A.

Local Government Taxation

1. General Principles
a) Taxation shall be uniform in each LGU;
b) Taxes, fees, charges, and other impositions shall:
1. Be equitable and based, as far as practicable, on the taxpayer’s ability to
pay;
2. Be levied and collected only for public purposes;
3. Not be unjust, excessive, oppressive, or confiscatory;
4. Not be contrary to law, public policy, national economic policy, or in the
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 the Local Government
Code of 1991 (LGC) shall inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge, or other imposition unless
otherwise specifically provided in the LGC; and
e) Each LGU shall, as far as practicable, evolve a progressive system of taxation
(Sec. 130, LGC).
2. Nature and Source of Taxing Power
a) Grant of Local Taxing Power Under the Local Government Code
1. Book II, Sec. 129 of RA 7160, otherwise known as the “Local
Government Code (LGC) of the Philippines”, as amended, provides that,
each local government unit shall exercise its power to create its own
source 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.
2. 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 (Sec.
132, LGC)
1. In the case of MCIAA vs Marcos (G.R. No. 120082, September
11, 1996), MCIAA is not exempt from realty tax by the City of
Cebu. First, its tax exemption under its charter has already been
withdrawn. Second, while it is true that LGUs cannot levy tax on
property of the Republic of the Philippine or the National
Government (outside Metro Manila), the beneficial use of
property should not be given to a taxable person. Here, MCIAA
is already the owner of the parcels of land in question. Hence,
even the exemption under the LGC cannot apply.

b) Authority to Prescribe Penalties for Tax Violations

Q: Who has the authority to prescribe penalties for local tax violations?
A: Section 516 of the Local Government Code States that:
 1. The Sanggunian of a LGU is authorized to prescribe fines or
other penalties for violation of tax ordinances:
a.in no case shall such fines be less than P1,000 nor more than
P5,000;
b.nor shall imprisonment be less than 1 month nor more than 6
months.
2. Such fine or other penalty, or both, shall be imposed at the
discretion of the court.
- The Sangguniang Barangay may prescribe a fine of not less than P100
nor more than P1,000. Authority to Grant Local Tax Exemptions

c) Authority to Grant Local Tax Exemptions

Under Section 192 of the Local Government Code, LGUs may, through
ordinances, grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem
necessary.

The power to grant tax exemptions, tax incentives and tax reliefs shall not
apply to regulatory fees which are levied under the police power of the LGU.
(Sec. 1, Malacañang Memorandum Circular No. 153, s. 1992)

The guidelines for granting tax exemptions, incentives and reliefs:

1. Tax Exemptions and Reliefs

a. May be granted in cases of natural calamities, civil disturbance, general
failure of crops or adverse economic conditions such as substantial decrease in
prices of agricultural or agri-based products;
b. The grant shall be through an ordinance;
c. Any exemption or relief granted to a type or kind of business shall apply
to all businesses similarly situated;
d. The same may take effect only during the calendar year not exceeding
12 months as may be provided in the ordinance;
e. In case of shared revenues, the relief or exemption shall only extend to
the LGU granting such.

2. Tax Incentives
a. Shall be granted only to new investments in the locality and the
ordinance shall prescribe the terms and conditions therefore;
b. The grant shall be for a definite period not exceeding 1 calendar year;
c. The grant shall be through an ordinance passed prior to the 1st day of
January of any year;
d. Tax incentive granted to a type or kind of business shall apply to all
businesses similarly situated.
TAX EXEMPTION is conferred through the issuance of a non-transferable tax
exemption certificate. (Art. 282, IRR of LGC)

PLDT v. City of Davao (GR. No. 143867, August 22, 2001)

FACTS: PLDT paid a franchise tax equal to three percent (3%) of its gross
receipts. The franchise tax was paid “in lieu of all taxes on this franchise or
earnings thereof” pursuant to RA 7082.

In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the

Philippines, Sec. 23 of which provides that any advantage, favor, privilege,
exemption, or immunity granted under existing franchises, or may hereafter
be granted, shall ipso facto become part of previously granted
telecommunications franchises and shall be accorded immediately and
unconditionally to the grantees of such franchises. The law took effect on
March 16, 1995.

The City of Davao withheld PLDT’s application for a Mayors Permit pending
PLDT’s payment of the local franchise tax.

PLDT refused to pay and sought a refund of the franchise tax it had paid
before, insisting it was exempt from the payment of franchise tax based on an
opinion of the Bureau of Local Government Finance.

Davao City denied PLDT’s protest and claim for tax refund.

ISSUE: Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to
the exemption from payment of the local franchise tax in view of the grant of
tax exemption to Globe and Smart.

HELD: The SC ruled in favor of the City of Davao.

The Local Government Code withdrew all tax exemptions previously enjoyed
by all persons. It also authorized local government units to impose a tax on
businesses enjoying a franchise notwithstanding the grant of tax exemption to
them. Exemptions from taxation are highly disfavored, so much so that they
may almost be said to be odious to the law.

He who claims an exemption must be able to point to some positive provision

of law creating the right.

The following are Government Instrumentalities Exempted from Local

Taxation:
 a. Philippine Amusement and Gaming Corporation
b. Philippine Reclamation Authority
c. Manila International Airport Authority
d. Mactan Cebu International Airport Authority
e. Philippine Rice Research Institute
f. Philippine Ports Authority
g. Philippine National Railways
h. University of the Philippines
i. Bangko Sentral ng Pillipinas
j. Philippine Fisheries Development Authority
k. Cebu Port Authority
l. Cagayan De Oro Port Authority
m. San Fernando Port Authority
n. Government Service Insurance System
o. Laguna Lake Development Authority
p. Bases Conversion Development Authority

NOTE: Exemption likewise applies to real property taxation.

d) Withdraw of Exemptions
General rule: Unless otherwise provided, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or judicial, including
government owned or controlled corporations are withdrawn upon the
effectivity of the LGC. [Sec. 193, LGC]

Exceptions: Tax exemptions not withdrawn

1. Local water districts
2. Cooperatives duly registered under RA 6938 (Cooperative Code of the
Philippines)
3. Non-stock and non-profit hospitals
4. Educational institutions [Sec. 193, LGC]

Withdrawal of tax exemption is not to be construed as prohibiting future

grants of tax exemptions. The grant of taxing powers to LGUs under the LGC
does not affect the power of Congress to grant exemptions to certain persons
pursuant to a declared national policy.

Note: The LGC took effect on January 1, 1992.

Sec. 193 is an express and general repeal of all statutes granting exemptions
from local taxes. It withdrew the sweeping tax privileges previously enjoyed by
private and public corporations.
National Power Corporation vs. City of Cabanatuan (G.R. No. 149110, April 9,
2003)

FACTS: Pursuant to section 37 of Ordinance No. 165-92, the respondent

assessed the petitioner a franchise tax.

NPC refused to pay, arguing that the city government did not have the
authority to impose tax on government entities, and that as a non-profit
organization, it is exempted from the payment of all forms of taxes, charges,
duties or fees in accordance with Sec. 13 of RA No. 6395.

The city government, on the other hand, claimed that NPC's exemption from
payment of tax was already repealed by Sec. 193 of the Local Government
Code.

Respondent filed a collection suit in the RTC of Cabanatuan City, demanding

that petitioner pay the assessed tax due, plus a surcharge. Respondent alleged
that petitioner's exemption from local taxes has been repealed by section 193
of Rep. Act No. 7160. The trial court issued an Order dismissing the case.

On appeal, the CA reversed the trial court's Order on the ground that section
193, in relation to sections 137 and 151 of the LGC, expressly withdrew the
exemptions granted to the petitioner. The petitioner filed a Motion for
Reconsideration on the Court of Appeal's Decision. This was denied by the
appellate court.

ISSUE: Whether or not CA erred in reversing the trial court's Order on the
ground that section 193, in relation to sections 137 and 151 of the LGC,
expressly withdrew the exemptions granted to the petitioner.

HELD: No. In the case at bar, section 151 in relation to section 137 of the LGC
clearly authorizes the respondent city government to impose on the petitioner
the franchise tax in question.

One of the most significant provisions of the Local Government Code is the
removal of the blanket exclusion of instrumentalities and agencies of the
national government from the coverage of local taxation because exemption
privileges granted to GOCCs and all other units of government were that such
privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises.

Although as a general rule, LGUs cannot impose taxes, fees, or charges of any
kind on the National Government, its agencies and instrumentalities, this rule
now admits an exception, i.e., when specific provisions of the LGC authorize
the LGUs to impose taxes, fees or charges on the aforementioned entities. In
the instance case, Section 151 in relation to Section 137 of the LGC clearly
authorizes Cabanatuan government to impose on NPC the franchise tax in
question.

To determine whether the NPC is covered by the franchise tax in question, the
following requisites should concur: (1) that petitioner has a “franchise” in the
sense of a secondary or special franchise; and (2) that it is exercising its rights
or privileges under this franchise within the territory of the respondent city
government. NPC fulfills both requisites.

Rationale for the withdrawal of tax exemptions

In the case of Philippine Rural Electric Cooperatives Association v. Department
of Interior and Local Government (GR. No. 143076, June 10, 2003), it was held
that it is ingrained in jurisprudence that the constitutional prohibition on the
impairment of the obligations of contracts does not prohibit every change in
existing laws. To fall within the prohibition, the change must not only impair
the obligation of the existing contract, but the impairment must be
substantial. Moreover, to constitute impairment, the law must affect a change
in the rights of the parties with reference to each other and not with respect
to non-parties.

The quoted provision under the loan agreement does not purport to grant any
tax exemption in favor of any party to the contract, including the beneficiaries
thereof. The provisions simply shift the tax burden, if any, on the transactions
under the loan agreements to the borrower and/or beneficiary of the loan.
Thus, the withdrawal by the Local Government Code under Sec. 193 and 234
of the tax exemptions previously enjoyed by petitioners does not impair the
obligation of the borrower, the lender or the beneficiary under the loan
agreements as, in fact, no tax exemption is granted therein.

Tax Exemption not applicable to Regulatory Fees

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

Guidelines for the Granting of Tax Exemptions, Tax Incentives and Tax Reliefs
(IRR of LGC, Art 282 [B])

On the grant of tax exemptions or tax reliefs:

• The same may be granted in cases of natural calamities, civil
disturbance, general failure of crops, or adverse economic conditions such as
substantial decrease in prices or agricultural or agri-based products;
• The grant shall be through an ordinance;
 • Any exemption or relief granted to a type or kind of business shall apply
to all business similarly situated;
• The same shall take effect only during the next calendar year for a
period not exceeding 12 months as may be provided by the ordinance;
• In the case of shared revenue, the exemption or relief shall only
extended to the LGU granting such exemption or relief.

On the grant of tax incentives:

• The same shall be granted only to new investments in the locality and
the ordinance shall prescribe the terms and conditions therefore;
• The grant shall be for a definite period not exceeding 1 calendar year;
• The grant shall be by ordinance passed prior to the 1st day of January of
any year;
• Any grant to a type or kind of business shall apply to all businesses
similarly situated.

3. Scope of Taxing Power

1) Each LGU 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 it.

2) LGUs may exercise the power to levy taxes, fees or charges on any base or subject not
otherwise specifically enumerated herein or taxed under the provisions of the NIRC:
Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such taxes, fees or charges
shall not be enacted without any prior public hearing conducted for the purpose.

3) Any question on the constitutionality or legality of tax ordinances or revenue

measures may be raised on appeal within thirty (30) days from the effectivity thereof to
the Secretary of Justice who shall render a decision within sixty (60) days from the date
of receipt of the appeal.

4) The power to impose a tax, fee, or charge or to generate revenue under the LGC shall
be exercised by the sanggunian of the LGU concerned through an appropriate ordinance.

4. Specific Taxing Power of Local Government Units

a) Taxes, fees and charges which a province or a city may levy
1. Tax on transfer of real property ownership (Sec. 135, LGC)
2. Tax on business of printing and publication (Sec. 136, LGC)
3. Franchise Tax (Sec. 137, LGC)
4. Tax on sand, gravel and other quarry resources (Sec. 138, LGC)
5. Professional Tax (Sec. 139, LGC)
6. Amusement Tax (Sec. 140, LGC)
 7. Annual fixed tax for every delivery truck or van of manufacturers or
producers, wholesalers of, dealers, or retailer in certain products (Sec.
141, LGC)
8. Annual ad valorem tax on real property such as land, building,
machinery, and other improvement not specifically exempted at the rate
not exceeding 1% of the assessed value of the real property (Sec. 232,
LGC)
9. Special levies on real property
10. Toll fees or charges for the use of any public road, pier, or wharf,
waterway, bridge, ferry, or telecommunication system funded and
constructed by the provincial government (Sec. 155, LGC)
11. Reasonable fees and charges for services rendered (Sec. 153, LGC)
12. Charges for the operation of public utilities owned, operated, and
maintained by the provincial government (Sec. 154, LGC)

5. Common Revenue Raising Powers

a) a) Service Fees and Charges. — LGUs may impose and collect such reasonable
fees and charges for services rendered.
b) b) Public Utility Charges. — LGUs may fix the rates for the operation of public
utilities owned, operated and maintained by them within their jurisdiction.
c) c) Toll Fees or Charges. — The sanggunian concerned may prescribe the terms
and conditions and fix the rates for the imposition of toll fees or charges for
the use of any public road, pier, or wharf, waterway, bridge, ferry or
telecommunication system funded and constructed by the local government
unit concerned: Provided, that no such toll fees or charges shall be collected
from
1. officers and enlisted men of the AFP and members of the PNP on
mission,
2. post office personnel delivering mail,
3. physically-handicapped, and disabled, and
4. citizens who are sixty-five (65) years or older.

When public safety and welfare so requires, the sanggunian concerned may
discontinue the collection of the tolls, and thereafter the said facility shall be
free and open for public use.

6. Community Tax
- The community tax is a poll or capitation tax imposed upon residents of a city or
municipality.

• Who may levy a community tax?

- It may be levied by a city or municipality (Sec. 156, LGC)

• Persons liable to pay community tax

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

2. Juridical Persons – Every corporation no matter how created or organized,

whether domestic or resident foreign, engaged in or doing business in the Philippines.
(Sec 157, LGC)

• Amount of Community Taxes

1. Individuals
a. Basic: annual community tax of P5.00
b. Additional: Additional tax of P1.00 for every P1,000.00 of income
regardless of whether from business, exercise of profession or from property which in no
case shall exceed P5,000.00
Note: In case of husband and wife, the additional tax shall be based on the total
property, gross receipts or earnings owned or derived by them (Sec. 157, LGC)

2. Juridical persons
a. Basic: annual community tax of P500.00
b. Additional tax: in no case, shall exceed Ten thousand pesos (P10,000.00)
in accordance with the following schedule:
i. For every P5,000.00 worth of real property in the Philippines
owned by it during the preceding year based on the valuation used for the
payment of the real property tax under existing laws, found in the assessment
rolls of the city or municipality where the real property is situated - Two pesos
(P2.00); and
ii. For every P5,000.00 of gross receipts or earnings derived by it
from its business in the Philippines during the preceding year - Two pesos
(P2.00). (Sec 158, LGC)

• Persons Exempt from Community Tax

1. Diplomatic and consular representatives; and
2. Transient visitors when their stay in the Philippines does not exceed
three (3) months (Sec 159, LGC).

• Place of Payment
- The community tax shall be paid in the place of residence of the individual, or in
the place where the principal office of the juridical entity is located (Sec. 160, LGC).

• Time of payment
 - The community tax shall accrue on the first (1st) day of January of each year
which shall be paid not later than the last day of February of each year (Sec. 161, LGC)

• Penalty for delinquency

- If the tax is not paid within the time prescribed above, there shall be added to
the unpaid amount an interest of twenty-four percent (24%) per annum from the due
date until it is paid. (Sec. 161, LGC)

• Presentation of community tax certificate, when required

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

7. Common Limitations on the Taxing Powers of Local Government Units

- The exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
1. Income tax, except when levied on banks and other financial institutions;
2. Documentary stamp tax;
2. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided herein;
3. Customs duties, registration fees vessels and wharfage on wharves, tonnage
dues, and all other kinds of customs fees, charges and dues except wharfage on
wharves constructed and maintained by the local government unit concerned;
4. Taxes, fee and charges and other impositions upon goods carried into or out of,
or passing through, the territorial jurisdictions of local government units in the
guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees
or charges in any form whatsoever upon such goods or merchandise;
5. Taxes, fees, or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;
6. Taxes on business enterprises certified to by the Board of Investments as pioneer
or non-pioneer for a period of six (6) and (4) four years, respectively from the
date of registration;
7. Excise taxes on articles enumerated under the National Internal Revenue Code,
as amended, and taxes, fees or charges on petroleum products;
8. Percentage or value added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;
9. Taxes on the gross receipts of transaction contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land
or water, except as provided in this Code;
 10. Taxes on premium paid by way or reinsurance or retrocession;
11. Taxes, fees or charges for the registration of motor vehicle and for the issuance of
all kinds of licenses or permits for the driving thereof, except tricycles;
12. Taxes, fees or charges on Philippine products actually exported, except as
otherwise provided herein;
13. Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
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
"Cooperatives Code of the Philippines" respectively; and
14. Taxes, fees or charges, of any kind on the National Government, its agencies and
instrumentalities, and local government units. (Sec. 133, LGC)

 Q: May LGUs impose taxes on petroleum products?

A: No. The power of LGUs to impose business taxes derives from Section 143 of the Local
Government Code. However, the same is subject to the explicit statutory impediment provided
for under Section 133(h) which prohibits LGUs from imposing “taxes, fees or charges on
petroleum products”.

Batangas City vs Pilipinas Shell Corporation

GR No. 187631, July 05, 2015

FACTS: Petitioner Batangas City is a local government unit (LGU) with the
capacity to sue and be sued under its Charter and Section 22(a)(2) of the Local
Government Code (LGC) of 1991. Petitioners Teodulfo A. Deguito and
Benjamin E. Pargas are the City Legal Officer and City Treasurer, respectively,
of Batangas City.

Respondent Pilipinas Shell Petroleum Corporation operates an oil refinery and

depot in Tabagao, Batangas City, which manufactures and produces petroleum
products that are distributed nationwide.

Batangas City sent Shell a notice of assessment demanding the payment of

P92,373,720.50 and P312,656,253.04 as business taxes for its manufacture
and distribution of petroleum products. In addition, Shell was required and
assessed to pay the amount of P4,299,851.00 as Mayor's Permit Fee based on
the gross sales of its Tabagao Refinery.

Shell protested the assessment saying that it is not liable to pay the amount
and that the Mayor's Permit Fees are exorbitant, confiscatory, arbitrary,
unreasonable and not commensurable with the cost of issuing a license. Shell
paid under protest.

ISSUE: Whether a LGU is empowered under the LGC to impose business taxes

on persons or entities engaged in the business of manufacturing and
 distribution of petroleum products.

HELD: No, the Local Government Unit of Batangas does not have said power
under the Local Government Code.

Section 133 of the LGC puts a limitation on the taxing powers of LGUs. It
provides that the exercise of taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following: xxx (h) Excise taxes
on articles enumerated under the National Internal Revenue Code, as
amended, and taxes, fees or charges on petroleum products. Indisputably, the
power of LGUs to impose business taxes derives from Section 143 of the LGC.
However, the same is subject to the explicit statutory impediment provided
for under Section 133(h) of the same Code which prohibits LGUs from
imposing "taxes, fees or charges on petroleum products." It can, therefore, be
deduced that although petroleum products are subject to excise tax, the
same is specifically excluded from the broad power granted to LGUs under
Section 143(h) of the LGC to impose business taxes. Thus, the omnibus grant
of power to LGUs under Section 143(h) of the LGC cannot overcome the
specific exception or exemption in Section 133(h) of the same Code.

 Q: Can LGUs validly impose business tax on the gross receipts of transportation contractors?
A: NO. It is already well-settled that although the power to tax is inherent in the State, the same is
not true for the LGUs to whom the power must be delegated by Congress and must be exercised
within the guidelines and limitations that Congress may provide.

City of Manila, et al. vs. Hon. Colet

G.R. No. 120051, December 10, 2014

FACTS: The City of Manila, through its City Treasurer, began imposing and
collecting the business tax under Section 21(B) of the Manila Revenue Code
(Code), as amended by Ordinance No. 7807 (Ordinance). Section 21 (B) of the
Code imposed business tax on “transportation contractors, persons who
transport passenger or freight for hire, and common carriers by land, air or
water” while the Ordinance amended such by lowering the tax rate from 3%
per annum to .5% per annum. Because they were assessed and/or compelled
to pay business taxes pursuant to Section 21(B) of the Manila Revenue Code,
as amended, before they were issued their business permits, several
corporations, with principal offices in Manila and operating as "transportation
contractors, persons who transport passenger or freight for hire, and common
carriers by land, air or water," filed their respective petitions before the
Manila RTC against the City of Manila, Mayor Lim, Vice Mayor Lito Atienza
(Atienza), the City Council of Manila and City Treasurer Acevedo and
questioned the constitutionality of Sec. 21 (B) for being contrary to the
 Constitution and the Local Government Code, and asked for the refund of
what they had paid as business tax.

ISSUE: Whether or not Section 21(B) of the Manila Revenue Code, as amended
by Ordinance No. 7807 is unconstitutional

RULING: Yes. Section 21(B) of the Manila Revenue Code, as amended, is

unconstitutional.

It is already well-settled that although the power to tax is inherent in the

State, the same is not true for the LGUs to whom the power must be
delegated by Congress and must be exercised within the guidelines and
limitations that Congress may provide. It is settled that a municipal
corporation unlike a sovereign state is clothed with no inherent power of
taxation. The charter or statute must plainly show an intent to confer that
power or the municipality, cannot assume it.

Section 133(j) of the Local Government Code clearly and unambiguously

proscribes LGUs from imposing any tax on 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.

The omnibus grant of power to municipalities and cities under Section 143(h)
of the LGC cannot overcome the specific exception/exemption in Section
133(j) of the same Code. This is in accord with the rule on statutory
construction that specific provisions must prevail over general ones. A special
and specific provision prevails over a general provision irrespective of their
relative positions in the statute.

8. Requirements for a Valid Tax Ordinance

Local Tax Ordinance - The power to impose a tax, fee, or charge or to generate revenue
under the LGC shall be exercised by the Sanggunian concerned through an appropriate
ordinance. [Sec. 132, LGC]

Requisites for substantive validity of an ordinance: (GOD-PC)

1. It must not contravene the Constitution or any statute;
2. It must not be unfair or oppressive;
3. It must not be partial or discriminatory;
4. It must not prohibit but may regulate trade;
5. It must be general and consistent with public policy; and
6. It must not be unreasonable. [Magtajas v. Pryce Properties, G.R. No. 111097
(1994)]
NOTE: Incentive or relief granted by any local government unit pursuant to the
provisions of the LGC shall be construed strictly against the person claiming it. (Section
5(b), LGC) An ordinance is presumed valid unless declared otherwise by a court in an
appropriate proceeding. [Rural Bank of Makati v. Municipality of Makati, G.R. No.
150763 (2004)]

Procedure for Approval and Effectivity of Tax Ordinances

1. The procedure applicable to local government ordinances in general should be
observed. (Sec. 187, LGC)
The following procedural details must be complied with:
a. Necessity of a quorum;
b. Submission for approval by the local chief executive;
c. The matter of veto and overriding the same; and
d. Publication and effectivity. (Secs. 54, 55, and 59, LGC)

2. Public hearings are required before any local tax ordinance is enacted (Sec. 187,
LGC)

3. Within 10 days after their approval, publication in full for 3 consecutive days in a
newspaper of general circulation. In the absence of such newspaper in the province,
city or municipality, then the ordinance may be posted in at least two conspicuous
and publicly accessible places. (Sec. 188 & 189, LGC)

NOTE: The requirement of publication in full for 3 consecutive days is mandatory for a
tax ordinance to be valid. The tax ordinance will be null and void if it fails to comply with
such publication requirement. (Coca-Cola v. City of Manila, G.R. No. 156252, June 27,
2006)

COCA COLA BOTTLERS vs. CITY OF MANILA

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

FACTS: On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No.
7988, otherwise known as "Revised Revenue Code of the City of Manila" which
increased the tax rates applicable to certain establishments operating within the City of
Manila, including that of Coca Cola. Coca Cola then filed a petition before the
Department of Justice (DOJ), against the City of Manila and its Sangguniang Panlungsod,
invoking Section 1874 of the Local Government Code of 1991 and at the same time
questioning the constitutionality of Section 21 of Tax Ordinance No. 7988. Section 21 of
the Old Revenue Code states that all registered businesses in the City of Manila that are
already paying the aforementioned tax shall be exempted from payment thereof. This
was deleted in the ordinance. In effect, it now imposed additional business tax on Coca
Cola which is already subject to other business tax. It is contended that the deletion is a
palpable and manifest violation of the LGC 1991. Subsequently, DOJ issued a Resolution
declaring Tax Ordinance No. 7988 null and void and without legal effect due to failure to
comply with mandatory publication requirements as provided for in the Local
Government Code of 1991 which provides:
"Section 188. Publication of Tax Ordinances and Revenue Measures. – Within
ten (10) days after their approval, certified true copies of all provincial, city and
municipal tax ordinances or revenue measures shall be published in full for three (3)
consecutive days in a newspaper of local circulation; Provided, however, that in
provinces, cities, and municipalities where there are no newspapers or local circulations
the same may be posted in at least two (2) conspicuous and publicly accessible places."
Documentary evidence submitted by Coca Cola indubitably shows that subject
tax ordinance was published only once, i.e., on the May 22, 2000 issue of the Philippine
Post. Clearly, therefore, City of Manila failed to satisfy the requirement that said
ordinance shall be published for three (3) consecutive days as required by law. In
affirming the nullification of the ordinance as per request of another taxpayer, Singer
Sewing Maching, the BLGF Executive Director issued an Indorsement on 20 November
2000 ordering the City Treasurer of Manila to "cease and desist" from enforcing Tax
Ordinance No. 7988. However, despite the Resolution of the DOJ and the directive of the
BLGF, they still continued to assess Coca Cola business tax for the year 2001. Thus, Coca
Cola filed a Complaint with the RTC of Manila praying that the City be enjoined from
implementing the tax ordinance.
During the pendency of the said case, the City Mayor of Manila approved an
amendment of the same tax ordinance which was again challenged by Coca Cola before
the DOJ on the grounds that (1) said tax ordinance amends a tax ordinance previously
declared null and void and without legal effect by the DOJ; and (2) said tax ordinance
was likewise not published upon its approval. The amendatory ordinance was likewise
declared null and void by the DOJ, it being a mere amendatory ordinance of Ordinance
No. 7988. The omnibus motion of petitioners for reconsideration of the resolution of
April 23, 2003 which denied the motion for an extension of time to file a petition is
DENIED for lack of merit.
Meanwhile, on the basis of the enactment of Tax Ordinance No. 8011, the City
of Manila filed a Motion for Reconsideration with the RTC of Manila which the court a
quo granted stating that considering that Ordinance No. 7988 (Amended Revenue Code
of the City of Manila) has already been amended by Ordinance No. 8011 entitled "An
Ordinance Amending Certain Sections of Ordinance No. 7988" approved by the City
Mayor of Manila on February 22, 2001, the case must be DISMISSED.

ISSUE: Whether or not Tax Ordinance No. 7988 is null and void and of no legal effect.

RULING: Yes, Tax Ordinance No. 7988 is null and void and of no legal effect. It is
undisputed from the facts of the case that Tax Ordinance No. 7988 has already been
declared by the DOJ Secretary, in its Order, dated 17 August 2000, as null and void and
without legal effect due to respondents’ failure to satisfy the requirement that said
ordinance be published for three consecutive days as required by law. Neither is there
quibbling on the fact that the said Order of the DOJ was never appealed by the City of
Manila, thus, it had attained finality after the lapse of the period to appeal. Furthermore,
 the RTC of Manila, Branch 21, in its Decision dated 28 November 2001, reiterated the
findings of the DOJ Secretary that respondents failed to follow the procedure in the
enactment of tax measures as mandated by Section 188 of the Local Government Code
of 1991, in that they failed to publish Tax Ordinance No. 7988 for three consecutive days
in a newspaper of local circulation. From the foregoing, it is evident that Tax Ordinance
No. 7988 is null and void as said ordinance was published only for one day in the 22 May
2000 issue of the Philippine Post in contravention of the unmistakable directive of the
Local Government Code of 1991.

9. Taxpayer’s Remedies
a) Protest
a. When the correct tax, fee, or charge is not paid, the Local Treasurer shall
issue a notice of assessment within the applicable prescriptive period, (Sec.
195, LGC) stating the nature of the levy, the amount of deficiency, the
surcharges, interests and penalties.

b. Within 60 days from receipt of the assessment, the taxpayer may file a
written protest of the assessment with the local treasurer contesting the
assessment; otherwise the assessment shall become final and executory.

c. The local treasurer shall decide the protest within 60 days from the time of
its filing. If the local treasurer finds the assessment to be wholly or partly
correct, he shall deny the protest wholly or partly with notice to the taxpayer.
d. The taxpayer shall have 30 days from the receipt of the denial of the protest
or from the lapse of the 60-day period prescribed herein within which to
appeal with the court of competent jurisdiction otherwise the assessment
becomes conclusive and unappealable. (Sec. 195, LGC)

e. The competent court referred to is the RTC/MTC/MetC/MCTC which acts in

the exercise of its original jurisdiction, depending on the amount. Local tax
cases originally decided by the MTC/MetC/MCTC may be appealed to RTC.

NOTE: When an assessment is seasonably disputed, the collection of tax, fee,

or charge subject matter of the assessment should be held in abeyance
pending final determination thereof.

b) Refund
a. A written claim for refund or credit is filed with the local treasurer.

b. A claim or proceeding is then filed with the court of competent jurisdiction

(depending upon the jurisdictional amount) within 2 years from the date of
the payment of such tax, fee, or charge, or from the date the taxpayer is
entitled to a refund or credit. (Sec. 196, LGC)
 NOTE: The filing of a written claim for refund with the local treasurer is a
condition precedent for maintaining a court action. If the local treasurer does
not act on the written claim for refund and the 2-year statute of limitation is
about to expire, the taxpayer should forthwith initiate the court action and
consider the treasurer’s inaction as a denial of his claim for refund.

c) Action before the Secretary of Justice

a. Administrative appeal questioning the constitutionality or legality within 30
days from the effectivity of the tax ordinance or revenue measure.

b. Secretary of Justice shall render a decision within 60 days from date of

receipt of the appeal.

c. Within 30 days after receipt of the decision or the lapse of 60-day period
without action from the Secretary of Justice, aggrieved party may file
appropriate proceedings with a court of competent jurisdiction.

NOTE: Such appeal shall not have the effect of suspending the effectivity of
the ordinance and the accrual of the payment of the tax, fee, or charge levied
therein. (Sec. 187, LGC) The three separate periods (30-30-60) are given for
compliance as a prerequisite before seeking redress in a competent court.
(Jardine Davies Insurance Brokers, Inc. vs. Aliposa, G.R. No. 118900, February
27, 2003)

JARDINE DAVIES INSURANCE BROKERS vs. HON. ERNA ALIPOSA

G.R. No. 118900, February 27, 2003

FACTS: On 1993, the DOJ, on petition of the Philippine Racing Club, Inc.,
declared null and void the Makati Revenue Code, which provides, inter alia, for
the schedule of real estate, business and franchise taxes in the Municipality of
Makati at rates higher than those in the Metro Manila Revenue Code. Pending
resolution of its MR of the Resolution of the DOJ, Makati filed a petition ad
cautelam with the RTC of Makati alleging validity of the Ordinance. In the
meantime, respondent Makati continued to implement the ordinance.
Petitioner was assessed and billed by the respondents for taxes, fees and
charges under the ordinance for the second, third, and fourth quarters of
1993. Petitioner paid its quarterly business taxes without protest. On 1994,
petitioner requested Makati to compute its business tax liabilities in
accordance with the Metro Manila Revenue Code and not under the
ordinance considering that it was already declared by the DOJ null and void.
Petitioner asked that it be credited for the amount it overpaid or to refund its
overpayment. When Makati denied the request, petitioner filed a complaint.
RTC dismissed the complaint on ground of prescription, holding that petitioner
failed to file an opposition or protest within 60 days from the notice of
 assessment. Petitioner moved for reconsideration alleging that it was not
required to first file a protest with Makati before instituting its action for a
refund of its overpayment or for it to be credited for said overpayments. The
MR was, however, denied by RTC. Hence, petitioner brought the matter before
the SC.

ISSUE: Whether or not petitioner’s failure to interpose the requisite appeal to

the Secretary of Justice is fatal to its complaint for a refund.

RULING: Yes, the petitioner’s failure to interpose the requisite appeal to the
Secretary of Justice is fatal to its complaint for a refund. The Court agreed with
the petitioner that as a general precept, a taxpayer may file a complaint
assailing the validity of the ordinance and praying for a refund of its perceived
overpayments without first filing a protest to the payment of taxes due under
the ordinance. However, it held that the petitioner was proscribed from filing
its complaint with the trial court for the reason that petitioner failed to appeal
to SOJ w/n 30 days from the effectivity date of the ordinance as mandated by
Sec. 187 of LGC. In Reyes v. CA, the Court ruled that failure of a taxpayer to
interpose the requisite appeal to the Secretary of Justice is fatal to its
complaint for a refund. A taxpayer may file a complaint assailing the validity
thereof and praying for are fund of its perceived overpayments without first
filing a protest. The Court, therefore, denied the petition.

10. Assessment and Collection of Local Taxes

a) Remedies of Local Government Units
The LGU may enforce collection of delinquent taxes, fees, charges and other
revenues by civil action in any court of competent jurisdiction. The civil action
shall be filed by the local treasurer within five (5) years from the date of
assessment (Sec. 194, LGC).

The term “civil action” would preclude a criminal case as a proper remedy for
collection of delinquent local taxes (Republic vs. Patanao, 20 SCRA 712).

NOTE: The local government files an ordinary suit for the collection of sum of
money before the MTC, RTC or CTA depending upon the jurisdictional amount.

b) Prescriptive Period
GR: Within five (5) years from the date they become due.

No action for collection of such taxes, fees, or charges, whether administrative

or judicial, shall be instituted after the expiration of such period.

EXCEPTION:
 In case of fraud or intent to evade the payment of taxes, fees, or charges, the
assessment may be made within ten (10) years from discovery of fraud or
intent to evade payment.

Within five (5) years from date of assessment by administrative or judicial

action.

B. Real Property Taxation

Real Property Tax is a direct tax on ownership of lands and buildings or other improvements
thereon not specially exempted and is payable regardless of whether the property is used or not,
although the value may vary in accordance with such factor.
Real Property Tax is a fixed proportion of the assessed value of the property being taxed and
requires, therefore, the intervention of assessors.
R.A. 7160, otherwise known as the Local Government Code, provides that the said law adopts
actual use of real property as basis assessment, even if the user is not the owner. (Province of
Nueva Ecija v Imperial Mining Co., Inc., G.R. No. 59463, November 19, 1982)

1. Fundamental Principles
The appraisal, assessment, levy and collection of real property tax shall be guided by the
following fundamental principles: (Sec. 198, LGC)
a. Real property shall be appraised at its current and fair market value.

b. Real property shall be classified for assessment purposes on the basis of its
actual use.
NOTE: Actual use refers to the purpose for which the property is principally
or predominantly utilized by the person in possession of the property. (Sec.
199(b), LGC)

c. Real property shall be assessed based on a uniform classification within each

LGU.

d. The appraisal, assessment, levy and collection of real property tax shall not be
left to any private person.

e. The appraisal and assessment of real property shall be equitable.

NOTE: Real Property shall be classified, valued and assessed on the basis of
its actual use regardless of where located, whoever owns it and whoever
uses it (Sec. 217, LGC)
2. Nature
a. It is a direct tax on the use of real property.
Note: Real property shall be classified, valued and assessed on the basis of
its actual use regardless of where located, whoever owns it, and whoever
uses it. (Sec. 217, LGC)
 b. It is an ad valorem tax where the tax base is a fixed proportion of the value of
the property. (Sec. 199(c), LGC)

c. It is proportionate because the tax is calculated on the basis of a certain

percentage of the value assessed.

d. It creates a single, indivisible obligation.

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

NOTE: LGUs responsible for the administration of real property tax

1. Provinces
2. Cities
3. Municipalities in Metro Manila Area

3. Imposition
a) Power to Levy
A. Has a Power to impose an Ad Valorem Tax on Real Property, levied
annually, by a province (rate is not exceeding 1% of the assessed value) or
city/municipality (rate is not exceeding 2%) within Metropolitan Manila Area.
LGC merely provides range, the LGU may enact ordinance that will fix the
rates.

B. No Power to Impose Tax on Real Property, are those municipalities

outside metropolitan manila area.

b) Exemption from Real Property Tax

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

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

thereto, mosques, non-profit or religious cemeteries and all lands, buildings,
and improvements actually, directly, and exclusively used for religious,
charitable or educational purposes;

(c) All machineries and equipment that are actually, directly, and exclusively
used by local water districts and GOCCs engaged in the supply and distribution
of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and
 (e) Machinery and equipment used for pollution control and environmental
protection.

4. Appraisal and Assessment

Appraisal is the act or process of determining the value of property as of a specified date
for a specific purpose. [Sec. 199(e), LGC]

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

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

Fundamental Principles of Appraisal, Assessment, Levy, and Collection of Real Property

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

2. Real property shall be classified for assessment purposes on the basis of its
actual use;

3. Real property shall be assessed on the basis of a uniform classification within

each LGU;

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

5. The appraisal and assessment of real property shall be equitable.

a) Classes of Real Property

For purposes of assessment, real property shall be classified as residential,
agricultural, commercial, industrial, mineral, timberland or special. [Sec. 215, LGC]

1. Residential land – land principally devoted to habitation [Sec. 199(u), LGC]

2. Agricultural land – land devoted principally to the planting of trees, raising of

crops, livestock and poultry, dairying, salt making, inland fishing and similar
aquaculture activities and other agricultural activities and is not classified as
mineral, timber, residential, commercial or industrial land [Sec. 199(d), LGC]

3. Commercial land – land devoted principally for the object of profit and is not
classified as agricultural, industrial, mineral, timber or residential land [Sec.199(i),
LGC]

4. Industrial land – land devoted principally to industrial activity as capital

investment and is not classified as agricultural, commercial, timber, mineral or
residential land [Sec. 199(n), LGC]
5. Mineral land – land in which minerals exist in sufficient quantity or grade to
justify the necessary expenditures to extract and utilize such minerals [Sec. 199(p),
LGC]

6. Timberland – land identified as forest or reserved area by the government, which

may or may not be granted to a concessionaire, licensee, lessee or permitee [BLGF
Manual on Real Property Appraisal and Assessment Operations]

7. Special
a. all lands, buildings and other improvements actually, directly and exclusively
used for hospitals, cultural, or scientific purposes, and

b. those owned and used by local water districts, and GOCCs rendering
essential public services in the supply and distribution of water and/or
generation and transmission of electric power
[Sec. 216, LGC]

Declaration of real property by owner or administrator

All persons owning or administering real property, including improvements therein,
shall prepare a sworn statement:

1. declaring the true value of the property which shall be the current and
FMV of the property; and

2. containing a sufficient description of the property for assessment

purposes.

The declaration must be filed with the assessor once every 3 years during the
period from January 1 to June 30. [Sec. 202, LGC]

Declaration by person acquiring real property or making improvements

A sworn statement declaring the true value of the property must be filed with the
provincial, city or municipal assessor within 60 days after the acquisition of a real
property or upon completion or occupancy of the improvement, whichever comes
earlier. [Sec. 203, LGC]

Declaration by the local assessor

When the person required to file the sworn declaration under Sec. 202 of the LGC
refuses or fails to make such declaration, the provincial, city or municipal assessor
shall declare the property in the name of the defaulting owner, and shall assess the
property for taxation. [Sec. 204, LGC]

Notice of transfer of real property

 Any person who shall transfer real property ownership to another shall notify the
provincial, city or municipal assessor within 60 days from the date of such transfer.
The notification shall include:
1. Mode of transfer,
2. Description of the property alienated, and
3. Name and address of the transferee [Sec. 208, LGC]

Appraisal of Real Property at Fair Market Value

All real property shall be appraised at the current and FMV prevailing at the locality
where the property is situated. [Sec. 201, LGC]
FMV is the price at which property may be sold by a seller who is not compelled to
sell and bought by a buyer who is not compelled to buy. [Sec. 199(l), LGC]

Determination of FMV
1. The assessor of the province, city or municipality or his deputy may
summon the owners or persons having legal interest therein and witnesses,
and may administer oaths, and take deposition concerning the property, its
ownership, amount, nature, and value. [Sec. 213, LGC]

2. The assessors shall prepare a schedule of FMV for the different classes
of real property situated in their respective local government units for
enactment by ordinance of the Sanggunian concerned. [Sec. 212, LGC]

3. The schedule of FMV shall be published in a newspaper of general

circulation in the LGU concerned or in the absence thereof, shall be posted
in the provincial capitol, city or municipal hall and in 2 other conspicuous
public places therein. [Sec.212, LGC]

4. The assessor may recommend to the Sanggunian amendments to

correct errors in valuation in the schedule of FMV. The Sanggunian shall, by
ordinance, act upon the recommendation within 90 days from its receipt.
[Sec. 214, LGC]

b) Assessment Based on Actual Use

Real property shall be classified, valued and assessed on the basis of actual use
regardless of where located, whoever owns it, and whoever uses it. [Sec. 217, LGC]

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

Note: Unpaid realty taxes attach to the property and are chargeable against the
person who had actual or beneficial use and possession of it regardless of whether
or not he is the owner. [Estate of Lim v. City of Manila, G.R. No. 90639 (1990)]
Assessment levels
It is the percentage applied to the FMV to determine the taxable value of the
property. [Sec. 199(g), LGC]

Note: Assessment levels shall be fixed by ordinances of the Sanggunian at rates not
exceeding those prescribed under Sec. 218 of the LGC.

Assessed or Taxable Value

It is the FMV of the real property multiplied by the assessment level. [Sec. 199(h),
LGC]
• Assessed Value = FMV × AssessmentLevel
• RPT = Assessed Value × Tax Rate

General revisions of assessments and property classification

The local assessor shall undertake a general revision of real property assessments
every 3 years. [Sec. 219, LGC]

Valuation of real property by assessor

The local assessor shall make a classification, appraisal and assessment of the real
property irrespective of any previous assessment or taxpayer’s valuation thereon in
the following cases:

1. real property is declared and listed for taxation purposes for the first time;

2. there is an ongoing general revision of property classification and assessment; or

3. a request is made by the person in whose name the property is declared. [Sec.
220, LGC]

Note: The assessment shall not be increased more often than once every 3 years
except in case of new improvements substantially increasing the value of said
property or of any change in its actual use. [Sec. 220, LGC]

Date of effectivity of assessment or reassessment

General rule: All assessments or reassessments made after January 1 of any year
shall take effect on January 1 of the succeeding year [Sec. 221, LGC]

Exceptions: Reassessments due to the following causes shall be made within 90

days from the date of any cause and shall take effect at the beginning of the
quarter subsequent to the reassessment:

1. partial or total destruction

2. major change in actual use;
3. any great and sudden inflation or deflation of real property values;
 4. gross illegality of the assessment when made; or
5. any other abnormal cause. [Sec. 221, LGC]

Assessment of property subject to back taxes

Property declared for the first time shall be assessed for taxes for the period during
which it would have been liable but in no case for more than 10 years prior to the
date of initial assessment [Sec. 222, LGC]

Notification of new or revised assessment

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

Notice may be given personally or by registered mail or through the assistance of

the Punong Barangay to the last known address of the person to be served. [Sec.
223, LGC]

5. Collection
a) Date of Accrual
1. The real property tax for any year shall accrue in the first day of January
and from that date it shall constitute a lien on the property which shall
be superior to any other lien, mortgage, or encumbrance of any kind
whatsoever, and shall be extinguished only upon the payment of the
delinquent tax (Sec. 246, LGC)

b) Periods to Collect
1. The owner of the real property or the person having legal interest
therein may pay the basic real property tax and the additional tax for
Special Education Fund (SEF) due thereon without interest in four (4)
equal installments:
1. The first installment to be due and payable on or before March
31;
2. The second installment, on or before June 30;
3. The third installment, on or before September 30; and
4. The last installment, on or before December 31.

2. The basic real property tax and any other tax levied under Title II of the
Book II of the LGC shall be collected within five (5) years from the date
they become due. In case of fraud or intent to evade payment of the tax,
such action may be instituted for the collection of the same within ten
(10) years from the discovery of such fraud or intent to evade payment.

3. Suspension of the Running of the Prescriptive Period

 1. The local treasurer is legally prevented from collecting the tax;
2. The owner of the property or the person having legal interest
therein requests for reinvestigation, and executes a waiver in
writing before the expiration of the period within which to
collect; and
3. The owner of the property or the person having legal interest
therein is out of the country or otherwise cannot be located.
(Sec. 270, LGC)

c) Remedies of Local Government Units

1. Under Sec. 254, the local treasurer is required to immediately post a
notice of delinquency in publicly accessible and conspicuous places and
publish it in a newspaper when the real property tax becomes
delinquent. Thereafter, under Sec. 258, the local treasurer should issue
and execute a warrant of levy. If there is no action coming from the
taxpayer, the simultaneous institution of civil and judicial remedies such
as the sale of real property at public auction and collection through
courts (under Sec. 266) of appropriate jurisdiction will be enforced.

2. Tax delinquencies which are not collected within the five-year period (or
10 years as the case may be) should be automatically written off. No
action for the collection of the tax, whether administrative or judicial,
shall be instituted after the expiration of such period.

6. Taxpayer’s Remedies
a) Contesting an Assessment
1. Payment Under Protest; Exceptions
GENERAL RULE:

No protest shall be entertained unless the taxpayer first pays the tax.
There shall be annotated on the tax receipts the words “paid under
protest”.

National Power Corp. v The Prov. Treasurer of Benguet, et al.

GR No. 209303, November 14, 2016

“If the property being taxed has not been dropped from the assessment
roll, taxes must be paid under protest if the exemption from taxation is
insisted upon.”

FACTS:
National Power Corporation (NPC) is a government-owned and
controlled corporation created to undertake the development of power
generation and production from hydroelectric or other sources, and may
undertake the construction, operation and maintenance of power
plants, dams, reservoirs, and other works. It operated and maintains the
Binga Hydro-Electric Power Plant. Respondents Provincial Treasurer,
Provincial Assessor, Municipal Treasurer and Municipal Assessor of
Itogon are representatives of the province of Benguet, a local
government unit. Respondent issued the subject assessment in their
official capacities.

Municipal Assessor of Benguet assessed the NPC the amount of

₱62,645,668.80 real property tax. NPC challenged before the Local
Board of Assessment Appeals (LBAA) the legality of the assessment and
the authority of the respondents to assess and collect real property
taxes from it when its properties are exempt pursuant to Section 234 (b)
and (c) of Local Government Code. Respondents alleged that NPC’s
properties were not exempt from tax since the properties were
classified in their tax declarations as “industrial,” “for industrial use,” or
“machineries” and “equipment.” There was no evidence that the
properties were being used for generation and transmission of electric
power. LBAA deferred the proceedings upon NPC’s payment under
protest of the assessed amount, or upon filing of a surety bond to cover
the disputed amount of tax. NPC filed a petition for review before the
Central Board of Assessment Appeals (CBAA) claiming that payment
under protest was not required before it could challenge the authority
of respondents to assess tax on tax exempt properties before the LBAA.
CBAA dismissed the appeal for being filed out of time. The CBAA, in an
Order denied the NPC’s motion for reconsideration. It ruled that it is
incumbent upon the NPC to pay under protest before the LBAA could
entertain its appeal as provided under LGC. NPC appealed to CTA en
banc by filing a Petition for Review. The CTA en banc denied the same
for lack of merit.

ISSUE:
Whether or not NPC need to pay the assessed amount under protest in
claiming for an exception from the payment of real property tax?

RULING:
Yes. Settled is the rule that should the taxpayer/real property owner
question the excessiveness or reasonableness of the assessment, LGC
directs that the taxpayer should first pay the tax due before his protest
can be entertained. A claim for exemption from the payment of real
property taxes does not actually question the assessor’s authority to
assess and collect such taxes, but pertains to the reasonableness or
correctness of the assessment by the local assessor. Every person who
shall claim exemption from payment of real property taxes imposed
upon said property shall file with the provincial, city, or municipal
assessor sufficient documentary evidence in support for such claim. The
burden of proving is upon whom the subject real property is declared. If
the property being taxed has not been dropped from the assessment
roll, taxes must be paid under protest if the exemption from taxation is
insisted upon. NPC’s failure to comply with the mandatory requirement
of payment under protest in accordance with Section 252 of the LGC
was fatal to its appeal.

EXCEPTIONS:
1. The payment of the tax prior to the protest is not necessary
where the taxpayer questions the authority and power of the assessor
to impose the assessment and of the treasurer to collect the tax.

Alejandro Ty, et al. v The Hon. Aurelio Trampe, et al.

GR No. 117577, December 01, 1995

FACTS:
Petitioner Alejandro Ty and MVR Picture Tube Inc., both registered
owners of lands and buildings in the then Municipality of Pasig, assailed
the legality of the increase of real estate taxes imposed by and being
collected in Pasig from the year 1994.

As such, petitioners filed with the Regional Trial Court of the National
Capital Judicial Region, Branch 163, presided over by respondent Judge,
a Petition for Prohibition with prayer for a restraining order and/or writ
of preliminary injunction to declare null and void the new tax
assessments and to enjoin the collection of real estate taxes based on
said assessments. In its Decision, respondent Judge denied the petition
"for lack of merit". Aggrieved, petitioners filed this present Petition for
Review directly before the Supreme Court.

On the other hand, respondents argue that this case is premature

because petitioners neither appealed the questioned assessments on
their properties to the Board of Assessment Appeal, pursuant to Section
226 nor paid the taxes under protest, per Sec. 252 of the LGC.

ISSUE:
Whether the petitioners are required to exhaust administrative
remedies prior to seeking judicial relief?

RULING:
No. Although as rule, administrative remedies must first be exhausted
before resort to judicial action can prosper, there is a well-settled
exception in cases where the controversy does not involve questions of
fact but only of law.

The protest contemplated under Sec. 252 of R.A. 7160 is needed where
there is a question as to the reasonableness of the amount assessed.
Hence, if a taxpayer disputes the reasonableness of an increase in a real
estate tax assessment, he is required to "first pay the tax" under protest.
Otherwise, the city or municipal treasurer will not act on his protest. In
the case at bench however, the petitioners are questioning the very
authority and power of the assessor, acting solely and independently, to
impose the assessment and of the treasurer to collect the tax. These are
not questions merely of amounts of the increase in the tax but attacks
on the very validity of any increase.

The Supreme Court constituted the Central Board of Assessment

Appeals as a fact finding body to assist the Court in resolving said factual
issues. But in the instant proceedings, there are no such factual issues.
Therefore, there is no reason to require petitioners to exhaust the
administrative remedies provided in RA 7160 nor to mandate a referral
by this Court to said Board.

2.“Payment under protest” is not a prerequisite when the issue

is the legality or validity of the assessment. Certainly, it would be unjust
to require the realty owner to first pay the tax, the validity of which he
precisely questions, before he can lodge a complaint to the court.

National Power Corporation v Mun. Gov. of Navotas, et al.

GR No. 192300, November 24, 2014

FACTS:
Petitioner National Power Corp. (NPC) entered into a Build-Operate-and-
Transfer Project Agreements (BOTs) with Mirant Navotas I Corp. (MNC-I)
and Mirant Navotas II Corp. (MNC-II). The BOTs are for the construction,
operation and eventual transfer to petitioner of MNC-I and MNC-II’s
certain gas turbine power stations. Petitioner has the obligation to pay
for all taxes, except business taxes, relative to the implementation of the
agreements.

For the 1st quarter of 2003, petitioner paid respondent Mun. of Navotas
real property taxes but stopped paying thereafter claiming exemption
from payment thereon pursuant to Sec. 243 of the LGC. On May 25,
 2005, respondent Mun. Treasurer Manuel Enriquez notified MNC-I and
MNC-II of their real property tax delinquencies. On November 21, 2005,
a Warrant of Levy was received from Enriquez. Consequently, petitioner
filed before the RTC a Petition for Declaratory Relief, Annulment of
Notice of Delinquency, Warrant of Levy, and Notice of Sale with prayer
for the issuance of a Writ of Preliminary Injunction and TRO. The same
was denied hence respondents proceeded with the public auction.
Petitioner sought the declaration of the same as null and void.

In denying the petition, the RTC ruled that although Section 234 of the
LGC exempts petitioner from payment of real property tax due on the
subject properties, failure to exhaust administrative remedies resulted in
the finality of the assessment. The Petition for Review filed by the
petitioner was dismissed by the CTA division which was subsequently
affirmed by CTA en banc.

ISSUE:
Whether appeals to the LBAA and CBAA are required before the petition
for declaratory relief filed by petitioner before the RTC may be given due
course.

RULING:
No. When the legality or validity of the assessment is in question, and
not its reasonableness or correctness, appeals to the LBAA, and
subsequently to the CBAA, pursuant to Sections 226 and 229 of the LGC,
are not necessary. In the event that the taxpayer questions the authority
and power of the assessor to impose the assessment and of the
treasurer to collect the real property tax, resort to judicial action may
prosper.

In the case at bar, the claim of petitioner essentially questions the very
authority and power of the Municipal Assessor to impose the
assessment and of the Municipal Treasurer to collect the real property
tax with respect to the machineries and equipment located in the
Navotas I and II power plants. Certainly, it does not pertain to the
correctness of the amounts assessed but attacks the validity of the
assessment of the taxes itself.

FILING OF PROTEST

How By filing a protest in writing

When Must be filed within 30 days from payment of the
 tax
To the provincial, city treasurer or municipal
treasurer in the case of a municipality within
To Whom
Metropolitan Manila Area. The tax or portion
Filed
thereof paid under protest, shall be held in trust
by the treasurer concerned.
Period to The local treasurer shall decide the protest within
Decide sixty (60) days from receipt.
a. In favour of the taxpayer – the amount or
portion of the tax protested shall be
refunded to the protestant, or applied as tax
credit against his existing or future tax
Decision
liability.
on the
b. Denied or upon lapse of 60-day period –
Protest
the taxpayer may appeal to the LBAA and
subsequently to the CBAA pursuant to Sec.
226 and 229 as in the case of assessment
appeals.

By posting the surety bond, a taxpayer may be considered to have

substantially complied with Section 252 of the LGC for the said bond
already guarantees the payment to the Office of the Local Treasurer of
the total amount of real property taxes and penalties due. (Camp John
Hay Development Corp. v Central Board of Assessment Appeals, GR No.
169234, October 02, 2013)

b) Contesting a Valuation of Property

1. Appeal to the Local Board of Assessment Appeals
1. Composition of the LBAA
i. The Registrar of Deeds, as Chairman;
ii. The provincial or city prosecutor as member;
iii. The provincial or city engineer as member (Sec. 227,
LGC)
2. Jurisdiction of the LBAA
i. LBAA has jurisdiction to hear appeals of owners of
persons having legal interest in the property who are
not satisfied with the action of the assessor on an
assessment of his property.
ii. In the exercise of its appellate jurisdiction, the LBAA
shall have the power to
1. Summon witnesses,
2. Administer oaths,
3. Conduct ocular inspection,
4. Take depositions, and
5. Issue subpoena and subpoena duces tecum.
3. Period for the decision of an appeal
i. The LBAA shall decide the appeal within 120 days from
the date of receipt of such appeal. The Board, after
hearing, shall render its decision based on substantial
evidence or such relevant evidence on record as a
reasonable mind might accept as adequate to support
the conclusion (Sec. 229(a), LGC)
2. Appeal to the Central Board of Assessment Appeals
1. Composition of the CBAA
i. A Chairman; and
ii. Two (2) members (Sec. 230, LGC)
2. Jurisdiction of the CBAA
i. The Board shall have appellate jurisdiction over all
assessment cases decided by the LBAA. (Sec 230, LGC)
ii. The CBAA can be appointed by the Supreme Court to
act as court-appointed fact-finding commission to assist
the Court in resolving the factual issues raised in the
cases before it. In that regard, the CBAA is not acting in
its appellate jurisdiction. (Mothay v. Undersecretary of
Finance, En banc Minute Resolution, Nov. 5, 1991)
iii. The owner of the property or the person having legal
interest therein or the assessor who is not satisfied with
the decision of the Board may, within 30 days after
receipt of the decision of said board, appeal, as herein
provided. The decision of the Central Board shall be
final and executory. (Sec. 229)c), LGC)
 3. CBAA has NO authority to hear purely legal issues
i. Such authority is lodge with the regular courts. Thus,
the issue of whether RA 7160 repealed PD 921, is an
issue which does not find referral to the CBAA beefore
resort is made to the courts. (Ty v. Trampe, GR No.
117577, December 1, 1995)
4. Appeal to LBAA or CBAA do not suspend the collection of tax
(Sec. 231)
5. Period within which CBAA should resolve a case submitted to it
for decision
i. Within 12 months from the date of receipt thereof,
which decision shall become final and executory after
the lapse of 15 days from the date of receipt thereof by
the appellant.

3. Effect of Payment of Taxes

1. Appeal on assessments of real property shall, in no case,
suspend the collection of the corresponding realty taxes on the
property involved as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon
the final outcome of the appeal. (Sec. 231, LGC)
c) Compromise of Real Property Tax Assessment

Section 276 Section 277

By whose President of the
Sangunian
authority Philippines
In cases of:
a. General failure of crops
b. Substantial decrease in
When public interest so
When the price of agricultural or
requires
agri-based products
c. calamity in any province,
city or municipality

By ordinance passed prior to

the 1st day of January of any
How year and upon -
recommendation of the local
disaster coordinating council
 Condone or reduce, wholly Condone or reduce the
or partially, the taxes and real property tax and
What is
interest thereon for the interest for any year in
compromise
succeeding year or years in any province or city or
d
the city or municipality municipality within the
affected by the calamity. Metro Manila.