LOCAL TAXATION

Balbin, Blando, Dos Santos, Ferrer, Mendiola, Montoya,

Ortega, Pichay, Sosito, Tagorda, Yu
III - E
Taxing Powers of the LGU

01 Legal Basis; Local Autonomy

02 Power to Create Sources of Fund

03 Fundamental Principles

04 Common Limitations
 01
Legal Basis? Local autonomy
1987 Constitution
 1987 Constitution

Art II, Sec. 25

The State shall ensure the autonomy of local
governments.
 1987 Constitution
Art X
SECTION 2. The territorial and political subdivisions shall enjoy local
autonomy.

SECTION 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units.
 1987 Constitution
Art X
SECTION 4. The President of the Philippines shall exercise general supervision over
local governments. Provinces with respect to component cities and municipalities, and
cities and municipalities with respect to component barangays shall ensure that the
acts of their component units are within the scope of their prescribed powers and
functions.

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 6. Local government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them.
 PH Petroleum Corp v. Palilia (1991)

Pursuant to its local tax code, the Municipality of Palilia sought

to collect business tax and various fees from PPC. PPC claimed
that its oil products were tax exempt under PD 436 and must
not be held liable for business taxes and storage fees.
PH Petroleum Corp v. Palilia (1991)

A tax on business is distinct from a tax on the article itself.

While PD 436 exempts oil products from local taxation, such
did not amend PD 231 and 426 which granted LGUs the right to
levy taxes on manufacturers and producers.

Rationale: The exercise by local governments of the power to

tax is ordained by the Constitution.
 Mandanas v. Ochoa Jr. (2018)

Mandanas questioned the validity of the 2012 GAA and Sec.

284 of the LGC because both limit the just share of LGUs in
national taxes to “national internal revenue taxes”
 Mandanas v. Ochoa Jr. (2018)

The phrase “national internal revenue taxes” engrafted in

Section 284 is undoubtedly more restrictive than the term
national taxes written in Section 6. As such, Congress has
actually departed from the letter of the 1987 Constitution
stating that national taxes should be the base from which the
just share of the LGU comes. Such departure is impermissible.
 Mandanas v. Ochoa Jr. (2019)

What can be excluded from the base of “national taxes”?

● Proceeds from the transfer of military bases
● Excise taxes on Virginia tobacco products
● Share of COA in national internal revenue taxes
● Franchise taxes paid by Manila Jockey and PH Racing Club
● Excise taxes on mineral products
● Taxes from ARMM
 02
Power to Create Sources of Funds
Sec. 129, LGC
Section 129, Local Government Code
Power to Create Source of Revenue. -

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.
 MCIAA v. Marcos (1996)

The City of Cebu compelled MCIAA, a GOCC, to pay realty taxes.

Citing LC 133(o), MCIAA claimed that it was exempt from realty
taxes since it was a government instrumentality
 MCIAA v. Marcos (1996)
The Supreme Court applied LC 234 (a) which explicitly
governed the exemptions to real property taxes by local
government units, not LC 133(o) which only referred to the
limitations on their taxing authority.

“Republic of the Philippines or any of its political subdivisions”

If GOCCs are included, this would result in tax base erosion and
distortions in the tax treatment of similar enterprises.
 NPC v. Cabanatuan (2003)

The City of Cabanatuan assessed NPC for franchise taxes. NPC

claimed that LGUs have no authority to impose taxes on govʼt
entities and that NPC is a non-profit organization exempt from
taxes by virtue of RA 6395
 NPC v. Cabanatuan (2003)
NPC is liable to pay franchise tax to Cabanatuan. Although,
generally, LGUs cannot impose taxes on the National
Government, its agencies and instrumentalities, this rule
admits of an exception, as when specific provisions of the LGC
authorize LGUs to impose on government entities. LC 133
provides the general rule, while in this case, LC 151 in relation
to LC 137 clearly authorizes Cabanatuan to impose franchise
tax on NPC.

Further, by the promulgation of LC 193 all tax exemptions

enjoyed by all, even GOCCs, have been repealed unless the
exceptions apply.
 Republic v. COCOFED (2001)

PCGG sequestered UCPB shares for being part of Marcosʼ

ill-gotten wealth. The Republic claims that the registered
owners of the shares must no longer be allowed to vote on said
shares since the valid voter was already PCGG.
 Republic v. COCOFED (2001)
UCPBʼs coconut levy funds are public funds which are raised
through the police and taxing powers of the state to support
public needs (Fitch v. Wisconsin Tax Commission)

Even if the money is allocated for a special purpose and raised

by special means, it is still public in character especially since
the coconut industry is involved
 City of San Pablo v. Reyes (1999)

Act 3648 granted Escudero Electric Co. a franchise to operate a

light and power system in San Pablo. Pursuant to RA 2340, the
franchise was transferred to Meralco. Through an ordinance,
San Pablo demanded franchise taxes from Meralco.
 City of San Pablo v. Reyes (1999)

LC 137 and 193 explicitly authorize San Pablo to impose

franchise taxes notwithstanding any exemption granted by
law.
 Iloilo Bottlers v. Iloilo (1988)

The City of Iloilo made an ordinance imposing a tax on

business engaged in the distribution, manufacture, or bottling
of softdrinks. To evade liability, Iloilo Bottlers moved outside
the cityʼs territorial jurisdiction but it continued to sell
softdrinks to its patrons in Iloilo. Because of this, the City still
made it liable for the tax.
 Iloilo Bottlers v. Iloilo (1988)
Iloilo Bottlers distributed softdrinks through a fleet of delivery
trucks which went directly to customers in Iloilo. Sales
transactions were entered into and sales were perfected and
consummated by route salesmen. The delivery trucks were not
used solely for the purpose of delivering softdrinks. They
served as selling units. They were what were called, "rolling
stores". The delivery trucks were therefore much the same as
the stores and warehouses. That is, the corporation was
engaged in the separate business of selling or distributing
soft-drinks, independently of its business of bottling them
 Ferrer v. Herbert Bautista (2015)

Quezon City enacted ordinances which imposed a socialized

housing tax and garbage collection fees. Ferrer, a Quezon City
property owner, questioned their constitutionality.
 Ferrer v. Herbert Bautista (2015)
Following Sec. 43 of the UDHA, socialized housing taxes are
within an LGUʼs power to impose. Proceeds go to socialized
housing programs and real property owners benefit from the
prevention of urban slums

However, the garbage fee is invalid for violating the equal

protection clause. It disproportionately burdens condo owners
vis-a-vis residential lot owners.
 03
Fundamental Principles
Section 130, Local Government Code
Fundamental Principles. — The following fundamental principles shall govern
the exercise of the taxing and other revenue-raising powers of local
government units:

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

(b) Taxes, fees, charges and other impositions shall:
(i) be equitable and based as far as practicable on the taxpayer's
ability to pay;
(ii) be levied and collected only for public purposes;
(iii) not be unjust, excessive, oppressive, or confiscatory;
(iv) not be contrary to law, public policy, national economic policy,
or in restraint of trade;
(c) The collection of local taxes, fees, charges and other impositions
shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code shall
inure solely to the benefit of, and be subject to the disposition by, the
local government unit levying the tax, fee, charge or other imposition
unless otherwise specifically provided herein; and
(e) Each local government unit shall, as far as practicable, evolve a
progressive system of taxation.
Section 132, Local Government Code
Local Taxing Authority

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.
 Coca-Cola Bottlers Philippines, Inc. v.
City of Manila (2006)
Tax Ordinance No 7988 has already been declared by the DOJ Secretary as null and void and
without legal effect. The City of Manila also failed to appeal, thus the decision had attained finality
after the lapse of the period to appeal.
Tax Ordinance 8011 was likewise declared null and void by the DOJ Secretary in a Resolution,
ruling that instead of amending Ordinance No. 7988, the City should have enacted another tax
measure which strictly complies with the requirements of law, both procedural and substantive.
The DOJ further ruled that the passage of the assailed ordinance did not have the effect of curing
the defects of Ordinance No. 7988 which, anyway, does not legally exist. The Resolution of the
DOJ Secretary had also attained finality.
The amending law, having been declared as null and void, in legal contemplation, therefore, does
not exist. 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.
 Pepsi-Cola Bottling Co. vs. City of
Cabanatuan (1976)
The Court upheld the validity of the law and ordinances. Section 2 of RA No. 2264 is
within the sphere of the legislative power to enact and vest in local governments the
power of local taxation, as provided for under Section 5, Article XI of the 1973
Constitution.

An increase in the tax alone would not support the claim that the tax is oppressive,
unjust and confiscatory. Municipal corporations are allowed much discretion in
determining the rates of imposable taxes.

The taxes imposed by Ordinance No. 27 was not a percentage tax on sales because the
tax was on the product, not on the sales. It was also not a specific tax because soft drinks
was not one of those articles specified under the law.
 City of Baguio v. De Leon (1968)
The ordinance under consideration cannot be considered ultra vires whether its purpose be to
levy a tax or impose a license fee, there being ample statutory authority for the enactment thereof.

The source of authority for the challenged ordinance is supplied by RA 329, amending the city
charter of Baguio empowering it to fix the license fee and regulate businesses, trades and
occupations as may be established or practiced in the City. Unless it can be shown then that such
a grant of authority is not broad enough to justify the enactment of the ordinance now assailed,
the decision appealed from must be affirmed.

Further, the validity of the ordinance city cannot be challenged as amounting to double taxation.
There is nothing inherently obnoxious in the requirement that license fees or taxes be
exacted with respect to the same occupation, calling or activity by both the state and the
political subdivision thereof.
 Association of Customs Brokers v.
Municipal Board (1953)
The Supreme Court ruled that the Ordinance is null and void, as it imposes a license fee under the
cloak of an ad valorem tax. While as a rule an ad valorem tax is a property tax, the rule should not be
taken in its absolute sense if the nature and purpose of the tax shows that it is a license tax.

The rule applies to Ordinance 3379. While it refers to property tax and it is fixed ad valorem, it is
merely levied on motor vehicles operating within the City of Manila with the main purpose of raising
funds to be expended exclusively for the repair, maintenance and improvement of the streets and
bridges in said city.

It also violates the rule on uniformity of taxation under the Constitution. The ordinance imposes
the tax on all motor vehicles operating within Manila. It does not distinguish between a motor vehicle
for hire and one for purely private use, nor one registered in Manila and one in any other place which
merely uses the streets of Manila.
 Ormoc Sugar Company v. Ormoc City (1968)

A reasonable classification is reasonable where:

1. Classification is based on substantial distinctions, which make real differences
2. Distinctions are germane to the purpose of the law
3. Classification applies not only to the present conditions but also to future conditions--Future
conditions which are substantially identical to those of the present
4. Classification applies only to those who belong to the same class

By taxing only sugar produced and exported by Ormoc Sugar Co. without taking into account the setting
up of similar companies in the future, Ordinance No. 4 created an UNREASONABLE classification since it
cannot apply to future conditions. While the classification was applicable to the PRESENT conditions,
given that Ormoc Sugar Co. Inc. was the only sugar central in the City of Ormoc at the time of the
enactment of Ordinance No. 4, the classification cannot apply to FUTURE conditions.
 Gaston v. Republic Planters Ban (1988)

The stabilization fees collected pursuant to P.D. No. 388 are not funds in trust for the sugar
planters and millers. The stabilization fees are collected in the nature of a tax, which is
within the power of the State to impose for the promotion of the sugar industry. They
constitute public funds.

The fact that the State has taken possession of moneys pursuant to law is sufficient to
constitute them state funds, even though they are held for a special purpose — that of
"financing the growth and development of the sugar industry and all its components,
stabilization of the domestic market including the foreign market." Having been levied for a
special purpose, the revenues collected are to be treated as a special fund, to be,
"administered in trust" for the purpose intended. Once the purpose has been fulfilled or
abandoned, the balance, if any, is to be transferred to the general funds of the Government.
That is the essence of the trust intended.
 Progressive Development Corp. v. Quezon
City (1989)
The Court distinguished a tax from a license fee and ruled that the supervision fee imposed was a license
fee that was within the authority of the local government to impose. Here, the 5% tax imposed by the QC
Market Code constitutes neither a tax on income, nor a city income tax, but rather a license tax or fee for
the regulation of the business in which Progressive is engaged. As Progressive has not shown that the
rates imposed are unreasonable or invalid, the Court ruled in favor of the validity of its imposition.

RA 2264 confers upon local governments broad taxing authority extending to almost "everything,
excepting those which are mentioned therein," provided that the tax levied is "for public purposes, just
and uniform," does not transgress any constitutional provision and is not repugnant to a controlling
statute. Both the Local Autonomy Act and the Charter of respondent clearly show that respondent is
authorized to fix the license fee collectible from and regulate the business of petitioner as operator of a
privately-owned public market.

If the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is
a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not
make the imposition a tax.
 Ancheta v. Sison (1984)

He is wrong. In the case of the gross income taxation embodied in BP 135, the discernible basis of
classification is the susceptibility of the income to the application of generalized rules removing
all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be
applied to all of them.

Taxpayers who are recipients of compensation income are set apart as a class. As there is
practically no overhead expense, these taxpayers are not entitled to make deductions for income
tax purposes because they are in the same situation more or less.

On the other hand, in the case of professionals in the practice of their calling and businessmen,
there is no uniformity in the costs or expenses necessary to produce their income. It would not be
just then to disregard the disparities by giving all of them zero deduction and indiscriminately
impose on all alike the same tax rates on the basis of gross income.
Matalin Coconut Company v. Malabang (1986)

While the Court did not agree with the lower courtʼs finding that it is a percentage tax that is
beyond the scope of the power granted to the Municipal Councilʼs to levy under the Local
Autonomy Act, it agreed with the its finding that the tax imposed was unjust, unreasonable,
excessive, and confiscatory.

The Court has construed the grant of power to tax under Sec. 2, RA 2264 as sufficiently plenary to
cover "everything, excepting those which are mentioned" therein, subject only to the limitation
that the tax so levied is for public purposes, just and uniform.
 Villanueva v. City of Iloilo (1968)

Sps. Villanueva maintain that Ordinance 11 is a “property tax” or “real estate tax.”

They are WRONG. The tax is not a real estate tax. Unlike a real estate tax, Ordinance 11:
1. Is not a tax on the land on which the tenement houses are erected, although both land and tenement
houses may belong to the same owner;
2. Is not a fixed proportion of the assessed value of the tenement houses, and does not require the
intervention of assessors or appraisers;
3. Is not payable at a designated time or date, and is not enforceable against the tenement houses either by
sale or distraint.

It is plain from the context of the ordinance that the intention is to impose a license tax on the operation of
tenement houses, which is a form of business or calling. The ordinance, in both its title and body, particularly
Secs. 1 and 3 thereof, designates the tax imposed as a "municipal license tax" which, by itself, 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."
Ericsson Telecommunications v. City of Pasig
(2007)

The Court decided in favor of Ericsson. The LGC is clear that tax should be based on
gross receipts which is defined as income actually and constructively received. To
allow tax to be imposed on income earned but not yet received would lead to double
taxation when income is recorded one year and received the next year
 Bagatsing v. Ramirez (1976)
What law shall govern the publication of a tax ordinance enacted by the Municipal Board of Manila, the
Revised City Charter (RA 409, as amended), which requires publication of the ordinance before its
enactment and after its approval, or the Local Tax Code (PD 231), which only demands publication after
approval? Local Tax Code.

There is no question that the Revised Charter of the City of Manila is a special act since it relates only to
the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local
governments.

In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is dominant, but,
that dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing
taxes, fees or other charges" in particular.

Local Tax Code controls.

 Asiatic Integrated Corporation v. Alikpala
(1975)

Municipal corporations have both governmental and corporate or business functions, and
to the latter belongs the construction and maintenance of markets. Section 2318 of the
Revised Administrative Code expressly authorizes that markets be "let for a stipulated
return to private parties."

The case was decided before the LGC of 1991. Sec. 130 of the LGC provides that the
collection of local taxes, fees, charges and other impositions shall in no case be let to any
private person. As such, if this case was decided under the LGC, the contract would have
been struck down as an act that cannot be done by an LGU since it effectively ceded the
act of collection of fees to a private corporation.
 04
Common Limitations
Sec. 133, LGC
 Section 133, Local Government Code
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:
(a) Income tax, except when levied on banks and other financial institutions; (i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;
(b) Documentary stamp tax;
(j) Taxes on the gross receipts of transportation contractors and persons engaged
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except in the transportation of passengers or freight by hire and common carriers by air,
as otherwise provided herein; land or water, except as provided in this Code;

(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and
(k) Taxes on premiums paid by way or reinsurance or retrocession;
all other kinds of customs fees, charges and dues except wharfage on wharves constructed
and maintained by the local government unit concerned;
(l) Taxes, fees or charges for the registration of motor vehicles and for the
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or issuance of all kinds of licenses or permits for the driving thereof, except tricycles;
passing through, the territorial jurisdictions of local government units in the guise of
charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any (m) Taxes, fees, or other charges on Philippine products actually exported, except
form whatsoever upon such goods or merchandise; as otherwise provided herein;

(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
farmers or fishermen;
cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered
Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or
"Cooperative Code of the Philippines" respectively; and
non-pioneer for a period of six (6) and four (4) years, respectively from the date of
registration;
(o) Taxes, fees or charges of any kind on the National Government, its agencies
(h) Excise taxes on articles enumerated under the national Internal Revenue Code, as and instrumentalities, and local government units.
amended, and taxes, fees or charges on petroleum products;
 Progressive Devt. Corp v. QC

RA 2264 confers upon local governments broad taxing authority extending to almost
"everything, excepting those which are mentioned therein," provided that the tax levied is
"for public purposes, just and uniform," does not transgress any constitutional provision
and is not repugnant to a controlling statute. Both the Local Autonomy Act and the Charter
of respondent clearly show that respondent is authorized to fix the license fee collectible
from and regulate the business of petitioner as operator of a privately-owned public
market.

If the generating of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but if regulation is the primary purpose, the fact that incidentally
revenue is also obtained does not make the imposition a tax.
 Pepsi-Cola v. Municipality of Tanauan

The case of Pepsi-Cola Bottling Company vs. Municipality of Tanauan gives us the
same ruling; That RA 2264 gives LGUs a broad taxing authority; that as long as the
text levied under the authority of a city or municipal ordinance is not within the
exceptions and limitations in the law, the same comes within the ambit of the general
rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non
excepti.

The limitation applies, particularly, to the prohibition against municipalities and

municipal districts to impose “any percentage tax or other taxes in any form based
thereon nor impose taxes on articles subject to specific tax except gasoline, under the
provisions of the National Internal Revenue Code.”
 People v. Nazario

This case highlighted the ancient principle

and common limitation that the
Government is immune from taxes.
 First Phil. Industrial Corporation v. CA

Common carriers are exempt

from local tax on gross receipts.
 Alta Vista v. Cebu City
A golf course is not a place of amusement. People do
not enter a golf course to see or view a show or
performance. Petitioner does not actively display, stage,
or present a show or performance. People go to
petitioner to engage in physical activity, i.e. to play golf;
the same reason why people go to the gym or to a court
to play badminton. Therefore, the golf course cannot be
taxed amusement taxes.
 City of Pasig v. Republic

The portions of the properties leased to non-taxable

entities are exempt from real estate tax while the
portions of the properties leased to taxable entities
are subject to real estate tax.
 City of Manila v. Colet
Sec. 133 (j) of the LGC prevails over Sec. 143 (h) of the same Code, and Sec. 21
(B) of the Manila Revenue Code, as amended, was manifestly in contravention
of the former.
1. Sec. 133 (j) of the LGC is a specific provision that explicitly withholds from any LGU,
the power to tax the gross receipts of transportation contractors, persons engaged
in the transportation of passengers or freight by hire, and common carriers by air,
land, or water.
2. In contrast, Section 143 of the LGC defines the general power of the municipality
to tax businesses within its jurisdiction.
3. The succeeding proviso of Sec. 143 (h) is not a specific grant of power to the
municipality or city to impose business tax on the gross sales or receipts of such a
business. Rather, the proviso only fixes a maximum rate of imposable business tax
in case the business taxed under Sec. 143 (h) of the LGC happens to be subject to
excise, value added, or percentage tax.
 Levy of Tax

Tax Ordinance
 Procedure for Approval and Effectivity
of Tax Ordinances
Sec. 186
● LGU may exercise the power to levy taxes, fees, or charges
○ On any base or subject not otherwise specifically enumerated in the -
■ (a) LGC;
■ (b) NIRC; and
■ (c) Other applicable laws
○ Provided:
■ Such shall not be unjust, excessive, oppressive, confiscatory, or contrary to
declared national policy;
■ Tax ordinance shall not be enacted without any prior public hearing
conducted for the purpose.
Sec. 187
● The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the
provisions of the LGC.
 Mandatory Public Hearings

Art. 186 Art. 187

“the ordinance levying such “public hearings shall be
taxes, fees or charges shall conducted for the purpose
not be enacted without any prior to the enactment
prior public hearing thereof”
conducted for the purpose.”
 Publication of Tax Ordinance and
Revenue Measures and Furnishing of
Copies
Publication Furnishing of Copies

Sec. 188 Sec. 189

● Within 10 days from after their ● Copies of all local tax ordinances and
approval, tax ordinances shall be revenue measures shall be furnished the
published in full for 3 consecutive respective local treasurers for public
days in a newspaper of local dissemination.
circulation.
○ When there is no local newspaper
of local circulation, the same may
be posted in at least 2
conspicuous and publicly
accessible places.
 Appeal to the Secretary of Justice
(Sec. 187)
(1) Appeal to the SOJ (2) SOJ Decision (3) Court Proceedings

Any question on the SOJ shall render a decision Aggrieved party may file
constitutionality or legality of ● w/in 60 days from appropriate proceedings with
tax ordinances or revenue receipt of the appeal a court of competent
measures may be raised on jurisdiction.
appeal to the SOJ. ● w/in 30 days after
● w/in 30 days from receipt of decision; OR
effectivity. ● after the lapse of
60-day period w/o the
SOJ acting on the
Note: such appeal shall not have the effect of suspending the appeal
effectivity of the ordinance and the accrual and payment of the
tax, fee, or charge levied therein
 Enforcement of Void or Suspended Tax
Ordinances or Revenue Measures
Sec. 190

The enforcement of any tax ordinance or revenue measure after due notice of the
disapproval or suspension thereof shall be sufficient ground for administrative
disciplinary action against the local officials and employees responsible therefor.
 Other Provisions

Adjustment of Tax Ordinance Rates Tax Exemption

Sec. 191 Sec. 192 and 193

● LGU has the authority to adjust the tax ● LGUs, through ordinances, may grant tax
rates exemptions, incentives, or reliefs.
● Blanket Withdrawal of Tax Exemption
○ Not oftener than once every 5 years Privileges (193)
○ Adjustment shall not exceed 10% of ○ Tax exemptions or incentives currently
the rates fixed under the LGC enjoyed by all persons are withdrawn.
○ Ex:
■ Local water districts
■ Cooperatives (RA 6938)
■ Non-stock and non-profit
hospitals and educational
institutions.
 Drilon v. Lim
Facts:

● A tax ordinance (Manila Revenue Code) was appealed to SOJ Drilon.

● SOJ annulled the MRC for failure to comply with the prescribed enactment of tax ordinances. This was pursuant to the power
granted to him under Sec. 187 of the LGC.
● SOJ Drilon says that the following were not complied with:
○ No written notices of public hearings on the proposed Manila Revenue Code that were sent to interested parties as
required by Art. 276(b) of the IRR of LGC
○ No copies of the proposed ordinance published in three successive issues of a newspaper of general circulation
pursuant to Art. 276(a).
○ No minutes were submitted to show that the obligatory public hearings had been held.
○ No copies of the measure as approved posted in prominent places in the city in accordance with Sec. 511(a) of LGC.
○ The Manila Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people for their
information and guidance, conformably to Sec. 59(b) of the Code.
● RTC held:
○ that the ordinance was valid as it complied with the procedural requirements, and
○ that the Sec. 187 of LGC is unconstitutional since it confers to the president the power of control over the local
governments in contravention of the constitution, which only confers the power of supervision.
 Drilon v. Lim
W/N Sec 187 is constitutional – YES. It does not grant the SOJ the power of control, only supervision.

Section 187 authorizes the SOJ to review only the constitutionality or legality of the tax ordinance and, if
warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax
ordinance, he is not permitted to substitute his own judgment.

ITC: Secretary Drilon set aside the Manila Revenue Code only on two grounds (non-compliance with the
prescribed procedure in its enactment and inclusion therein of certain ultra vires provisions). These grounds
affected the legality, not the wisdom or reasonableness, of the tax measure.

It was not an act of control but of mere supervision. Secretary Drilon did set aside the Manila Revenue Code,
but he did not replace it with his own version of what the Code should be, he just said it was illegal.

However, after examining the exhibits, the SC agrees with the RTC that most of the requirements were
complied with.
 Ongsuco v. Malones
Facts:

● Petitioners are stall holders at the Maasin Public Market.

● Aug. 6, 1998 - The Office of the Municipal Mayor of Maasin informed petitioners of a meeting scheduled on
Aug. 11 concerning the public market.
○ Revenue measures were discussed during the said meeting.
● Thereafter, the Sangguniang Bayan of Maasin approved Municipal Ordinance 98-01 (which is a tax ordinance)
which imposed a “goodwill fee.”
● The SB approved Resolution 68 moving to have the meeting dated Aug. 11 declared as inoperative as a public
hearing, because majority of the persons affected by the imposition of the goodwill fee failed to agree to the said
measure. But this was vetoed by the RES.
● After the ordinance was approved on Aug 17, another purported public hearing was held on Jan 22, 1999.
● Petitioners challenged the ordinance before the RTC
○ They argued that a public hearing was mandatory in the imposition of goodwill fees based on Sec. 186 of
the LGC and notice thereof should have been given 10 days prior such public hearing.
 Ongsuco v. Malones
W/N the rule on exhaustion of administrative remedies is applicable in this case. NO.

● GR: Before a party is allowed to seek the intervention of the court, he or she should have availed himself
or herself of all the means of administrative processes afforded him or her
● EX: Issue raised is a purely legal question
○ The rule on the exhaustion of administrative remedies is intended to preclude a court from
arrogating unto itself the authority to resolve a controversy, the jurisdiction over which is initially
lodged with an administrative body of special competence.
○ Thus, a case where the issue raised is a purely legal question is well within the competence of the
court. And the jurisdiction of the court would constitute an exception.

ITC, the parties are not disputing any factual matter on which they still need to present evidence.

The sole issue that petitioners raised was whether the subject ordinance was valid and enforceable despite
absence, prior to its enactment, of a public hearing. This is undoubtedly a pure question of law, within the
competence and jurisdiction of the RTC to resolve.
 Ongsuco v. Malones
W/N public hearing was required. YES.

● Respondent maintains that the imposition of goodwill fees is not a revenue measure that requires a prior
public hearing; That rentals and other consideration for occupancy of the stall at the municipal public
market are not matters of taxation.
● Citing Art. 219 and 221 (g) of the LGC, the Court held that revenues of LGU do not consist of taxes alone,
but also other fees and charges. The rentals and goodwill fees under the subject ordinance fall under the
definition of charges.
● For the valid enactment of ordinances imposing charges, certain legal requisites must be met (i.e. public
hearing under Sec. 186).
 Ongsuco v. Malones
ITC, the requirement of public hearing was not complied with.

● There is no dispute herein that the notices sent to petitioners and other stall holders at the municipal
public market were sent out on 6 August 1998, informing them of the supposed "public hearing" to be
held on 11 August 1998.
● Even assuming that petitioners received their notice also on 6 August 1998, the "public hearing" was
already scheduled, and actually conducted, only five days later, on 11 August 1998.
○ This contravenes Article 277 (b) (3) of the IRR of the LGC which requires that the public hearing
be held no less than ten days from the time the notices were sent out, posted, or published.
● The defect in the enactment was not cured when another public hearing was held thereafter.
○ Section 186 of the Local Government Code prescribes that the public hearing be held prior to the
enactment by a local government unit of an ordinance levying taxes, fees, and charges.
● Since no public hearing had been duly conducted prior to the enactment, the subject ordinance is void.
 Figuerres vs. Court of Appeals
Facts:

● Petitioner received a notice of assessment based on 3 municipal ordinances.

○ increasing the schedule of fair market values of the different classes of real property, fixing the
assessment levels applicable to such classes of real property and providing the implementation of
one-third (1/3) of the increase in the market value on residential lands in the years 1994, 1995, and
1996.
● PET brought a prohibition suit in the CA on the ground that the ordinances were invalid for having been
adopted allegedly without:
○ public hearings and
○ prior publication or posting
● CA dismissed the petition.
 Figuerres vs. Court of Appeals
W/N Administrative remedies were exhausted. NO.

Sec. 187 of the LGC provides for an administrative remedy - Appeal to the SOJ.

Where a remedy is available within the administrative machinery, this should be resorted to before resort can
be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself
correctly, but also to prevent unnecessary and premature resort to courts.

Although cases raising purely legal questions are excepted from the rule requiring exhaustion of administrative
remedies before a party may resort to the courts, in the case at bar, the legal questions raised by petitioner
require proof of facts for their resolution.

Therefore, the petitioner's action in the CA was premature, and the appellate court correctly dismissed her
action on the ground that she failed to exhaust available administrative remedies.
 Figuerres vs. Court of Appeals
W/N public hearings are required prior to enactment of an ordinance. YES.

Public hearings are required prior to the enactment of a tax ordinance.

ITC, however, apart from her bare assertions, petitioner Figuerres has not presented any evidence to show that
no public hearings were conducted prior to the enactment of the ordinances in question.

In accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality
should be upheld in the absence of evidence showing that the procedure prescribed by law was not observed in
their enactment.

Furthermore, the lack of a public hearing is a negative allegation essential to petitioner's cause of action in the
present case. Hence, as petitioner is the party asserting it, she has the burden of proof.
 Figuerres vs. Court of Appeals
W/N publication and posting of schedule of fair market values is required. YES.

Publication or posting of the proposed schedule of fair market values of the different classes of real property in
a local government unit is required pursuant to Sec. 212 of the LGC. An ordinance imposing real property taxes
must be posted or published as required by Sec. 188.

In addition, Sec. 511(a) must also be complied with when the ordinances impose penal sanctions.

In sum:

An ordinance [188] fixing the assessment levels applicable to the different classes of real property in a local
government unit and [515(a)] imposing penal sanctions for violations thereof should be

➢ [188] published in full for three (3) consecutive days in a newspaper of local circulation, where available,
within ten (10) days of its approval, and
➢ [515(a)] posted in at least two (2) prominent places in the provincial capitol, city, municipal, or barangay
hall for a minimum of three (3) consecutive weeks.
 Coca-Cola Bottlers Philippines, Inc. v.
City of Manila
Facts:

● Tax Ordinance 7988 (TO7988) was enacted. It increased the tax rates applicable to certain establishments, including
petitioner.
● Petitioner filed an appeal before the SOJ invoking Sec. 187.
● The SOJ declared TO7988 VOID for violating Sec. 188 which required tax ordinances to be published in full for 3
consecutive days in a newspaper of local circulation.
○ The subject tax ordinance was published only once.
● As there was no appeal, the SOJ order attained finality.
● The Bureau of Local Government Finance issued a cease and desist order against the City Treasurer of Manila.
● Despite the SOJ resolution and BLGF directive, respondents continued to assess petitioner for business tax under
TO7988.
● Petitioner filed a complaint with the RTC, which ruled in its favor.
● Tax Ordinance 8011 (TO8011) was passed which amended TO7988.
○ SOJ also declared this as VOID.
● On the basis of the enactment of TO8011, the City of Manila filed a MR with the RTC. This was granted.
 Coca-Cola Bottlers Philippines, Inc. v.
City of Manila
W/N Tax Ordinance 7988 and 8011 are void. YES.

Respondents failed to follow the procedure in the enactment of tax measures as mandated by Sec. 188 of the
LGC 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 contravention of the unmistakable directive of the LGC

The SOJ also declared TO8011 void. The SOJ said: “instead of amending Ordinance No. 7988, respondent
should have enacted another tax measure which strictly complies with the requirements of law, both procedural
and substantive. The passage of the assailed ordinance did not have the effect of curing the defects of
Ordinance No. 7988 which, any way, does not legally exist."

Furthermore, even if TO8011 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 TO7988.

● 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.
 Local Taxing Authorities and
Scope of Taxing Power

01 Provinces 02 Municipalities 03 Cities

04 Barangays 05 Common revenue-raising powers

01Provinces
Scope of Taxing Powers
Sec. 134-141, LGC
 Scope of Taxing Power - Provinces
The province may levy only the taxes, fees, and
charges provided in the Local Government Code,
[Section 134, LGC] namely:

● Real Property Transfer Tax

● Tax on Printing and Publication
● Franchise Tax
● Tax on Quarry Resources
● Professional Tax
● Amusement Tax
● Tax on Delivery Trucks
[Section 135, LGC]

a. Real Property Transfer Tax

What is Taxed: Transfer of ownership/title of real property
through a sale, donation, barter, or other modes

Tax Rate: Max 50% of 1% of consideration involved in transfer

or of the fair market value, whichever is higher

What is Exempt: Transfers under R.A. No. 6657 (Comprehensive

Agrarian Reform Law)
a. Real Property Transfer Tax

Duty of Taxpayer: Transferor must pay within 60 days

from execution of the deed transferring
the property

Notary public must give the Provincial

Treasurer a copy of the deed within 30
days from notarization
a. Real Property Transfer Tax

Duty of Government: Register of Deeds and Provincial

Assessor must require evidence of
payment of tax prior to the
registration of the deed and the
issuance of a new tax declaration
over the property, respectively.
[Section 136, LGC]

b. Tax on Printing and Publication

What is Taxed: Business of printing and publishing books, cards,
posters, leaflets, handbills, certificates, receipts,
pamphlets and others of similar nature

Tax Rate: Max 50% of 1% of gross receipts of preceding year

***If newly started business, max 5% of 1% of
capital investment

What is Exempt: Printing/publishing of school materials

prescribed by the Department of Education,
Culture, and Sports
[Section 137, LGC]

c. Franchise Tax
What is Taxed: Businesses enjoying a franchise

Tax Rate: Max 50% of 1% of gross receipts of preceding year

***If newly started business, max 5% of 1% of
capital investment
 Province of Misamis Oriental v. Cagayan Electric
Effect of Tax Exemptions

Facts: Under R.A. 3247, Cagayan Electric was liable to pay franchise tax and such would be in
lieu of all taxes and assessments of whatever authority. Thus, Cagayan Electric was exempt
from taxes imposed by other authorities. However, Misamis Oriental still imposed its own
franchise tax on Cagayan Electric pursuant to the Local Tax Code. Cagayan Electric opposed
this invoking R.A. 3247.

Ruling/Doctrine: R.A. No. 3247 is a special law, while the Local Tax Code is a general law.
Special statutes are exceptions to the general law because they pertain to a special
charter granted to meet a particular set of conditions and circumstances.
 City Government of San Pablo v. Reyes
Effect of Tax Exemptions

Facts: Escudero Electric Service Company (later Meralco) was granted a legislative
franchise. The Sangguniang Panlungsod of San Pablo imposed a franchise tax pursuant to
the LGC. Thus, the company was sent a demand for payment. The company opposed this
invoking its charter wherein it was given an exemption from taxes.

Ruling: The imposition of franchise tax was valid. The company must pay.

Doctrine: Section 137, LGC is clear - ”Notwithstanding any exemption granted by any
law or other special law, the province may impose franchise tax.”

Same Doctrine is seen in Manila Electric Company v. Province of Laguna

 PLDT v. City of Davao
Effect of Tax Exemptions

Facts: PLDT paid franchise tax under R.A. No. 7082 (“in lieu of..”) and was thus exempt from
taxes from other authorities. However, upon the passing of the LGC, the City of Davao began
imposing franchise tax on PLDT. PLDT opposed saying that the special law should prevail
over the LGC.

Ruling/Doctrine: The phrase “in lieu of all taxes” found in special franchises should give
way to the peremptory language of Sec. 193 of the LGC, which provides for the
withdrawal of the exemption privileges.
The rule that a special law must prevail over the provisions of a later general law does not
apply because the legislative purpose to withdraw tax privileges enjoyed under existing laws
or charters is apparent from the express provisions of Secs. 137 and 193 of the LGC.

Same Doctrine is seen in PLDT v. Province of Laguna

PLDT v. City of Davao; PLDT v. Province of Laguna
Effect of Tax Exemptions

SEC. 193, LGC. Withdrawal of Tax Exemption Privileges. –

Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or
controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
 NAPOCOR v. City of Cabanatuan
Taxing the National Government; Requisites to Impose Franchise Tax

Facts: Franchise tax was assessed against NAPOCOR by Cabanatuan. NAPOCOR opposed
saying that it was tax exempt for being a GOCC.

Ruling/Doctrine:
General Rule: LGUs cannot impose taxes on the National Government, its agencies and
instrumentalities
Exception: When specific provisions of the LGC authorize the LGU to impose taxes on the
aforementioned entities. The exception applies here because of Sec. 137, LGC.

NAPOCOR is covered by the franchise tax because the following requisites are present:
(1) That entity 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

Same Doctrine is seen in NAPOCOR v. Province of Isabela

 Palma Dev’t Corp. v. Municipality of Malangas
Limitations

Facts: Palma used Malangas as a transshipment point for its goods. Malangas then issued
an ordinance imposing fees for the use of municipal roads and for police surveillance on all
goods and equipment harbored or sheltered within the jurisdiction of the municipality.

Ruling: The ordinance is void for violating the LGC.

Doctrine: Sec. 133(e) of LGC prohibits taxes, fees and charges and other impositions upon
goods carried into and out of, or passing through, the territorial jurisdictions of LGUs in the
guise of charges for wharfage, tolls for bridges or otherwise.
 Smart Communications v. City of Makati
Practical Insights
Facts:
● Smart received an assessment for local franchise taxes from Makati amounting to Php
3.2B. Smart contested the assessment in the RTC for being based on the nationwide
revenues of Smart.
● During the proceedings, Makati filed a motion for the production of various
documents from Smart. After Makati showed how these documents were relevant to
confirming the veracity of the tax assessment, the RTC granted the motion.
● Smart opposed this on the ground that it would be subjected to duplicitous audit.

RTC Ruling:
● Mere production of records does not ipso facto lead to re-auditing. However, even
if Makati uses the documents to amend the tax assessment, Smart is not left without a
remedy should such happen.
 Smart Communications v. City of Makati
Practical Insights
CTA Ruling: Affirmed RTC.
● Aside from needing the documents to confirm the veracity of the tax assessment,
it is also necessary because Smart failed to provide Makati with a summary of its
franchise tax payments in other localities and of a breakdown of its gross
sales/receipts.
● Smart’s objection is a disguised objection to the admissibility of the documents,
which should be raised when said documents are actually offered into evidence.
○ The production order is only for purposes of discovery.
○ It does not automatically make the produced documents admissible, which
is a totally different issue that the court cannot be expected to rule on
before the documents have even been presented to it.
● Further, the production order will not expose Smart to re-auditing.
○ In civil cases, parties should discover or inform themselves of all facts
relevant to the action; not only known to them but those known to their
adversaries. Civil cases should not be carried in the dark
Smart Communications v. City of Makati
Practical Insights

“Makati’s Bid to Collect P3.246B

from Smart gets Court approval.”
[Section 138, LGC]

d. Tax on Quarry Resources

What is Taxed: Extracted stones, sand, gravel, earth, and other
quarry resources from public lands or waters
within the territorial jurisdiction of the province

Tax Rate: Max 10% of fair market value per cubic meter of
quarry resources
d. Tax on Quarry Resources
Tax Proceeds: Proceeds from the taxes collected shall be
distributed as follows:

30% to the Province

30% to the Component City/Municipality where
the quarry resources were extracted
40% to the Barangay where the quarry
resources were extracted
[Section 139, LGC]

e. Professional Tax
What is Taxed: Exercise or practice of profession requiring
government examination in the province where
person practices or where his/her principal
office is
Tax Rate: Max Php 300

Date of Payment: Annually on or before January 31

- Any person first beginning to practice a
profession after January must pay the full
tax before engaging in the profession.
e. Professional Tax
Other Rules: - Person who has paid shall be entitled to
practice his/her profession in any part of the
PH without being subjected to other taxes
for such profession.
- A line of professions does not become
exempt even if conducted with some other
profession for which tax has been paid.

What is Exempt: Professions exclusively employed in government

[Section 140, LGC; Section 125, NIRC]

f. Amusement Tax
What is Taxed: Proprietors, lessees, or operators of places of
amusement

What is Exempt: Holding of operas, concerts, dramas, recitals,

painting and art exhibitions, flower shows, musical
programs, literary and oratorical presentations,
except pop, rock, or similar concerts

Boxing exhibitions promoted by entities whose

capital is owned by at least 60% PHs with a stake in
world/oriental championships and with at least one
PH citizen contender
 PBA v. CA
How to interpret “other places of amusement”

Facts: The CIR demanded PBA to pay

deficiency amusement tax. PBA
opposed saying basketball games are
not part of those to be taxed.

Ruling/Doctrine: “Other places of

amusement” does not include the
power to tax professional basketball
games. It only covers artistic forms of
entertainment and not sports and
games.
Pelizloy Realty Corp. v. Province of Benguet
How to interpret “other places of amusement”

Facts: Benguet imposed amusement taxes on resorts against

Pelizloy, the owner of Palm Grove Resort. Pelizloy opposed this
saying resorts were not included in “other places of amusement.”

Ruling/Doctrine: Provinces are not authorized to impose

amusement taxes on admission fees to resorts, swimming
pools, bath houses, hot springs, and tourist spots since these
are not "amusement places" under the LGC.
Amusement taxes are fixed at a certain percentage of the gross
receipts incurred by certain specified establishments. Thus,
amusement taxes are percentage taxes.
 f. Amusement Tax
Date of Payment: End of each quarter

How Collected: For theaters/cinemas, the tax shall be deducted and

withheld by their proprietors, lessees, or operators and
paid to the provincial treasurer before the gross receipts
are divided between them and the distributors of the
cinematographic films

For others, the proprietor, lessee, or operator shall make a

return within 20 days after the end of each quarter and
pay
 f. Amusement Tax
“Gross Receipts,” Defined

All the receipts of the proprietor, lessee or operator of the amusement

place. Said gross receipts also include income from television, radio and
motion picture rights, if any.

Liability of Persons/Entity/Association
A person or entity or association conducting any activity subject to the
tax herein imposed shall be similarly liable for said tax with respect to
such portion of the receipts derived by him or it.
f. Amusement Tax
Tax Rate:
General Rule under LGC: Max 30% of gross receipts from admissions fees

Special Rules under NIRC:

- 18% from cockpits
- 18% from cabarets, night or day clubs
- 10% from boxing exhibitions (Note: Some are tax exempt)
- 15% from professional basketball games under P.D. 871*
- 30% Jai-Alai and racetracks of their gross receipts, regardless if for
admission (Note: For others, only receipts from admission)
f. Amusement Tax
Tax Proceeds: Proceeds from the tax shall be shared equally by
the province and municipality where such
amusement places are located

Penalties: In case of fraud or failure to pay, the Sangguniang

Panlalawigan may impose surcharges, interest, and
penalties deemed appropriate
[Section 141, LGC]

g. Tax on Delivery Trucks

What is Taxed: Every truck, van, or any vehicle used by
manufacturers, producers, wholesalers, dealers
or retailers in the delivery or distribution of
distilled spirits, fermented liquors, soft drinks,
cigars and cigarettes to sales outlets or
consumers within the province

Tax Rate: Annual fixed tax; Max Php 500

02
Municipalities
Scope of Taxing Powers
Sec. 142-146, LGC
 Scope of Taxing Power - Municipalities

● Municipalities may levy taxes, fees, and charges not

otherwise levied by provinces.
○ Municipalities within the Metropolitan Manila Area
may levy taxes at rates which shall not exceed by fifty
percent (50%) the maximum rates prescribed in
Section 143.
 Businesses Subject to Tax
1. Manufacturers, assemblers, repackers, processors, brewers,
distillers, rectifiers, and compounders of liquors, distilled spirits,
and wines or manufacturers of any article of commerce of
whatever kind or nature
2. Wholesalers, distributors, or dealers in any article of commerce of
whatever kind or nature
3. Exporters, and on manufacturers , millers, producers,
wholesalers, distributors, dealers or retailers of essential
commodities
4. Retailers
5. Contractors and other independent contractors
6. Banks and financial institutions
7. Peddlers engaged in the sale of any merchandise or article of
commerce
8. Any business which the sanggunian may deem proper to tax
 Payment of Business Tax

● Tax is payable for every separate or distinct establishment

where business subject to the tax is conducted.
○ If person conducts 2 or more businesses subject to
the SAME rate of tax: tax shall be based on the
COMBINED gross sales/receipts
○ If person conducts 2 or more businesses subject to
DIFFERENT rates of tax: gross sales/receipts shall
be SEPARATELY reported
 Effect of Retirement of Business

● Business must submit a sworn statement of its gross

sales/receipts for the year
● If the tax due is less than the tax already paid, the
difference must be paid before the business is
considered officially retired
 City of Davao v. Randy Allied Ventures Inc. (2019)
City of Davao v. AP Holdings, Inc. (2020)
Definition of “Doing Business”

Local Business Taxes are taxes imposed by the LGC on the

privilege of doing business within their jurisdiction. Doing
business means a trade or commercial activity regularly
engaged in as a means of livelihood or with view to profit.

The mere fact that a holding company makes investments

does not ipso facto convert it to a business subject to local
business tax. Otherwise, there would be absolutely no distinction
between a mere holding company and financial intermediaries.
 Luz Yamane v. BA Lepanto Condominium (2005)
Collections not meriting the imposition of business tax

Even though a Corporation is empowered to levy

assessments or dues, said Corporation will not be liable
for business tax when the amounts collected are not
intended for profit but to shoulder the multitude of
necessary expenses that arise from the maintenance of
the Corporation’s projects.
 Petron v. Mayor Tiangco (2008)
Limits on tax on petroleum products
Local government units cannot impose taxes, fees, or
charges on petroleum products.

While Section 133(h) does not generally bar the imposition

of business taxes on articles burdened by excise taxes under
the NIRC, it specifically prohibits local government units
from extending the levy of any kind of "taxes, fees or
charges on petroleum products."
 Iloilo Bottlers Inc v. Iloilo City (1988)
Situs of excise tax

A business will be considered as engaged in distribution when

manufacturing and bottling occurs outside of a city and the
drinks are sold within it in a “moving store” fashion.
By its nature, the power to levy an excise tax depends upon the
place where the business is done, or the occupation is engaged
in, or where the transaction took place. The Situs for excise
tax is the area of transaction, not necessarily base of
operation.
 Manila Trading & Supply Co v. City of Manila (1959)
Central Azucarera Don Pedro v. City of Manila (1955)
Caltex Philippines Inc. v. City of Manila (1969)
Definition of “Manufacturer” and “Dealer”
One who imports raw materials and assembles them later to turn them into
finished products is a manufacturer and NOT a dealer. The word
"manufacturer" in its plain and ordinary meaning includes "the process of
assembling articles which while complete and finished, have no
independent utility but are designed to be used in combination as parts of
some other articles”.

One does not become a dealer simply because it sells the products it
manufactures, since the right to manufacture implies the right to sell the
manufactured products.

EXCEPTION: If the manufacturer "carries on the business of selling goods

or his products manufactured by him at store or warehouse apart from
his own shop or manufactory."
 City of Manila v. Manila Remnant Co. (1957)
Definition of “Retail”

The sale to different companies for purpose of conversion

and manufacture into different products should be
regarded as retail and will hold the business owner liable
for license taxes.
 Ericsson Telecommunications v. City of Pasig (2007)
The imposition of local business tax should be computed
Tax base
based on gross receipts, not gross revenue.
 Mobil Philippines Inc. v. City Treasurer of Makati (2005)
Time of payment

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.
 Fees and Charges (LGC 147)
● Municipalities may impose and collect reasonable fees
and charges on business and occupation.

○ Except: Those reserved to the province under LGC

139 (Professional Tax)

● The fee or charge must be commensurate with the cost of

regulation and licensing
● It may be imposed as a pre-condition for engaging in a bussines or
profession, or practicing a profession or calling
Angeles University Foundation v. City of Angeles
(2012)
Under the Local Government Code (LGC):

Charges - refer to pecuniary liability (rents and similar impositions

against persons or property)

Fees - fixed by law or ordinance for the regulation or inspection of a

business or activity. Building permit fees are not impositions on
property but on the activity subject of government regulation.

Building permit fees are NOT impositions on property but on the

activity subject of government regulation.
Fees for licensing of weights and measures (LGC 148)

● Municipalities may levy reasonable fees for sealing and

licensing weights and measures

● The Sangguniang Bayan may also prescribe the criminal

penalty for fraudulent practices as to weights and measures
○ It may also settle the same offenses upon payment of a
compromise penalty of not less than P200.
Fishery Rentals, Fees, and Charges (LGC 149)
● Municipalities shall have the EXCLUSIVE authority to grant
fishery privileges in the municipal waters and impose rentals
fees or charges therefor.
○ Marginal fishermen shall have preferential right to such
fishery privileges

● The Sangguniang Bayan shall have the authority to penalize

deleterious modes of fishing and prescribe the criminal
penalty therefor.
Tax Situs - Location of branch or sales outlet
● Principal Office - head or main office as stated in the
documents submitted to SEC or DTI

● Branch or Sales office - Fixed place which conducts

operations as an extension of the principal office
○ Warehouses which accept orders and issue sales
invoices are considered sales offices (LGC-IRR 243)
Tax Situs - Location of branch or sales outlet
(LGC 150)
● Businesses operating a branch or sales outlet elsewhere shall
record the sale in the branch or sales outlet making the sale or
transaction
○ The tax thereon shall accrue and be paid to the municipality
where such branch or sales outlet is located

● If there is NO branch or sales outlet where the sale is made, the

sale shall be recorded in the principal office, and the taxes shall be
paid to the city or municipality where such principal office is
located.
 Philippine Match Co. v. City of Cebu

A city can validly tax sales to customers

outside of the city, as long as the orders were
booked and paid for in the company’s branch
office WITHIN the city.
 Allied Thread Co v. City Mayor of Manila

The power to levy an excise upon the performance of

an act or the engaging in an occupation does NOT
depend upon the domicile of the person subject to the
excise NOR upon the physical location of the property in
connection with the act or occupation taxed.
It depends upon the place in which the act is
performed or where the occupation is engaged in.
 Municipality of Cainta v. Pasig City

The location stated in the Certificate of Title should be

followed until amended through proper judicial
proceedings.
The IRR of the LGC provides that in case of a boundary
dispute, the status of the affected area prior to the
dispute shall be maintained and continued for all
purposes.
 Linberg Philippines, Inc. v. City of Makati

The financing and construction of power plants in

different localities is considered as “doing business”.
In a BOT business, the usual negotiations for the
same is done in the principal office.
Following this, LGC 150 gives the authority to tax the
same business to the municipality where the
principal office is located.
 City of Iriga v. Camarines Sur III Electric
Cooperative, Inc

A franchise tax is a tax on the exercise of a

privilege. As it takes the nature of an excise tax, the
situs of taxation is the place where the privilege is
exercised.
 Rules on Allocation to 2 or more LGUs

Where the taxpayer has a factory, project office, or

plantation, and all sales are recorded in the principal
office:
● 30% of all sales - Municipality of Principal Office
● 70% of all sales - Municipality of Factory, Project
office, Plant, or Plantation
 Rules on Allocation to 2 or more LGUs
In case the plantation and factory are in
separate LGUs:

● 60% of the 70% - Municipality of Factory

● 40% of the 70% - Municipality of Plantation
 Rules on Allocation to 2 or more LGUs

In case of 2 or more factories, project offices, plants,

or plantations:

● The allotted 70% shall be prorated based on the

volume of production during the taxable period.
 City of Makati v. Municipality of Bakun and
Luzon Hydro Corporation
A “project office” where no sales are recorded or
undertaken ,is not really a project office but is rather a
mere administrative office. Given this, the Municipality in
which it is located cannot claim from the 70% local
business tax provided under LGC 150. The same is
reserved for factories, actual project offices, plants, and
plantations.
The mere label of a project office does not convert an
administrative office into such.
 Rules for taxation of Sales by Route trucks,
vans, or vehicles

Route sales in locality where the manufacturer or

dealer HAS a branch, sales office or warehouse:

➢ Tax is due to LGU where branch, sales office or

warehouse is located
 Rules for taxation of Sales by Route trucks,
vans, or vehicles

Route sales in a locality where the manufacturer or dealer

has NO branch, sales office or warehouse:

➢ Tax is due to LGU where branch, sales office or

warehouse from which the trucks withdraw their
products for sale is located
 Rules for taxation of Sales by Route trucks,
vans, or vehicles
LGUs where route trucks deliver merchandise CANNOT
impose any tax on said trucks

Exceptions:
● Annual fixed tax (LGC 231)
● Mayor’s Permit Fee (LGC 234 in re 223)
 Iloilo Bottlers v. City of Iloilo (1988)
Marketing systems of Manufacturers:

❖ Manufacturer enters into sales transactions in principal office

only and sends orders to the company’s warehouses, which
merely serve as delivery point
➢ Treated as Manufacturer only

❖ Aside from the above, warehouse sales are made independent

of those made in the principal office.
➢ Treated as Manufacturer AND Seller (w/ respect to
warehouse for the latter)
03 Cities
Scope of Taxing Powers
Sec. 151, LGC
 Scope of Taxing Power - Cities

The city may levy the taxes, fees, and charges which
the province or municipality may impose.
● It can exceed the maximum rates allowed for the
province and municipality by not more than 50%.
○ This does not apply to professional taxes (Sec.
139) and amusement taxes (Sec. 140)

[Sec. 151, LGC]

 Cagayan Electric v. City of Cagayan de Oro (2012)

Imposable tax rate on businesses

City ordinances are subject to the limitation under Section 143(h) of the LGC,
which states that on any business subject to VAT under the NIRC, the rate of
tax shall not exceed 2% of gross sales or receipts of the preceding
calendar year from the lease of goods or properties.
 Estanislao v. Costales (1991)

Imposable tax rate on businesses

The authority of the City is limited to the imposition of a percentage tax on the gross sales
or receipts of said product which, being non-essential, shall be at the rate of not
exceeding 2% of the gross sales or receipts of the softdrinks for the preceding calendar
year. The tax being imposed under said Ordinance is based on the output or production
and not on the gross sales or receipts as authorized under the Local Tax Code.
04
Barangays
Scope of Taxing Powers
Sec. 152, LGC
 Scope of Taxing Power - Barangays

The barangays may levy the following, which shall exclusively

accrue to them:

● Taxes on stores and retailers

● Service Fees or Charges
● Barangay Clearance
● Other Fees and Charges
○ Commercial breeding of fighting cocks, cockfighting and cockpits;
○ Places of recreation which charge admission fees; and
○ Billboards, signboards, neon signs, and outdoor advertisements.

[Sec. 152, LGC]

 05
Common Revenue-raising Powers
(Sec. 153 - 155, LGC)
 Common Revenue-raising Powers

service fees public utility toll fees

& charges charges & charges
Sec. 153, LGC Sec. 154, LGC Sec. 155, LGC
Community
Tax
Secs. 156 to 164, LGC, Arts. 246 to 252, LGC IRR
 Community Tax

Who may levy? [Sec. 156, LGC] Cities and municipalities only.

Persons liable [Sec. 157 & 158 , LGC]

● Individuals who are:
○ Inhabitants of the Philippines
○ 18 years of age or over
○ Either:
■ Regularly employed on a wage or salary basis for at least 30 consecutive
working days during any calendar year, or
■ Engaged in business or occupation, or
■ Owns real property with an aggregate assessed value of P1,000 or more, or
■ Is required by law to file an income tax return
● Juridical Persons
○ Every corporation no matter how created or organized
○ Whether domestic or resident foreign
○ Engaged in or doing business in the Philippines.
 Community Tax

Rates [Sec. 157 & 158, LGC]

● Individuals
○ Annual community tax of P5.00 PLUS annual additional tax of P1.00 per
P1,000 of income regardless of whether from business, exercise of profession
or property, but which shall not exceed P5,000
○ Husband and wife shall pay a basic tax of P5.00 each PLUS an additional tax
of P1.00 for every P1,000 of income based on the total property owned by them
and/or the total gross receipts or earnings derived by them
 Community Tax
Rates [Sec. 157 & 158, LGC]

● Juridical Persons
○ Annual community tax of P500 PLUS annual additional tax, which shall not
exceed P10,000 according to the following schedule:
■ P2.00 for every P5,000 worth of real property in the Philippines owned
during the preceding year, based on the assessed value used for the
payment of the real property tax; and
■ P2.00 for every P5,000 of gross receipts or earnings derived from business
in the Philippines during the preceding year.
○ Dividends received by a corporation from another corporation shall be deemed
part of the gross receipts or earnings for purposes of computing additional tax.
 Community Tax

Persons exempt [Sec. 159, LGC]

● Diplomatic and consular representatives
● Transient visitors who stay in the Philippines for not more than 3 months

Place of payment [Sec. 160 , LGC]

● Where individual resides, or where the principal office of the juridical entity is
located

Note: In case of branch, sales office or warehouse where sales are made and
recorded, corresponding community tax shall be paid to the LGU where such
branch, sales office or warehouse is located. [Art. 246(e)(3), LGC IRR]
 Community Tax

Time of Payment [Sec. 161, LGC]

● Accrues on January 1 of each year to be paid not later than the last day of February
of each year
○ If a person reaches 18 years of age or otherwise loses the benefit of exemption:
■ on or before June 30 – he shall be liable on the day he reaches such age or upon
the day the exemption ends;
■ on or before March 31 – he shall have 20 days to pay without being delinquent.
○ If a person comes to reside in the Philippines, or reaches 18 years old, or ceases to
belong to an exempt class on or after July 1, he shall not be subject to community tax
for that year.
○ If a corporation is established and organized:
■ on or before June 30 – it shall be liable to community tax for that year
■ on or before March 31 – it shall have 20 days to pay without becoming
delinquent
■ on or after July 1 – it shall not be subject to community tax for that year
 Community Tax

Penalty [Sec. 161, LGC]

● If unpaid within the prescribed period, an interest of 24% per annum shall be
added from the due date until payment
Community Tax Certificate
 Community Tax Certificate
CEDULA

● 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 P1.00.

[Sec. 162, LGC]

 Community Tax Certificate
CEDULA
Presentation [Sec. 163, LGC]

Necessary when an individual subject to community tax:

● acknowledges any document before a notary public;
● takes the oath of office upon election or appointment to any position in
the government service;
● receives any license, certificate, or permit from any public authority;
● pays any tax or fee;
● receives any money from any public fund
● transacts other official business; or
● receives any salary or wage from any person or corporation
Note: Presentation of CTC is not needed in the registration of a voter
 Community Tax Certificate
CEDULA
Printing [Sec. 164, LGC]
● BIR shall cause the printing of CTCs and distribute the same to the cities and
municipalities through the city and municipal treasurers

Distribution of proceeds of community tax [Sec. 164, LGC]

● If the community tax is actually and directly collected by the city or municipal
treasurer, the proceeds shall accrue entirely to the general fund of the city or
municipality.
● If the community tax is collected through the barangay treasurers, the proceeds
shall be apportioned equally between the city/municipality and the barangay.
Tax Exemption
Privileges
 Rule
Tax exemptions must be
interpreted strictly
against the taxpayer
and in favor of the taxing
authority.
 Quezon City v. ABS-CBN
(2008)
Claims for tax exemption must be based on language in law too plain to be
mistaken. It cannot be made out of inference or implication. The “in lieu of all
taxes” provision in ABS-CBN’s franchise does not expressly provide what
kind of taxes ABS-CBN is exempted from, i.e., whether both local, whether
municipal, city or provincial, and national tax. Hence, the uncertainty in the
“in lieu of all taxes” provision should be construed against ABS-CBN.
 Grant of Tax Exemption

SECTION 192. Authority to Grant Tax Exemption Privileges. - Local

government units may, through ordinances duly approved, grant tax
exemptions, incentives or reliefs under such terms and conditions, as they
may deem necessary.
 PLDT vs. City of
Davao (2001)
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.
 NAPOCOR vs. City of
Cabanatuan (2003)
Nothing prevents Congress from decreeing that even instrumentalities or agencies of the

government performing governmental functions may be subject to tax. One of the most

significant provisions of the Local Government Code (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, Local Government Units (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 LGU to impose taxes, fees or charges on the aforementioned entities.
 PLDT vs. Province of
Laguna (2005)
Applying the rule of strict construction of laws granting tax exemptions and the
rule that doubts should be resolved in favor of municipal corporations in
interpreting statutory provisions on municipal taxing powers, the Court held
that Sec. 23 of R.A. No. 7925 cannot be considered as having amended
petitioner's franchise so as to entitle it to exemption from the imposition of
local franchise taxes.
 Withdrawal of Tax Exemption

SECTION 193. Withdrawal of Tax Exemption Privileges. - Unless

otherwise provided in this Code, tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether natural or juridical, including
government-owned or -controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and
nonprofit hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.
 Mactan Cebu International
Airport Authority vs. Marcos
(1996)

The taxing powers of LGUs cannot extend to the levy of “taxes, fees and charges of any
kind on the National Government, its agencies and instrumentalities, and LGUs.” However,
pursuant to Sec. 232, provinces, cities, and municipalities in the Metro Manila Area
may impose the RPT except on “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,” as
provided in item (a) of the 1st par. of Sec. 234.
 City Government of San
Pablo, Laguna vs. Reyes
(1999)

The explicit language of Sec. 137 LGC which authorizes the province to impose
franchise tax notwithstanding any exemption granted by law or other special
law is all encompassing and clear. The franchise tax is imposable despite any
exemption enjoyed under special law.
 Manila Electric Company vs.
Province of Laguna (1999)

The 1991 Code explicitly authorizes provincial governments,

notwithstanding “any exemption granted by any law or other special law
to impose a tax on businesses enjoying a franchise.
Collection of
Taxes
 Tax Period

SECTION 165. Tax Period and Manner of Payment. - Unless

otherwise provided in this Code, the tax period of all local
taxes, fees and charges shall be the calendar year. Such taxes,
fees and charges may be paid in quarterly installments.
 Accrual of Tax

SECTION 166. Accrual of Tax. - Unless otherwise provided in

this Code, all local taxes, fees, and charges shall accrue on the
first (1st) day of January of each year. However, new taxes, fees
or charges, or changes in the rates thereof, shall accrue on the
first (1st) day of the quarter next following the effectivity of the
ordinance imposing such new levies or rates.
 Time of Payment

SECTION 167. Time of Payment. - Unless otherwise provided in this

Code, all local taxes, fees, and charges shall be paid within the first
twenty (20) days of January or of each subsequent quarter, as the case
may be. The Sanggunian concerned may, for a justifiable reason or
cause, extend the time of payment of such taxes, fees, or charges
without surcharges or penalties, but only for a period not exceeding
six (6) months.
 Surcharges and Penalties

SECTION 168. Surcharges and Penalties on unpaid Taxes, fees, or

Charges. - The Sanggunian may impose a surcharge not exceeding
twenty-five percent (25%) of the amount of taxes, fees or charges not
paid on time and an interest at the rate not exceeding two percent
(2%) per month of the unpaid taxes, fees or charges including
surcharges, until such amount is fully paid but in no case shall the
total interest on the unpaid amount or portion thereof exceed
thirty-six (36) months.
 Interest on Other Unpaid Revenues

SECTION 169. Interests on Other Unpaid Revenues. - 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.
 Collection by Local Treasurer

SECTION 170. Collection of Local Revenues by Treasurer. - All local taxes, fees,
and charges 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. In case a bond is
required for the purpose, the provincial, city or municipal government shall pay
the premiums thereon in addition to the premiums of bond that may be
required under this Code.
 Examination of Books of Accounts
Who may examine?
- The provincial, city, municipal or Barangay treasurer by himself or through any
of his deputies duly authorized in writing.
What may be examined?
- The books, accounts, and other pertinent records of any person, partnership,
corporation, or association subject to local taxes, fees and charges.
What is the purpose of the examination?
- In order to ascertain, assess, and collect the correct amount of the tax, fee, or
charge.
When shall examination be made?
- During regular business hours, only once for every tax period, and shall be
certified to by the examining official.
Civil Remedies
for Collection
of Taxes
 Where applicable? (SEC. 172)

For the collection of

any delinquent local
tax, fee, charge or
other revenue
 Local Government Lien
Local taxes, fees, charges and other revenues constitute a
lien:
● Superior to all liens*, charges or encumbrances in favor of any
person,
● Enforceable by appropriate administrative or judicial action
● Covers 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.
● Extinguished upon full payment of the delinquent local taxes fees and
charges including related surcharges and interest.
 What are the civil remedies for collection of
local taxes, fees and charges? (SEC. 174)

Administrative Action Judicial Action

● Distraint (Sec. 175) ● Civil action filed in the
● Levy (Sec. 176) court of competent
jurisdiction (Sec. 183)
 Distraint vs. Levy

Distraint Levy
● Covers goods, chattels, ● Covers real property and
effects and other personal interest and rights to real
property property
○ (e.g. stocks, other securities, debt,
credits, bank accounts, interest
and rights to personal property)
DISTRAINT
(Section 175, Local Government
Code)
 Release upon
payment prior
to sale

Publication by
officer in not
Issuance of Seizure by the Accounting of
less than 3
certificate of local treasurer distrained
public and
delinquency or deputy goods
conspicuous
places
Sale of goods
to the highest
bidder for cash

Sale of goods
and effects at
public auction

Overview
Sale of goods
to local
government
unit concerned
 Step ONE: Issuance of Certificate of
Delinquency (SEC. 175 (A))
● Issued by the LOCAL TREASURER or HIS DEPUTY
● Based upon the records of his office, showing:
○ The fact of delinquency
○ The amount of the fee, charge or penalty due
● Serves as sufficient warrant for the distraint of personal
property aforementioned
○ Subject to the taxpayer’s defense of exemption
under provisions of existing laws
 Step TWO: Seizure (SEC. 175 (A))
● Done upon FAILURE of the person owing the local tax,
fee or charge to pay the same at the time required.
● LOCAL TREASURER or his DEPUTY can seize, confiscate
any personal property belonging to the person OR any
personal property subject to the lien in sufficient quality
to satisfy the tax, fee or charge in question.
○ Together with any increment incident to delinquency
and the expenses of seizure
● WRITTEN NOTICE A PREREQUISITE
 Step THREE: Accounting of Distrained
Goods (SEC. 175 (B))

● Executing officer shall make or cause to be made an

account of the goods, chattels or effects distrained
○ Includes a statement of the sum demanded and a
not of the time and place of sale
● Signed by the executing officer
● Copy left with the owner of the goods or at the dwelling
of that person with someone of suitable age/discretion
 Step FOUR: Publication (SEC. 175 (C))
● Executing officer shall cause a notification to be
published and exhibited in not less than three (3)
public and conspicuous places in the territory of the
LGU where the distraint was made
○ Specifying the time and place of sale and articles that
are distrained
○ One place for posting is at the office of the chief
executive of the LGU
● Time of sale should not be less than twenty (20) days
after notice to the owner and the posting of the notice
 Step FIVE (A): Release of Distrained
Property Prior to Sale (SEC. 175 (D))

● If at any time prior to the consummation of the sale,

all the proper charges are paid to the officer
conducting the sale, the goods or effects distrained
shall be restored to the owner
 Step FIVE (B): Procedure of Sale
(SEC. 175 (E))

● At the time and place fixes in the notice, the public

officer shall sell the goods or effects at public auction
to the highest bidder for cash.
● WITHIN 5 DAYS - Local treasurer makes a report of the
proceedings in writing to the local chief executive.
 Step FIVE (C): Sale to LGU (SEC. 175 (E))

● Should the property not be disposed within 120 DAYS

from the date of distraint, the same shall be considered
sold to the LGU for the amount assessed
 Disposition of Proceeds (SEC. 175 (F))

● Proceeds shall be applied to satisfy the tax, including the

surcharges, interest and other penalties incident to
delinquency and the expenses of the distraint or sale.
● Any remaining balance to be returned to the owner of
the property sold
● No payment for services of local officer or deputy!
● IF INSUFFICIENT: Other property can be distrained until
the full amount is collected.
 LEVY
(Section 176-182, Local
Government Code)
 Release upon
payment prior
to sale

Publication of
Mailing of Notice of Sale
Issuance of
written Notice in the two
Warrant of
of Levy and places
Levy
annotation required by
law
Sale of goods
Redemption of
to the highest
property sold
bidder for cash

Sale of goods
and effects at
public auction

Overview
Sale of goods
Issuance of
to local
final deed to
government
purchaser
unit concerned
 Issuance of Warrant of Levy (SEC. 176)
● After expiration of time required to pay the delinquent
tax, fee, or charge, the real property may be levied on.
● The Provincial, City or Municipal Treasurer prepares a
Warrant of Levy with the following information:
○ Name of the Taxpayer
○ Description of the Property
○ Amount of the Tax Due
● Levy is effected upon writing the description of the
property in the Warrant of Levy
 Issuance of Warrant of Levy (SEC. 176)
● Operates with the force of a legal execution throughout
the Philippines
● Mailed or served upon the delinquent real property
owner, or person having legal interest therein, or the
administrator or occupant of the property.
● If not issued before or simultaneously with warrant of
distraint: Thirty (30) days after execution of distraint,
the officer shall proceed with the levy.
● Report on the levy is to be submitted to the Sanggunian
by the levying officer
 Mailing of Notice of Levy and Annotation
(SEC. 176)

● A written Notice of Levy with an attached copy of the

Warrant of Levy is to be mailed upon the Local
Assessor and the Register of Deeds
● The levy shall then be annotated on the tax declaration
and the certificate of title.
Note: Penalty for Failure to Issue or Execute
Warrant (SEC. 177)

● Failure to issue the Warrant of Levy after the expiration

of the time period or being found guilty of the abuse of
exercise thereof by competent authority shall lead to
automatic dismissal from the service after due notice
and hearing.
 Advertisement and Sale (SEC. 178)
● Within thirty (30) days after levy, the local treasurer
shall proceed to advertise the sale or auction of the
property or a usable portion thereof as to satisfy the
claim and cost of sale.
● To be effected by posting a notice:
○ At the main entrance of the municipal or city hall
○ At a public and conspicuous place in the barangay
where the real property is located
● Publication once a week for three (3) weeks in a
newspaper of general circulation in the province, city or
municipality where the property is located
 Advertisement and Sale (SEC. 178)

● The advertisement shall contain the amount of taxes,

charges, fees and penalties, time and place of sale, the
name of the taxpayer and a short description of the
property
● At any time before the date fixed for the sale, the
taxpayer may stay they proceedings by paying the taxes,
fees, charges, penalties and interests.
 Advertisement and Sale (SEC. 178)

● If he fails to do so, the sale shall proceed and 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 determined by the local treasurer
conducting the sale and specified in the notice of sale.
 Advertisement and Sale (SEC. 178)
● 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.
● After consultation with the Sanggunian, the local
treasurer shall make and deliver to the purchaser a
certificate of sale, showing the proceeding of the sale,
describing the property sold, stating the name of the
purchaser and setting out the exact amount of all taxes,
fees, charges, and related surcharges, interests, or
penalties
 Redemption of Property Sold (SEC. 179)

● Within one (1) year from the date of sale, the delinquent
taxpayer or his representative shall have the right to
redeem the property upon payment to the local
treasurer of the total amount of taxes, fees, or charges,
and related surcharges, interests or penalties 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 purchase to the date of
redemption.
 Redemption of Property Sold (SEC. 179)

● Such payment shall invalidate the certificate of sale

issued to the purchaser and the owner shall be entitled
to a certificate of redemption from the provincial, city or
municipal treasurer or his deputy.
 Redemption of Property Sold (SEC. 179)
● The provincial, city or municipal treasurer or his deputy,
upon surrender by the purchaser of the certificate of
sale previously issued to him, shall forthwith return to
the latter the entire purchase price paid by him plus the
interest of not more than two percent (2%) per month
herein provided for, the portion of the cost of sale and
other legitimate expenses incurred by him, and said
property thereafter shall be free from the lien of such
taxes, fees, or charges, related surcharges, interests, and
penalties.
 Final Deed to Purchaser (SEC. 180)

● In case the taxpayer fails to redeem the property, the

local treasurer shall execute a deed conveying to the
purchaser so much of the property as has been sold,
free from liens of any taxes, fees, charges, related
surcharges, interests, and penalties. The deed shall
succinctly recite all the proceedings upon which the
validity of the sale depends.
 Sale to Local Government (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.
 Sale to Local Government (SEC. 181)

● 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.
 Sale to Local Government (SEC. 181)

● 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 taxes, fees, charges, and related surcharges,
interests, or penalties, and the costs of sale. If the
property is not redeemed as provided herein, the
ownership thereof shall be fully vested on the local
government unit concerned.
Resale of Real Estate Taken for Taxes, Fees
and Charges (SEC. 182)

● The sanggunian concerned may, by ordinance duly

approved, and upon notice of not less than twenty (20)
days, sell and dispose of the real property acquired
under the preceding section at public auction. The
proceeds of the sale shall accrue to the general fund of
the local government unit concerned.
 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.
Personal Property Exempt from Distraint or
Levy (SEC. 185)
● Tools and implements necessarily used by the
delinquent taxpayer in his trade or employment;
● 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;
● His necessary clothing, and that of all his family;
● 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 (P10,000.00);
Personal Property Exempt from Distraint or
Levy (SEC. 185)

● Provisions, including crops, actually provided for

individual or family use sufficient for four (4) months;
● The professional libraries of doctors, engineers, lawyers
and judges;
● One fishing boat and net, not exceeding the total value
of Ten thousand pesos (P10,000.00), by the lawful use of
which a fisherman earns his livelihood; and
● Any material or article forming part of a house or
improvement of any real property.
JUDICIAL
ACTION (Section 183,
Local Government Code)
 Collection through 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
this Code.
Prescription
 Periods To Remember

Five Three Five Three

(5) (3) (5) (3)
Years Years Years Years

Assessment Assessment Collection Collection

Period for For taxes, fees and Period for collection For taxes, fees and
assessment counted charges prior to the counted from charges prior to the
from due date Local Gov’t Code assessment date Local Gov’t Code
 Ten (10) Years
In case of fraud or intent to evade the payment of
taxes, assessment allowed from discovery of such fraud
or intent to evade payment
 Suspension of Running of Period
(SEC. 194 (d))

● The treasurer is legally prevented from making the

assessment of collection;
● The taxpayer requests for a reinvestigation and executes
a waiver in writing before expiration of the period within
which to assess or collect; and
● The taxpayer is out of the country or otherwise cannot
be located.
LOCAL TAXATION
Balbin, Blando, Dos Santos, Ferrer, Mendiola, Montoya,
Ortega, Pichay, Sosito, Tagorda, Yu
III - E
 KINDS OF REMEDIES

01 Administrative Action

02 Judicial Action
ADMINISTRATIVE
ACTION
 1. Protest of assessment

30 days from receipt of denial

60 days 60 days or lapse of 60-day period

Receipt of Filing of Decision by Appeal by

notice of written local taxpayer
assessment protest treasurer
Yamane v. BA Lepanto
Condominium Corp.
 The notice of assessment, which stands as
the first instance a taxpayer is officially
made aware of a pending tax liability, should
be sufficiently informative to apprise the
taxpayer of the legal basis of the tax.
Sec. 195 of the LGC does not require that a
notice of assessment cite the specific
provision of law on which it is based.
San Juan v. Castro
 A petition for mandamus is not a proper
remedy for an incorrect assessment, as
mandamus only lies to compel an officer to
perform a ministerial duty and not a
discretionary function—such as the
assessment of tax liabilities.
Team Pacific Corp. v. Daza
 A petition for certiorari is not a proper
remedy to protest an assessment since a
Municipal or City Treasurer does not exercise
judicial or quasi-judicial functions, and a
plain, adequate, and speedy remedy (i.e.
appeal) is present.
 City of Manila v.
Cosmos Bottling Corp.
 A taxpayer who previously protested and paid an
assessment under Sec. 195 may later shift its remedy
and institute an action for refund under Sec. 196.
 City Treasurer of Manila v.
Philippine Beverage Partners
Where an assessment is to be protested, the
taxpayer may proceed with or without having
paid the assessed tax, fee, or charge.
 2. Claim for refund or tax credit
Payment of a tax, fee, or charge erroneously or illegally collected

Written claim for refund or credit with the local treasurer

Action in court for recovery

Within 2 years from the date of payment or from the date
the taxpayer is entitled to a refund or credit
LGC IRR, Sec. 286:

- The written claim must be duly supported by evidence of

payment
- Any tax credit granted a taxpayer shall not be refundable in cash,
but applied to future tax obligations of the taxpayer for the
same business
City of Manila v. Cosmos Bottling Corp
There is no particular form necessary for the
protest of an assessment or claim of refund
of taxes. What is material is the substance of
the letter submitted to the local treasurer.
JUDICIAL
ACTION
 JURISDICTION OF COURTS
RTC → Cases where the demand or the value of the subject
property exceeds P300k outside Metro Manila, and P400k
inside Metro Manila (e.g., P300,001 outside Metro Manila)

MeTCs, MTCs, MCTCs → Civil actions and probate proceedings

where the value of the personal property, estate, or amount of
demand not exceed P300k outside Metro Manila, and P400k
inside Metro Manila (e.g., P300,000 outside Metro Manila)
 JURISDICTION OF THE CTA
R.A. 1125 → Appellate jurisdiction over decisions of provincial or
city Boards of Assessment Appeals in cases involving the
assessment and taxation of real property or other matters arising
under the Assessment Law

R.A. 9282, amending R.A. 1125 → Appellate jurisdiction over

decisions of the Central Board of Assessment Appeals in its
exercise of its appellate jurisdiction over cases decided by the
provincial or city board of assessment appeals
Provincial or City Board of Assessment Appeals

Central Board of Assessment Appeals

Court of Tax Appeals

City of Manila v. Cosmos Bottling Corp.
 A judicial action for refund must be filed
within 30 days from the denial of or inaction
on a written protest or claim, even if within
two years from the date of payment of the tax,
fee, or charge sought to be refunded.
 Two conditions that must be satisfied to
prosecute an action for refund:
(1) Pay the tax and administratively assail the
assessment before the local treasurer
within 60 days
(2) Bring an action in court within 30 days from
the decision or inaction by the local
treasurer
International Container Terminal
Services v. City of Manila
 The doctrine of exhaustion of administrative
remedies requires recourse to the pertinent
administrative agency before resorting to court
action. Thus, generally, when there is an adequate
remedy available, courts will decline to interfere.
However, failure to exhaust administrative remedies is
not always fatal to a party’s cause. If the party can
prove that resort to the administrative remedy would
be an idle ceremony, such that it will be absurd/unjust
for it to continue seeking relief that evidently will not
be granted, the doctrine will not apply.
Thank you!