6938, non-stock and non-
profit hospitals and educational institutions.
However, withdrawal of tax exemption is not to be construed as prohibiting
future grants of tax exemptions. The grant of taxing powers to LGU’s under the
LGC does not affect the power of Congress to grant exemptions to certain
persons, pursuant to a declared national policy

f. Community Tax
g.
i. Who may impose (Sec. 156)- The community tax is a poll or capitation tax
imposed upon residents of a city or municipality. It replaced the former residence
tax. It may be levied by a city or municipality but not a province.

ii. Individuals Liable to pay (Sec. 157)- 1. Individuals – Every inhabitant of the
Philippines 18 years of age or over:
a. who has been regularly employed on a wage or salary basis for at least
30 consecutive working days during any calendar year; or
b. who is engaged in business or occupation;
c. or who owns real property with an aggregate assessed value of
P1,000.00 or more; or
d. who is required by law to file an income tax return (Sec. 157, LGC).

iii. Juridical Persons Liable to Community Tax (Sec. 158)- additional tax,
which, in no case, shall exceed P10,000.00 in accordance with the following schedule:
a. For every P5,000.00 worth of real property in the Philippines owned by it
during the preceding year based on the valuation used for the payment of real
property tax under existing laws, found in the assessment rolls of the city or
municipality where the real property is situated - Two pesos (P2.00); and
b. For every P5,000.00 of gross receipts or earnings derived by it from its
business in the Philippines during the preceding year - Two pesos (P2.00) (Sec.
157 & 158, LGC)

iv. Exemptions (Sec. 159)- The following are exempt from community tax:
a. Diplomatic and consular
representatives
b. Transient visitors when their stay
in the Philippines does not exceed
three (3) months

v. Place of Payment (Sec. 160)- Residence of the individual, or in the place

where the principal office of the juridical entity is located
 vi. Time of Payment (Sec. 161)- Within the first 20 days of January or of
each subsequent quarter as the case may be.

vi. Community Tax Certificate (Sec. 162)- It is issued to every person or

corporation upon payment of the community tax. It may also be issued
to any person or corporation not subject to the community tax upon
payment of 1 peso.

vii. Presentation of CTC on certain occasions (Sec. 163)-

1. Acknowledgment of any document before a notary public.

(This is in accordance with the provisions of the LGC, note that
this is no longer included under the competent evidences of
identity under the Revised Rules on Notarial Practice);
2. Taking an oath of office upon election or appointment to any
position in the government service;
3. Receiving any license, certificate or permit from any public
authority;
4. Paying any tax or fee;
5. Receiving any money from any public fund;
6. Transacting other official business; or
7. Receiving any salary or wage from any person or
corporation.

III. COLLECTION OF TAXES AND

REMEDIES
i. Collection of Taxes
a. Tax Period and Manner of Payment (Sec. 165)- Calendar year, unless
otherwise provided in the LGC. May be paid in lump-sum or quarterly
isntallments.
b. Accrual of Tax (Sec. 166)- First day of January of each year, However, new
taxes charges and fees or changes in the rate thereof shall accrue on the first day
of the quarter following the effectivity of the ordinance imposing such new levies
or rates.
c. Time of Payment (Sec. 167)- within the first 20 day of January or of each
subsequent quarter as the case may be.
d. Surcharges and Penalties (Sec. 168)- Surcharge not exceeding 25% of the
amount of taxes not paid on time and an interest not paid on the time and an
interest at the rate not exceeding 2% per month of the unpaid taxes, including
surcharges, until such amount is fully paid but in no case shall total 36 months.

G.R. No. 177332. October 1, 2014

NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN,
represented by its CITY MAYOR, HON. HONORATO PEREZ, respondent.
RULING: Both the surcharge and interest are imposable upon failure of the
taxpayer to pay the tax on the date fixed in the law for its payment.
The surcharge is a civil penalty imposed once for late payment of a tax. Contrast
this with the succeeding provisions on interest, which was imposable at the rate
not exceeding 2% per month of the unpaid taxes until fully paid. The fact that the
interest charge is made proportionate to the period of delay, whereas the
surcharge is not, clearly reveals the legislative intent for the different modes in
their application. Indeed, both the surcharge and interest are imposable upon
failure of the taxpayer to pay the tax on the date fixed in the law for its payment.
The surcharge is imposed to hasten tax payments and to punish for evasion or
neglect of duty, while interest is imposed to compensate the State “for the delay
in paying the tax and for the concomitant use by the taxpayer of funds that
rightfully should be in the government’s hands.”
Respondent’s computation of the surcharge is oppressive and unconscionable.
Taxes and its surcharges and penalties cannot be construed in such a way as to
become oppressive and confiscatory. Taxes are implied burdens that ensure that
individuals and businesses prosper in a conducive environment assured by good
and effective government. A healthy balance should be maintained such that
 laws are interpreted in a way that these burdens do not amount to a confiscatory
outcome. Taxes are not and should not be construed to drive businesses into
insolvency. To a certain extent, a reasonable surcharge will provide incentive to
pay; an unreasonable one delays payment and engages government in
unnecessary litigation and expense.

e. Interests on Other Unpaid Revenues (Sec. 169)- Where the amount of any
other revenue due a local government unit, except voluntary contributions or
donations, is not paid on the date fixed in the ordinance, or in the contract,
expressed or implied, or upon the occurrence of the event which has given rise to
its collection, there shall be collected as part of that amount an interest thereon at
the rate not exceeding two percent (2%) per month from the date it is due until it
is paid, but in no case shall the total interest on the unpaid amount or a portion
thereof exceed thirty-six (36) months

f. Collection of Local Revenues by Treasurer (Sec. 170)- Shall be collected

by the provincial, city, municipal or barangay, treasurer, or their duly authorized
deputies. The provincial city or municipal treasurer may designate the barangay
treasurer as his deputy to collect local taxes, fees or charges.
g. Examination of Books of Accounts and Pertinent Records (Sec. 171)-
The local treasurer may, by himself or through any of his deputies duly
authorized in writing, examine the books, accounts, and other pertinent records
of any person, partnership, corporation or association subject to local taxes, fees,
and charges in order to ascertain, assess and collect the correct amount of the tax
fee, or charge. Such examination during regular business hours, only once for
every tax period.

ii. Remedies of the Government

a. Local Government’s Lien (Sec. 173)- 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.

b. Civil Remedies (Sec. 174)- a. Distraint of personal property

b. Levy of real property
c. Judicial action

b. Distraint (Sec. 175)- It is a summary remedy whereby the collection of

tax is enforced on the goods, chattels or effects of the taxpayer
(including other personal property of whatever character as well as
stocks and other securities, debts, credits, bank accounts and interest in
or rights to personal property.) The property may be offered in a public
sale, if taxes are not voluntarily paid.

Kinds of Distraint
a. Actual- there is taking of possession of the personal property out of
the taxpayer into that of the government;
b. Constructive- the owner is merely prohibited from disposing of his
property.

c. Levy of Real Property (Sec. 176)- A summary administrative remedy,

seizure of real property to enforce payment of taxes.
At any time before the date fixed for the sale, the taxpayer may stay the
proceedings by paying the taxes, fees, charges, penalties, and interest.
d. Advertisement and Sale (Sec. 178)- within 30 days after the levy and shall
cover a period of at least thirty days. It shall be affected by:
Posting a notice at the main entrance of the municipality building or city hall
and in a public conspicuous place in the barangays where the real property is
located and,
By publication once a week for three weeks in a newspaper of general
circulation in the province, city or municipality where the property is
located.

e. Redemption of Property Sold (Sec. 179)- The delinquent taxpayer has one
(1) year from the date of sale to redeem the property. If property is
redeemed, a certificate of redemption will be issued

f. Purchase of Property by LGU for want of bidder (Sec. 181)- In case there
is no bidder for the real property advertised for sale as provided herein, or if
the highest bid is for an amount insufficient to pay the taxes, fees, or charges,
related surcharges, interests, penalties and costs, the local treasurer
conducting the sale shall purchase the property in behalf of the local
government unit concerned to satisfy the claim and within two (2) days
thereafter shall make a report of his proceedings which shall be reflected
upon the records of his office

g. Resale of Real Estate Tax for TFC

i. Judicial Action (Sec. 183)- The local government unit concerned may
enforce the collection of delinquent taxes, fees, charges or other revenues by civil
action in any court of competent jurisdiction. The civil action shall be filed by the
local treasurer within the period prescribed in Section 194 of the LGC.
 j. Further Distraint and Levy (Sec. 184)- The remedies by distraint and levy
may be repeated if necessary until the full amount due, including all expenses, is
collected

k. Personal Property Exempt from Distraint or Levy (Sec. 185)-

The following property shall be exempt from distraint and the levy, attachment or
execution thereof for delinquency in the payment of any local tax, fee or charge,
including the related surcharge and interest:chanrobles virtual law library

(a) Tools and the implements necessarily used by the delinquent taxpayer in his
trade or employment;

(b) One (1) horse, cow, carabao, or other beast of burden, such as the delinquent
taxpayer may select, and necessarily used by him in his ordinary occupation;

(c) His necessary clothing, and that of all his family;

(d) 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
Ten thousand pesos (P=10,000.00);

(e) Provisions, including crops, actually provided for individual or family use
sufficient for four (4) months;

(f) The professional libraries of doctors, engineers, lawyers and judges;

(g) One fishing boat and net, not exceeding the total value of Ten thousand pesos
(P=10,000.00), by the lawful use of which a fisherman earns his livelihood; and
cralaw

(h) Any material or article forming part of a house or improvement of any real
property.

iii. Taxpayer’s Remedies

a. Question Constitutionality of Ordinance (Sec. 187)- Authorizes the secretary
of justice to review only on the constitutionality or legality of the tax ordinance
and, if warranted, to revoke it on either or both of these grounds. He cannot
replace it with his own version of what ordinance should be, neither can he
declare such ordinance as unjust excessive oppressive or confiscatory.
A taxpayer may file a complaint assailing the validity of the ordinance and
praying for a refund of its perceived overpayments without first filing a
protest to the payment of taxes due under the ordinance.
1. Before assessment-
a. Within thirty days from effectivity thereof to the
secretary of justice
b. The decision by the secretary of justice with 60 days
from the date of the receipt of the appeal.
c. Taxpayer must file an appropriate action with a court
of competent jurisdiction within 30 days.
2. After assessment-
a. Protest- if there is a protest filed: A written protest
must be filed within 60 days from receipt from notice
of assessment.

G.R. No. 191761. November 14, 2012

CAGAYAN ELECTRIC POWER AND LIGHT CO., INC., petitioner, vs. CITY OF
CAGAYAN DE ORO, respondent.
RULING: The law requires that the dissatisfied taxpayer who questions the
validity or legality of a tax ordinance must file his appeal to the Secretary of
Justice, within 30 days from effectivity thereof. In case the Secretary decides
the appeal, a period also of 30 days is allowed for an aggrieved party to go to
court. But if the Secretary does not act thereon, after the lapse of 60 days, a
party could already proceed to seek relief in court.
CEPALCO ignored our ruling in Reyes v. Court of Appeals on the mandatory
nature of the statutory periods: Clearly, the law requires that the dissatisfied
taxpayer who questions the validity or legality of a tax ordinance must file his
appeal to the Secretary of Justice, within 30 days from effectivity thereof. In
case the Secretary decides the appeal, a period also of 30 days is allowed for an
 aggrieved party to go to court. But if the Secretary does not act thereon, after
the lapse of 60 days, a party could already proceed to seek relief in court. These
three separate periods are clearly given for compliance as a prerequisite
before seeking redress in a competent court. Such statutory periods are set to
prevent delays as well as enhance the orderly and speedy discharge of judicial
functions. For this reason the courts construe these provisions of statutes as
mandatory. A municipal tax ordinance empowers a local government unit to
impose taxes. The power to tax is the most effective instrument to raise needed
revenues to finance and support the myriad activities of local government
units for the delivery of basic services essential to the promotion of the general
welfare and enhancement of peace, progress, and prosperity of the people.
Consequently, any delay in implementing tax measures would be to the
detriment of the public. It is for this reason that protests over tax ordinances
are required to be done within certain time frames. In the instant case, it is our
view that the failure of petitioners to appeal to the Secretary of Justice within
30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause.

G.R. No. 204429. February 18, 2014

SMART COMMUNICATIONS, INC., petitioner, vs. MUNICIPALITY OF
MALVAR, BATANGAS, respondent.
RULING: To justify the nullification of the law or its implementation, there
must be a clear and unequivocal, not a doubtful, breach of the Constitution.
Settled is the rule that every law, in this case an ordinance, is presumed valid.
To strike down a law as unconstitutional, Smart has the burden to prove a clear
and unequivocal breach of the Constitution, which Smart miserably failed to
do.
In Lawyers Against Monopoly and Poverty (LAMP) v. Secretary of Budget and
Management, 670 SCRA 373 (2012), the Court held, thus: To justify the
nullification of the law or its implementation, there must be a clear and
unequivocal, not a doubtful, breach of the Constitution. In case of doubt in the
sufficiency of proof establishing unconstitutionality, the Court must sustain
legislation because “to invalidate [a law] based on x x x baseless supposition is
an affront to the wisdom not only of the legislature that passed it but also of
the executive which approved it.” This presumption of constitutionality can be
overcome only by the clearest showing that there was indeed an infraction of
the Constitution, and only when such a conclusion is reached by the required
majority may the Court pronounce, in the discharge of the duty it cannot
escape, that the challenged act must be struck down.

c. Publication (Sec. 188)- Within ten (10) days after their approval, certified true
copies of all provincial, city, and municipal tax ordinances or revenue measures
shall be published in full for three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and municipalities
where there are no newspapers of local circulation, the same may be posted in at
least two (2) conspicuous and publicly accessible places.

G.R. No. 156252. June 27, 2006

COCA-COLA BOTTLERS PHILIPPINES, INC., petitioner, vs. CITY OF MANILA,
LIBERTY M. TOLEDO—City Treasurer and JOSEPH SANTIAGO—Chief,
Licensing Division, respondents.
RULING: Failure to follow the procedure in enactment of tax measures as
mandated by Section 188 of the Local Government Code of 1991, in that they
failed to publish Tax Ordinance No. 7988 for three consecutive days in a
newspaper of local circulation renders the same null and void.
The RTC of Manila, Branch 21, in its Decision dated 28 November 2001,
reiterated the findings of the DOJ Secretary that respondents failed to follow the
procedure in the enactment of tax measures as mandated by Section 188 of the
Local Government Code of 1991, in that they failed to publish Tax Ordinance No.
7988 for three consecutive days in a newspaper of local circulation. From the
foregoing, it is evident that Tax Ordinance No. 7988 is null and void as said
ordinance was published only for one day in the 22 May 2000 issue of the
Philippine Post in contravention of the unmistakable directive of the Local
Government Code of 1991.
 If an order or law sought to be amended is invalid, then it does not legally exist,
there should be no occasion or need to amend it. The amending law, having been
declared as null and void, in legal contemplation, therefore, does not exist.
Furthermore, even if Tax Ordinance No. 8011 was not declared null and void, the
trial court should not have dismissed the case on the reason that said tax
ordinance had already amended Tax Ordinance No. 7988. As held by this Court
in the case of People v. Lim, if an order or law sought to be amended is invalid,
then it does not legally exist, there should be no occasion or need to amend it.

d. Periods of Assessment and Collection (Sec. 194)- (a) Local taxes, fees, or
charges shall be assessed within five (5) years from the date they became
due. No action for the collection of such taxes, fees, or charges, whether
administrative or judicial, shall be instituted after the expiration of such
period: Provided, That, taxes, fees or charges which have accrued before the
effectivity of this Code may be assessed within a period of three (3) years
from the date they became due.

e. Protest of Assessment (Sec. 195)- A written protest is mandatory when

protesting an assessment. You can’t go straight to court.

Procedure for assessment:

1. Treasurer to issue an assessment.
2. Taxpayer to file a written protest with the local treasurer with
60 days from the receipt of the notice of assessment, otherwise
it shall become final and executory
3. The treasurer has to decide with 60 days from the time of its
filling. If treasurer finds the protest meritorious, he will cancel
the assessment; if no he will deny the protest.

G.R. No. 174617. December 27, 2007

ROMULO D. SAN JUAN, petitioner, vs. RICARDO L. CASTRO, in
his capacity as City Treasurer of Marikina City, respondent.
RULING: Mandamus does not lie to compel the City Treasurer to
accept as full compliance of tax payment which in his reasoning and
assessment is deficient and incorrect.
Petitioner did not observe any of these remedies available to him,
however. He instead opted to file a petition for mandamus to compel
respondent to accept payment of transfer tax as computed by him.
Mandamus lies only to compel an officer to perform a ministerial duty
(one which is so clear and specific as to leave no room for the exercise
of discretion in its performance) but not a discretionary function (one
which by its nature requires the exercise of judgment). Respondent’s
argument that “mandamus cannot lie to compel the City Treasurer to
accept as full compliance a tax payment which in his reasoning and
assessment is deficient and incorrect” is thus persuasive.

G.R. No. 204117. July 1, 2015

CHINA BANKING CORPORATION, petitioner, vs. CITY TREASURER OF
MANILA, respondent.
RULING: Under the current state of law, there can be no doubt that the
law does not prescribe any formal requirement to constitute a valid
protest. To constitute a valid protest, it is sufficient if what has been
filed contains the spontaneous declaration made to acquire or keep
some right or to prevent an impending damage. Accordingly, a protest
is valid so long as it states the taxpayer’s objection to the assessment
and the reasons therefor.
Tax Refunds; Claims for refunds are the exception, rather than the
rule, and that each claim for refund, in order to be granted, must be
proceeded in accordance with the manner set forth by law.
Lest it be misunderstood, this Court is not reversing its
pronouncements in Coca-Cola Bottlers Philippines, Inc. v. City of
Manila, 493 SCRA 279 (2006), The City of Manila v. Coca-Cola Bottlers,
Inc., 595 SCRA 299 (2009) and City of Manila v. Coca--Cola Bottlers,
Inc. that Ordinance Nos. 7988 and 8011 are invalid. This Court is
simply pointing out the rule that claims for refunds are the exception,
rather than the rule, and that each claim for refund, in order to be
granted, must be proceeded in accordance with the manner set forth by
law. After all, in every claim for refund of taxes paid, the burden is on
the taxpayer to show that he has strictly complied with the conditions
for the grant of the tax refund or credit.

f. Appeal to the CTA- Taxpayer has 30 days from receipt of denial, or 3o days
from the lapse of the 60-day period within which to appeal to the proper court of
competent jurisdiction; otherwise, the assessment shall become final and
executory.
After go to the CTA within 30 days via:
Petition for review to the CTA Division under Rule 42(if from RTC
acting original), or
Petition for review to the CTA En Banc under Rule 43(If from the RTC acting
in its appellate jurisdiction)

f. Claim for Refund (Sec. 196)- Requirements in tax credit or refund cases:
1. Written claim filed with the local treasurer
2. Filed within two years from
Date of payment, or
Date when taxpayer is entitled to refund or credit.
Distinguished from refunds for national taxes, in local taxation, supervening
causes are allowed as reckoning points for prescriptive period purposes.

Alabang Supermarket Corporation, petitioner, vs. CITY OF MUNTINLUPA,

respondent.

RULING: The Court in Division appropriately denied petitioner’s claim for refund to
the period from December 16, 2000 to December 2002, due to petitioner’s failure to
file administrative claim for refund before the City Government of Muntinlupa as
required under Section of the Local Government Code prior to judicial recourse. No
case or proceeding may be entertained by any courts absent showing that petitioner
has a written claim for refund or erroneous or excessive payment to any tax, fee or
charge filed with the local treasurer prior to its filing before any court. Moreover, it
should be noted that two ' reckoning periods are provided by law for the filing of a
case or proceeding, that is from the date of paymentof the tax, and "from the date
the taxpayer becomes entitled to the refund.

CTA AC NO. 62
MINDANAO SHOPPING DESTINATION CORP., VS DAVAO CITY and RODRIGO S.
RIOLA, Promulgated: in his capacity as the City Treasure of Davao City,
RULING: After a painstaking and thorough analysis of the records at hand, this
Court holds that the judgment of the trial court dismissing the complaint of
petitioners against defendants Davao City and Rodrigo S. RioJa, in his capacity as the
City Treasurer of Davao City, is fu lly justified in law, jurisprudence, and reason. A
claim for refund with the local government may be reckoned from the date the
taxpayer is entitled to refund or credit, is pro hac vice and that it is not the intention
of the taxpayers to grant judicial relief on business tax refunds beyond two (2) years
from the time of payment.
It is beyond cavil that the claim for refund lodged with the RTC is primarily hinged
on the alleged unconstitutionality and invalidity of the New Tax Ordinance, which is
the very same issue pending for determination by the CA. What claim for refund
would there be to speak about if in case CA sustains the constitutionality and/or
validity of the tax ordinance? Evidently, the claim for refund is afflicted with the vice
of prematurity.
Taxpayers judicially claiming for refund of any local tax, fee, or charge must satisfy
two essenti al requirements: (1) A written claim for refund or credit must be filed
with the local treasurer; and (2) The case or proceeding must be filed within two (2)
years [i] from the date of payment of tax, fee, or charge or [ii] from the date the
taxpayer is entitled to a refund or credit.
 g. Is injunction available?- Yes, The LGC does not specifically prohibit an
injunction enjoining the collection of taxes.
G.R. No. 166134. June 29, 2010
ANGELES CITY, petitioner, vs. ANGELES ELECTRIC CORPORATION and
REGIONAL TRIAL COURT BRANCH 57, ANGELES CITY, respondents.
RULING: A principle deeply embedded in our jurisprudence is that taxes being the
lifeblood of the government should be collected promptly, without unnecessary
hindrance or delay. In line with this principle, the National Internal Revenue Code of
1997 (NIRC) expressly provides that no court shall have the authority to grant an
injunction to restrain the collection of any national internal revenue tax, fee or
charge imposed by the code. An exception to this rule obtains only when in the
opinion of the Court of Tax Appeals (CTA) the collection thereof may jeopardize the
interest of the government and/or the taxpayer.
The situation, however, is different in the case of the collection of local taxes as there
is no express provision in the LGC prohibiting courts from issuing an injunction to
restrain local governments from collecting taxes. Thus, in the case of Valley Trading
Co., Inc. v. Court of First Instance of Isabela, Branch II, 171 SCRA 501 (1989), cited by
the petitioner, we ruled that: Unlike the National Internal Revenue Code, the Local
Tax Code does not contain any specific provision prohibiting courts from enjoining
the collection of local taxes. Such statutory lapse or intent, however it may be viewed,
may have allowed preliminary injunction where local taxes are involved but cannot
negate the procedural rules and requirements under Rule 58.
As a rule, the issuance of a preliminary injunction rests entirely within the discretion
of the court taking cognizance of the case and will not be interfered with, except
where there is grave abuse of discretion committed by the court. For grave abuse of
discretion to prosper as a ground for certiorari, it must be demonstrated that the
lower court or tribunal has exercised its power in an arbitrary and despotic manner,
by reason of passion or personal hostility, and it must be patent and gross as would
amount to an evasion or to a unilateral refusal to perform the duty enjoined or to act
in contemplation of law. In other words, mere abuse of discretion is not enough.

REAL PROPERTY TAXATION

I. PRELIMINARY MATTERS
i. Definition of Real Property Tax
Real property tax is a direct tax on ownership of lands and buildings or other
improvements thereon not specially exempted, and is payable regardless of whether the
property is used or not, although the value may vary in accordance with such factor.
• VILLANUEVA VS. CITY OF ILOILO, L-26521, DECEMBER 28, 1968
In City of Iloilo v. Villanueva, et al., L-12695, March 23, 1959, the Supreme Court
adopted the definition of a "tenement house" as "any house or building, or portion thereof,
which is rented, leased, or hired out to be occupied, or is occupied, as the home or residence
of three families or more living independently of each other and doing their cooking in the
premises, or by more than two families upon any floor, so living and cooking, but having a
common right in the halls, stairways, yards, water-closets, or privies, or some of them."
Tenement houses, being necessarily offered for rent or lease by their very nature and
essence, therefore constitute a distinct form of business or calling, similar to the hotel or
motel business, or the operation of lodging houses or boarding houses. Tenement houses
constitute a distinct class of property.
A "municipal license tax" means an imposition or exaction on the right to use or
dispose of property, to pursue a business, occupation, or calling, or to exercise a privilege
(51 Am. Jur. 59-60; 33 Am. Jur. 325-326).
It is now settled that the provisions of Section 2 of Republic Act No. 2264 confer on
local governments broad taxing authority which extends to almost "everything, excepting
those which are mentioned therein," provided that the tax so levied is "for public purposes,
just and uniform," and does not transgress any constitutional provision or is not repugnant
to a controlling, statute (Nin Bay Mining Co. v. Mun. of Roxas, Prov. of Palawan, L-20125, July
20, 1965). Thus when a tax, levied under the authority of a city or municipal ordinance, is
not within the exceptions and limitations aforementioned, the same comes within the ambit
of the general rule, pursuant to the rules of expressio unius est exclusio alterius, and exceptio
firmat regulum in casibus non excepti.
ii. Who should pay the real property tax?
 BAGUIO VS. BUSUEGO, GR NO. 29772, SEPTEMBER 18, 1980

An installment purchaser of land and building within a housing project of the

GSIS is liable to pay real estate taxes from the time possession of such property was
transferred to him, although pending full payment of the purchase price, the seller GSIS
retains ownership and title over the property; Reasons.—What is determinative was its
rulings on the merits (not on the nomenclature or classification of the contract), wherein it
correctly held that purchaser-appellant agreed to the contractual stipulation “to pay and
shoulder all taxes and assessments on the lot and building or improvements thereon and
insurance during the term of the contract. In view of his acceptance of this condition, he is
now estopped to deny his liability to pay the taxes.
Where ‘use’ is the test, the ownership is immaterial. (Martin on the Rev. Adm. Code,
1961, Vol. II, p. 487, citing Apostolic Prefect of Mt. Province vs. Treasurer of Baguio City, 71
Phil. 547). In the instant case, altho the property was still in the name of the GSIS pending
the payment of the full price its use and possession was already transferred to the
defendant.” Such contractual stipulation that the purchaser on installments pay the real
estate taxes pending completion of payments, although the seller who retained title is
exempt from such taxes, is valid and binding, absent any law to the contrary and none has
been cited by appellant. Thus, the delivery of possession by the seller GSIS to the purchaser
was clearly with the intention of passing to the latter the possession, use of and control over
said property, and all the other attributes of ownership, short of the naked ownership, such
that it included in said transfer the incidental obligation to pay the taxes thereon, for nothing
more was left to the GSIS except its right to receive full payment of the purchase price.
 NPC VS. PROVINCE OF QUEZON, GR NO. 171586, JULY 15, 2009

The unpaid realty tax attaches to the property but is directly chargeable against the
taxable person who has actual and beneficial use and possession of the property
regardless of whether or not that person is the owner.—The liability for taxes generally
rests on the owner of the real property at the time the tax accrues. This is a necessary
consequence that proceeds from the fact of ownership. However, personal liability for realty
taxes may also expressly rest on the entity with the beneficial use of the real property, such
as the tax on property owned by the government but leased to private persons or entities, or
when the tax assessment is made on the basis of the actual use of the property. In either case,
the unpaid realty tax attaches to the property but is directly chargeable against the taxable
person who has actual and beneficial use and possession of the property regardless of
whether or not that person is the owner.
On liability for taxes, the NPC indeed assumed responsibility for the taxes due on the
power plant and its machineries, specifically, “all real estate taxes and assessments, rates
and other charges in respect of the site, the buildings and improvements thereon and the
[power plant].” The tax liability we refer to above, however, is the liability arising from
law that the local government unit can rightfully and successfully enforce, not the
contractual liability that is enforceable between the parties to a contract as discussed
below. By law, the tax liability rests on Mirant based on its ownership, use, and possession
of the plant and its machineries.
 NPC VS. PROVINCE OF QUEZON, GR NO. 171586, JANUARY 25, 2010
(RESOLUTION)

Contractual assumption of tax liability alone is insufficient to make one liable for
taxes.—For the third argument, we relied on the Court’s rulings in Baguio v. Busuego, 100
SCRA 116 (1980) and Lim v. Manila, 182 SCRA 482 (1990). In these cases, the Court
essentially declared that contractual assumption of tax liability alone is insufficient to make
one liable for taxes. The contractual assumption of tax liability must be supplemented by an
interest that the party assuming the liability had on the property; the person from whom
payment is sought must have also acquired the beneficial use of the property taxed. In other
words, he must have the use and possession of the property—an element that was missing
in Napocor’s case.
The tax liability must be a liability that arises from law, which the local government unit
can rightfully and successfully enforce, not the contractual liability that is enforceable only
between the parties to the contract.—We further stated that the tax liability must be a
liability that arises from law, which the local government unit can rightfully and successfully
enforce, not the contractual liability that is enforceable only between the parties to the
contract. In the present case, the Province of Quezon is a third party to the BOT Agreement
and could thus not exact payment from Napocor without violating the principle of relativity
of contracts. Corollarily, for reasons of fairness, the local government units cannot be
compelled to recognize the protest of a tax assessment from Napocor, an entity against
whom it cannot enforce the tax liability.
 GSIS VS. CITY TREASURER AND ASSESSOR OF MANILA, GR NO. 186242,
DECEMBER 23, 2009

Government Service Insurance System (GSIS), as a government instrumentality, is

not a taxable juridical person under Sec. 133(o) of the Local Government Code.—Thus
read together, the provisions allow the Republic to grant the beneficial use of its property to
an agency or instrumentality of the national government. Such grant does not necessarily
result in the loss of the tax exemption. The tax exemption the property of the Republic or its
instrumentality carries ceases only if, as stated in Sec. 234(a) of the LGC of 1991, “beneficial
use thereof has been granted, for a consideration or otherwise, to a taxable person.” GSIS, as
a government instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC.
GSIS, however, lost in a sense that status with respect to the Katigbak property when it
contracted its beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax
assessment of PhP 54,826,599.37 covering 1992 to 2002 over the subject Katigbak property
is valid insofar as said tax delinquency is concerned as assessed over said property.
The unpaid tax attaches to the property and is chargeable against the taxable
person who had actual or beneficial use and possession of it regardless of whether or
not he is the owner.—The next query as to which between GSIS, as the owner of the
Katigbak property, or MHC, as the lessee thereof, is liable to pay the accrued real estate tax,
need not detain us long. MHC ought to pay.
As we declared in Testate Estate of Concordia T. Lim, “the unpaid tax attaches to the
property and is chargeable against the taxable person who had actual or beneficial use and
possession of it regardless of whether or not he is the owner.” Actual use refers to the
purpose for which the property is principally or predominantly utilized by the person in
possession thereof. Being in possession and having actual use of the Katigbak property since
November 1991, MHC is liable for the realty taxes assessed over the Katigbak property from
1992 to 2002.
iii. Fundamental Principles (Sec. 198)
The following are the fundamental principles governing Real Property Taxation:

1. Real property shall be appraised at its current and fair market value.

2. Real property shall be classified for assessment purposes on the basis of its actual use.
(Doctrine of Usage)

Actual use refers to the purpose for which the property is principally or predominantly
utilized by the person in possession of the property.

3. Real property shall be assessed on the basis of a uniform classification within each Local
Government Unit .

4. The appraisal, assessment, levy and collection of real property tax shall not be let to any
private person.
 5. The appraisal and assessment of real property shall be equitable.

Real Property shall be classified, valued and assessed on the basis of its actual use
regardless of where located, whoever owns it and whoever uses it (Sec. 217, LGC).

iv. Important Definitions (Sec. 199)

a. Real Property for RPT Purposes (415 NCC)

For purposes of taxation, real property consists of the following:

 The list of immovables in Article 415 of the Civil Code; and
 The definition of machinery under Section 199 of the LGC clarified by the DOF
Local Finance Circular 001-2002

Under Article 415 of the New Civil Code, the following are Immovable Property:

1. Land, buildings, roads and constructions of all kinds adhered to the soil;
2. Trees, plants, and growing fruits, while they are attached to the land or form an integral
part of an immovable;
3. Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;
4. Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings
or on lands by the owner of the immovable in such a manner that it reveals the intention
to attach them permanently to the tenements;
5. Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works;
6. Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar
nature, in case their owner has placed them or preserves them with the intention to have
them permanently attached to the land, and forming a permanent part of it; the animals
in these places are included;
7. Fertilizer actually used on a piece of land;
8. Mines, quarries, and slag dumps, while the matter thereof forms part of the bed,
and waters either running or stagnant;
9. Docks and structures which, though floating, are intended by their nature and
object to remain at a fixed place on a river, lake, or coast;
10. Contracts for public works, and servitudes and other real rights over
immovable property.

Note that an object used indirectly for the general purpose of the business shall not be
treated as real property. The Supreme Court has generally held that Art 415 of the Civil Code
provides an exclusive enumeration of what constitutes real property, for tax purposes, however,
it is common for otherwise personal properties under the Civil Code to be classified as real
property.
b. Machineries

"Machinery" embraces machines, equipment, mechanical contrivances, instruments,

appliances or apparatus which may or may not be attached, permanently or temporarily, to
the real property. It includes the physical facilities for production, the installations and
appurtenant service facilities, those which are mobile, self-powered or self-propelled, and
those not permanently attached to the real property which are actually, directly, and
exclusively used to meet the needs of the particular industry, business or activity and which
by their very nature and purpose are designed for, or necessary to its manufacturing, mining,
logging, commercial, industrial or agricultural purposes. (Sec. 199(O), LGC)

 MINDANAO BUS VS. CITY ASSESSOR AND TREASURER L-17870, SEPT. 29, 1962
 Immovable Property by Destination; Two requisites before movables may be
deemed to have immobilized; Tools and equipments merely incidental to business not
subject to real estate tax.—Movable equipments, to be immobilized in contemplation of
Article 415 of the Civil Code, must be the essential and principal elements of an industry or
works which are carried on in a building or on a piece of land.
Thus, where the business is one of transportation, which is carried on without a repair
or service shop, and its rolling equipment is repaired or serviced in a shop belonging to
another, the tools and equipments in its repair shop which appear movable are merely
incidentals and may not be considered immovables, and, hence, not subject to assessment as
real estate for purposes of the real estate tax.
 CALTEX PHILIPPINES, INC. VS. CBAA – GR NO. 50466, MAY 31, 1982

Gasoline station equipments and machineries are subject to the real property
tax.—We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures
are necessary to the operation of the gas station, for without them the gas station would be
useless, and which have been attached or affixed permanently to the gas station site or
embedded therein, are taxable improvements and machinery within the meaning of the
Assessment Law and the Real Property Tax Code.
Gasoline station equipments and machineries are permanent fixtures for purposes
of realty taxation.—Here, the question is whether the gas station equipment and machinery
permanently affixed by Caltex to its gas station and pavement (which are indubitably taxable
realty) should be subject to the realty tax.
 MANILA ELECTRIC CO. VS. CBAA L-47943, MAY 31, 1982

Storage tanks although not embedded on land considered as improvements and

are subject to realty tax.—We hold that while the two storage tanks are not embedded in
the land, they may, nevertheless, be considered as improvements on the land, enhancing its
utility and rendering it useful to the oil industry.
It is undeniable that the two tanks have been installed with some degree of permanence
as receptacles for the considerable quantities of oil needed by Meralco for its operations. For
purposes of taxation, the term “real property” may include things which should generally
be regarded as personal property.
 MANILA ELECTRIC COMPANY VS. THE CITY OF ASSESSOR AND CITY TREASURER
OF LUCENA CITY, GR NO. 166102 DATED AUGUST 5, 2015.

The Court highlights that under Section 199(o) of the Local Government Code
(LGC), machinery, to be deemed real property subject to real property tax, need no
longer be annexed to the land or building as these “may or may not be attached,
permanently or temporarily to the real property,” and in fact, such machinery may
even be “mobile.”— The same provision though requires that to be machinery subject to
real property tax, the physical facilities for production, installations, and appurtenant service
facilities, those which are mobile, self-powered or self-propelled, or not permanently
attached to the real property:
a. Must be actually, directly, and exclusively used to meet the needs of the
particular industry, business, or activity; and
b. By their very nature and purpose, are designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or agricultural
purposes.

For determining whether machinery is real property subject to real property tax, the
definition and requirements under the Local Government Code (LGC) are controlling.—
MERALCO maintains that its electric posts are not machinery subject to real property tax
because said posts are not being exclusively used by MERALCO; these are also being utilized
by cable and telephone companies. This, however, is a factual issue which the Court cannot
take cognizance of in the Petition at bar as it is not a trier of facts. Whether or not the electric
posts of MERALCO are actually being used by other companies or industries is best left to
the determination of the City Assessor or his deputy, who has been granted the authority to
take evidence under Article 304 of the Rules and Regulations Implementing the Local
Government Code of 1991.
 PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. FILIPINAS PALM OIL, GR NO.
183416 DATED OCTOBER 5, 2016.

Under Section 133(n) of the Local Government Code (LGC), the taxing power of
local government units (LGUs) shall not extend to the levy of taxes, fees, or charges on
duly registered cooperatives under the Cooperative Code.— Section 234(d) of the Local
Government Code specifically provides for real property tax exemption to cooperatives:
“SECTION 234. Exemptions from Real Property Tax.—The following are exempted from
payment of the real property tax: . . . . (d) All real property owned by duly registered
cooperatives as provided for under [Republic Act] No. 6938[.]” NGPI-NGEI, as the owner
of the land being leased by respondent, falls within the purview of the law. Section 234 of the
Local Government Code exempts all real property owned by cooperatives without
distinction. Nothing in the law suggests that the real property tax exemption only applies
when the property is used by the cooperative itself. Similarly, the instance that the real
property is leased to either an individual or corporation is not a ground for withdrawal of
tax exemption.
 CAPITOL WIRELESS, INC. VS. PROVINCIAL TREASURER OF BATANGAS, GR NO.
180110 DATED MAY 30, 2016

In disputes involving real property taxation, the general rule is to require the
taxpayer to first avail of administrative remedies and pay the tax under protest before
allowing any resort to a judicial action, except when the assessment itself is alleged to
be illegal or is made without legal authority.— For example, prior resort to
administrative action is required when among the issues raised is an allegedly erroneous
assessment, like when the reasonableness of the amount is challenged, while direct court
action is permitted when only the legality, power, validity or authority of the assessment
itself is in question. Stated differently, the general rule of a prerequisite recourse to
administrative remedies applies when questions of fact are raised, but the exception of direct
court action is allowed when purely questions of law are involved.
c. Actual Use

"Actual Use" refers to the purpose for which the property is principally or predominantly
utilized by the person in possession thereof. (Sec. 199 (b), LGC)

 PATALINGHUG VS. CA, GR NO. 104786, JANUARY 27, 1994

Under Section 22 of Real Estate Tax Code, appraisal and assessment are based on
the “actual use” irrespective of any previous assessment or taxpayer’s valuation.—
Needless to say, even if we are to examine the evidentiary value of a tax declaration under
the Real Property Tax Code, a tax declaration only enables the assessor to identify the same
for assessment levels. In fact, a tax declaration does not bind a provincial/city assessor, for
under Sec. 22 of the Real Estate Tax Code, appraisal and assessment are based on the actual
use irrespective of “any previous assessment or taxpayer’s valuation thereon,” which is
based on a taxpayer’s declaration. In fact, a piece of land declared by a taxpayer as residential
may be assessed by the provincial or city assessor as commercial because its actual use is
commercial.
Even if a building declared for taxation purposes as residential, once a local government
has reclassified an area as commercial, that determination for zoning purposes must prevail.
While the commercial character of the questioned vicinity has been declared thru the
ordinance, private respondents have failed to present convincing arguments to substantiate
their claim that Cabaguio Avenue, where the funeral parlor was constructed, was still a
residential zone. Unquestionably, the operation of a funeral parlor constitutes a “commercial
purpose,” as gleaned from Ordinance No. 363.
d. Appraisal

"Appraisal" is the act or process of determining the value of property as of a

specified date for a specific purpose. (Sec. 199 (e), LGC)

e. Assessment

"Assessment" is the act or process of determining the value of a property, or

proportion thereof subject to tax, including the discovery, listing, classification, and
appraisal of properties. (Sec. 199 (f), LGC)

f. Assessed Value

"Assessed Value" is the fair market value of the real property multiplied by the
assessment level. It is synonymous to taxable value. (Sec. 199 (h), LGC)

v. Appraisal of Real Property (Sec. 201)

Section 201. Appraisal of Real Property. - All real property, whether taxable or exempt,
shall be appraised at the current and fair market value prevailing in the locality where the
property is situated. The Department of Finance shall promulgate the necessary rules and
regulations for the classification, appraisal, and assessment of real property pursuant to the
provisions of this Code.

All real property shall be appraised at the current fair market value prevailing at the
locality where the property is situated. This also implies that a Local Government Unit may
only collect real estates to properties within its territorial jurisdiction.

"Fair Market Value" is the price at which a property may be sold by a seller who is
not compelled to sell and bought by a buyer who is not compelled to buy. (Sec. 199 (l), LGC)

 SESBRENO V. CBAA, 270 SCRA 263

The cited provision merely defines "market value." It does not in any way direct that the
market value as defined therein should be used as basis in determining the value of a
property for purposes of real property taxation.
On the other hand, Section 5 of PD 464 provides unequivocally that "all real property,
whether taxable or exempt, shall be appraised at the current and fair market value prevailing
in the locality where the property is situated."
Contrary to petitioner's contention, acquisition cost cannot be and is not the sole
basis of the current and fair market value of a property. The current value of like properties
and their actual or potential uses, among others, are also considered.
vi. Declaration of Real Property
a. By Owner or Administrator (Sec. 202)

It shall be the duty of all persons, natural or juridical, owning or administering real
property, including the improvements therein, within a city or municipality, or their duly
authorized representative, to prepare, or cause to be prepared, and file with the provincial,
city or municipal assessor, a sworn statement declaring the true value of their property,
whether previously declared or undeclared, taxable or exempt, which shall be the current
and fair market value of the property, as determined by the declarant. Such declaration shall
contain a description of the property sufficient in detail to enable the assessor or his deputy
to identify the same for assessment purposes. The sworn declaration of real property herein
referred to shall be filed with the assessor concerned once every three (3) years during the
period from January first (1st) to June thirtieth (30th) commencing with the calendar year
1992.

b. In case improvements are made (Sec. 203)

It shall be the duty of any person, or his authorized representative, acquiring at any
time real property in any municipality or city or making any improvement on real property,
to prepare, or cause to be prepared, and file with the provincial, city or municipal assessor,
a sworn statement declaring the true value of subject property, within sixty (60) days after
the acquisition of such property or upon completion or occupancy of the improvement,
whichever comes earlier.

c. By Assessor (Sec. 204)

When any person, natural or juridical, by whom real property is required to be

declared, refuses or fails for any reason to make such declaration within the time prescribed,
the provincial, city or municipal assessor shall himself declare the property in the name of
the defaulting owner, if known, or against an unknown owner, as the case may be, and shall
assess the property for taxation. No oath shall be required of a declaration thus made by the
provincial, city or municipal assessor.

d. Notification of Transfer of Real Property Ownership (Sec. 208)

Any person who shall transfer real property ownership to another shall notify the
provincial, city or municipal assessor concerned within sixty (60) days from the date of such
transfer. The notification shall include the mode of transfer, the description of the property
alienated, the name and address of the transferee.

vii. Assessment of Real Property

a. Preparation of Schedule of Fair Market Values (Sec. 212)

Before any general revision of property assessment is made, there shall be prepared a
schedule of fair market values by the provincial, city and municipal assessor of the
municipalities within the Metropolitan Manila Area for the different classes of real property
situated in their respective local government units for enactment by ordinance of the
Sanggunian concerned.

The schedule of fair market values shall be published in a newspaper of general

circulation in the province, city or municipality concerned or in the absence thereof, shall be
posted in the provincial capitol, city or municipal hall and in two other conspicuous public
places therein.

 LOPEZ VS. CITY OF MANILA, GR NO. 127139 FEBRUARY 19, 1999

Steps to be Followed for the Mandatory Conduct of General Revision of Real

Property Assessments.—Based on the evidence presented by the parties, the steps to be
followed for the mandatory conduct of General Revision of Real Property assessments,
pursuant to the provision of Sec. 219 of R.A. No. 7160 are as follows:
1. The preparation of “Schedule of Fair Market Values”; and
2. The enactment of Ordinances:
a. Levying an annual “ad valorem” tax on real property and an additional tax
accruing to the SEF;
b. Fixing the assessment levels to be applied to the market values of real
properties;
 c. Providing necessary appropriation to defray expenses incident to general
revision of real property assessments; and
d. Adopting the Schedule of Fair Market Values prepared by the assessors.

Coming down to specifics, we find it desirable to lay down the procedure in

computing the real property tax. With the introduction of assessment levels, tax rates could
be maintained, although tax payments can be made either higher or lower depending on
their percentage (assessment level) applied to the fair market value of property to derive its
assessed value which is subject to tax.
b. Classes of Real Property for Assessment (Sec. 215)

For purposes of assessment, real property shall be classified as:

o Residential
o Agricultural
o Commercial
o Industrial
o Mineral
o Timberland; or
o Special, which are:
 Lands, buildings and other improvements actually, directly, and
exclusively used for hospitals, cultural, or scientific purposes; and
 Thos owned, used by local water districts and GOCCs rendering
essential public services in the supply and distribution of water an
electricity.

The city or municipality within the Metropolitan Manila Area, through their
respective Sanggunian, shall have the power to classify lands as residential, agricultural,
commercial, industrial, mineral, timberland, or special in accordance with their zoning
ordinances.

c. Special Classes of Real Property (Sec. 216)

All lands, buildings, and other improvements thereon actually, directly and
exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by
local water districts, and Government-Owned or Controlled Corporations rendering
essential public services in the supply and distribution of water and/or generation and
transmission of electric power shall be classified as “special.”

 CITY ASSESSOR OF CEBUCITY VS. ASSOCIATION DE BENEVOLA DE CEBU –GR NO.

152904, JUNE 8, 2007

The fact alone that the doctors and medical specialists holding clinics in a separate
Medical Arts Center are those duly accredited by the Hospital—they are consultants of
the hospital and the ones who can treat the Hospital’s patients confined in it—takes
away the said Medical Arts Center from being categorized as “commercial” since a
tertiary hospital is required by law to have a pool of physicians who comprise the
required medical departments in various medical fields.—We so hold that CHHMAC is an
integral part of CHH. It is undisputed that the doctors and medical specialists holding clinics
in CHHMAC are those duly accredited by CHH, that is, they are consultants of the hospital
and the ones who can treat CHH’s patients confined in it. This fact alone takes away CHHMAC
from being categorized as “commercial” since a tertiary hospital like CHH is required by law
to have a pool of physicians who comprises the required medical departments in various
medical fields.
The exemption in favor of property used exclusively for charitable or educational
purposes is “not limited to property actually indispensable” therefore but extends to
facilities which are “incidental to and reasonably necessary for” the accomplishment of
said purposes—such as, in the case of hospitals, “a school for training nurses, a nurses’
home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for
student nurses, interns and residents” such as “athletic fields,” including “a farm used for the
inmates of the institution.” Verily, being an integral part of CHH, CHHMAC should be under
the same special assessment level of as that of the former.
d. Actual Use as Basis for Assessment (Sec. 217)
For purposes of assessment, the “actual use” is the basis for classification and
valuation, regardless of who owns the property.
 TESTATE ESTATE OF CONCORDIA LIM VS. CITY OF MANILA – GR NO. 90639,
FEBRUARY 21, 1990)\

Unpaid real estate taxes attaches to the property and is chargeable against the
taxable person who had actual or beneficial use and possession of it, regardless of
whether or not he is the owner.—The records show that the subject properties were leased
to other persons during the time when GSIS held their titles, as was the case during the
ownership of the late Concordia Lim. However, the real estate taxes later assessed on the
said properties for the years 1977, 1978 and the first quarter of 1979 were charged against
the plaintiff-appellant even if the latter was not the beneficial user of the parcels of land. In
real estate taxation, the unpaid tax attaches to the property and is chargeable against the
taxable person who had actual or beneficial use and possession of it regardless of whether
or not he is the owner.
 LRTA VS. CBAA – GR NO. 127316, OCTOBER 12, 2000

Under Section 22 of Real Estate Tax Code, appraisal and assessment are based on the
actual use irrespective of any previous assessment or taxpayer’s valuation.—Needless to
say, even if we are to examine the evidentiary value of a tax declaration under the Real
Property Tax Code, a tax declaration only enables the assessor to identify the same for
assessment levels. In fact, a tax declaration does not bind a provincial/city assessor, for
under Sec. 22 of the Real Estate Tax Code, appraisal and assessment are based on the actual
use irrespective of “any previous assessment or taxpayer’s valuation thereon,” which is
based on a taxpayer’s declaration. In fact, a piece of land declared by a taxpayer as residential
may be assessed by the provincial or city assessor as commercial because its actual use is
commercial.
Even if a building declared for taxation purposes as residential, once a local government
has reclassified an area as commercial, that determination for zoning purposes must prevail.
 ALLIED BANKING CORPORATION VS. QUEZON CITY GOVERNMENT – GR NO.
154126, OCTOBER 11, 2005

Given that petitioner is engaged in a service-oriented commercial endeavor, its

carriageways and terminal stations are patrimonial property subject to tax,
notwithstanding its claim of being a government-owned or controlled corporation.—
Though the creation of the LRTA was impelled by public service—to provide mass
transportation to alleviate the traffic and transportation, situation in Metro Manila—its
operation undeniably partakes of ordinary business. Petitioner is clothed with corporate
status and corporate powers in the furtherance of its proprietary objectives. Indeed, it
operates much like any private corporation engaged in the mass transport industry. Given
that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal
stations are patrimonial property subject to tax, notwithstanding its claim of being a
government-owned or controlled corporation.
Under the Real Property Tax Code, real property is classified for assessment purposes on
the basis of actual use, which is defined as “the purpose for which the property is principally
or predominantly utilized by the person in possession of the property.”
e. Assessment Levels (Sec. 218)
The assessment levels to be applied to the fair market value of real property to determine
its assessed value shall be fixed by ordinances of the sangguniang panlalawigan,
sangguniang panlungsod or sangguniang bayan of a municipality within the Metropolitan
Manila Area, at the rates not exceeding the following:

(a) On Lands:

CLASS ASSESSMENT LEVELS

Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%
Timberland 20%

(b) On Buildings and Other Structures:

(1) Residential
Fair market Value
Over Not Over Assessment
Levels
P175,000.00 0%
P175,000.00 300,000.00 10%
300,000.00 500,000.00 20%
500,000.00 750,000.00 25%
750,000.00 1,000,000.00 30%
1,000,000.00 2,000,000.00 35%
2,000,000.00 5,000,000.00 40%
5,000,000.00 10,000,000.00 50%
10,000,000.00 60%
(2) Agricultural
Fair Market Value
Over Not Over Assessment
Levels
P300,000.00 25%
P300,000.00 500,000.00 30%
500,000.00 750,000.00 35%
750,000.00 1,000,000.00 40%
1,000,000.00 2,000,000.00 45%
2,000,000.00 50%
(3) Commercial / Industrial
Fair Market Value
Over Not Over Assessment
Levels
P300,000.00 30%
P300,000.00 500,000.00 35%
500,000.00 750,000.00 40%
750,000.00 1,000,000.00 50%
1,000,000.00 2,000,000.00 60%
2,000,000.00 5,000,000.00 70%
5,000,000.00 10,000,000.00 75%
10,000,000.00 80%
(4) Timberland
Fair Market Value
Over Not Over Assessment
Levels
P300,000.00 45%
P300,000.00 500,000.00 50%
500,000.00 750,000.00 55%
750,000.00 1,000,000.00 60%
5,000,000.00 2,000,000.00 65%
2,000,000.00 70%

(c) On Machineries

Class Assessment Levels

Agricultural 40%
Residential 50%
Commercial 80%
Industrial 80%

(d) On Special Classes: The assessment levels for all lands buildings,
machineries and other improvements;

Actual Use Assessment

Level
Cultural 15%
Scientific 15%
Hospital 15%
Local water districts 10%
 Government-owned or 10%
controlled corporations
engaged in the supply and
distribution of water
and/or generation and
transmission of electric
power

f. General Revision of Assessments and Property Classification (Sec. 219)

The provincial, city or municipal assessor shall undertake a general revision of real
property assessments within two (2) years after the effectivity of the Code and every three
(3) years thereafter.

Assessments made after the first day of January of any year shall take effect on the
first day of January of the next year.

g. Valuation of Real Property (Sec. 220)

In cases where:

(a) Real property is declared and listed for taxation purposes for the first time;

(b) There is an ongoing general revision of property classification and assessment; or

(c) A request is made by the person in whose name the property is declared, the
provincial, city or municipal assessor or his duly authorized deputy shall, in accordance with
the provisions of this Chapter, make a classification, appraisal and assessment or
taxpayer's valuation thereon.

Provided, however, that the assessment of real property shall not be increased
oftener than once every three (3) years except in case of new improvements substantially
increasing the value of said property or of any change in its actual use.

 ALLIED BANK VS. QUEZON CITY GOVERNMENT – GR NO. 154126, OCTOBER 11,
2005

Local Assessment Regulations No. 1-92 suggests three approaches in estimating the
fair market value, namely:
(1) The sales analysis or market data approach;
(2) The income capitalization approach; and
(3) The replacement or reproduction cost approach.
Under the sales analysis approach, the price paid in actual market transactions is
considered by taking into account valid sales data accumulated from among the various
sources stated in Sections 202, 203, 208, 209, 210, 211 and 213 of the Code. In the income
capitalization approach, the value of an income-producing property is no more than the
return derived from it. An analysis of the income produced is necessary in order to estimate
the sum which might be invested in the purchase of the property. The reproduction cost
approach, on the other hand, is a factual approach used exclusively in appraising man-made
improvements such as buildings and other structures, based on such data as materials and
labor costs to reproduce a new replica of the improvement.
“Fair market value” is the price at which a property may be sold by a seller who is not
compelled to sell and bought by a buyer who is not compelled to buy, taking into
consideration all uses to which the property is adapted and might in reason be applied. The
criterion established by the statute contemplates a hypothetical sale. Hence, the buyers need
not be actual and existing purchasers.
h. Date of Effectivity of Assessment or Reassessment (Sec. 221)

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: Provided, however,
That the reassessment of real property due to its partial or total destruction, or to a major
change in its actual use, or to any great and sudden inflation or deflation of real property
values, or to the gross illegality of the assessment when made or to any other abnormal
cause, shall be made within ninety (90) days from the date any such cause or causes
occurred, and shall take effect at the beginning of the quarter next following the
reassessment.

i. Assessment of Property Subject to Back Taxes (Sec. 222)

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 of more than ten (10) years prior to the date
of initial assessment: Provided, however, That such taxes shall be computed on the basis of
the applicable schedule of values in force during the corresponding period.

 SESBRENO V. CBAA, 270 SCRA 263

Section 5 of PD 464 provides that all real property, shall be appraised at the current
and fair market value prevailing in the locality where the property is situated.—We
cannot sustain petitioner’s contention. The cited provision merely defines “market value.” It
does not in any way direct that the market value as defined therein should be used as basis
in determining the value of a property for purposes of real property taxation. On the other
hand, Section 5 of PD 464 provides unequivocally that “(a)ll real property, whether taxable
or exempt, shall be appraised at the current and fair market value prevailing in the locality
where the property is situated.”
The value of real property does not remain stagnant; it is unrealistic to expect that the
current market value of a property is the same as its cost of acquisition ten years ago. In this
light, a general revision of real property assessment is required by law every five (5)
years to ensure that real properties are assessed at their current and fair market values.
j. Notification of New or Revised Assessment (Sec. 223)

When real property is assessed for the first time or when an existing assessment is
increased or decreased, the provincial, city or municipal assessor shall within thirty (30)
days give written notice of such new or revised assessment to the person in whose name the
property is declared. The notice may be delivered personally or by registered mail or
through the assistance of the punong barangay to the last known address of the person to be
served.

 MANILA ELECTRIC COMPANY VS. THE CITY OF ASSESSOR AND CITY TREASURER
OF LUCENA CITY, GR NO. 166102 DATED AUGUST 5, 2015

The Local Government Code defines “Appraisal” as the “act or process of determining
the value of property as of a specific date for a specific purpose.” “Assessment” is “the act or
process of determining the value of a property, or proportion thereof subject to tax, including
the discovery, listing, classification, and appraisal of the properties[.]”
Every machinery must be individually appraised and assessed depending on its
acquisition cost, remaining economic life, estimated economic life, replacement or
reproduction cost, and depreciation.
A notice of assessment, which stands as the first instance the taxpayer is officially
made aware of the pending tax liability, should be sufficiently informative to apprise
the taxpayer the legal basis of the tax. When real property is assessed for the first time or
when an existing assessment is increased or decreased, the provincial, city or municipal
assessor shall within thirty (30) days give written notice of such new or revised assessment
to the person in whose name the property is declared. The notice may be delivered
personally or by registered mail or through the assistance of the Punong Barangay to the last
known address of the person to served. A notice of assessment, which stands as the first
instance the taxpayer is officially made aware of the pending tax liability, should be
sufficiently informative to apprise the taxpayer the legal basis of the tax.
k. Appraisal and Assessment of Machinery (Sec. 224)

Appraisal and Assessment of Machinery. -

(a) The fair market value of a brand-new machinery shall be the acquisition cost. In
all other cases, the fair market value shall be determined by dividing the remaining
economic life of the machinery by its estimated economic life and multiplied by the
replacement or reproduction cost.

(b) If the machinery is imported, the acquisition cost includes freight, insurance,
bank and other charges, brokerage, arrastre and handling, duties and taxes, plus
charges at the present site. The cost in foreign currency of imported machinery shall
be converted to peso cost on the basis of foreign currency exchange rates as fixed by
the Central Bank.

l. Depreciation Allowance for Machinery (Sec. 225)\

For purposes of assessment, a depreciation allowance shall be made for machinery at

a rate not exceeding five percent (5%) of its original cost or its replacement or reproduction
cost, as the case may be, for each year of use: Provided, however, That the remaining value
for all kinds of machinery shall be fixed at not less than twenty percent (20%) of such
original, replacement, or reproduction cost for so long as the machinery is useful and in
operation.

viii. Condonation of RPT

a. Condonation and Reduction of RPT (Sec. 276)

In case of a general failure of crops or substantial decrease in the price of agricultural or

agribased products, or calamity in any province, city or municipality, the Sanggunian
concerned, by ordinance passed prior to the first (1st) day of January of any year and upon
recommendation of the Local Disaster Coordinating Council, may condone or reduce, wholly
or partially, the taxes and interest thereon for the succeeding year or years in the city or
municipality affected by the calamity.

b. Condonation or Reduction of RPT by President (Sec. 277)

The President of the Philippines may, when public interest so requires, condone or
reduce the real property tax and interest for any year in any province or city or a municipality
within the Metropolitan Manila Area.

II. IMPOSITION OF REAL PROPERTY TAX

i. Power to Levy Real Property Tax (Sec. 232)

A province or city or a municipality within the Metropolitan Manila Area my levy an

annual ad valorem tax on real property such as land, building, machinery, and other
improvement not hereinafter specifically exempted.
 Municipalities outside Metro Manila cannot levy real property taxes. They can, however,
impose special levies.

ii. Rates of Levy (Sec. 233)

Provinces, cities, and municipalities do not only have the power to levy real estate taxes,
but they may also fix real estate tax rates.

A province or city or a municipality within the Metropolitan Manila Area shall fix a
uniform rate of basic real property tax applicable to their respective localities as
follows:

(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed
value of real property; and
(b) In the case of a city or a municipality within the Metropolitan Manila Area, at the rate
not exceeding two percent (2%) of the assessed value of real property.

 ALLIED BANK VS. QUEZON CITY GOVERNMENT – GR NO. 154126, OCTOBER 11,
2005

Local Assessment Regulations No. 1-92 suggests three approaches in estimating the fair
market value, namely:

(1) the sales analysis or market data approach;

(2) the income capitalization approach; and
(3) the replacement or reproduction cost approach.

Under the sales analysis approach, the price paid in actual market transactions is
considered by taking into account valid sales data accumulated from among the various
sources stated in Sections 202, 203, 208, 209, 210, 211 and 213 of the Code. In the income
capitalization approach, the value of an income-producing property is no more than the
return derived from it. An analysis of the income produced is necessary in order to estimate
the sum which might be invested in the purchase of the property. The reproduction cost
approach, on the other hand, is a factual approach used exclusively in appraising man-made
improvements such as buildings and other structures, based on such data as materials and
labor costs to reproduce a new replica of the improvement.

“Fair market value” is the price at which a property may be sold by a seller who is not
compelled to sell and bought by a buyer who is not compelled to buy, taking into consideration all
uses to which the property is adapted and might in reason be applied. The criterion established by
the statute contemplates a hypothetical sale. Hence, the buyers need not be actual and existing
purchasers.

iii. Exemptions from RPT (Sec. 234)

The following are exempted from payment of the real property tax:

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

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

thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;
 (c) All machineries and equipment that are actually, directly and exclusively used
by local water districts and government owned or controlled corporations
engaged in the supply and distribution of water and/or generation and
transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under
R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental
protection.

Except as provided herein, any exemption from payment of real property tax previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including all
government-owned or controlled corporations are hereby withdrawn upon the effectivity of
this Code.

a. Proof of Exemption from RPT (Sec. 206)

Every person by or for whom real property is declared, who shall claim tax exemption
for such property shall file with the provincial, city or municipal assessor within thirty
(30) days from the date of the declaration of real property sufficient documentary
evidence in support of such claim including corporate charters, title of ownership,
articles of incorporation, by-laws, contracts, affidavits, certifications and mortgage
deeds, and similar documents.

 PROVINCIAL ASSESSOR OF MARINDUQUE VS. CA – GR NO. 170532, APRIL 4, 2009

The exemption granted under Sec. 234(e) of Republic Act No. 7160 to machinery and
equipment used for pollution control and environmental protection is based on usage. The
term usage means direct, immediate and actual application of the property itself to the
exempting purpose.—As held in Mactan, the exemption granted under Sec. 234(e) of R.A. No.
7160 to “[m]achinery and equipment used for pollution control and environmental
protection” is based on usage. The term usage means direct, immediate and actual
application of the property itself to the exempting purpose. Section 199 of R.A. No. 7160
defines actual use as “the purpose for which the property is principally or predominantly
utilized by the person in possession thereof.” It contemplates concrete, as distinguished from
mere potential, use. Thus, a claim for exemption under Sec. 234(e) of R.A. No. 7160 should
be supported by evidence that the property sought to be exempt is actually, directly and
exclusively used for pollution control and environmental protection.

The burden is upon the taxpayer to prove, by clear and convincing evidence, that his claim for
exemption has legal and factual basis.

b. Constitutional Provisions on RPT Exemption

 LUNG CENTER OF THE PHILIPPINES VS. QC – 433 SCRA 119

To determine whether an enterprise is a charitable institution/entity or not, the elements which

should be considered include the statute creating the enterprise, its corporate purpose, its
constitution and by-laws, the methods of administration, the nature of the actual work performed,
the character of the services rendered, the indefiniteness of the beneficiaries, and the use and
occupation of the properties; In the legal sense, a charity may be fully defined as a gift, to be applied
consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing
their minds and hearts under the influence of education or religion, by assisting them to establish
themselves in life or otherwise lessening the burden of government. The test whether an enterprise
is charitable or not is whether it exists to carry out a purpose recognized in law as charitable or
whether it is maintained for gain, profit, or private advantage
 The Lung Center of the Philippines was organized for the welfare and benefit of the Filipino people
principally to help combat the high incidence of lung and pulmonary diseases in the Philippines; Any
person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of
charity.—Hence, the medical services of the petitioner are to be rendered to the public in general in
any and all walks of life including those who are poor and the needy without discrimination. After all,
any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject
of charity.

As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-
patient, or confined in the hospital, or receives subsidies from the government, so long as the
money received is devoted or used altogether to the charitable object which it is intended to
achieve, and no money inures to the private benefit of the persons managing or operating
the institution.

Those portions of Lung Center’s real property that are leased to private entities are not
exempt from real property taxes as these are not actually, directly and exclusively used for
charitable purposes.

 FELS ENERGY, INC. VS. PROVINCE OF BATANGAS GR NO. 168557, FEBRUARY 16,
2007

The right of local government units to collect taxes due must always be upheld to avoid severe tax
erosion.—It must be pointed out that the protracted and circuitous litigation has seriously resulted
in the local government’s deprivation of revenues. The power to tax is an incident of sovereignty and
is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against
its abuse is to be found only in the responsibility of the legislature which imposes the tax on the
constituency who are to pay for it. The right of local government units to collect taxes due must
always be upheld to avoid severe tax erosion. This consideration is consistent with the State policy
to guarantee the autonomy of local governments and the objective of the Local Government Code that
they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest
development as self-reliant communities and make them effective partners in the attainment of
national goals.

 PHILIPPINE FISHERIES DEV’T AUTHORITY VS. CA GR NO. 169836, GR NO. JULY

31, 2007

The Court rules that the Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said exemption
does not apply to the portions of the IFPC which the Authority leased to private entities. With respect
to these properties, the Authority is liable to pay real property tax. Nonetheless, the IFPC, being a
property of public dominion cannot be sold at public auction to satisfy the tax delinquency.

The Authority should be classified as an instrumentality of the national government; It is generally

exempt from payment of real property tax, except those portions which have been leased to private
entities.

Applying Section 234(a) of the Local Government Code, the Court ruled that when an
instrumentality of the national government grants to a taxable person the beneficial use of a real
property owned by the Republic, said instrumentality becomes liable to pay real property tax

 MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY VS. MARCOS – GR NO.

120082, SEPT. 11, 1996

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who are to pay it.
Nevertheless, effective limitations thereon may be imposed by the people through their
Constitutions. Our Constitution, for instance, provides that the rule of taxation shall be uniform and
equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the power
that it was once opined that “the power to tax involves the power to destroy.”

Since taxation is a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support of the
government, tax statutes must be construed strictly against the government and liberally in
favor of the taxpayer; But since taxes are what we pay for civilized society, or are the
lifeblood of the nation, the law frowns against exemptions from taxation and statutes
granting tax exemptions are thus construed strictissimi juris against the taxpayer and
liberally in favor of the taxing authority.—Taxation is the rule and exemption therefrom
the exception, the exemption may be withdrawn at the pleasure of the taxing authority,
the only exception being where the exemption was granted to private parties based on
material consideration of a mutual nature, which then becomes contractual and thus
covered by the non-impairment clause of the Constitution.

 MIAA VS. CA – GR NO. 155650, JULY 20, 2006

The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government instrumentality under Section 133(o)
of the Local Government Code.—The minority’s theory violates Section 133(o) of the Local
Government Code which expressly prohibits local governments from imposing any kind of tax on
national government instrumentalities. Section 133(o) does not distinguish between national
government instrumentalities with or without juridical personalities. Where the law does not
distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national
government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is
the specific provision of law prohibiting local governments from imposing any kind of tax on the
national government, its agencies and instrumentalities.

 MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY VS. CITY OF LAPU-

LAPU – GR NO. 181756 DATED JUNE 15, 2015

Mactan-Cebu International Airport Authority (MCIAA) is an instrumentality of the

government; thus, its properties actually, solely and exclusively used for public
purposes, consisting of the airport terminal building, airfield, runway, taxiway and the
lots on which they are situated, are not subject to real property tax and respondent City
is not justified in collecting taxes from petitioner over said properties.

Like in MIAA, the airport lands and buildings of MCIAA are properties of public dominion
because they are intended for public use. As properties of public dominion, they indisputably belong
to the State or the Republic of the Philippines, and are outside the commerce of man. This, unless
petitioner leases its real property to a taxable person, the specific property leased becomes subject
to real property tax; in which case, only those portions of petitioner’s properties which are leased to
taxable persons like private parties are subject to real property tax by the City of Lapu-Lapu.

The real properties owned by the Republic are titled either in the name of the Republic itself
or in the name of agencies or instrumentalities of the National Government. The Administrative
Code allows real property owned by the Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real properties remain owned by the
Republic and continue to be exempt from real estate tax. The Republic may grant the
beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its tax exemption
only if the “beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person.”

 NPC VS. PROVINCE OF QUEZON, GR NO. 171586, JULY 15, 2009

The tax liability referred to is the liability arising from law that the local government unit can
rightfully and successfully enforce, not the contractual liability that is enforceable between the parties
to a contract.—On liability for taxes, the NPC indeed assumed responsibility for the taxes due on the
power plant and its machineries, specifically, “all real estate taxes and assessments, rates and other
charges in respect of the site, the buildings and improvements thereon and the [power plant].” At
first blush, this contractual provision would appear to make the NPC liable and give it standing to
protest the assessment. The tax liability we refer to above, however, is the liability arising from law that
the local government unit can rightfully and successfully enforce, not the contractual liability that is
enforceable between the parties to a contract as discussed below. By law, the tax liability rests on
Mirant based on its ownership, use, and possession of the plant and its machineries.

The NPC is neither the owner, nor the possessor or user of the property taxed. No interest on its
part thus justifies any tax liability on its part other than its voluntary contractual undertaking. Under
this legal situation, only Mirant as the contractual obligor, not the local government unit, can enforce
the tax liability that the NPC contractually assumed; the NPC does not have the “legal interest” that
the law and jurisprudence require to give it personality to protest the tax imposed by law on Mirant.

The test of exemption is the use, not the ownership of the machineries devoted to
generation and transmission of electric power. The nature of the NPC’s ownership of these
machineries only finds materiality in resolving the NPC’s claim of legal interest in protesting
the tax assessment on Mirant.

 NPC VS. PROVINCE OF QUEZON, GR NO. 171586, JANUARY 25, 2010

(RESOLUTION)

The phrase “person having legal interest in the property” in Section 226 of the Local
Government Code (LGC) can include an entity that assumes another person’s tax liability by contract.—
While a real property owner’s failure to comply with Sections 202 and 206 does not necessarily
negate its tax obligation nor invalidate its legitimate claim for tax exemption, Napocor’s omission to
do so in this case can be construed as contradictory to its claim of ownership of the subject
machineries. That it assumed liability for the taxes that may be imposed on the subject machineries
similarly does not clothe it with legal title over the same. We do not believe that the phrase “person
having legal interest in the property” in Section 226 of the LGC can include an entity that assumes
another person’s tax liability by contract.

Tax Exemptions; A claim for tax exemption whether full or partial does not question the authority
of local assessor to assess real property tax.—Like Olivarez, Napocor, by claiming exemption from
realty taxation, is simply raising a question of the correctness of the assessment. A claim for tax
exemption, whether full or partial, does not question the authority of local assessor to assess real
property tax. This may be inferred from Section 206.

 GSIS VS. CITY TREASURER AND ASSESSOR OF MANILA, GR NO. 186242

DECEMBER 23, 2009

It is to be noted that prominently added in Government Service Insurance System’s (GSIS’s)

present charter is a paragraph precluding any implied repeal of the tax-exempt clause so as to
protect the solvency of GSIS funds; Restrictions in the Government Service Insurance System
(GSIS) Charter which for a future express repeal do not make the proviso an irrepealable law,
for such restrictions do not impinge or limit the carte blanche legislative authority of the
legislature to so amend it.—The foregoing exempting proviso, couched as it were in an
encompassing manner, brooks no other construction but that GSIS is exempt from all forms
of taxes.

Moreover, an express repeal by a subsequent law would not suffice to affect the full exemption
benefits granted the GSIS, unless the following conditionalities are met: (1) The repealing clause
must expressly, specifically, and categorically revoke or repeal Sec. 39; and (2) a provision is enacted
to substitute or replace the exemption referred to herein as an essential factor to maintain or protect
the solvency of the fund. These restrictions for a future express repeal, notwithstanding, do not make
the proviso an irrepealable law, for such restrictions do not impinge or limit the carte
blanche legislative authority of the legislature to so amend it. The restrictions merely enhance other
provisos in the law ensuring the solvency of the GSIS fund.

The unpaid tax attaches to the property and is chargeable against the taxable person who
had actual or beneficial use and possession of it regardless of whether or not he is the owner. A
valid tax levy presupposes a corresponding tax liability; Even granting arguendo that
Government Service Insurance System’s (GSIS’s) liability for realty taxes attached from 1992,
when Republic Act No. 7160 effectively lifted its tax exemption under Presidential Decree
Nos. 1146 to 1996, when Republic Act No. 8291 restored the tax incentive, the levy on the
subject properties to answer for the assessed realty tax delinquencies cannot still be
sustained for the simple reason that the governing law, Republic Act No. 8291, in force at the
time of the levy prohibits it.

 CITY OF PASIG VS. REPUBLIC, GR NO. 185023 DATED AUGUST 24, 2011

Properties owned by the Republic of the Philippines are exempt from real property tax
“except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person”—the portions of the properties not leased to taxable entities are exempt from
real estate tax while the portions of the properties leased to taxable entities are subject to real
estate tax.—Even as the Republic of the Philippines is now the owner of the properties in view of the
voluntary surrender of MPLDC by its former registered owner, Campos, to the State, such transfer does
not prevent a third party with a better right from claiming such properties in the proper forum. In the
meantime, the Republic of the Philippines is the presumptive owner of the properties for taxation
purposes. Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the
Philippines are exempt from real property tax “except when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person.” Thus, the portions of the properties not leased to
taxable entities are exempt from real estate tax while the portions of the properties leased to taxable
entities are subject to real estate tax. The law imposes the liability to pay real estate tax on the Republic
of the Philippines for the portions of the properties leased to taxable entities. It is, of course, assumed
that the Republic of the Philippines passes on the real estate tax as part of the rent to the lessees.

 REPUBLIC VS. CITY OF PARANAQUE, GR NO. 191109 DATED JULY 28, 2012

Philippine Reclamation Authority (PRA) is a government instrumentality vested with corporate

powers and performing an essential public service pursuant to Section 2(10) of the Introductory
Provisions of the Administrative Code. Being an incorporated government instrumentality, it is exempt
from payment of real property tax.—This Court is convinced that PRA is not a GOCC either under
Section 2(3) of the Introductory Provisions of the Administrative Code or under Section 16, Article
XII of the 1987 Constitution. The facts, the evidence on record and jurisprudence on the issue support
the position that PRA was not organized either as a stock or a non-stock corporation. Neither was it
created by Congress to operate commercially and compete in the private market.

It is clear from Section 234 that real property owned by the Republic of the Philippines (the
Republic) is exempt from real property tax unless the beneficial use thereof has been granted to a
taxable person. In this case, there is no proof that PRA granted the beneficial use of the subject
reclaimed lands to a taxable entity. There is no showing on record either that PRA leased the subject
reclaimed properties to a private taxable entity. This exemption should be read in relation to Section
133(o) of the same Code, which prohibits local governments from imposing “[t]axes, fees or charges
of any kind on the National Government, its agencies and instrumentalities x x x.”

 ANGELES UNIVERSITY FOUNDATION VS. CITY OF ANGELES, GR NO. 189999 JUNE

27, 2012

In Lung Center of the Philippines v. Quezon City, 433 SCRA 119 (2004), this Court held that only
portions of the hospital actually, directly and exclusively used for charitable purposes are exempt
from real property taxes, while those portions leased to private entities and individuals arenot
exempt from such taxes. We explained the condition for the tax exemption privilege of charitable and
educational institutions, as follows: Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in
order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof,
that (a) it is a charitable institution; and (b) its real properties
are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. “Exclusive” is defined as
possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and
“exclusively” is defined, “in a manner to exclude; as enjoying a privilege exclusively.”

If real property is used for one or more commercial purposes, it is not exclusively used for the
exempted purposes but is subject to taxation. The words “dominant use” or “principal use” cannot be
substituted for the words “used exclusively” without doing violence to the Constitutions and the law.
Solely is synonymous with exclusively. What is meant by actual, direct and exclusive use of the
property for charitable purposes is the direct and immediate and actual application of the property
itself to the purposes for which the charitable institution is organized. It is not the use of the income
from the real property that is determinative of whether the property is used for tax-exempt purposes.

 CITY OF LAPU-LAPU VS. PEZA, GR NO. 184203 DATED NOVEMBER 26, 2014

Under Section 234(a) of the Local Government Code, real properties owned by the
Republic of the Philippines are exempt from real property taxes. Properties owned by the
state are either property of public dominion or patrimonial property as per Art. 420.

Citing the ruling in the case of Manila International Airport Authority vs. Court of
Appeals,”properties of public dominion, being for public use, are not subject to levy,
encumbrance or disposition through public or private sale. Any encumbrance, levy on
execution or auction sale of any property of public dominion is void for being contrary to
public policy. Essential public services will stop if properties of public dominion are subject
to encumbrances, foreclosures and auction sale.”

In this case, the properties sought to be taxed are located in publicly owned economic
zones. These economic zones are property of public dominion – sites which were reserved
by President Marcos under Proclamation No. 1811, Series of 1979 (Mactan).

 PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. FILIPINAS PALM OIL, GR NO.
183416 DATED OCTOBER 5, 2016

Under Section 133(n) of the Local Government Code (LGC), the taxing power of local government
units (LGUs) shall not extend to the levy of taxes, fees, or charges on duly registered cooperatives under
the Cooperative Code.—Under Section 133(n) of the Local Government Code, the taxing power of local
government units shall not extend to the levy of taxes, fees, or charges on duly registered
cooperatives under the Cooperative Code. Section 234(d) of the Local Government Code specifically
provides for real property tax exemption to cooperatives: SECTION 234. Exemptions from Real
Property Tax.—

The following are exempted from payment of the real property tax: . . . . (d) All real property
owned by duly registered cooperatives as provided for under [Republic Act] No. 6938[.] NGPI-NGEI, as
the owner of the land being leased by respondent, falls within the purview of the law. Section 234 of
the Local Government Code exempts all real property owned by cooperatives without distinction.
Nothing in the law suggests that the real property tax exemption only applies when the property is
used by the cooperative itself. Similarly, the instance that the real property is leased to either an
individual or corporation is not a ground for withdrawal of tax exemption.

iv. Additional Levy for SEF (Sec. 235)

A province or city, or a municipality within the Metropolitan Manila Area, may 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).

Note: This is in addition to the real property tax.

v. RPT on Idle Lands (Sec. 236)

A province or city, or a municipality within the Metropolitan Manila Area, 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.

Purpose of imposing ad valorem taxes on idle land: To penalize property owners who
do not use their property productively. It is also designed to encourage utilization of land
resources in order to contribute to national development.

a. Coverage of Idle Lands (Sec. 237)

For purposes of real property taxation, idle lands shall include the following:

(a) Agricultural lands, more than one (1) hectare in area, suitable for
cultivation, dairying, inland fishery, and other agricultural uses, one-half
(1/2) of which remain uncultivated or unimproved by the owner of the
property or person having legal interest therein. Agricultural lands planted
to permanent or perennial crops with at least fifty (50) trees to a hectare
shall not be considered idle lands. Lands actually used for grazing purposes
shall likewise not be considered idle lands.

(b) Lands, other than agricultural, located in a city or municipality, more than
one thousand (1,000) square meters in area one-half (1/2) of which
remain unutilized or unimproved by the owner of the property or person
having legal interest therein.

Regardless of land area, this shall likewise apply to residential lots 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: Provided, however, That
individual lots of such subdivisions, the ownership of which has not been transferred to the
buyer shall be considered as part of the subdivision, and shall be subject to the additional tax
payable by subdivision owner or operator.

b. Idle Lands Exempt from Tax (Sec. 238)

A province or city or a municipality within the Metropolitan Manila Area may exempt idle
lands from the additional levy by reason of the following:

a. force majeure;
 b. civil disturbance;
c. natural calamity; or
d. any cause or circumstance which physically or legally prevents the owner of the
property or person having legal interest therein from improving, utilizing or
cultivating the same.

vi. Special Levies (Sec. 240)

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.

Provided, however, That the special levy shall not exceed sixty percent (60%) of the
actual cost of such projects and improvements, including the costs of acquiring land and
such other real property in connection therewith: Provided, further, That 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.

a. Ordinance Imposing Special Levy (Sec. 241)

A tax ordinance imposing a special levy shall describe with reasonable accuracy the
nature, extent, and location of the public works projects or improvements to be undertaken,
state the estimated cost thereof, specify the metes and bounds by monuments and lines and
the number of annual installments for the payment of the special levy which in no case shall
be less than five (5) nor more than ten (10) years.

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.

b. Publication and Public Hearing (Sec. 242)

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.

c. Fixing Amount of Special Levy (Sec. 243)

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.

d. Taxpayers Remedies (Sec. 244)

 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,
avail of the remedies provided by law.

The phrase “person having legal interest in the property” in Section 226 of the
Local Government Code (LGC) can include an entity that assumes another person’s tax
liability by contract.

e. Accrual of Special Levy (Sec. 245)

The special levy shall accrue on the first day of the quarter next following the
effectivity of the ordinance imposing such levy.

III. COMPUTATION OF REAL PROPERTY TAX

i. Date of Accrual (Sec. 246)

Section 246. Date of Accrual of Tax. - The real property tax for any year shall accrue on the
first day of January and from that date it shall constitute a lien on the property which shall be
superior to any other lien, mortgage, or encumbrance of any kind whatsoever, and shall be
extinguished only upon the payment of the delinquent tax.

SALIENT POINTS:

 First day of January

 RPT shall constitute a lien from such date and shall be extinguished only upon payment
of delinquent tax

 Collecting authority

GR: The collection of real property tax with interest thereon and related expenses, and
the enforcement of the remedies are the responsibility of the city or municipal
treasurer.
XPN: Treasurer may deputize the barangay treasurer to collect all taxes on real property
located in the barangay, provided that:
1. The barangay treasurer is properly bonded for the purpose: provided, further,
2. The premium on the bond shall be paid by the city or municipal government
concerned (Sec. 247, LGC).

 Duty of assessor to furnish local treasurer with assessment rolls

The provincial, city, or municipal assessor shall prepare and submit to the treasurer of
the LGU, on or before the 31st day of December each year, an assessment roll
containing a list of all persons whose real properties have been newly assessed or
reassessed and the values of such properties (Sec. 248, LGC).

ii. Notice of Time of Collection (Sec. 249)

Section 249. Notice of Time for Collection of Tax. - The city or municipal treasurer shall, on or
before the thirty-first (31st) day of January each year, in the case of the basic real property tax
and the additional tax for the Special Education Fund (SEF) or any other date to be prescribed
by the sanggunian concerned in the case of any other tax levied under this title, 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. Said notice shall likewise be published in a newspaper of
general circulation in the locality once a week for two (2) consecutive weeks.

SALIENT POINTS:

 Notice of time for collection of taxes

 1. Treasurer shall post the notice of the dates when the tax may be paid without
interest in a publicly accessible place at the city or municipal hall.
2. Notice shall likewise be published in a newspaper of general circulation in the
locality once a week for two consecutive weeks on or before the 31st day of January
each year in the case of the basic real property tax and the additional tax for the
Special Education Fund or any other date to be prescribed by the sanggunian
concerned in the case of any other tax levied under this title.

iii. Payment of RPT in Installments (Sec. 250)

Section 250. Payment of Real Property Taxes in Installments. - The owner of the real property
or the person having legal interest therein may pay the basic real property tax and the
additional tax for Special Education Fund (SEF) due thereon without interest in four (4) equal
installments; the first installment to be due and payable on or before March Thirty-first (31st);
the second installment, on or before June Thirty (30); the third installment, on or before
September Thirty (30); and the last installment on or before December Thirty-first (31st),
except the special levy the payment of which shall be governed by ordinance of the
sanggunian concerned.

The date for the payment of any other tax imposed under this Title without interest shall be
prescribed by the sanggunian concerned.

Payments of real property taxes shall first be applied to prior years delinquencies, interests,
and penalties, if any, and only after said delinquencies are settled may tax payments be
credited for the current period.

SALIENT POINTS:

 Payment of real property taxes in installment

 The owner or the person having legal interest may pay the basic real property tax
and the additional tax for Special Education Fund (SEF) due without interest in four
equal installments:
1. on or before March 31
2. on or before June30
3. on or before September 30
4. on or before December 31
 Payments of real property taxes shall first be applied to prior years delinquencies,
interests, and penalties, if any, and only after said delinquencies are settled may
tax payments be credited for the current period.

iv. Tax Discount for Advanced Prompt Payment (Sec. 251)

Section 251. Tax Discount for Advanced Prompt Payment. - If the basic real property tax and
the additional tax accruing to the Special Education Fund (SEF) are paid in advance in
accordance with the prescribed schedule of payment as provided under Section 250, the
sanggunian concerned may grant a discount not exceeding twenty percent (20%) of the annual
tax due.

SALIENT POINTS:

 Advance payment - discount not exceeding 20% of annual tax (LGC, Sec. 251)

 Prompt payment - discount not exceeding 10% of annual tax due (IRR of LGC, Art. 342)

IV. REMEDIES

i. Local Government Unit’s Remedies

a. Date of Accrual of Tax (Sec. 246)

Section 246. Date of Accrual of Tax. - The real property tax for any year shall accrue
on the first day of January and from that date it shall constitute a lien on the property
 which shall be superior to any other lien, mortgage, or encumbrance of any kind
whatsoever, and shall be extinguished only upon the payment of the delinquent tax.

SALIENT POINTS:
 First day of January

 RPT shall constitute a lien from such date and shall be extinguished only upon
payment of delinquent tax

b. LGU’s Lien (Sec. 257)

Section 257. Local Governments Lien. - The basic real property tax and any other tax
levied under this Title constitutes 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.

SALIENT POINTS:
 Issuance of delinquency notice for real property tax payment
When real property tax or other tax imposed becomes delinquent, the local
treasurer shall immediately cause a notice of the delinquency to be posted at the
main hall and in a publicly accessible and conspicuous place in each barangay
of the LGU concerned. Notice of delinquency shall also be published once a
week for two (2) consecutive weeks, in a newspaper of general circulation in the
province, city, or municipality.

 Guidelines in the exercise of local government lien

(1) A legal claim on the property subject on the real property tax as security for
the payment of tax obligation.
(2) It is constituted on the property subject to the tax from the date the RPT
accrued, i.e., January 1 (Sec. 246, LGC).
(3) It is superior to any lien, mortgage, or encumbrance of any kind whatsoever
(Sec. 246, LGC) in favor of any person, irrespective of the owner or possessor
thereof (Sec. 257, LGC).
(4) It is enforceable by administrative or judicial action (Sec. 257, LGC).
(5) It may be extinguished only upon payment of the tax and related interests and
expenses (Sec. 246 and 257, LGC).

c. Interest on Unpaid RPT (Sec. 255)

Section 255. Interests on Unpaid Real Property Tax. - In case of failure to pay the
basic real property tax or any other tax levied under this Title upon the expiration of the
periods as provided in Section 250, or when due, as the case may be, shall subject the
taxpayer to the payment of interest at the rate of two percent (2%) per month on the
unpaid amount or a fraction thereof, until the delinquent tax shall have been fully paid:
Provided, however, That in no case shall the total interest on the unpaid tax or portion
thereof exceed thirty-six (36) months.

SALIENT POINTS:

 The rate is (2%) per month on the unpaid amount until the delinquent tax shall
have been fully paid.
 Provided, in no case shall the total interest on the unpaid tax or portion thereof
exceed 36 months.

d. Period to Collect (Sec. 270)- Suspension of Period to Collect

Section 270. Periods Within Which To Collect Real Property Taxes. - The basic real
property tax and any other tax levied under this Title shall be collected within five (5)
years from the date they become due. No action for the collection of the tax, whether
administrative or judicial, shall be instituted after the expiration of such period. In case
of fraud or intent to evade payment of the tax, such action may be instituted for the
collection of the same within ten (10) years from the discovery of such fraud or intent
to evade payment.
 The period of prescription within which to collect shall be suspended for the time during
which:

1) The local treasurer is legally prevented from collecting the tax;

2) The owner of the property or the person having legal interest therein
requests for reinvestigation and executes a waiver in writing before the
expiration of the period within which to collect; and
3) The owner of the property or the person having legal interest therein is
out of the country or otherwise cannot be located.

SALIENT POINTS:

 Prescriptive period to collect

GR: Within 5 years from the date taxes become due.

XPN: In case of fraud or intent to evade payment - within 10 years from discovery
of fraud or intent.
 Suspension of Period
1. The local treasurer is legally prevented from collecting the tax;
2. The owner of the property or the person having legal interest therein requests
for reinvestigation and executes a waiver in writing before the expiration of the
period within which to collect; and
3. The owner of the property or the person having legal interest therein is out of
the country or otherwise cannot be located.

e. Levy on Real Property (Sec. 258) - Advertisement and Sale (Sec. 260)

Section 258. Levy on Real Property. - After the expiration of the time required to pay
the basic real property tax or any other tax levied under this Title, real property subject
to such tax may be levied upon through the issuance of a warrant on or before, or
simultaneously with, the institution of the civil action for the collection of the delinquent
tax. The provincial or city treasurer, or a treasurer of a municipality within the
Metropolitan Manila Area, as the case may be, when issuing a warrant of levy shall
prepare a duly authenticated certificate showing the name of the delinquent owner of the
property or person having legal interest therein, the description of the property, the
amount of the tax due and the interest thereon. The warrant shall operate with the force
of a legal execution throughout the province, city or a municipality, within the
Metropolitan Manila Area. The warrant shall be mailed to or served upon the delinquent
owner of the real property or person having legal interest therein, or in case he is out of
the country or cannot be located, the administrator or occupant of the property. At the
same time, written notice of the levy with the attached warrant shall be mailed to or
served upon the assessor and the Registrar of Deeds of the province, city or municipality
within the Metropolitan Manila Area where the property is located, who shall annotate
the levy on the tax declaration and certificate of title of the property, respectively.

The levying officer shall submit a report on the levy to the sanggunian concerned within
ten (10) days after receipt of the warrant by the owner of the property or person having
legal interest therein.

Section 260. Advertisement and Sale. - Within thirty (30) days after service of the
warrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction
the property or a usable portion thereof as may be necessary to satisfy the tax
delinquency and expenses of sale. The advertisement shall be effected by posting a
notice at the main entrance of the provincial, city or municipal building, and in a publicly
accessible and conspicuous place in the barangay where the real property is located,
and by publication once a week for two (2) weeks in a newspaper of general circulation
in the province, city or municipality where the property is located. The advertisement
shall specify the amount of the delinquent tax, the interest due thereon and expenses of
sale, the date and place of sale, the name of the owner of the real property or person
having legal interest therein, and a description of the property to be sold. At any time
before the date fixed for the sale, the owner of the real property or person having legal
interest therein may stay the proceedings by paying the delinquent tax, the interest due
thereon and the expenses of sale. The sale shall be held either at the main entrance of
 the provincial, city or municipal building, or on the property to be sold, or at any other
place as specified in the notice of the sale.

Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report
of the sale to the sanggunian concerned, and which shall form part of his records. The
local treasurer shall likewise prepare and deliver to the purchaser a certificate of sale
which shall contain the name of the purchaser, a description of the property sold, the
amount of the delinquent tax, the interest due thereon, the expenses of sale and a brief
description of the proceedings: Provided, however, That proceeds of the sale in excess
of the delinquent tax, the interest due thereon, and the expenses of sale shall be remitted
to the owner of the real property or person having legal interest therein.

The local treasurer may, by ordinance duly approved, advance an amount sufficient to
defray the costs of collection thru the remedies provided for in this Title, including the
expenses of advertisement and sale.

SALIENT POINTS:

 When is levy made? After the expiration of the time required to pay the tax
levied, the real property subject to the tax may be levied upon; may be made on
or before the civil action for the collection of the delinquent tax.
 When advertisement is made? Within 30 days after the service of the warrant
of the levy, the local treasurer shall proceed to publicly advertise for sale or
auction the subject real property.
 Where sale be held? The sale shall be held either at the main entrance of the
provincial, city or municipal building, or on the property to be sold, or at any other
place as specified in the notice of the sale.
 Disposition of proceeds: Proceeds of the sale in excess of the delinquent tax,
the interest due thereon, and the expenses of sale shall be remitted to the owner
of the real property or person having legal interest therein.
 Report of Sale: Within thirty (30) days after the sale, the local treasurer or his
deputy shall make a report of the sale to the sanggunian concerned.

 Puzon vs. Abelera 169 SCRA 789

 The holding of the tax sale despite the absence of the requisite notice was tantamount
to a violation of her substantial right to due process.

 The findings of fact of both the trial court and the appellate court not being contrary to
the evidence, should be accorded respect

 Spouses Tan vs. Bantequi GR No. 154027 October 24, 2005

 The auction sale of real property for the collection of delinquent taxes is in personam,
not in rem. Although sufficient in proceedings in rem like land registration, mere notice
by publication will not satisfy the requirements of proceedings in personam.
“[P]ublication of the notice of delinquency [will] not suffice, considering that the
procedure in tax sales is in personam.”
 It is still incumbent upon the city treasurer to send the notice directly to the taxpayer—
the registered owner of the property—in order to protect the latter’s interests. Although
preceded by proper advertisement and publication, an auction sale is void absent an
actual notice to a delinquent taxpayer.
 Notice of sale to the delinquent landowners and to the public, in general, is an essential
and indispensable requirement of law, the non-fulfillment of which vitiates the sale.—
 Section 80 of PD 464 provides that “any balance of the proceeds of the sale left after
deducting the amount of the taxes and penalties due and the costs of sale, shall be
returned to the owner or his representative.”
 A purchaser of real estate at the tax sale obtains only such title as that held by the
taxpayer; the principle of caveat emptor applies. The defense of indefeasibility of a
Torrens title does not extend to a transferee who takes the title despite a notice of the
flaw in it
f. Redemption of Property Sold (Sec. 261)

Section 261. Redemption of Property Sold. - Within one (1) year from the date of sale,
the owner of the delinquent real property or person having legal interest therein, or his
representative, shall have the right to redeem the property upon payment to the local
treasurer of the amount of the delinquent tax, including the interest due thereon, and the
expenses of sale from the date of delinquency to the date of sale, plus interest of not
more than two percent (2%) per month on the purchase price from the date of sale to
the date of redemption. Such payment shall invalidate the certificate of sale issued to
the purchaser and the owner of the delinquent real property or person having legal
interest therein shall be entitled to a certificate of redemption which shall be issued by
the local treasurer or his deputy.

From the date of sale until the expiration of the period of redemption, the delinquent real
property shall remain in possession of the owner or person having legal interest therein
who shall be entitled to the income and other fruits thereof.

The local treasurer or his deputy, upon receipt from the purchaser of the certificate of
sale, shall forthwith return to the latter the entire amount paid by him plus interest of not
more than two percent (2%) per month. Thereafter, the property shall be free from lien
of such delinquent tax, interest due thereon and expenses of sale.

SALIENT POINTS:

 Right of redemption of owner of the delinquent property

Within 1 year from the date of sale, the owner of the delinquent real property
or person having legal interest therein, or his representative, shall have the
right to redeem the property upon payment to the local treasurer of the:
(a) Amount of the delinquent tax;
(b) The interest due thereon
(c) The expenses of sale from the date of delinquency to the date of sale
(d) Plus interest of not more than 2% per month on the purchase price from
the date of sale to the date of redemption.

g. Purchase of Property by the Local Government Units for Want of Bidder (Sec. 263)

Section 263. Purchase of Property By the Local Government Units for Want of Bidder. -
In case there is no bidder for the real property advertised for sale as provided herein,
the real property tax and the related interest and costs of sale the local treasurer
conducting the sale shall purchase the property in behalf of the local government unit
concerned to satisfy the claim and within two (2) days thereafter shall make a report of
his proceedings which shall be reflected upon the records of his office. It shall be the
duty of the Registrar of Deeds concerned upon registration with his office of any such
declaration of forfeiture to transfer the title of the forfeited property to the local
government unit concerned without the necessity of an order from a competent court.

Within one (1) year from the date of such forfeiture, the taxpayer or any of his
representative, may redeem the property by paying to the local treasurer the full amount
of the real property tax and the related interest and the costs of sale. If the property is
not redeemed as provided herein, the ownership thereof shall be vested on the local
government unit concerned.

SALIENT POINTS:

LGUs may purchase real property advertised for sale when

1. There is no bidder; or
2. The highest bid is for an amount insufficient to pay the real property tax, fees, charges,
surcharges, interests or penalties.

h. Court Action for Collection (Sec. 266)

Section 266. Collection of Real Property Tax Through the Courts. - The local
government unit concerned may enforce the collection of the basic real property tax or
 any other tax levied under this Title by civil action in any court of competent jurisdiction.
The civil action shall be filed by the local treasurer within the period prescribed in Section
270 of this Code.

ii. Taxpayer’s Remedies

a. Action Assailing Validity of Tax Sale (Sec. 267)

Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any action
assailing the validity or any sale at public auction of real property or rights therein under
this Title until the taxpayer shall have deposited with the court the amount for which the
real property was sold, together with interest of two percent (2%) per month from the date
of sale to the time of the institution of the action. The amount so deposited shall be paid to
the purchaser at the auction sale if the deed is declared invalid but it shall be returned to
the depositor if the action fails.

Neither shall any court declare a sale at public auction invalid by reason or irregularities or
informalities in the proceedings unless the substantive rights of the delinquent owner of
the real property or the person having legal interest therein have been impaired.

SALIENT POINTS:

 Deposit of amount for which the real property was sold together with interest of 2% per
month from date of sale to the time of institution of action.

b. Action Involving Ownership (Sec. 268)

Section 268. Payment of Delinquent Taxes on Property Subject of Controversy. - In any

action involving the ownership or possession of, or succession to, real property, the court
may, motu propio or upon representation of the provincial, city, or municipal treasurer or
his deputy, award such ownership, possession, or succession to any party to the action
upon payment to the court of the taxes with interest due on the property and all other costs
that may have accrued, subject to the final outcome of the action.

c. Payment under Protest (Sec. 252)

Section 252. Payment Under Protest. -

a. No protest shall be entertained unless the taxpayer first pays the tax. There shall
be annotated on the tax receipts the words "paid under protest". The protest in
writing must be filed within thirty (30) days from payment of the tax to the provincial,
city treasurer or municipal treasurer, in the case of a municipality within Metropolitan
Manila Area, who shall decide the protest within sixty (60) days from receipt.
b. The tax or a portion thereof paid under protest, shall be held in trust by the treasurer
concerned.
c. In the event that the protest is finally decided in favor of the taxpayer, the amount
or portion of the tax protested shall be refunded to the protestant, or applied as tax
credit against his existing or future tax liability.
d. In the event that the protest is denied or upon the lapse of the sixty day period
prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided
for in Chapter 3, Title II, Book II of this Code.

SALIENT POINTS:

 Rules as to the necessity of paying real property tax prior to protest

GR: The taxpayer must pay the real property tax assessed prior to protesting a real
property tax assessment (Sec. 252, LGC).
XPN: The payment of the tax prior to protest is not necessary where the taxpayer
questions the authority and power of the assessor to impose the assessment and of
the treasurer to collect the tax (Ty, et. al., v. Trampe, G.R. No. 117577. December 1,
1995).
 The protest contemplated under Section 252 is required where there is a question as
to the reasonableness or correctness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real property tax assessment, he is
required to “first pay the tax” under protest. Otherwise, the city or municipal treasurer
will not act on his protest (Ibid.).

 When payment under protest required

It is necessary in claims for refund for real property taxes under Sec. 252, LGC and
for customs duties under Sec. 2308, TCC.

 Guidelines in paying tax under protest

1. No protest shall be entertained unless the taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid under protest" The protest in writing
must be filed within 30 days from payment of the tax to treasurer who shall decide
the protest within 60 days from receipt.
2. The tax or a portion paid under protest shall be held in trust by the treasurer
concerned.
3. In the event that the protest is finally decided in favor of the taxpayer, the amount or
portion of the tax protested shall be refunded to the protestant, or applied as tax credit
against his existing or future tax liability.
4. In the event that the protest is denied or upon the lapse of the 60-day period, the
taxpayer may avail appeal the assessment before the Local Board of Assessment
Appeals (Sec. 252, LGC).
5. In case there is adverse decision by the LBAA, the taxpayer may appeal with the
CBAA within 30 from receipt of the adverse decision by the LBAA.

 Manila Electric Company vs. The City of Assessor and City Treasurer of Lucena
City, GR No. 166102 dated August 5, 2015.

 It is settled that the requirement of “payment under protest” is a condition sine qua
non before an appeal may be entertained.
 Under the Local Government Code, even when the assessment of the real property
is appealed, the real property tax due on the basis thereof should be paid to and/or
collected by the local government unit concerned.
 By posting the surety bond, MERALCO may be considered to have substantially
complied with Section 252 of the Local Government Code for the said bond already
guarantees the payment to the Office of the City Treasurer of Lucena of the total
amount of real property taxes and penalties due on Tax Declaration Nos. 019-6500
and 019-7394. This is not the first time that the Court allowed a surety bond as an
alternative to cash payment of the real property tax before protest/appeal as required
by Section 252 of the Local Government Code.

 Ramie Textile vs. Mathay - 89 SCRA 586

 Protest is not a requirement in order that a taxpayer who paid under a mistaken belief
that it is required by law, may claim for a refund Section 54 of Commonwealth Act
No. 470 does not apply to petitioner which could conceivably not have been expected
to protest a payment it honestly believed to be due. The same refers only to the case
where the taxpayer, despite his knowledge of the erroneous or illegal assessment,
still pays and fails to make the proper protest, for in such case, he should manifest
an unwillingness to pay, and failing so, the taxpayer is deemed to have waived his
right to claim a refund.

 The quasi-contract of solutio indebiti, is one of the concrete manifestations of the

ancient principle that no one shall enrich himself unjustly at the expense of another.
Hence, it would seem unedifying for the government, that knowing it has no right at
all to collect or to receive money for alleged taxes paid by mistake, it would be
reluctant to return the same.

 Ty vs. Trampe – GR No. 117577, December 1, 1995

 Although as a rule, administrative remedies must first be exhausted before resort to

judicial action can prosper, there is a well-settled exception in cases where the
 controversy does not involve questions of fact but only of law. In the present case,
the parties, even during the proceedings in the lower court on 11 April 1994, already
agreed “that the issues in the petition are legal,” and thus, no evidence was presented
in said court.
 The protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a
question as to the reasonableness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real estate tax assessment, he is
required to “first pay the tax” under protest. Otherwise, the city or municipal treasurer
will not act on his protest.

 Olivarez vs. Marquez - 438 SCRA 679

 The extraordinary remedies of certiorari, prohibition and mandamus may be resorted

to only when there is no other plain, available, speedy and adequate remedy in the
course of law. Where administrative remedies are available, petitions for the issuance
of these peremptory writs do not lie in order to give the administrative body the
opportunity to decide the matter by itself correctly and to prevent unnecessary and
premature resort to courts.
 Should the taxpayer/real property owner question the excessiveness or
reasonableness of the assessment, Section 252 directs that the taxpayer should first
pay the tax due before his protest can be entertained. There shall be annotated on
the tax receipts the words “paid under protest.” It is only after the taxpayer has paid
the tax due that he may file a protest in writing within thirty days from payment of the
tax to the Provincial, City or Municipal Treasurer, who shall decide the protest within
sixty days from receipt. In no case is the local treasurer obliged to entertain the
protest unless the tax due has been paid.
 Under the doctrine of primacy of administrative remedies, an error in the assessment
must be administratively pursued to the exclusion of ordinary courts whose decisions
would be void for lack of jurisdiction. But an appeal shall not suspend the collection
of the tax assessed without prejudice to a later adjustment pending the outcome of
the appeal.

 NPC vs. Province of Quezon, GR No. 171586, July 15, 2009

 A taxpayer’s failure to question the assessment before the LBAA renders the
assessment of the local assessor final, executory, and demandable, thus precluding
the taxpayer from questioning the correctness of the assessment, or from invoking
any defense that would reopen the question of its liability on the merits. Section 226
of the LGC lists down the two entities vested with the personality to contest an
assessment: the owner and the person with legal interest in the property.

 The liability for taxes generally rests on the owner of the real property at the time the
tax accrues. This is a necessary consequence that proceeds from the fact of
ownership. However, personal liability for realty taxes may also expressly rest on the
entity with the beneficial use of the real property, such as the tax on property owned
by the government but leased to private persons or entities, or when the tax
assessment is made on the basis of the actual use of the property. In either case, the
unpaid realty tax attaches to the property but is directly chargeable against the
taxable person who has actual and beneficial use and possession of the property
regardless of whether or not that person is the owner.

 Legal interest should be an interest that is actual and material, direct and immediate,
not simply contingent or expectant. The concept of the directness and immediacy
involved is no different from that required in motions for intervention under Rule 19 of
the Rules of Court that allow one who is not a party to the case to participate because
of his or her direct and immediate interest, characterized by either gain or loss from
the judgment that the court may render.

 NPC vs. Province of Quezon, GR No. 171586, January 25, 2010 (Resolution)

 Legal interest should be one that is actual and material, direct and immediate, not
simply contingent or expectant.

 On the Court’s rulings in Baguio v. Busuego, 100 SCRA 116 (1980) and Lim v.
Manila, 182 SCRA 482 (1990),the Court essentially declared that contractual
 assumption of tax liability alone is insufficient to make one liable for taxes. The
contractual assumption of tax liability must be supplemented by an interest that the
party assuming the liability had on the property; the person from whom payment is
sought must have also acquired the beneficial use of the property taxed. In other
words, he must have the use and possession of the property—an element that was
missing in Napocor’s case.

 The tax liability must be a liability that arises from law, which the local government
unit can rightfully and successfully enforce, not the contractual liability that is
enforceable only between the parties to the contract.

 Legal interest is defined as interest in property or a claim cognizable at law,

equivalent to that of a legal owner who has legal title to the property. Given this
definition, Napocor is clearly not vested with the requisite interest to protest the tax
assessment, as it is not an entity having the legal title over the machineries. It has
absolutely no solid claim of ownership or even of use and possession of the
machineries, as our July 15, 2009 Decision explained.

 While a real property owner’s failure to comply with Sections 202 and 206 does not
necessarily negate its tax obligation nor invalidate its legitimate claim for tax
exemption, Napocor’s omission to do so in this case can be construed as
contradictory to its claim of ownership of the subject machineries. That it assumed
liability for the taxes that may be imposed on the subject machineries similarly does
not clothe it with legal title over the same. We do not believe that the phrase “person
having legal interest in the property” in Section 226 of the LGC can include an entity
that assumes another person’s tax liability by contract.

 Like Olivarez, NAPOCOR, by claiming exemption from realty taxation, is simply

raising a question of the correctness of the assessment. A claim for tax exemption,
whether full or partial, does not question the authority of local assessor to assess real
property tax. This may be inferred from Section 206.

 Camp John Hay Development Corp. vs. CBAA, GR No. 169234, October 2, 2013.
(include concurring opinion of Justice Carpio)

 Section 252 of the Local Government Code emphatically directs that the
taxpayer/real property owner questioning the assessment should first pay the tax due
before his protest can be entertained. As a matter of fact, the words “paid under
protest” shall be annotated on the tax receipts. Consequently, only after such
payment has been made by the taxpayer may he file a protest in writing (within thirty
[30] days from said payment of tax) to the provincial, city, or municipal treasurer, who
shall decide the protest within sixty (60) days from its receipt. In no case is the local
treasurer obliged to entertain the protest unless the tax due has been paid.
 The requirement of “payment under protest” is a condition sine qua non before a
protest or an appeal questioning the correctness of an assessment of real property
tax may be entertained. Moreover, a claim for exemption from payment of real
property taxes does not actually question the assessor’s authority to assess and
collect such taxes, but pertains to the reasonableness or correctness of the
assessment by the local assessor, a question of fact which should be resolved, at the
very first instance, by the LBAA.

Carpio, Jr., J., Concurring Opinion:

 There is no showing that CJHDC ever complied with the requirements of Section 206
of the Local Government Code in claiming tax exemption; hence, the City Assessor
of Baguio acted well within her power to assess the subject properties. There was no
need for CJHDC to wait for an assessment before submission of its proofs of tax
exemption. Had CJHDC submitted proofs of its tax exemption to the City Assessor,
there would have been no need for CJHDC to pay under protest. CJHDC could
question in court any adverse decision of the City Assessor, the Local Board of
Assessment Appeals, and the Central Board of Assessment Appeals denying its tax
exemption, without paying any tax assessment under protest, due to its claim of tax
exemption under Proclamation No. 420.
  Once the non-tax-exempt status of the taxpayer is settled with finality, or if the same
is not in issue, any dispute on the realty assessment only raises questions on the
correctness of the amount of the assessment, thus necessitating prior payment of the
assessment under protest. To repeat, any protest that CJHDC files or pursues after
17 November 2005 necessarily refers only to the correctness of the amount of the
assessment, in which case CJHDC must pay the assessed tax under protest. The
present petition should be denied because JHSEZ can no longer claim tax exemption,
with the finality of this Court’s ruling in John Hay. CJHDC’s doctrine of operative fact
argument is a defense it may raise before the Local Board of Assessment Appeals,
to where this case is being remanded.

 NPC vs. Municipal Government of Navotas, GR No. 192300 dated November 24,
2014

 If a taxpayer is not satisfied with the decision of the Central Board of Assessment
Appeals (CBAA) or the Regional Trial Court (RTC), as the case may be, the taxpayer
may file, within thirty (30) days from receipt of the assailed decision, a petition for
review with the Court of Tax Appeals (CTA) pursuant to Section 7(a) of Republic Act
(RA) No. 9282.

 In cases where the question involves the amount of the tax or the correctness thereof,
the appeal will be pursuant to Section 7(a)(5) of R.A. 9282. When the appeal comes
from a judicial remedy which questions the authority of the local government to impose
the tax, Section 7(a)(3) of R.A. 9282 applies. Thereafter, such decision, ruling or
resolution may be further reviewed by the CTA En Banc pursuant to Section 2, Rule 4
of the Revised Rules of the CTA.

 City of Lapu-Lapu vs. PEZA, GR No. 184203 dated November 26, 2014

 Once an assessment has already been issued by the assessor, the proper remedy of
a taxpayer depends on whether the assessment was erroneous or illegal. An
erroneous assessment “presupposes that the taxpayer is subject to the tax but is
disputing the correctness of the amount assessed.” With an erroneous assessment,
the taxpayer claims that the local assessor erred in determining any of the items for
computing the real property tax, i.e., the value of the real property or the portion thereof
subject to tax and the proper assessment levels. In case of an erroneous assessment,
the taxpayer must exhaust the administrative remedies provided under the Local
Government Code before resorting to judicial action.

 Payment under protest and appeal to the Local Board of Assessment Appeals are
“successive administrative remedies to a taxpayer who questions the correctness of
an assessment.” The Local Board Assessment Appeals shall not entertain an appeal
“without the action of the local assessor” on the protest. If the taxpayer is still
unsatisfied after appealing with the Local Board of Assessment Appeals, the taxpayer
may appeal with the Central Board of Assessment Appeals within 30 days from receipt
of the Local Board’s decision.

 In case of an illegal assessment, the taxpayer may directly resort to judicial action
without paying under protest the assessed tax and filing an appeal with the Local and
Central Board of Assessment Appeals.
 Real property taxes are collected by the Local Treasurer, not by the Bureau of Internal
Revenue in charge of collecting national internal revenue taxes, fees, and charges.
Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act
No. 9282, separately provides for the exclusive appellate jurisdiction of the Court of
Tax Appeals over decisions of the Central Board of Assessment Appeals involving the
assessment or collection of real property taxes.

 Exhaustion of administrative remedies under the Local Government Code is necessary

in cases of erroneous assessments where the correctness of the amount assessed is
assailed. The taxpayer must first pay the tax then file a protest with the Local Treasurer
within 30 days from date of payment of tax. If protest is denied or upon the lapse of the
60-day period to decide the protest, the taxpayer may appeal to the Local Board of
Assessment Appeals within 60 days from the denial of the protest or the lapse of the
 60-day period to decide the protest. The Local Board of Assessment Appeals has 120
days to decide the appeal.

 If the taxpayer is unsatisfied with the Local Board’s decision, the taxpayer may appeal
before the Central Board of Assessment Appeals within 30 days from receipt of the
Local Board’s decision. The decision of the Central Board of Assessment Appeals is
appealable before the Court of Tax Appeals En Banc. The appeal before the Court of
Tax Appeals shall be filed following the procedure under Rule 43 of the Rules of Court.
The Court of Tax Appeals’ decision may then be appealed before this court through a
petition for review on certiorari under Rule 45 of the Rules of Court raising pure
questions of law.

 In case of an illegal assessment where the assessment was issued without authority,
exhaustion of administrative remedies is not necessary and the taxpayer may directly
resort to judicial action. The taxpayer shall file a complaint for injunction before the
Regional Trial Court to enjoin the local government unit from collecting real property
taxes. The party unsatisfied with the decision of the Regional Trial Court shall file an
appeal, not a petition for certiorari, before the Court of Tax Appeals, the complaint
being a local tax case decided by the Regional Trial Court. The appeal shall be filed
within fifteen (15) days from notice of the trial court’s decision.

 In case the local government unit (LGU) has issued a notice of delinquency, the
taxpayer may file a complaint for injunction to enjoin the impending sale of the real
property at public auction

 In case the local government unit has already sold the property at public auction, the
taxpayer must first deposit with the court the amount for which the real property was
sold, together with interest of 2% per month from the date of sale to the time of the
institution of action. The taxpayer may then file a complaint to assail the validity of the
public auction. The decisions of the Regional Trial Court in these cases shall be
appealable before the Court of Tax Appeals, and the latter’s decisions appealable
before this court through a petition for review on certiorari under Rule 45 of the Rules
of Court.

 CE Casecnan Water and Energy Company, Inc. vs. The Province of Nueva Ecija,
GR No. 196278 dated June 17, 2015

 With respect to the CTA, its jurisdiction was expanded and its rank elevated to that of
a collegiate court with special jurisdiction by virtue of Republic Act No. 9282. This
expanded jurisdiction of the CTA includes its exclusive appellate jurisdiction to review
by appeal the decisions, orders or resolutions of the RTC in local tax cases originally
decided or resolved by the RTC in the exercise of its original or appellate jurisdiction.
 In the recent case of City of Manila v. Grecia-Cuerdo, 715 SCRA 182 (2014), the Court
ruled that the CTA likewise has the jurisdiction to issue writs of certiorari or to determine
whether there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within
the CTA’s exclusive appellate jurisdiction.
 It is settled that it is the CTA which has exclusive jurisdiction over a special civil action
for certiorari assailing an interlocutory order issued by the RTC in a local tax case.
 No doubt, the injunction case before the RTC is a local tax case. And as earlier
discussed, a certiorari petition questioning an interlocutory order issued in a local tax
case falls under the jurisdiction of the CTA. Thus, the CA correctly dismissed the
Petition for Certiorari before it for lack of jurisdiction.

 NPC vs. Provincial Treasurer of Benguet, GR No. 209303 dated November 14,
2016

 Settled is the rule that should the taxpayer/real property owner question the
excessiveness or reasonableness of the assessment, Section 252 of the LGC of 1991
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, City or Municipal Treasurer,
who shall decide the protest within sixty days from receipt. In no case is the local
treasurer obliged to entertain the protest unless the tax due has been paid.

 Chapter 3, Title Two, Book II of the LGC of 1991, Sections 226 to 231, provides for the
administrative remedies available to a taxpayer or real property owner who does not
agree with the assessment of the real property tax sought to be collected, particularly,
the procedural and substantive aspects of appeal before the LBAA and CBAA,
including its effect on the payment of real property taxes.

 As settled in jurisprudence, a claim for exemption from the payment of real property
taxes does not actually question the assessor’s authority to assess and collect such
taxes, but pertains to the reasonableness or correctness of the assessment by the local
assessor, a question of fact which should be resolved, at the very first instance, by the
LBAA. The same may be inferred in Section 206 of the LGC of 1991.

 While it is evident in jurisprudence that the filing of motion for reconsideration before
the LBAA is allowed, this Court finds that, inevitably, the filing of the appeal before the
CBAA through registered mail on November 16, 2006 was already late. It is settled that
the “fresh period rule” in the case of Domingo Neypes, et al. v. Court of Appeals, et al.,
469 SCRA 633 (2005), applies only to judicial appeals and not to administrative
appeals.

d. Refunds (Sec. 253)

Section 253. Repayment of Excessive Collections. - When an assessment of basic real

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

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

SALIENT POINTS:

 Like local business taxes, refunds must be claimed within two (2) years from the date
the taxpayer is entitled, i.e., the supervening clause doctrine applies.

 It must be filed with the Treasurer who must decide within 60 days.

 If the treasurer denies the claim, follow the procedure in questioning an assessment.
(Appeal to LBAA – CBAA – CTA En Banc)

 Period for claim for refund

The claim must be filed with the local treasurer within two (2) years from the date the
taxpayer is entitled to such reduction or adjustment.

 Allied Banking vs. Quezon City Government – GR No. 154126, September 15,
2006 Motion for Clarification of Decision

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

i. Appeal with the LBAA (Sec. 226)

Section 226. Local Board of Assessment Appeals. - 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 sixty (60)
days from the date of receipt of the written notice of assessment, appeal to the
Board of Assessment Appeals of the provincial or city 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.

SALIENT POINTS:

 If a taxpayer having legal interest in the property is not satisfied with the
action of the assessor in the assessment of his property, he must appeal
to the Local Board of Assessment Appeals within 60 days from the date of
receipt of the written notice of assessment.
 Composition of the LBAA
1) The Registrar of Deeds, as Chairman;
2) The provincial or city prosecutor as member;
3) The provincial or city engineer as a member (Sec. 227, LGC).

 City Government of Quezon City vs. Bayan Telecommunications – GR No.

162015, March 6, 2006

 With the reality that Bayantel’s real properties were already levied upon on account
of its nonpayment of real estate taxes thereon, the Court agrees with Bayantel that
an appeal to the LBAA is not a speedy and adequate remedy within the context of
the Section 2 of Rule 65. This is not to mention of the auction sale of said properties
already scheduled on July 30, 2002. Moreover, one of the recognized exceptions to
the exhaustion-of-administrative remedies rule is when, as here, only legal issues
are to be resolved. In fact, the Court, cognizant of the nature of the questions
presently involved, gave due course to the instant petition. As the Court has said in
Ty vs. Trampe, 250 SCRA 500 (1995): x x x. Although as a rule, administrative
remedies must first be exhausted before resort to judicial action can prosper, there
is a well-settled exception in cases where the controversy does not involve
questions of fact but only of law. x x x.

 Systems Plus Computer College of Caloocan vs. Local Government of Caloocan,

GR No. 146382. August 7, 2003

 Where administrative remedies are available, a petition for mandamus does not lie.
 Under Section 226 of RA 7160, the remedy of appeal to the Local Board of
Assessment Appeals is available from an adverse ruling or action of the provincial,
city or municipal assessor in the assessment of property.
 The determination made by the respondent City Assessor with regard to the
taxability of the subject real properties squarely falls within its power to assess
properties for taxation purposes subject to appeal before the Local Board of
Assessment Appeals.
 When the law provides for remedies against the action of an administrative board,
body, or officer, as in the case at bar, relief to the courts can be made only after
exhausting all remedies provided therein. Otherwise stated, before seeking the
intervention of the courts, it is a precondition that petitioner should first avail of all
the means afforded by the administrative processes.

 Fels Energy, Inc. vs. Province of Batangas GR No. 168557, February 16, 2007

 Instead of appealing to the Board of Assessment Appeals (as stated in the notice),
NPC opted to file a motion for reconsideration of the Provincial Assessor’s decision,
a remedy not sanctioned by law. The remedy of appeal to the LBAA is available from
 an adverse ruling or action of the provincial, city or municipal assessor in the
assessment of the property. It follows then that the determination made by the
respondent Provincial Assessor with regard to the taxability of the subject real
properties falls within its power to assess properties for taxation purposes subject to
appeal before the LBAA.
 Under Section 226 of R.A. No. 7160, the last action of the local assessor on a
particular assessment shall be the notice of assessment; it is this last action which
gives the owner of the property the right to appeal to the LBAA. The procedure
likewise does not permit the property owner the remedy of filing a motion for
reconsideration before the local assessor.
 If the taxpayer fails to appeal in due course, the right of the local government to collect
the taxes due with respect to the taxpayer’s property becomes absolute upon the
expiration of the period to appeal. It also bears stressing that the taxpayer’s failure to
question the assessment in the LBAA renders the assessment of the local assessor
final, executory and demandable, thus, precluding the taxpayer from questioning the
correctness of the assessment, or from invoking any defense that would reopen the
question of its liability on the merits.

ii. Action by the LBAA (Sec. 229)

Section 229. Action by the Local Board of Assessment Appeals. -

(a) The Board shall decide the appeal within one hundred twenty (120) days from the
date of receipt of such appeal. The Board, after hearing, shall render its decision based
on substantial evidence or such relevant evidence on record as a reasonable mind
might accept as adequate to support the conclusion.

(b) In the exercise of its appellate jurisdiction, the Board shall have the power to
summon witnesses, administer oaths, conduct ocular inspection, take depositions, and
issue subpoena and subpoena duces tecum. The proceedings of the Board shall be
conducted solely for the purpose of ascertaining the facts without necessarily adhering
to technical rules applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person
having legal interest therein and the provincial or city assessor with a copy of the
decision of the Board. In case the provincial or city assessor concurs in the revision or
the assessment, it shall be his duty to notify the owner of the property or the person
having legal interest therein of such fact using the form prescribed for the purpose. The
owner of the property or the person having legal interest therein or the assessor who
is not satisfied with the decision of the Board, may, within thirty (30) days after receipt
of the decision of said Board, appeal to the Central Board of Assessment Appeals, as
herein provided. The decision of the Central Board shall be final and executory.

SALIENT POINTS:

 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)

 Jurisdiction of the LBAA

LBAA has Jurisdiction to hear appeals of owners or persons having legal interest
in the property who are not satisfied with the action of the assessor on an
assessment of his property.

 Period for the decision of an appeal

The LBAA shall decide the appeal within 120 days from the date of receipt of such
appeal. The Board, after hearing, shall render its decision based on substantial
evidence or such relevant evidence on record as a reasonable mind might accept
as adequate to support the conclusion (Sec 229[a], LGC).

iii. Appeal to the CBAA (Sec. 229)

Section 229. Action by the Local Board of Assessment Appeals. -

(a) The Board shall decide the appeal within one hundred twenty (120) days from the
date of receipt of such appeal. The Board, after hearing, shall render its decision based
on substantial evidence or such relevant evidence on record as a reasonable mind might
accept as adequate to support the conclusion.

(b) In the exercise of its appellate jurisdiction, the Board shall have the power to summon
witnesses, administer oaths, conduct ocular inspection, take depositions, and issue
subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted
solely for the purpose of ascertaining the facts without necessarily adhering to technical
rules applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person
having legal interest therein and the provincial or city assessor with a copy of the
decision of the Board. In case the provincial or city assessor concurs in the revision or
the assessment, it shall be his duty to notify the owner of the property or the person
having legal interest therein of such fact using the form prescribed for the purpose. The
owner of the property or the person having legal interest therein or the assessor who is
not satisfied with the decision of the Board, may, within thirty (30) days after receipt of
the decision of said Board, appeal to the Central Board of Assessment Appeals, as
herein provided. The decision of the Central Board shall be final and executory.

SALIENT POINTS:

 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).

 Composition of the CBAA

(1) A Chairman; and
(2) Two (2) members (Sec. 230, LGC).

 Jurisdiction of the CBAA

The Board shall have appellate jurisdiction over all assessment cases decided by
the LBAA (Sec. 230, LGC).

iv. Appeal to the CTA En Banc

SALIENT POINTS:

 If unsatisfied with CBAA’s decision, appeal to the CTA en banc within 30 days.
 Why en banc? Remember that decisions of the CBAA and RTC in the exercise of
its appellate jurisdiction are appealable to the CTA via Rule 43.
 Instances where CTA (En Banc) has exclusive appellate jurisdiction over
cases filed with CBAA
1. In the exercise of its appellate jurisdiction
2. Over cases involving the assessment and taxation of real property
3. Originally decided by the provincial or CBAA

v. Effect of Appeal on Payment of RPT (Sec. 231)

Section 231. Effect of Appeal on the Payment of Real Property Tax. - Appeal on
assessments of real property made under the provisions of this Code shall, in no case,
suspend the collection of the corresponding realty taxes on the property involved as
assessed by the provincial or city assessor, without prejudice to subsequent
adjustment depending upon the final outcome of the appeal.

SALIENT POINTS:

 Appeal to LBAA or CBAA do NOT suspend the collection of tax

An appeal on assessments of real property shall in no case, suspend the collection
of the corresponding realty taxes the property involved as assessed. This is without
prejudice to subsequent adjustment depending upon the final outcome of the appeal
(Sec. 231).
  No court shall have the authority to enjoin or restrain the collection of any tax, fee, or
charge collected by the provincial, city or municipal treasurer. “No injunction rule”

 Effect of appeal on the payment of real property tax

Appeal on assessments of real property shall, in no case, SUSPEND the collection of
the corresponding realty taxes on the property involved as assessed by the provincial
or city assessor, without prejudice to subsequent adjustment depending upon the final
outcome of the appeal.

COURT OF TAX APPEALS

Introduction

The Court of Tax Appeals (CTA) was created on June 16, 1954 through the enactment of Republic Act (RA) No.
1125.

With the passage of RA 9282 on April 23, 2004, the CTA became an Appellate Court, equal in rank to the Court
of Appeals. The composition of the Court increased to six Justices with one Presiding Justice and five Associate
Justices. It sits en banc or in two Divisions with three Justices each.

Likewise, RA 9503 was enacted on June 12, 2008 and took effect on July 5, 2008. This further enlarged the
organizational structure of the CTA by creating a Third Division and providing for three additional Justices.
Hence, the CTA is now composed of one Presiding Justice and eight Associate Justices.

I. Jurisdiction of the Court of Tax Appeals (Sec. 7 of RA 1125, as amended)

Exclusive appellate jurisdiction over civil tax cases

The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as

herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or
other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal Revenue Code
or other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which case the inaction
shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs

duties, fees or other money charges, seizure, detention or release of property affected,
fines, forfeitures or other penalties in relation thereto, or other matters arising under
the Customs Law or other laws administered by the Bureau of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property
originally decided by the provincial or city board of assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him

automatically for review from decisions of the Commissioner of Customs which are
adverse to the Government under Section 2315 of the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural

product, commodity or article, and the Secretary of Agriculture in the case of
agricultural product, commodity or article, involving dumping and countervailing
duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and
safeguard measures under Republic Act No. 8800, where either party may appeal the
decision to impose or not to impose said duties.

a. Cases within the jurisdiction of the Court en banc

The Court en banc shall exercise exclusive appellate jurisdiction to review by

appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court
in Divisions in the exercise of its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies – Bureau of Internal Revenue,

Bureau of Customs, Department of Finance, Department of Trade and
Industry, Department of Agriculture;
(2) Local tax cases decided by the Regional Trial Courts in the exercise of
their original jurisdiction; and
(3) Tax collection cases decided by the Regional Trial Courts in the exercise
of their original jurisdiction involving final and executory assessments for
taxes, fees, charges and penalties, where the principal amount of taxes and
penalties claimed is less than one million pesos;

(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases
decided or resolved by them in the exercise of their appellate jurisdiction;

(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection
cases decided or resolved by them in the exercise of their appellate jurisdiction;

(d) Decisions, resolutions or orders on motions for reconsideration or new trial of

the Court in Division in the exercise of its exclusive original jurisdiction over tax
collection cases;

(e) Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of
its appellate jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of assessment appeals;

(f) Decisions, resolutions or orders on motions for reconsideration or new trial of

the Court in Division in the exercise of its exclusive original jurisdiction over cases
involving criminal offenses arising from violations of the National Internal Revenue
Code or the Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or Bureau of Customs;

(g) Decisions, resolutions or orders on motions for reconsideration or new trial of

the Court in Division in the exercise of its exclusive appellate jurisdiction over
criminal offenses mentioned in the preceding subparagraph; and
 (h) Decisions, resolutions or orders of the Regional trial Courts in the exercise of
their appellate jurisdiction over criminal offenses mentioned in subparagraph (f).
(Sec. 2, Rule 4 of Revised Rules of CTA)

b. Cases within the jurisdiction of the Court in divisions

The Court in Divisions shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the

following:

(1) Decisions of the Commissioner of Internal Revenue in cases involving

disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of
Internal Revenue;

(2) Inaction by the Commissioner of Internal Revenue in cases involving

disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of
Internal Revenue, where the National Internal Revenue Code or other
applicable law provides a specific period for action: Provided, that in case of
disputed assessments, the inaction of the Commissioner of Internal Revenue
within the one hundred eighty day-period under Section 228 of the National
Internal revenue Code shall be deemed a denial for purposes of allowing the
taxpayer to appeal his case to the Court and does not necessarily constitute a
formal decision of the Commissioner of Internal Revenue on the tax case;
Provided, further, that should the taxpayer opt to await the final decision of
the Commissioner of Internal Revenue on the disputed assessments beyond
the one hundred eighty day-period abovementioned, the taxpayer may appeal
such final decision to the Court under Section 3(a), Rule 8 of these Rules; and
Provided, still further, that in the case of claims for refund of taxes
erroneously or illegally collected, the taxpayer must file a petition for review
with the Court prior to the expiration of the two-year period under Section
229 of the National Internal Revenue Code;

(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax
cases decided or resolved by them in the exercise of their original jurisdiction;

(4) Decisions of the Commissioner of Customs in cases involving liability for

customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures of other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by
the Bureau of Customs;
(5) Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs
adverse to the Government under Section 2315 of the Tariff and Customs
Code; and

(6) Decisions of the Secretary of Trade and Industry, in the case of

nonagricultural product, commodity or article, and the Secretary of
Agriculture, in the case of agricultural product, commodity or article,
involving dumping and countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and safeguard measures under
Republic Act No. 8800, where either party may appeal the decision to impose
or not to impose said duties;
 (b) Exclusive jurisdiction over cases involving criminal offenses, to
wit:

(1) Original jurisdiction over all criminal offenses arising from violations of
the National internal Revenue Code or Tariff and Customs Code and other
laws administered by the Bureau of Internal Revenue of the Bureau of
Customs, where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is one million pesos or more; and

(2) Appellate jurisdiction over appeals from the judgments, resolutions or

orders of the Regional Trial Courts in their original jurisdiction in criminal
offenses arising from violations of the National Internal Revenue Code or
Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or Bureau of Customs, where the principal amount of taxes
and fees, exclusive of charges and penalties, claimed is less than one million
pesos or where there is no specified amount claimed;

(c) Exclusive jurisdiction over tax collections cases, to wit:

(1) Original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties, where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is one
million pesos or more; and

(2) Appellate jurisdiction over appeals from the judgments, resolutions or

orders of the Regional Trial Courts in tax collection cases originally decided
by them within their respective territorial jurisdiction. (Sec. 3, Rule 4 of
Revised Rules of CTA)

ii. Criminal cases

a. Exclusive original jurisdiction

Original jurisdiction over all criminal offenses arising from violations of the
National internal Revenue Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue of the Bureau of Customs,
where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is one million pesos or more; (Par. b(1) Sec. 3, Rule 4 of
Revised Rules of CTA)

b. Exclusive appellate jurisdiction in criminal cases

Appellate jurisdiction over appeals from the judgments, resolutions or orders
of the Regional Trial Courts in their original jurisdiction in criminal offenses
arising from violations of the National Internal Revenue Code or Tariff and
Customs Code and other laws administered by the Bureau of Internal Revenue
or Bureau of Customs, where the principal amount of taxes and fees, exclusive
of charges and penalties, claimed is less than one million pesos or where there
is no specified amount claimed; (Par. b(2)Sec.3, Rule 4 of Revised Rules of
CTA)

II. Judicial Procedures

i. Judicial action for collection of taxes
a. Internal revenue taxes
Internal revenue taxes must generally be assessed within three years
counted from the period fixed by law for the filing of the tax return or the actual
 date of filing, whichever is later. With regard to collection of taxes, the BIR has
only five years following the assessment to enforce collection.

Since tax is the lifeblood of the country, the Tax Code provides that no court shall
have the authority to stop or to restrain the collection of any national internal
revenue tax. Only the Court of Tax Appeals (CTA) may issue an order for the
suspension of collection of tax only upon payment by the taxpayer of a bond that
is double the amount that is being assessed.
Once a Final Assessment Notice (FAN) has been issued, the five-year period to
collect starts to run (CTA EB Case 1204, April 16, 2014).

b. Local taxes
Local taxes, fees, or charges shall be assessed within five (5) years from the
date they became due.
No action for the collection, whether administrative or judicial, shall be
instituted after the expiration of such period. In case of fraud or intent to evade the
payment of taxes, fees or charges, the same may be assessed within ten (10) years
from discovery of the fraud or intent to evade payment.
Local, taxes, fees or charges may be collected within five (5) years from the
date of assessment by administrative or judicial action. No such action shall be
instituted after the expiration of said period.
The running of the periods of prescription provided in the preceding
paragraphs shall be suspended for the time during which: (1) the treasurer is legally
prevented from making the assessment of collection; (2) the taxpayer requests for a
reinvestigation and executes a waiver in writing before expiration of the period
within which to assess or collect; and, (3) the taxpayer is out of the country or
otherwise cannot be located.

ii. Civil cases

a. Who may appeal, mode of appeal, effect of appeal;

Any party adversely affected by a decision, ruling or inaction of the Commissioner of

Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board
of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA
within thirty (30) days after the receipt of such decision or ruling or after the
expiration of the period fixed by law for action as referred to in Section 7(a)(2)
herein.

Appeal shall be made by filing a petition for review under a procedure analogous to
that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA
within thirty (30) days from the receipt of the decision or ruling or in the case of
inaction as herein provided, from the expiration of the period fixed by law to act
thereon. A Division of the CTA shall hear the appeal: Provided, however, That with
respect to decisions or rulings of the Central Board of Assessment Appeals and the
Regional Trial Court in the exercise of its appellate jurisdiction appeal shall be made
by filing a petition for review under a procedure analogous to that provided for
under rule 43 of the 1997 Rules of Civil Procedure with the CTA, which shall hear the
case en banc.

All other cases involving rulings, orders or decisions filed with the CTA as provided
for in Section 7 shall be raffled to its Divisions. A party adversely affected by a ruling,
order or decision of a Division of the CTA may file a motion for reconsideration of
new trial before the same Division of the CTA within fifteens (15) days from notice
thereof: Provide, however, That in criminal cases, the general rule applicable in
regular Courts on matters of prosecution and appeal shall likewise apply.
No appeal taken to the CTA from the decision of the Commissioner of Internal
Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city
or municipal treasurer or the Secretary of Finance, the Secretary of Trade and
Industry and Secretary of Agriculture, as the case may be shall suspend the payment,
levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his
tax liability as provided by existing law: Provided, however, That when in the
opinion of the Court the collection by the aforementioned government agencies may
jeopardize the interest of the Government and/or the taxpayer the Court any stage
of the proceeding may suspend the said collection and require the taxpayer either to
deposit the amount claimed or to file a surety bond for not more than double the
amount with the Court.

In criminal and collection cases covered respectively by Section 7(b) and (c) of this
Act, the Government may directly file the said cases with the CTA covering amounts
within its exclusive and original jurisdiction.
(Sec. 11, RA 1125 as amended)

1. Suspension of collection of tax

i. Injunction not available to restrain collection

No appeal taken to the Court shall suspend the payment, levy,

distraint, or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided under existing laws,
except as hereinafter prescribed (Sec. 1, Rule 10 of Revised Rules of
CTA)

Where the collection of the amount of the taxpayer’s liability,

sought by means of a demand for payment, by levy, distraint or
sale of any property of the taxpayer, or by whatever means, as
provided under existing laws, may jeopardized the interest of the
Government or the taxpayer, an interested party may file a motion
for the suspension of the collection of the tax liability. (Sec. 2, Rule
10 of Revised Rules of CTA)

2. Taking of evidence

SEC. 3. Taking of evidence by a justice. – The Court may, motu proprio or

upon proper motion, direct that a case, or any issue therein, be assigned to
one of its members for the taking of evidence, when the determination of a
question of fact arises at any stage of the proceedings, or when the taking of
an account is necessary, or when the determination of an issue of fact
requires the examination of a long account. The hearing before such justice
shall proceed in all respects as though the same had been made before the
Court.
Upon the completion of such hearing, the justice concerned shall promptly
submit to the Court a written report thereon, stating therein his findings and
conclusions. Thereafter, the Court shall render its decision on the case,
adopting, modifying, or rejecting the report in whole or in part, or, the Court
may, in its discretion, recommit it to the justice with instructions, or receive
further evidence.
(Sec. 3, Rule 12 of the Revised Rules of CTA)

SEC. 4. Taking of evidence by Court official. – In default or ex parte hearings,

or in any case where the parties agree in writing, the Court may delegate the
reception of evidence to the Clerk of Court, the Division Clerks of Court, their
assistants who are members of the Philippine bar, or any Court attorney.
The reception of documentary evidence by a Court official shall be for the
 sole purpose of marking, comparison with the original, and identification by
witnesses of such documentary evidence. The Court official shall have no
power to rule on objections to any question or to the admission of exhibits,
which objections shall be resolved by the Court upon submission of his
report and the transcripts within ten days from termination of the hearing
(Sec. 4, Rule 12 of the Revised Rules of CTA)

3. Motion for reconsideration or New trial

Any aggrieved party may seek a reconsideration or new trial of any decision,
resolution or order of the Court. He shall file a motion for reconsideration or
new trial within fifteen days from the date he received notice of the decision,
resolution or order of the Court in question. (Sec. 1, Rule 15 of the Revised
Rules of CTA)

b. Appeal to the CTA, en banc

No civil proceeding involving matter arising under the National Internal
Revenue Code, the Tariff and Customs Code or the Local Government Code
shall be maintained, except as herein provided, until and unless an appeal has
been previously filed with the CTA and disposed of in accordance with the
provisions of this Act.
A party adversely affected by a resolution of a Division of the CTA on a motion
for reconsideration or new trial, may file a petition for review with the CTA
en banc. (Sec. 18, RA 1125 as amended)

c. Petition for review on certiorari to the Supreme Court

A party adversely affected by a decision or ruling of the Court en banc may

appeal therefrom by filing with the Supreme Court a verified petition for
review on certiorari within fifteen days from receipt of a copy of the decision
or resolution, as provided in Rule 45 of the Rules of Court. If such party has
filed a motion for reconsideration or for new trial, the period herein fixed shall
run from the party’s receipt of a copy of the resolution denying the motion for
reconsideration or for new trial. (Sec. 1, Rule 16 of the Revised Rules of CTA)

iii. Criminal cases

a. Institution and prosecution of criminal actions

All criminal actions before the Court in Division in the exercise of its original
jurisdiction shall be instituted by the filing of an information in the name of
the People of the Philippines. In criminal actions involving violations of the
National Internal Revenue Code and other laws enforced by the Bureau of
Internal Revenue, the Commissioner of Internal Revenue must approve their
filing. In criminal actions involving violations of the tariff and Customs Code
and other laws enforced by the Bureau of Customs, the Commissioner of
Customs must approve their filing.
The institution of the criminal action shall interrupt the running of the period
of prescription. (Sec. 2, Rule 9 of the Revised Rules of CTA)

1. Institution on civil action in criminal action

In cases within the jurisdiction of the Court, the criminal action and
the corresponding civil action for the recovery of civil liability for
taxes and penalties shall be deemed jointly instituted in the same
proceeding. The filing of the criminal action shall necessarily carry
with it the filing of the civil action. No right to reserve the filing of
 such civil action separately from the criminal action shall be allowed
or recognized. (Sec.11, Rule 9 of the Revised Rules of CTA)

b. Appeal and period to appeal

(a) An appeal to the Court in criminal cases decided by a Regional Trial Court
in the exercise of its original jurisdiction shall be taken by filing a notice of
appeal pursuant to Sections 3(a) and 6, Rule 122 of the Rules of Court within
fifteen days from receipt of a copy of the decision or final order with the court
which rendered the final judgment or order appealed from and by serving a
copy upon the adverse party. The Court in Division shall act on the appeal.

(b) An appeal to the Court en banc in criminal cases decided by the Court in
Division shall be taken by filing a petition for review as provided in Rule 43
of the Rules of Court within fifteen days from receipt of a copy of the decision
or resolution appealed from. The Court may, for good cause, extend the time
for filing of the petition for review for an additional period not exceeding
fifteen days.

(c) An appeal to the Court in criminal cases decided by the Regional Trial
Courts in the exercise of their appellate jurisdiction shall be taken by filing a
petition for review as provided in Rule 43 of the Rules of Court within fifteen
days from receipt of a copy of the decision or final order appealed from. The
Court en banc shall act on the appeal. (Sec.8, Rule 9 of the Revised Rules of
CTA)

1. Solicitor General as counsel for the People and government officials sued
in their official capacity

The Solicitor General shall represent the People of the Philippines

and government officials sued in their official capacity in all cases brought
to the Court in the exercise of its appellate jurisdiction. He may deputized
the legal officers of the Bureau of Internal Revenue in cases brought under
the National Internal Revenue Code or other laws enforced by the Bureau
of Internal Revenue, or the legal officers of the Bureau of Customs in cases
brought under the Tariff and Customs Code of the Philippines or other
laws enforced by the Bureau of Customs, to appear in behalf of the officials
of said agencies sued in their official capacity: Provided, however, such
duly deputized legal officers shall remain at all times under the direct
control and supervision of the Solicitor General. (Sec.10, Rule 9 of the
Revised Rules of CTA)

c. Petition for review on certiorari to the Supreme Court

A party adversely affected by a decision or ruling of the Court en banc may

appeal therefrom by filing with the Supreme Court a verified petition for
review on certiorari within fifteen days from receipt of a copy of the decision
or resolution, as provided in Rule 45 of the Rules of Court. If such party has
filed a motion for reconsideration or for new trial, the period herein fixed
shall run from the party’s receipt of a copy of the resolution denying the
motion for reconsideration or for new trial (Sec.1, Rule 16 of the Revised
Rules of CTA)

III. Taxpayer’s suit impugning the validity of tax measures or acts of taxing authorities i.
Taxpayer’s suit, defined
ii. Distinguished from citizen’s suit
iii. Requisites for challenging the constitutionality of a tax measure or act of taxing
authority
a. Concept of locus standi as applied in taxation b.
Doctrine of transcendental importance
c. Ripeness for judicial determination
CUSTOMS MODERNIZATION AND TARIFF ACT (RA 10863)
I. Bureau of Customs
i. Functions of the BOC (Section 202, CMTA)
The Bureau shall exercise the following duties and functions:
(a) Assessment and collection of customs revenues from imported goods
and other dues, fees, charges, fines and penalties accruing under this
Act;(b) Simplification and harmonization of customs procedures to
facilitate movement of goods in international trade;
(c) Border control to prevent entry of smuggled goods;
(d) Prevention and suppression of smuggling and other customs fraud;
(e) Facilitation and security of international trade and commerce through
an informed compliance program;
(f) Supervision and control over the entrance and clearance of vessels and
aircraft engaged in foreign commerce;
(g) Supervision and control over the handling of foreign mails arriving in
the Philippines for the purpose of collecting revenues and preventing the
entry of contraband;
(h) Supervision and control on all import and export cargoes, landed or
stored in piers, airports, terminal facilities, including container yards and
freight stations for the protection of government revenue and prevention
of entry of contraband;
(i) Conduct a compensation study with the end view of developing and
recommending to the President a competitive compensation and
remuneration system to attract and retain highly qualified personnel, while
ensuring that the Bureau remains financially sound and sustainable;
(j) Exercise of exclusive originaljumdiction over forfeiture cases under this
Act; and
(k) Enforcement of this Act and all other laws, rules and regulations related
to customs administration.
ii. Powers & Functions of the BOC Commissioner (Section 201, CMTA)
The Commissioner shall have the following powers and functions;
(a) Exclusive and original jurisdiction to interpret the provisions of this
Act, in collaboration with other relevant government agencies, subject to
review by the Secretary of Finance;
(b) Exercise any customs power, duties and functions, directly or
indirectly;
(c) Review any action or decision of any customs officer performed
pursuant to the provisions of this Act;
(d) Review and decide disputed assessments and other matters related
thereto, subject to review by the Secretary of Finance and exclusive
appellate jurisdiction of the Court of Tax Appeals (CTA);
(e) Delegate the powers vested under this Act to any customs officer with
the rank equivalent to division chief or higher, except for the following
powers and functions:
(1) Promulgation of rules and regulations;
(2) Issuance, revocation or modification of rulings; and
(3) Compromise or abate of customs obligations.
(f) Assignment or reassignment of any customs officer subject to the
approval of the Secretary of Finance; Provided, That District Collectors and
other customs officers that perform assessment functions shall not remain
in the same area of assignment for more than three (8) years; and
(g) Perform all other duties and functions as may be necessary for the
effective implementation of this Act and other customs related laws.

iii. Functions of Deputy Commissioners (http://customs.gov.ph/offices/)

The functions of the Deputy Commissioners are:
 Revenue Collection Monitoring Group (RCMG). Under a Deputy
Commissioner, this group maintains an accounting of revenues collected;
administers the legal requirements of the BOC; provides information and
analysis of collection statistics; and audits liquidated entries and bonds.

Assessment and Operations Coordination Group (AOCG). Under a

Deputy Commissioner, this group gathers and publishes values of
commodities imported into the country; and monitors implementation of
rules and regulations governing assessment, end processing of goods for
exports, warehousing and support operations, and auction and disposal
activities.

Intelligence Group (IG). Under a Deputy Commissioner, this group

gathers intelligence information related to Customs and economic
activities; conducts internal inquiry and investigation; and develop
effective countermeasures to combat corruption, smuggling, and other
forms of customs fraud.

Enforcement Group (EG). Under a Deputy Commissioner, this group

exercises police authority to
secure the country’s ports and BOC installations; and to protect cargoes
and properties inside the customs zone.

II. Tariff Commission

i. Functions of the Tariff Commission (Section 1603, CMTA)
The Commission shall have the following functions:
(a) Adjudicate cases on the application of trade remedies against imports
pursuant to Sections 711, 712 and 713 of this Act;
(b) Study the impact of tariff policies and programs on national
competitiveness and consumer welfare inline with the economic objectives
of the government;
(c) Administer the Philippine tariff schedules and tariff nomenclatures;
(d) Issue advance rulings on tariff classification of imported goods and
render rulings on disputes over tariff classification of goods pursuant to
Section 1100 of this Act, except in cases involving goods on which the
Commission has provided advance ruling on tariff classification:
(e) Provide the President and Congress with independent analysis,
information and technical support on matters related to tariff and nontariff
measures affecting Philippine industries and exports for policy guidance;
(f) Analyze the nature and composition, and the classification of goods
according to tariff commodity classification and heading number for
customs and other related purposes, which information shall be furnished
the NEDA DTI, DA, DOF, DENR, and BSP;
(g) Review the trade agreements for negotiation and trade agreements
entered into by the Philippines and make recommendations, if necessary,
on the consistency of the terms of the agreements with the national policy
objectives;
(h) Conduct public consultations and public hearings pursuant to its
functions; and
(i) Deputize or delegate, to appropriate government agency its function of
rendering rulings on disputes over tariff classification of goods, until the
plantilla positions necessary for undertaking such function have been
approved and filled-up; Provided, That such delegation of function shall not
extend beyond three (3) years from the effectivity of this Act.

ii. Chief Officials of the TC (Section 1600, CMTA)

 The officials of the Tariff Commission shall consist of a Chairperson
and two (2) Commissioners to be appointed by the President of the
Philippines, The Chairperson and the Commissioners shall be natural-born
citizens of the Philippines, of good moral character and proven integrity,
and who, by experience and academic training possess the necessary
qualifications requisite for developing expert knowledge of tariff and trade
related matters. During their terms of office, the Chairperson and the
Commissioners shall not engage in the practice of any profession, or
intervene directly or indirectly in the management or control of any private
enterprise which may, in anyway, be affected by the functions of their
office. They shall not be, directly or indirectly, financially interested in any
contract with the government, or any subdivision or instrumentality
thereof.

III. Importation
i. Importation (Section 102(z), CMTA)
— refers to the act of bringing in of goods from a foreign territory into Philippine
territory, whether for consumption, warehousing, or admission as defined in this
Act;

ii. Exportation (Section 102(s), CMTA)

— refers to the act, documentation, and process of bringing goods out of
Philippine territory;

iii. Article subject to Duty (Section 204, CMTA)

The Commissioner, subject to the approval of the Secretary of Finance,
shall promulgate rules and regulations for the enforcement of this Act. The
Commissioner shall regularly prepare and publish an updated customs
manual, and the rules, regulations and decisions of the Bureau. The
Commissioner shall furnish the Congress of the Philippines, the NEDA and
the Tariff Commission with electronic copies of department orders,
administrative orders, circulars, and rules and regulations promulgated
pursuant to this Act.

iv. Liability for Duties & Taxes (Section 405, CMTA)

Unless relieved by laws or regulations, the liability for duties, taxes, fees,
and other charges attached to importation constitutes a personal debt due
and demandable against the importer in favor of the government and shall
be discharged only upon payment of duties, taxes, fees and other charges. It
also constitutes alien on the imported goods which may be enforced while
such goods are under customs' custody.

v. Importation Documents

a. Single Administrative Document

— is an internationally used form as customs declaration or goods
declaration. It was designed to standardize customs documents,
harmonize codification and simplify procedures in international
trade exchanges.
b. Bill of Lading/Airway Bill
Bill of Lading (B/L) - refers to a transport document issued by
shipping lines and international freight forwarders or non-vessel
operating common carrier for water-borne freight. The holder or
consignee of the bill has the right to claim delivery of the goods at
the port of destination. It is a contract of carriage that includes
carrier conditions, such as limits of liability and claims procedures.
In addition, it contains transport instructions to shipping lines and
carriers, a description of the goods, and applicable transportation
charges.4

Airway Bill (AWB) - refers to a transport document for airfreight used by

airlines and international freight forwarders which specify the
holder or consignee of the bill who has the right to claim delivery of
the goods when they arrive at the port of destination. It is a contract
of carriage that includes carrier conditions, such as limits of liability
and claims procedures. In addition, it contains transport
instructions to airlines and carriers, a description of the goods, and
applicable transportation charges.1

c. Supplemental Declaration on Valuation

— is a form accomplished under oath which contains questions pertaining
to circumstances surrounding the import transaction to bind the importer
in his declaration under pain of criminal sanction when the information
disclosed, such as on the existence or non-existence of relationship
between the buyer and the seller, turns out to be false. It is seen to deter
against erroneous or fraudulent value declaration
under a selfassessment regime.

d. Discharge Port Survey

—a report issued by an Accredited Cargo Surveying Company (ACSC) for
bulk or break bulk cargo after the conduct of a survey at the port of
discharge.

e. Tax Credit Certificate

—refers to the certificate evidencing the tax credit due to the taxpayer
named therein, duly issued in accordance with existing laws, rules and
regulations which shall bear, among others, the name of the grantee, the
amount of credit, the date of issuance and period of validity, that can be
used to settle duties and taxes due to the national government.

f. Tax Debit Memo

— refers to the proof that a portion of the TCC amount has been set aside
for payment of duties and taxes due, and may be used as such payment
within its validity period.

g. Certificate of Origin
— is a document attesting that goods in a particular export shipment are
wholly obtained or produced or manufactured or processed in a particular
country (country of origin).

h. Other Documents Required by BOC

The following are the other documentary requirements:

1. Commercial Invoice, Letter of Credit or any other verifiable commercial
document evidencing payment; in cases where there is no sale for export,
by any commercial document indicating the commercial value of the goods;
2. Packing List;
3. Documents as may be required by rules and regulations, such as:
 a) Import Permit or Clearance;
b) Authority to Release Imported Goods (ATRIG);
c) Proof of Origin for Free Trade Agreements (FTAs);
d) Copy of an Advance Ruling, if the ruling was used in the goods
declaration;
e) Load Port Survey (LPS) or Discharge Port Survey (DPS) report for bulk
or break bulk importations;
f) Document evidencing exemption from duties and taxes;
g) Others, e.g., Tax Credit Certificate (TCC) or Tax Debit
Memo (TDM).

IV. Types of Importation

i. Freely Importable Goods (Section 116, CMTA)

Unless otherwise provided by law or regulation, all goods may be freely

imported into and exported from the Philippines without need for import
and export permits, clearances or licenses.

ii. Regulated Importation (Section 117, CMTA)

Goods which are subject to regulation shall be imported or exported only

after securing the necessary goods declaration or export declaration,
clearances, licenses, and any other requirements, prior to importation or
exportation. In case of importation, submission of requirements after
arrival of the goods but prior to release from customs custody shall be
allowed but only in cases provided for by governing laws or regulations.

iii. Prohibited Importation (Section 118, CMTA)

The importation and exportation of the following goods are prohibited:

(a) Written or printed goods in any form containing any matter
advocating or inciting treason, rebellion, insurrection, sedition against
the government of the Philippines, or forcible resistance to any law of
the Philippines, or written or printed goods containing any threat to take
the life of, or inflict bodily harm upon any person in the Philippines;
(b) Goods, instruments, drugs and substances designed, intended or
adapted for producing unlawful abortion, or any printed matter which
advertises, describes or gives direct or indirect information where, how
or by whom unlawful abortion is committed;
(c) Written or printed goods, negatives or cinematographic films,
photographs, engravings, lithographs, objects, paintings, drawings or
other representation of an obscene or immoral character;
(d) Any goods manufactured in whole or in part of gold, silver or other
precious metals or alloys and the stamp, brand or mark does not
Indicate the actual fineness of quality of the metals or alloys;
(e) Any adulterated or misbranded food or goods for human
consumption or any adulterated or misbranded drug in violation of
relevant laws and regulations;
(f) Infringing goods as defined under the Intellectual Property Code and
related laws; and
(g) All other goods or parts thereof which importation and exportation
are explicitly prohibited by law or rules and regulations issued by the
competent authority.

iv. Restricted Importation (Section 119, CMTA)

 Except when authorized by law or regulation, the importation and
exportation of the following restricted goods are prohibited:
(a) Dynamite, gunpowder, ammunitions and other explosives, firearms
and weapons of war, or parts thereof;
(b) Roulette wheels, gambling outfits, loaded dice, marked cards,
machines, apparatus or mechanical devices used in gambling or the
distribution of money, cigars, cigarettes or other goods when such
distribution is dependent on chance, including jackpot and pinball
machines or similar contrivances, or parts thereof;
(c) Lottery and sweepstakes tickets, except advertisements thereof and
lists of drawings therein;
(d) Marijuana, opium, poppies, coca leaves, heroin or other narcotics or
synthetic drugs which are or may hereafter be declared habit forming by
the President of the Philippines, or any compound, manufactured salt,
derivative, or preparation thereof, except when imported by the
government of the Philippines or any person duly authorized by the
Dangerous Drugs Board, for medicinal purposes;
(e) Opium pipes or parts thereof, of whatever material; and
(f) Any other goods whose importation and exportation are restricted.
The restriction to import or export the above stated goods shall include the
restriction on their transit.

V. Tariff Classification & Advance Ruling

i. Advance Ruling System

— It provides specific and concrete rules that offer uniformity in the
application of customs policies, rules and regulations on customs valuation
and rules of origin.

ii. CAO No. 3-2016 on Establishment of an Advance Ruling System for

Valuation and
Rules of Origin)
— To enable the establishment of an Advance Ruling System that is in line
with the standards set out in the Revised Kyoto Convention, the World
Trade Organization’s Agreement on Trade Facilitation, the ASEAN Trade in
Goods Agreement, other relevant international trade facilitation
agreements, relevant to Philippines laws and international best customs
practices.

— An importer of foreign exporter or its authorized agent may request an

Advance Ruling.

— An advance ruling is an official written and binding ruling issued by the

Commissioner of the BOC which provides the requesting person with an
assessment of: (1) origin, or (2) treatment to be applied on a certain
element of customs value, prior to an import or export transaction for a
specified period.

— The ruling is valid for three calendar years unless a shorter period is
indicated in the ruling,

iii. Commission Order No. 2017-01 Procedure on Application for an Advance

Ruling on Tariff Classification related to Importation or Exportation of
Goods
— An application for an Advance Ruling shall cover only one product or
good, as determined by the Commission.
 — Advance Ruling on Tariff Classification is an official written decision
issued by the Commission which provides the Applicant with the
appropriate tariff classification of goods under the AHTN prior to an
importation or exportation.

— Applications for an Advance Ruling should be filed at least ninety (90)

days before the date of the importation or exportation. In which applicants
shall submit three (3) copies of the filled-out application form prescribed
by the Commission together with supporting documents and samples of
the good, if required. The Commission shall then assess the the sufficiency
of the documents.

— The Advance Ruling shall be valid for a period of five (5) years from the
date of its issuance unless it is earlier revoked or modified due to changes
in facts or circumstances on which the Advance Ruling is based

— The Advance Ruling may be modified whenever there is an error,

change in material facts/circumstances, change in the law or judicial
decision, or change in policy, as the case may be. Modification of Advance
Ruling is of prospective application.

iv. Basis of Tariff Classification (ASEAN Harmonized Tariff Nomenclature

(AHTN) 2017 effective 28 July 2017

— In international trade each product is assigned a particular classification

code using the Harmonized Commodity Description and Coding System or
simply Harmonized System (HS).

The HS is the universal economic language and code for goods authored by
the World Customs Organization (WCO). It is a six-digit Code common
among all WCO member countries.

The ASEAN Harmonized Tariff Nomenclature (AHTN) is an eight-digit HS-

based commodity nomenclature common among the 10 ASEAN Member
States.

Beyond the 8-digit AHTN level, the Philippines assigns alpha-numeric

codes to provide for its national tariff lines.

VI. Tariff Valuation & Advance Ruling

i. Advance Ruling System- It is an official written and binding ruling issued by BOC
upon request of an importer, foreign exporter. Or authorized agent, and is now part of
the law under CMTA. For a specified period to an import or export transaction, the
ruling gives an assessment of origin or of the treatment to be applied to a certain
element of customs value, or of other matters related to the importation or exportation
of goods under customs jurisdiction.

ii. CO No. 2017-01 on Procedure on Application for an Advance Ruling on Tariff

Classification related to Importation or Exportation of Goods –
SEC. 1100. Classification Ruling. – An importer or exporter may file a written
application for an advance ruling on the tariff classification of goods with the
Commission. The Commission shall render a ruling within thirty (30) days from, receipt
of a properly documented application.

When a declared tariff classification of goods, not subject of a pending application

for advance ruling, is in dispute, the importer, exporter, or the Bureau shall submit the
matter to the Commission for a ruling, without prejudice to the application of Section
1106 of this Act on "protest": Provided, That such rulings of the Commission on
commodity classification shall be binding upon the Bureau, unless the Secretary of
Finance shall rule otherwise.
 SEC. 1103. Conditions for Application and Effect of Advance Ruling. – An application
for an advance ruling shall cover only one (1) product or item. The application for
advance ruling shall be filed at least ninety (90) days before the importation or
exportation of the product or item, as the case may be.

iii. Tariff Valuation Method (Section 701-706, CMTA)

a. Transaction Value System- It uses the price actually paid or payable for the
goods when sold for export to the philippines at arm’s length transaction
including the following:
1. to the extent incurred by the buyer but not included in price actually
paid.
a. Commission and brokerage fees,
b. Cost of container,
c. Cost of packing;
d. Assists; and
e. Royalties and license fees.
2. Value of the proceed of any subsequent resale, disposal or use of the
imported goods that accrues directly or indirectly to the seller;
3. Transportation cost
4. Loading, unloading and handling charges; and
5. Cost of insurance
b. Transaction Value of Identical Goods System –
The dutiable value shall be transaction value of identical goods sold for
export to the philippines and exported at or about the same time as the
goods being valued.

Identical goods
1. the same in all respects including physical characteristics, quality and
reputation
2. Produced in the same country as the goods being valued; and
3. Produced by the producer off the good being valued.

c. Transaction Value of Similar Goods- The dutiable value shall be the

transanction value of similar goods sold for export to the philippines and
exported at or about the same as the goods being valued.
Similar goods
Good which, although not alike in all respects;
1. Have like characteristics and like component materrials.
2. Are capable of performing the same fucntions as the goods
being valued;
3. Are commercially interchangeable with the goods being
valued;
4. Are produced in the same country of goods being valued;
and
5. Are produced by the producer of goods being valued

d. Deductive Value – The deductive value shall be based on the unit price at
which the imported goods or identical or similar imported goods are sold in
the philippines, in the same condition as when imported, in the greatest
aggregate quantity, at or about the time of the importation of the goods being
valued to person not related to the persons from whom they buy such goods,
subject to deductions for the following.
1. Either the commission usually paid or agreed to be paid or the additions
usually made for profit and general expenses in connection with sales in
such country of imported goods of the same class or kind;
2. The usual Costs of transport, loading, unloading and handling charges,
and cost of insurance,
3. The usual cost of transport and insurance and Associated costs incurred
within the philippines and
4. Customs duties and other national taxes payable in the philippines by
reason of the importation or sale of the goods.

e. Computed Value- The computed value is the amount or price when all the
components of the article are added up.
The dutiable value under this method shall be the sum of(C 2A2F)
1. The cost or the value of material and fabrication or other processing
employed in producing the imported goods;
2. The cost of containers and packing, if their values are not included
under no. 1 hereof;
3. The amount for profit and general expenses equal to that usually
reflected in the sale of goods of the same class or kind as the goods
 being valued which are made by the producers in the country of
exportation for export to the philippines;
4. Any assist, if its value is not included under No. 1 hereof; and
5. The freight, insurance fees and other transportation expenses for the
importation of the goods.

f. Fallback Value- The dutiable value shall be determined by using reasonable

means consistent with the principles and general provisions of the Agreement
on Tariffs and trade of 1994 and of Article VII of GATT of 1994 and on the
basis of data available in the country of importation
If the importer so requests, he shall be informed in writing of the dutiable
value determined under Method six and the method used to determine
such value.

iv. Basic Computation of Customs Duties & Taxes - Customs Duties or Import duty will
be pending and need to be cleared while importing goods into the Philippines. Customs
clearance can be executed either by a private individual or a commercial entity. The
valuation method often used to arrive at dutiable value is CIF (Cost Insurance and Freight),
i.e., the cost of the imported goods, the shipping cost, and the insurance cost. Imports are
also subjected to Sales Tax.

v. Basics of Importation-
Importation- refers to the act of bringing in of goods from a foreign territory into
Philippine territory, whether for consumption, warehousing, or admission as defined in
this Act
a. The nature of the product to be imported to the Philippines- The first step
is to fully understand the nature of the product intended for importation and
vet it against the current rules and regulations to determine whether it is freely
importable, subject to regulations, or prohibited. Commonly, food and animal
products are subject to tight regulations in the Philippines - requiring a number
of certifications from relevant government agencies (e.g., Department of
Agriculture) to ensure that certain standards are met. Importers of animal
products, for example, should first be issued veterinary quarantine clearances
to certify that their sources are reputable and undergo safe processes. Certain
industrial products too are covered by similar standards. Tires, construction
materials, electrical equipment should first be inspected by the Bureau of
Product Standards and issued an import commodity clearance before they are
allowed entry into the Philippines. Among those items which are barred from
being imported in the Philippines are weapons and gambling paraphernalia.
Knowing the product is also important to ascertain if it should be subject to
certain excise taxes. Excise taxes are imposed on automobiles, oil/petroleum
and specific “sin” or “luxury” products (e.g., liquor, cigarettes) for which
different specific rates are applied.

b. The dutiable value of imported goods as basis of customs duty - Under

Section 201 of the Tariff and Customs Code (TCCP), the primary
method for determining the dutiable value of imported goods is the
Transaction Value (TV), which is defined as the “price paid or
payable” for the goods when sold for export to the Philippines plus
“certain adjustments.” These adjustments may be in the form of
royalties, commissions, costs of transport, and the like — which
usually trigger the questions. In the case of royalties, for example,
any payment must hurdle the tests of dutiability before they can be
considered a proper adjustment. That is, royalties are dutiable only
when they are: (1) related to the imported goods, (2) paid to the
supplier, either directly or indirectly, and (3) as a condition of the
importation.

c. The duty rate applicable to the product- Imported goods shall be subject
to the import duty rates under the applicable tariff heading that are effective at
the date of importation or upon withdrawal from the warehouse for
consumption. In case of withdrawal from free zones for introduction to the
customs territory, the duty rate at the time of withdrawal shall be applicable on
the goods originally admitted, whether withdrawn in its original or advanced
form.

In case of goods sold at customs public auction, the duty rates at the date of the
auction, shall apply for purposes of implementing Section 1143(a) of this Act.

d. The preferential tariff rate under Free Trade Agreement, if the

goods is subject thereto- Within the framework of the AFTA, the ASEAN
free trade agreement, the Philippines apply to other members a system
of tariff preferences (Common Effective Preference Tariff Scheme -
CEPT). As a general rule, imported manufactured goods in competition
 with locally produced goods face higher tariffs than those without
strong local competition.

e. The taxability of the imported goods under the

NIRC- Importation of goods is subject to a 12% VAT based
on the total value used by the Bureau of Customs in
determining tariff and customs duties, plus excise taxes, if
any, and other charges which shall be paid prior to the
release of the goods from customs custody: Provided, That
where the customs duties are determined on the basis of
the quantity or volume of the goods, the VAT shall be
based on the landed cost plus excise tax, if any.
In case tax-free imports are subsequently sold to non-
exempt persons, the purchasers or possessors thereof
shall be considered the importers thereof who shall be
liable for any internal revenue tax on such importation.

VII. Special Types of Entry

i. Balikbayan boxes - Residents of the Philippines, OFWs or other Filipinos while
residing abroad or upon their return to the Philippines shall be allowed to bring in or
send to their families or relatives in the Philippines balikbayan boxes which shall be
exempt from applicable duties and taxes imposed under the NIRC of 1997, as amended:
Provided, That balikbayan boxes shall contain personal and household effects only and
shall neither be in commercial quantities nor intended for barter, sale or for hire and
that the FCA value of which shall not exceed one hundred fifty thousand pesos
(P150,000.00): Provided, further, That every three (3) years after the effectivity of this
Act, the Secretary of Finance shall adjust the amount herein stated to its present value
using the CPI as published by the PSA: Provided, finally, That residents of the
Philippines, OFWs or other Filipinos can only avail of this privilege up to three (3) times
in a calendar year. Any amount in excess of the allowable non-dutiable value shall be
subject to the applicable duties and taxes;

ii. Postal Items- Postal item or mail shall include letter-post and parcels, as described
in international practices and agreements, such as the Acts of the Universal Postal Union
(AUPU), currently in force.

A simplified procedure shall be used in the clearance of postal item or mail, including
the collection of the applicable duties and taxes on such items or goods.

When all the information required by the customs are available in the special
declaration form for postal items as provided in the AUPU or similar international
agreements, the special declaration form and supporting documents shall be the goods
declaration. However, a separate goods declaration shall be required for the following:

(a) Goods whose value fall within the level that the Commissioner has determined to be
taxable and thus must be covered by a goods declaration;

(b) Prohibited and regulated goods;

(c) Goods, the exportation of which must be certified; and

(d) Imported goods under a customs procedure other than for consumption

iii. Returning Residents/OFWs- Personal and household effects belonging to returning

residents including household appliances, jewelry, precious stones, and other goods of
luxury which were formally declared and listed before departure and identified under oath
before the District Collector when exported from the Philippines by such returning residents
upon their departure therefrom or during their stay abroad; personal and household effects
including wearing apparel, goods of personal adornment, toilet goods, instruments related
to one's profession and analogous personal or household effects, excluding luxury items,
vehicles, watercrafts, aircrafts and animals purchased in foreign countries by residents of
the Philippines which were necessary, appropriate, and normally used for their comfort and
convenience during their stay abroad, accompanying them on their return, or arriving within
a reasonable time which, barring unforeseen and fortuitous events, in no case shall exceed
sixty (60) days after the owner's return.

For purposes of this section, the phrase "returning residents" shall refer to nationals who
have stayed in a foreign country for a period of at least sis (6) months. Returning residents
shall have tax and duty exemption on personal and household effects: Provided, That:

(1) It shall not be in commercial quantities;

(2) It is not intended for barter, sale or for hire; and

 (3) Limited to the FCA or FOB value of:

(i) Three hundred fifty thousand pesos (P350,000.00) for those who have stayed in a foreign
country for at least ten (10) years and have not availed of this privilege within ten (10) years
prior to returning resident's arrival;

(ii) Two hundred fifty thousand pesos (P250,000.00) for those who have stayed in a foreign
country for a period of at least five (5) but not more than ten (10) years and have not availed
of this privilege within five (5) years prior to returning resident's arrival; or

(iii) One hundred fifty thousand pesos (P150,000.00) for those who have stayed in a foreign
country for a period of less than five (5) years and have not availed of this privilege within
six (6) months prior to returning resident's arrival.

Any amount in excess of the above-stated threshold shall be subject to the corresponding
duties and taxes under this Act.

Every three (3) years after the effectivity of this Act, the Secretary of Finance shall adjust the
amount herein stated to its present value using the CPI as published by the PSA.

In addition to the privileges granted under the immediately preceding paragraph, returning
Overseas Filipino Workers (OFWs) shall have the privilege to bring in, tax and duty-free,
home appliances and other durables, limited to one of every kind once in a given calendar
year accompanying them on their return, or arriving within a reasonable time which, barring
unforeseen and fortuitous events, in no case shall exceed sixty (60) days after every
returning OFW's return upon presentation of their original passport at the port of entry:
Provided, That any amount in excess of FCA value of one hundred fifty thousand pesos
(P150,000.0,0) for personal and household effects or of the number of duty-free appliances
as provided for under this section, shall be subject to the corresponding taxes and duties:
Provided, further, That every three (3) years after the effectivity of this Act, the Secretary of
Finance shall adjust the amount herein stated to its present value using the CPI as published
by the PSA

VIII. ATRIG
An ATRIG is an authority issued by the Bureau of Internal Revenue (BIR), addressed to the
Commissioner of Customs, allowing the release of imported goods from customs custody upon
payment of applicable taxes, or proof of exemption from payment thereof, whichever is applicable

i. Section 131, NIRC- Payment of Excise Taxes on Imported Articles.32 –

(A) Persons Liable. – Excise taxes on imported articles shall be paid by the owner or
importer to the Customs Officers, conformably with the regulations of the Department of
Finance and before the release of such articles from the customs house, or by the person
who is found in possession of articles which are exempt from excise taxes other than
those legally entitled to exemption.

ii. Section 172, NIRC- Detention of Package Containing Taxable Articles. – Any revenue
officer may detain any package containing or supposed to contain articles subject to excise
tax when he has good reason to believe that the lawful tax has not been paid or that the
package has been or is being removed in violation of law, and every such package shall be
held by such officer in a safe place until it shall be determined whether the property so
detained is liable by law to be proceeded against for forfeiture; but such summary
detention shall not continue in any case longer than seven (7) days without due process of
law or intervention of the officer to whom such detention is to be reported.

iii. Section 268(C), NIRC- Forfeiture of Goods Illegally Stored or Removed. – Unless
otherwise specifically authorized by the Commissioner, all articles subject to excise tax
should not be stored or allowed to remain in the distillery warehouse, bonded warehouse
or other place where made, after the tax thereon has been paid; otherwise, all such articles
shall be forfeited. Articles withdrawn from any such place or from customs custody or
imported into the country without the payment of the required tax shall likewise be
forfeited.

iv. Revenue Regulation No. 2-2016 - This Circular is being issued to set forth guidelines
and procedures in securing and issuing an Authority to Release Imported Goods (ATRIGs)
for imported automobiles already released from customs custody. This Circular is likewise
being issued to clarify the legal basis for the issuance of an ATRIG and the legal
consequences of not securing an ATRIG prior to the release of imported automobiles.
 The ATRIG shall be issued for all importations of articles subject to excise tax (whether
exempt or taxable), including the raw materials in the production thereof, as well as the
machineries, equipment, apparatus or any mechanical contrivances especially used for its
assembly/production; and on all importations of articles exempt from VAT except on
those articles specifically identified and enumerated in the Circular issued jointly by the
Bureau of Internal Revenue and the Bureaus of Customs, as circulated by RMC 48-2002

v. RMC 48-2002- Issued on November 13, 2002 circularizes the list of imported articles
that no longer require the issuance of Authority to release of imported goods (ATRIG)
from BIR prior to release from custody of the Bureau of Customs.

IX. BOC Powers

i. Release & Limitations –
Functions of BOC-
1. Assessment and collection of customs revenues from
imported goods and other dues, fees, charges, fines and
penalties accruing under CMTA.
2. Simplification and harmonization of customs procedures
to facilitate movement of good in international trade.
3. Border control to prevent entry of smuggled good
4. Prevention and suppression of smuggling and other
customs fraud
5. Facilitation and security of international trade and
commerce through an informed compliances program
6. Supervision and control over the entrance and clearance of
vessels and aircraft engaged in foreign commerce;
7. Supervision and control over the handling of foreign mails
arriving in the philippines for the purpose of collection
revenues and preventing the entry of contraband
8. Supervison and control on all import and export cargoes,
landed or stored in piers, airports, terminal facilities,
including container yards and freight stations for the
protection of government revenue and prevention of entry
of contraband.
9. Conduct of compensation studies, and development and
recommendation to the president of a competitive
compensation and remuneration system to attract and
retain highly qualified personnel, while ensuring that the
Bureau remains financially sound and sustainable.
10. Exercise of exclusive original jurisdiction over forfeiture
case under CMTA
11. Enfrocement of CMTA and all other laws, rules and
regulations related to customs administration.

ii. BOC Powers

a. Selectivity System (Section 420, CMTA)- Pursuant to internationally
accepted standards, the Bureau may adopt nonintrusive examination of goods,
such as the use of x-ray machines.

b. Customs Formalities on Goods Declaration

Physical examination of the goods shall be conducted when:

(a) It is directed by the Commissioner on account of a derogatory

information;

(b) The goods are subject to an Alert Order issued by competent

authority;

(c) The goods are electronically selected for physical examination;

(d) There are issues and controversies surrounding the goods

declaration and the import clearance process; or

(e) The importer or declarant requests for the examination of the

goods.

The Commissioner may exempt from physical examination the goods

of authorized economic operators or of those provided for under any
existing trade facilitation program of the Bureau.

Physical examination, when required, shall be conducted in an

expeditious manner.
c. Requirements for Search, Seizure & Arrest (Section 214, CMTA)
Persons Exercising Police Authority. – For the effective implementation of
this Act, the following persons are authorized to effect search, seizure, and
arrest:

(a) Officials of the Bureau, District Collectors, Deputy District Collectors,

police officers, agents, inspectors and guards of the Bureau;

(b) Upon authorization of the Commissioner, officers and members of the

Armed Forces of the Philippines (AFP) and national law enforcement
agencies; and

(c) Officials of the BIR on all cases falling within the regular performance of
their duties, when payment of internal revenue taxes is involved.

All officers authorized by the Commissioner to exercise police authority shall

at all times coordinate with the Commissioner.

Goods seized by deputized officers pursuant to this section shall be physically

turned-over immediately to the Bureau, unless provided under existing laws,
rules and regulations.

For this purpose, mission orders shall clearly indicate the specific name
carrying out the mission and the tasks to be carried out.

Subject to the approval of the Secretary of Finance, the Commissioner shah1

define the scope, areas covered, procedures and conditions governing the
exercise of such police authority including custody and responsibility for the
seized goods. The rules and regulations to this effect shall be furnished to the
concerned government agencies and personnel for guidance and compliance.

d. Complement of Exercise of Police Authority (Section 216-224, CMTA)

SEC. 216. Exercise of Power of Seizure. – Any person exercising
police authority under this Act has the power and duty to seize any vessel,
aircraft, cargo, goods, animal or any other movable property when the
same is subject to forfeiture or when they are subject of a fine imposed
under this Act.

SEC. 217. Duty of Officer to Disclose Official Character. – For the proper
exercise of police authority, any authorized person shall disclose the
nature of the authority upon being questioned at the time of exercise
thereof and shall exhibit the corresponding written authority issued by
the Commissioner.

SEC. 218. Authority to Require Assistance and Information. – Any person

exercising police authority may demand the assistance of and request
information from the Philippine National Police (PNP), the AFP and other
national law enforcement agencies, when necessary, to effect any search,
seizure or arrest. It shall be the duty of any police officer and other
national law enforcers to give such lawful assistance.

SEC. 219. Authority to Enter Properties. – Any person exercising police

authority may, at any time, enter, pass through, and search any land,
enclosure, warehouse, store, building or structure not principally used as
a dwelling house.

When a security personnel or any other employee lives in the warehouse,

store, or any building, structure or enclosure that is used for storage of
goods, it shall not be considered as a dwelling house for purposes of this
Act.

SEC. 220. Authority to Search Dwelling House. – A dwelling house may be

entered and searched only upon warrant issued by a Judge of a competent
court, the sworn application thereon showing probable cause and
particularly describing the place to be searched and the goods to be seized.

SEC. 221. Authority to Search Vessels or Aircrafts and Persons or Goods

Conveyed Therein. – Any person exercising police authority under this Act
may board, inspect, search and examine a vessel or aircraft and any
container, trunk, package, box or envelope found on board, and physically
search and examine any person thereon. In case of any probable violation
of this Act, the person exercising police authority may seize the goods,
vessel, aircraft, or any part thereof.

Such power to search includes removal of any false bottom, partition,

bulkhead, or any other obstruction for the purpose of uncovering any
concealed dutiable or forfeitable goods.

The proceeding herein authorized shall not give rise to any claim for
damage caused to the goods, vessel or aircraft, unless there is gross
negligence or abuse of authority in the exercise thereof.

SEC. 222. Authority to Search Vehicles, Other Carriers, Persons and

Animals. – Upon reasonable cause, any person exercising police authority
may open and examine any box, trunk, envelope, or other container for
purposes of determining the presence of dutiable or prohibited goods.
This authority includes the search of receptacles used for the transport of
human remains and dead animals. Such authority likewise includes the
power to stop, search, and examine any vehicle or carrier, person or
animal suspected of holding or conveying dutiable or prohibited goods.

SEC. 223. Authority to Search Persons Arriving From Foreign Countries. –

Upon reasonable cause, travelers arriving from foreign countries may be
subjected to search and detention by the customs officers. The dignity of
the person under search and detention shall be respected at all times.
Female inspectors may be employed for the examination and search of
persons of their own sex.

SEC. 224. Power to Inspect and Visit. – The Commissioner or any customs
officer who is authorized in writing by the Commissioner, may demand
evidence of payment of duties and taxes on imported goods openly for sale
or kept in storage. In the event that the interested party fails to produce
such evidence within fifteen (15) days, the goods may be seized and
subjected to forfeiture proceedings: Provided, That during the
proceedings, the interested party shall be given the opportunity to prove
or show the source of the goods and the payment of duties and taxes
thereon: Provided, further, That when the warrant of seizure has been
issued but subsequent documents presented evidencing proper payment
are found to be authentic and in order, the District Collector shall, within
fifteen (15) days from the receipt of the motion to quash or recall the
warrant, cause the immediate release of the goods seized, subject to
clearance by the Commissioner: Provided, finally, That the release thereof
shall not be contrary to law.

e. Customs Jurisdiction & Doctrine of Hot Pursuit (Section 300, CMTA)

For the effective implementation of this Act, the Bureau shall exercise
jurisdiction over all seas within Philippine territory and all coasts, ports, airports,
harbors, bays, rivers and inland waters whether navigable or not from the sea and
any means of conveyance.

The Bureau shall pursue imported goods subject to seizure during its transport by
land, water and air and shall exercise jurisdiction as may be necessary for the
effective enforcement of this Act. When a vessel or aircraft becomes subject to
seizure for violation of this Act, a pursuit of such vessel or aircraft which began
within the territorial waters or air space may continue beyond the same, and the
vessel or aircraft may be seized in the high seas or international air space.

f. Customs Control (Section 302-202, CMTA)

SEC. 302 Enforcement of Port Regulation of the Bureau of Quarantine. –
Customs officials and employees shall cooperate with the quarantine authorities in
the enforcement of the port quarantine regulations promulgated by the Bureau of
Quarantine and shall give effect to the same insofar as connected with matters of
shipping and navigation.
EC. 202. Functions of the Bureau. – The Bureau shall exercise the following duties
and functions:

(a) Assessment and collection of customs revenues from imported goods and other
dues, fees, charges, fines and penalties accruing under this Act;

(b) Simplification and harmonization of customs procedures to facilitate movement

of goods in international trade;

(c) Border control to prevent entry of smuggled goods;

 (d) Prevention and suppression of smuggling and other customs fraud;

(e) Facilitation and security of international trade and commerce through an

informed compliance program

(f) Supervision and control over the entrance and clearance of vessels and aircraft
engaged in foreign commerce;

(g) Supervision and control over the handling of foreign mails arriving in the
Philippines for the purpose of collecting revenues and preventing the entry of
contraband;

(h) Supervision and control on all import and export cargoes, landed or stored in
piers, airports, terminal facilities, including container yards and freight stations for
the protection of government revenue and prevention of entry of contraband;

(i) Conduct a compensation study with the end view of developing and
recommending to the President a competitive compensation and remuneration
system to attract and retain highly qualified personnel, while ensuring that the
Bureau remains financially sound and sustainable;

(j) Exercise of exclusive original jurisdiction over forfeiture cases under this Act;
and

(k) Enforcement of this Act and all other laws, rules and regulations related to
customs administration.

g. Forfeiture (Section 1115, CMTA)

Conditions Affecting Forfeiture of Goods. – The forfeiture shall be effected
only when and while the goods are in the custody or within the jurisdiction of
customs officers, or in the possession or custody of or subject to the control of the
importer, exporter, original owner, consignee, agent of another person effecting the
importation, entry or exportation in question, or in the possession or custody of or
subject to the control of persons who shall receive, conceal, buy, sell, or transport
the same, or aid in any of such acts, with knowledge that the goods were imported,
or were the subject of an attempt at importation or exportation contrary to law.

h. Seizure or Release of Goods (Section 1116, CMTA)

Seizure or Release of Goods. – The District Collector shall issue an order of
release or a warrant of seizure within five (5) days, or two (2) days in case of
perishable goods, upon the recommendation of the alerting officer or any other
customs officer. The District Collector shall immediately make a report of such
seizure or release to the Commissioner

X. Special Duties & Measures-

i. Compulsory Acquisition (Section 709, CMTA)
Government's Right of Compulsory Acquisition. – In order to protect government
revenues against undervaluation of goods, the Commissioner may, motu proprio or upon
the recommendation of the District Collector, acquire imported goods under question for a
price equal to their declared customs value plus any duties already paid on the goods,
payment for which shall be made within ten (10) working days from issuance of a warrant
signed by the Commissioner for the acquisition of such goods.

An importer who is dissatisfied with a decision of the Commissioner pertaining to this

section may, within twenty (20) working days after the date on which notice of the decision
is given, appeal to the Secretary of Finance, and thereafter If still dissatisfied, to the CTA as
provided for in Section 1136 of this Act

ii. Marking Duty(Section 710, CMTA)- All goods of foreign origin imported into the
philippines or their containers, shall be conspicuously marked in any official language of
the Phillipines as legibly, indelibly and permanently as the nature of the goods or container
will permit and in such manner as to indicate to an ultimate purchaser in the philippines
the name of the country of origin of goods,
All good of foreign origin imported into the philippines should be marked by any
reasonable method of marking, whether by printing, stenciling, branding or labeling.
When good cannot be marked with any of these methods, any method of legible
and conspicuous marking which will remain on the article until it reaches the final buyer
is acceptable.
If any goods or their containers are not marked during importation, a marking duty
of 5% of the dutiable value will be levied and collected for such goods, with the duty
deemed to have accrued at the time of importation.
iii. Anti-Dumping Duty(Section 711, CMTA)- Refers to a special duty imposed on the
importation of a product, commodity or article of commerce into the philippines at less than
its normal value when destined or domestic consumption in the exporting country, which
is the difference between the export price and the normal value of such product, commodity
or article

iv. Safeguard Measures(Section 712, CMTA)- The provisions of Republic Act No. 8800,
otherwise known as the "Safeguard Measures Act", are hereby adopted.
A safeguard measure can be imposed when a product is being imported into the
philippines in increased quantities and is causing or threatens serious injury to domestic
industry.
v. Countervailing Duty(Section 713, CMTA)- The provisions of Republic Act No. 8751,
otherwise known as "An Act Strengthening the Mechanisms for the Imposition of
Countervailing Duties on Imported Subsidized Products, Commodities or Articles of
Commerce in Order to Protect Domestic Industries from Unfair Trade Competition,
Amending for the Purpose Section 302, Part 2, Title II, Book I of Presidential Decree No.
1464", otherwise known as the "Tariff and Customs Code of the Philippines, as Amended",
are hereby adopted.
Duties that are imposed in order to counter the negative impact of import subsidies to
protect domestic producers are called countervailing duties.
In cases foreign producers attempt to subsidize the goods being exported by
them so that it causes domestic production to suffer because of a shift in domestic
demand towards cheaper imported goods, the government makes mandatory the
payment of a countervailing duty on the import of such goods to the domestic
economy.

This raises the price of these goods leading to domestic goods again being equally
competitive and attractive. Thus, domestic businesses are cushioned. These duties
can be imposed under the specifications given by the WTO (World Trade Organization)
after the investigation finds that exporters are engaged in dumping. These are also
known as anti-dumping duties.

vi. Discriminatory Measures (Section 714, CMTA)- Without prejudice to the Philippine
commitment in any ratified international agreements or treaty, the following recourse shall
be applicable in case of discrimination by foreign countries:

(a) When the President finds that the public interest will be served thereby, the President
shall, by proclamation, specify and declare new or additional duties in an amount not
exceeding one hundred percent (100%) ad valorem upon goods wholly or in part the
growth or product of, or imported in a vessel of any foreign country whenever the
President shall find as a fact that such country:

(1) Imposes, directly or indirectly, upon the disposition or transportation in transit or

through reexportation from such country of any goods wholly or in part the growth or
product of the Philippines, any unreasonable charge, exaction, regulation or limitation
which is not equally enforced upon the like goods of every foreign country; or

(2) Discriminates in fact against the commerce of the Philippines, directly or indirectly, by
law or administrative regulation or practice, by or in respect to any customs, tonnage, or
port duty, fee, charge, exaction, classification, regulation, condition, restriction or
prohibition, in such manner as to place the commerce of the Philippines at a disadvantage
compared with the commerce of any foreign country.

(b) If at any time the President shall find it to be a fact that any foreign country has not only
discriminated against the commerce of the Philippines, as aforesaid, but has, after the
issuance of a proclamation as authorized in subsection (a) of this section, maintained or
increased its said discrimination against the commerce of the Philippines, the President is
hereby authorized, if deemed consistent with the interests of the Philippines and of public
interest, to issue a further proclamation directing that such product of said country or such
goods imported in their vessels be excluded from importation into the Philippines.

(c) Any proclamation issued by the President under this section shall, if the President
deems it consistent with the interest of the Philippines, extend to the whole of any foreign
country or may be confined to any subdivision or subdivisions thereof: Provided, That the
President may, whenever the public interest requires, suspend, revoke, supplement or
amend any such proclamation.

(d) All goods imported contrary to the provisions of this section shall be forfeited to the
government of the Philippines and shall be liable to be seized, prosecuted and condemned
in like manner and under the same regulations, restrictions, and provisions as may from
time to time be established for the recovery, collection, distribution, and remission or
forfeiture to the government by the tariff and customs laws. Whenever the provision of this
section shall be applicable to importations into the Philippines of goods wholly or in part
the growth or product of any foreign country, it shall be applicable thereto, whether such
goods are imported directly or indirectly.

(e) It shall be the duty of the Commission to ascertain and at all times be informed whether
any of the discriminations against the commerce of the Philippines enumerated in
subsections (a) and (b) of this section are practiced by any country; and if and when such
discriminatory acts are disclosed, it shall be the duty of the Commission to bring the matter
to the attention of the President, and to recommend measures to address such
discriminatory acts.

(f) The Secretary of Finance shall make such rules and regulations as are necessary for the
execution of a proclamation that the President may issue in accordance with the provisions
of this section.
2. Give at least three (3) questions from previous BAR EXAMS in relation to any of the topics
discussed in number 1 and provide for the Suggested Answer.

A. 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.

B. 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. 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 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).

C. IKM Corporation, doing business in the City of Kalookan, has been a distributor and retailer of
clothing and household materials. It has been paying the City of Kalookan local taxes based on Sections 15
(Tax on Wholesalers, Distributors or Dealers) and 17 (Tax on Retailers) of the Revenue Code of Kalookan
City (Code). Subsequently, the Sangguniang Panlungsod enacted an ordinance amending the Code by
inserting Section 21 which imposes a tax on "Businesses Subject to Excise, Value-Added and Percentage
Taxes under the National Internal Revenue Code (NIRC)," at the rate of 50% of 1 % per annum on the gross
sales and receipts on persons "who sell goods and services in the course of trade or business." KM
Corporation paid the taxes due under Section 21 under protest, claiming that (a) local government units
could not impose a tax on businesses already taxed under the NIRC and (b) this would amount to double
taxation, since its business was already taxed under Sections 15 and 17 of the Code. (a) May local
government units impose a tax on businesses already subjected to tax under the NIRC? (2.5%) (b) Does this
amount to double taxation? (2.5%) (2018)

SUGGESTED ANSWER:

a. Yes, local government units may impose a tax on businesses already subjected to tax under the NIRC.
“Each local government unit shall have the power to create its own sources of revenues and to levy taxes,
fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
governments.” (Article 10, Section 5 of the 1987 Constitution).

Sec 133 of the LGC – Common limitations on the taxing power of LGC Relate with Sec 143 (h) of the LGC –
“Tax on Businesses: (h) On any business, not otherwise specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax:

Provided, That on any business subject to the excise, value-added or percentage tax under the National
Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or
receipts of the preceding calendar year. The sanggunian concerned may prescribe a schedule of graduated
tax rates but in no case to exceed the rates prescribed herein.”

b. Yes, it will amount to indirect double taxation.

Under the law, direct double taxation exists if the following requisites exist: Both taxes are imposed on the
same property or subject matter; For the same purpose; Imposed by the same taxing authority; Within the
same jurisdiction; During the same taxing period; Covering the same kind or character of tax.

If there is an element lacking, only indirect double taxation exists. The Constitution only prohibits direct
double taxation
 3. Give at least three (3) potential BAR EXAM questions in relation to any of the topics
discussed in number 1 and provide for the Suggested Answer.

A Ydurr Milling is a sugar miller. Its gross receipts as a sugar central or sugar refinery is
subject to percentage tax by the NIRC. The Municipality of Victorias imposed a tax on sugar
millers depending upon the annual output capacity of the miller. Does the principle of preemption
apply?

A: NO. The NIRC imposes a percentage tax. The ordinance does not deal with percentage tax.
Rather, the ordinance deals with a tax specifically for operators of sugar centrals and sugar
refineries. The rates imposed are based on the maximum annual output capacity, which is not a
percentage because it is not a share. Nor is it a tax based on the amount of the proceeds realized
out of the sale of sugar, centrifugal or refined. (Victorias Milling Co., Inc. v. The Municipality of
Victorias, Negros Occidental, G.R. No. L-21183, September 27, 1968

B. 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]).

C. The City of Masbate 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.

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.