Mhealler Notes LOCAL TAX

LOCAL TAX 5.
Common limitations on the taxing power of LGUs
(Sections 128 to 196 of R.A. No. 7160) Exclusionary Rule
- Where the Natl govt elects to tax a particular area,

the delegated power of the LGUs to tax the same
field is impliedly limited.
I. LOCAL GOVERNMENT UNITS & SCOPE OF
LOCAL TAXATION - Where the Natl govt elects to tax a particular area
(subject matter of taxation), impliedly withholding
Territorial jurisdiction: form the local government the delegated power to
tax the same field.
1. Provinces
- Example: The Natl govt already subject AAA Corp
2. Cities to income tax, the LGU could no longer subject it to
income tax. However, the LGU can still impose
3. Municipalities business taxes (different subject matter of taxation)
4. Barangays Natl govt > LGU
II. POWER TO CREATE SOURCES OF REVENUE III. AUTHORITY TO GRANT TAX EXEMPTION
PRIVILEGES
Power to tax of the LGUs is NOT an inherent power. It is
a delegated power from direct authority of the SEC. 192. Authority to Grant Tax Exemption Privileges. - Local
Constitution and not by Congress. Without the government units may, through ordinances duly approved,
Constitution, LGUs have no power to tax. grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.
Local Government Code is a product of an enactment by
Congress of a law for local taxation as authorized by the LGUs can grant:
Constitution.
a. tax exemptions
Reason for giving LGUs power to tax:
b. tax incentives
Pursuant to LOCAL AUTONOMY provision of the
Constitution specifically to safeguard the viability and c. tax reliefs
self-sufficiency fo each and every LGU by directly
granting them the power to raise its own sources of Requisite: Duly approved Ordinance
revenues
Note: LGUs can grant tax exemptions however,
LGUs only have RESIDUAL TAXING POWERS this is not an inherent power. Since the power to tax of
LGUs is not inherent, the authority to grant tax
- Only those taxes not imposed by the National exemption is also not inherent.
Government through the Bureau of Customs (BOC)
and the BIR may fall within the taxing power of the Tax exemption, relief or incentive does NOT extend to
LGU. It cannot overlap generally because of the exemption of REGULATORY FEES. These fees are under
principle of avoidance of double taxation. the police power of the LGUs.
SEC. 186. Power To Levy Other Taxes, Fees or Charges. - Local

government units may exercise the power to levy taxes, fees or
charges on any base or subject not otherwise specifically IV. WITHDRAWAL OF TAX EXEMPTION
enumerated herein or taxed under the provisions of the
National Internal Revenue Code, as amended, or other
PRIVILEGES
applicable laws: Provided, That the taxes, fees, or charges shall
not be unjust, excessive, oppressive, confiscatory or contrary to SEC. 193. Withdrawal of Tax Exemption Privileges. - Unless
declared national policy: Provided, further, That the ordinance otherwise provided in this Code, tax exemptions or incentives
levying such taxes, fees or charges shall not be enacted without granted to, or presently enjoyed by all persons, whether natural
any prior public hearing conducted for the purpose. 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
LIMITATIONS of the residual taxing power of LGUs:
hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.
1. Constitutional Limitation
Entities exempt from Local taxation (Categorical
2. Fundamental Principles
Exemption):
3. Public Hearing requirement
1. Local water districts
4. Principle of Pre-emption or Exclusionary Rule
2. Cooperatives duly registered under R.A. No. 6938
1 TAXATION2 FINALS | maru.mhealler | 404

(Cooperative Code of the Phils.) every January 1 and is payable every jan.
20 every year based on the past years
3. Non-stock and non-profit hospitals operations. So if there is natural calamity
this year, you will only be exempt from
4. Non-stock and non-profit educational institutions paying the tax which will accrue January 1
of next year, payable on January 20 of
5. PEZA-registered companies or companies located next year. It will not be retroactive
within the economic zones, whether the Subic Bay, because tax has already accrued and has
PEZA, Laguna, Cavite, etc., because theyre already already been paid for the present year.
taxable to 5% preferential tax in lieu of all national
and local taxes (not expressed in the LGC but (2) On the grant of tax incentives:
exempt because of special laws)
(i) The tax incentive shall be granted only to new
For all the rest, theyre taxable already to local taxation. investments in the locality and the ordinance shall
prescribe the terms and conditions therefor;
Hence, GOCCs are NOT exempt from local taxation. Sec.
193 of the LGC withdrew its previous exemption. (ii) The grant of the tax incentive shall be for a
definite period not exceeding one (1) calendar year;
1. Though it was a blanket exemption, it was
(iii) The grant of tax incentives shall be by
expressly done and is valid ordinance passed prior to the first (1st) day of January of
any year; and
The National Government continues to be exempted as
well as its agencies and instrumentalities. LGUs are (iv) Any tax incentive granted to a type or kind of
exempt from local taxes as a rule, but a law can be business shall apply to all businesses similarly situated.
enacted to impose tax on LGUs by the Natl Govt.
Special ordinance is required for tax exemptions and
Proof of tax exemption of a particular entity: incentives because these are special cases. This is not
the general rule.
Tax Exemption certificate which is Non-transferrable
Ex. When Ondoy happened, businesses were affected.
ARTICLE 282 (IRR of LGC). Authority to Grant Tax Exemption Tax exemption can be provided for a business industry
Privileges or Incentives. similarly situated hence, it cannot be favorable to only
one or a few businesses and adverse to other business.
(a) While sanggunians may grant tax exemption, tax incentive,
OW, it becomes void.
or tax relief, such grant shall not apply to regulatory fees which
are levied under the police power of LGUs. Tax exemptions shall
be conferred through the issuance of a tax exemption It is only applicable for one year. However, if in that
certificate, which shall be non-transferable. business industry there is only one business of that kind,
it does not prevent the granting of the tax exemption.
(b) The sanggunians granting tax exemptions, tax incentives
and tax reliefs may be guided by the following:
(1) On the grant of tax exemptions or tax reliefs: V. FUNDAMENTAL PRINICIPLES (Sec. 130)
(i) Tax exemption or tax relief may be granted in
What are the fundamental principles (Sec. 130)?
cases of:
A. natural calamities, 1. Taxation shall be uniform in each LGU
B. civil disturbance, 2. Taxes, fees, charges and other impositions shall:
C. general failure of crops, or a. be equitable and based as far as practicable on

the TPs ability to pay
D. adverse economic conditions such as
substantial decrease in the prices of b. be levied and collected only for public
agricultural or agri-based products; purposes
(ii) The grant of exemption or relief shall be c. not unjust, excessive, oppressive, or
through an ordinance.
confiscatory; and
(iii) Any exemption or relief granted to a type or
kind of business shall apply to all business similarly d. not be contrary to law, public policy, national
situated; and economic policy, or in restraint of trade
(iv) Any exemption or relief granted shall take 3. The collection of local taxes, fees, charges and other
effect only during the next calendar year for a period impositions shall in no case be let to any private person
not exceeding twelve (12) months as may be
provided in the ordinance. In the case of shared Unlike taxes under the national
revenues, the exemption or relief shall only extend to government (BIR), the collection can be
the LGU granting such exemption or relief.
delegated to Authorized Agent Banks (AAB),
for local taxes, this cannot be delegated by
Next calendar year local taxes accrue
the LGUs
It is one of the differences between local SEC. 55. Veto Power of the Local Chief Executive. - (a)
taxes and national taxes. In local taxation, The local chief executive may veto any ordinance of the
both RP and local taxes, the collection of sangguniang panlalawigan, sangguniang panlungsod, or
sangguniang bayan on the ground that it is ultra vires or
taxes cannot be delegated to any private
prejudicial to the public welfare, stating his reasons
firm, including banks. therefor in writing.
Public funds cannot be used to hire private (b) The local chief executive, except the punong barangay,
lawyers shall have the power to veto any particular item or items
of an appropriations ordinance, an ordinance or resolution
4. The revenue collected shall inure solely to the adopting a local development plan and public investment
benefit of and be subject to disposition by the LGU program, or an ordinance directing the payment of money
levying the tax, fee, charge or imposition unless or creating liability. In such a case, the veto shall not affect
the item or items which are not objected to. The vetoed
otherwise provided in the LGC
item or items shall not take effect unless the sanggunian
overrides the veto in the manner herein provided;
5. Each LGU shall, as far as practicable, evolve a otherwise, the item or items in the appropriations
progressive system of taxation. ordinance of the previous year corresponding to those
vetoed, if any, shall be deemed reenacted.
(c) The local chief executive may veto an ordinance or

VI. LOCAL TAXING AUTHORITY resolution only once. The sanggunian may override the
veto of the local chief executive concerned by two-thirds
(2/3) vote of all its members, thereby making the
ordinance effective even without the approval of the local
chief executive concerned.
VII. LOCAL TAX ORDINANCE Procedure for
Approval and Effectivity Local Chief executive may approve or veto the
ordinance. (Note: Barangay captain has no veto
It must observe: powers)
a. Substantive due process - If vetoed, the Sanggunian may override the

veto by 2/3 vote of all its members
- must observe the fundamental principles provided
in Section 130 B.2 Mandatory Public Hearing
- Local tax ordinance must be within the confines of - to afford due process to the oppositors
the LGC. Any provision that is beyond the scope of
SEC. 187. Procedure for Approval and Effectivity of Tax
authority granted by the LGC makes such
ordinances and Revenue Measures; Mandatory Public
provision void. (meaning those that are provided Hearings. - The procedure for approval of local tax
in the LGC should be followed, i.e. maximum of ordinances and revenue measures shall be in accordance
professional tax is P300 per profession, LGU with the provisions of this Code: Provided, That public
cannot impose 400) hearings shall be conducted for the purpose prior to the
enactment thereof
b. Procedural due process
B.3 Publication of ordinances
B.1 Approval of the ordinance by the Sanggunian
concerned SEC. 188. Publication of Tax ordinances and Revenue
Measures. - Within ten (10) days after their approval,
SEC. 54. Approval of Ordinances. - (a) Every ordinance certified true copies of all provincial, city, and municipal
enacted by the sangguniang panlalawigan, sangguniang tax ordinances or revenue measures shall be published in
panlungsod, or sangguniang bayan shall be presented to full for three (3) consecutive days in a newspaper of local
the provincial governor or city or municipal mayor, as the circulation: Provided, however, That in provinces, cities
case may be. If the local chief executive concerned and municipalities where there are no newspapers of local
approves the same, he shall affix his signature on each circulation, the same may be posted in at least two (2)
and every page thereof; otherwise, he shall veto it and conspicuous and publicly accessible places.
return the same with his objections to the sanggunian,
which may proceed to reconsider the same. The Publication published in FULL
sanggunian concerned may override the veto of the local
chief executive by two-thirds (2/3) vote of all its members, - meaning the Entire Ordinance
thereby making the ordinance or resolution effective for
all legal intents and purposes. - after approval there must be
dissemination to the local treasurer of
(b) The veto shall be communicated by the local chief
the respective LGU for them to have it
executive concerned to the sanggunian within fifteen (15)
days in the case of a province, and ten (10) days in the
published within 10 days from date of
case of a city or a municipality; otherwise, the ordinance approval
shall be deemed approved as if he had signed it.
- published in newspaper of LOCAL
(c) ordinances enacted by the sangguniang barangay circulation for 3 consecutive days
shall, upon approval by the majority of all its members, be
signed by the punong barangay.

- If there are no such newspaper, then post SEC. 168. Surcharges and Penalties on Unpaid Taxes, Fees, or
in at least 2 conspicuous and public Charges. - The sanggunian may impose a surcharge not
accessible places 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
Tax Ordinance No. 7988 is null and void as said ordinance was or charges including surcharges, until such amount is fully paid
published only for one day in the 22 May 2000 issue of the Philippine but in no case shall the total interest on the unpaid amount or
Post in contravention of the unmistakable directive of the Local portion thereof exceed thirty-six (36) months.
Government Code of 1991 to publish it for 3 consecutive days. Also any
amending ordinance to Tax Ordinance No. 7988 is null and void. If an SEC. 516. Penalties for Violation of Tax ordinances. - The
order or law sought to be amended is invalid, then it does not legally sanggunian of a local government unit is authorized to
exist, there should be no occasion or need to amend it. (Coca-Cola prescribe fines or other penalties for violation of tax ordinances
Philippines, Inc. vs. City of Manila) but in no case shall such fines be less than One thousand pesos
(P=1,000.00) nor more than Five thousand pesos (P=5000.00),
nor shall imprisonment be less than one (1) month nor more
Question on the constitutionality or legality than six (6) months. Such fine or other penalty, or both, shall be
imposed at the discretion of the court. The sangguniang
Section 187. Provided, further, That any question on the barangay may prescribe a fine of not less than One hundred
constitutionality or legality of tax ordinances or revenue pesos (P=100.00) nor more than One thousand pesos
measures may be raised on appeal within thirty (30) days from (P=1,000.00).
the effectivity thereof to the Secretary of Justice who shall render
a decision within sixty (60) days from the date of receipt of the
LIMIT 25% surcharge
appeal: Provided, however, That such appeal shall not have the
effect of suspending the effectivity of the ordinance and the
accrual and payment of the tax, fee, or charge levied therein:
Interest 2% per month of the unpaid taxes, fees or
Provided, finally, That within thirty (30) days after receipt of the charges including surcharges (up to 36 months interest
decision or the lapse of the sixty-day period without the only)
Secretary of Justice acting upon the appeal, the aggrieved party
may file appropriate proceedings with a court of competent i.e. unpaid taxes of 1Million in 2007
jurisdiction.
Surcharge limit is 250,000
- Raise on appeal to Secretary of Justice within
30 days from effectivity Interest is 2% of 1,250,000 up to 36 months only
- SOJ given 60 days after receipt of appeal to

give decision
VIII. COMMON LIMITATIONS ON THE TAXING
- After SOJ, appeal to RTC
POWER OF THE LGUs
o 30 days after adverse decision
SEC. 133. Common Limitations on the Taxing Powers of
Local Government Units. - Unless otherwise provided
o 30 days after end of 60 days from
herein, the exercise of the taxing powers of provinces,
receipt of SOJ without decision
cities, municipalities, and barangays shall not extend to
Void or Suspended Tax Ordinances the levy of the following:
Effect of appeal: (a) Income tax, except when levied on banks and other
financial institutions;
- Does not suspend the effectivity of the
ordinance nor the accrual and payment of the - Income tax is already imposed by the Natl
tax, fee or charge levied. Hence, the ordinance govt (Principle of Pre-emption / Exclusionary
remains valid until adjudged unlawful or Rule)
unconstitutional.
- Banks and other financial institutions
Refund of taxes from a void tax ordinance (including money chargers, pawnshops etc.)
are imposed income taxes since they are
- allowed only if declaration of nullity of the highly profitable institutions (not a high-risk
ordinance is based on the ground of void ab business)
initio
(b) Documentary stamp tax;
SEC. 190. Attempt to Enforce Void or Suspended Tax
ordinances and revenue measures. - The enforcement of any - already covered by the NIRC
tax ordinance or revenue measure after due notice of the
disapproval or suspension thereof shall be sufficient ground for (c) Taxes on estates, inheritance, gifts, legacies and
administrative disciplinary action against the local officials and other acquisitions mortis causa, except as otherwise
employees responsible therefor. provided herein;
Administrative cases may be filed against an erring local - already covered by NIRC.
government official who continues to enforce the ordinance
that has been declared as void.
- Except those subject to taxes on transfer or
real property by provinces and cities (Sec. 135
Penalties for Violations of Tax Ordinances
and 151)

(d) Customs duties, registration fees of vessel and - already covered by the NIRC
wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except - However, for local business taxes, if you reach
wharfage on wharves constructed and maintained by the maximum amount, that can already be
the local government unit concerned; equated to percentage taxes (i.e. 37.5% of 1%
of gross receipts for manufacturers if 6.5M or
- wharfage on wharves constructed and more)
maintained by the local government unit
concerned still taxable (j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation
(e) Taxes, fees and charges and other impositions upon of passengers or freight by hire and common carriers
goods carried into or out of, or passing through, the by air, land or water, except as provided in this Code;
territorial jurisdictions of local government units in the
guise of charges for wharfage, tolls for bridges or - already covered as percentage taxes in NIRC
otherwise, or other taxes, fees or charges in any form
whatsoever upon such goods or merchandise; - However, gross receipts of tricycle operators
are still subject to local taxes
(f) Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or fishermen; (k) Taxes on premiums paid by way of reinsurance or
retrocession;
(g) Taxes on business enterprises certified to by the
Board of Investments as pioneer or non-pioneer for a - Hence, premiums on insurance are as a rule
period of six (6) and four (4) years, respectively from covered
the date of registration;
- Only the reinsurance is exempt since they
A domestic corporation certified by the Board of have already been previously subjected to
Investments is not absolutely tax exempt. local taxes
If pioneer enterprise 6 years exempted (l) Taxes, fees or charges for the registration of motor
vehicles and for the issuance of all kinds of licenses or
If non-pioneer enterprise 4 years only permits for the driving thereof, except tricycles;
Pioneer enterprise - first to establish such kind of - already covered by special laws
business in the Philippines
- Taxes, fees or charges for the registration of
(non-pioneer already existing) tricycles and the issuance of licenses for
tricycles belong to the LGUs, including the
(h) Excise taxes on articles enumerated under the power to tax on their gross receipts
National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
Land Transportation Office vs. City of Butuan, SC GR No.
- For petroleum products there is a Blanket
131512, January 20, 2000
exemption, meaning it is tax exempt on the
business and the product itself The newly delegated powers to the LGU pertain to the franchising
and regulatory powers theretofore exercised by the LTFRB and not
- For other business subject to excise taxes, only to the functions of the LTO relative to the registration of motor
the article or product itself is exempt, the vehicles and issuance of licenses for the driving thereof. Clearly
business can still be taxable either as unaffected by the Local Government Code are the powers of LTO
manufacture, retailer, exporter, wholesaler under R.A. No. 4136 requiring the registration of all kinds of motor
etc. vehicles "used or operated on or upon any public highway" in the
country.
Petron Corporation vs. Mayor Tobias M. Tiangco, et.al. SC The devolution of the functions of the DOTC, performed by the
GR No. 158881, April 16, 2008 LTFRB, to the LGUs, is aimed at curbing the alarming increase of
accidents in national highways involving tricycles. It has been the
A tax on a business is distinct from a tax on the article itself, or for perception that local governments are in good position to achieve
that matter, that a business tax is distinct from an excise tax. the end desired by the law-making body because of their proximity
However, such distinction is immaterial insofar as the latter part of to the situation that can enable them to address that serious
Section 133(h) is concerned, for the phrase "taxes, fees or charges on concern better than the national government.
petroleum products" does not qualify the kind of taxes, fees or
charges that could withstand the absolute prohibition imposed by
the provision. The language of Section 133(h) makes plain that the
(m) Taxes, fees, or other charges on Philippine products
prohibition with respect to petroleum products extends not only to
excise taxes thereon, but all "taxes, fees and charges."
actually exported, except as otherwise provided herein;
- Local tax on every product exported is not

allowed
(i) Percentage or value-added tax (VAT) on sales,
barters or exchanges or similar transactions on goods - However, exporters are subjected to local
or services except as otherwise provided herein; taxes on their business of exporting

(n) Taxes, fees, or charges, on Countryside and wharf, waterway, bridge, ferry or telecommunication
Barangay Business Enterprises and cooperatives duly system funded and constructed by the local government
registered under R.A. No. 6810 and Republic Act unit concerned
Numbered Sixty-nine hundred thirty-eight (R.A. No.
6938) otherwise known as the "Cooperatives Code of Reason for charging toll fees recovery of the costs of
the Philippines" respectively; and these public roads and other infrastructures
(o) Taxes, fees or charges of any kind on the National Not all are subject to toll fees. There are individuals who
Government, its agencies and instrumentalities, and are exempt as stated above.
local government units.
- It contravenes the existing govt policy or

violative of the fundamental principles of X. SCOPE OF THE POWER TO TAX
taxation
4 LGUS can tax: Province, city, municipality and
barangay.
IX. COMMON REVENUE-RAISING POWERS OF Least taxing power Barangay

LGUS
Most taxing power Cities because it may levy taxes,
1. Service Fees and Charges fees and charges which the province or municipality may
impose. It can also impose up to 50% higher than what
2. Public Utility Charges the province or municipality may impose.
3. Toll fees or charges Taxing power of Province and municipality is mutually

exclusive. One pre-empts the other. Whatever is taxable
SEC. 153. Service Fees and Charges. - Local government by the province can no longer be taxed by municipality
units may impose and collect such reasonable fees and and vice-versa.
charges for services rendered.
The city pre-empts the municipality and the province.
Ex. For whatever type of basic services (i.e. parking fees, When the city taxes a specific subject, the municipality
garbage collection) and the province can no longer tax them.
SEC. 154. Public Utility Charges. - Local government A. Province (Secs. 134-141)
units may fix the rates for the operation of public utilities
owned, operated and maintained by them within their 1. Tax on Transfer of Real Property Ownership or
jurisdiction. Local transfer tax (LTT)
- As long as it is the LGU that owns the public SEC. 135. Tax on Transfer of Real Property
utility (i.e. LGUs except barangays can operate Ownership. - (a) The province may impose a tax on
bus operations and impose common charge to the sale, donation, barter, or on any other mode of
passengers) transferring ownership or title of real property at
the rate of not more than fifty percent (50%) of one
SEC. 155. Toll Fees or Charges. - The sanggunian percent (1%) of the total consideration involved in
concerned may prescribe the terms and conditions and the acquisition of the property or of the fair market
fix the rates for the imposition of toll fees or charges for value in case the monetary consideration involved
the use of any public road, pier or wharf, waterway, in the transfer is not substantial, whichever is
bridge, ferry or telecommunication system funded and higher. The sale, transfer or other disposition of real
constructed by the local government unit concerned: property pursuant to R.A. No. 6657 (CARL
Provided, That no such toll fees or charges shall be Comprehensive Agrarian Reform Law) shall be
collected from: exempt from this tax.
a. Officers and enlisted men of the Armed Forces of the (b) For this purpose, the Register of Deeds of the
Philippines (AFP) and members of the Philippine National province concerned shall, before registering any
Police (PNP) on mission, deed, require the presentation of the evidence of
payment of this tax. The provincial assessor shall
b. Post office personnel delivering mail, likewise make the same requirement before
cancelling an old tax declaration and issuing a new
c. Physically-handicapped, and one in place thereof. Notaries public shall furnish
the provincial treasurer with a copy of any deed
d. Disabled citizens who are sixty-five (65) years or older. transferring ownership or title to any real property
within thirty (30) days from the date of
e. When public safety and welfare so requires, the notarization. It shall be the duty of the seller, donor,
sanggunian concerned may discontinue the collection of transferor, executor or administrator to pay the tax
the tolls, and thereafter the said facility shall be free and herein imposed within sixty (60) days from the date
open for public use. of the execution of the deed or from the date of the
decedent's death.
Toll fee a charge for the use of public road, pier or

Any mode of transfer of RP ownership, such pay the LTT.
as sale, donation, barter, succession, exchange
(whether mortis causa or inter vivos, onerous However, the parties may agree among
or gratuitous) themselves that the transferee will pay it to
the taxing authority. Nonetheless, this is only
Exceptions: biding between the parties. If the transferee
fails to pay, the LGU will still go after the
a.) Transfers pursuant to CARL (transfers from transferor who is the statutory taxpayer.
the landlord to the tenant or the farmer)
Time of Payment
b.) Sale of socialized housing.
Within 60 days from:
c.) Transfer of personal property
a.) Date of the execution of the deed /
RATE: At of 1% (50% of 1%) based on the notarization (i.e. deed of sale/donation)
total consideration or the FMV if the total or
consideration received is not substantial,
whichever is higher b.) Date of the decedents death (for
transfer through succession)
Example: A religious institution donated a
parcel of land to a non-stock non-profit c.) Date of execution of final deed of sale
foundation. Subject to LTT? if property sold through public auction (if
not redeemable)
YES. The provision of the LGC is clear that all
modes of transfer of RP ownership, regardless d.) Date of lapse of redemption period if
of who the owner is subject to LTT. foreclosed
LTT is taxed on TRANSFER regardless of Register of Deeds will not transfer ownership
ownership (whether transferee or transferor is of the RP in the new owners name unless
religious institution, non-stock, non-profit theres clearance from both agencies of the
foundation) It is a privilege of transferring the government the BIR and the LGU.
RP ownership to another person. It is an excise
tax. There are 3 persons who are instrumental in
the collection of LTT:
The exemption provided by the Constitution
for religious institutions only relate to real 1. Registrar of Deeds
property taxes. It does not include local
transfer tax. 2. Local treasurer
Constitutional exemption only relate when it is 3. Notary public (NP)

actually, directly and exclusively (ADE) used for its
purpose. Transferring property cannot be Every notarization of a deed of sale or deed of
considered ADE use. conveyance of RP, the NP is required to inform
the office of the local treasurer within 30 days
in order to put into record that theres a
collectible in favor of the government.
RPT vs. LTT
RPT LTT
2. Tax on Business of Printing and Publication (Sec.
property tax directed excise tax; a tax on the 136)
against the property itself privilege of transferring RP
ownership SEC. 136. Tax on Business of Printing and
Publication. - The province may impose a tax on the
business of persons engaged in the printing and/or
publication of books, cards, posters, leaflets,
Is Capital gains tax (CGT) and LTT valid for the handbills, certificates, receipts, pamphlets, and
same transfer? others of similar nature, at a rate not exceeding
fifty percent (50%) of one percent (1%) of the gross
Yes. This is not considered direct double annual receipts for the preceding calendar year. In
taxation in its strict sense. It is only indirect the case of a newly started business, the tax shall
double taxation which is allowed. They have not exceed one-twentieth (1/20) of one percent
different taxing authority (natl govt and LGU) (1%) of the capital investment. In the succeeding
calendar year, regardless of when the business
BURDEN to pay LTT started to operate, the tax shall be based on the
gross receipts for the preceding calendar year, or
It is the duty of the seller, donor, transferor, any fraction thereof, as provided herein. The
executor or administrator (source of the RP) to receipts from the printing and/or publishing of

books or other reading materials prescribed by the based on the incoming receipt, or realized, within
Department of Education, Culture and Sports, as its territorial jurisdiction. In the case of a newly
school texts or references shall be exempt from the started business, the tax shall not jhexceed one-
tax herein imposed. twentieth (1/20) of one percent (1%) of the capital
investment. In the succeeding calendar year,
Tax on the business of printing and publishing regardless of when the business started to operate,
NOT on the business of selling the tax shall be based on the gross receipts for the
preceding calendar year, or any fraction thereof, as
Includes persons engaged in the business of provided herein.
printing and/or publication of books, cards,
posters, leaflets, handbills, certificates, Local franchise tax (LFT) is different from
receipts, pamphlets, and others of similar national franchise tax imposed under the
nature NIRC.
Except: Printing and/or publishing of books or Notwithstanding any exemption granted by

other reading materials prescribed by the any law or other special law
Department of Education as school texts or
references If one is already subject to franchise tax (as
percentage tax under NIRC), it will still be
RATE: In case of a newly started business tax subject to local franchise taxes.
shall not exceed 1/20 of 1% of the capital
investment Tax upon those businesses enjoying a
franchise at a rate not exceeding of 1% of
In case of a business operating for more than a the gross annual receipts for the preceding
year tax shall be of 1% of the gross annual calendar year based on the incoming receipt,
receipts for the preceding calendar year or realized, within its territorial jurisdiction.
Example: Includes receivables for consummated sales

even if no payment has been received
Start of operations February 2011
However, in case of a newly started business,
Capital investment 2M the tax shall not exceed 1/20 of 1% of the
capital investment.
Gross annual receipts for 2011 0
Franchises covered include those engaged in
Gross annual receipts for 2012 2M telecommunications, television, broadcasting,
water, electricity franchises granted by the
Tax due:
National Government.
2011 tax shall not exceed 1/20 of 1% of
EXAMPLE: VECO, PLDT, and other public utility
the capital investment
companies.
So 1% of 2m = 20k
Taxicabs, and other transportation contractors
are not subject to local franchise taxes
20k/20 = 1,000 business tax for 2011
because under the common limitations
2012 0 tax liability (base it on the provided in Sec. 133, LGUs are pre-empted or
preceding calendar years gross annual prohibited from imposing taxes on
receipt) transportation contractors
2013 10k (1/2 of 1% of 2M) Holders of Certificate of Public Convenience

(CPC) are not considered franchise holders,
hence, not subject to LFT
1. Franchise Tax (Sec. 137) EXAMPLE:
Franchise - is a right or privilege, affected with A telecommunications company in 2012 had

public interest, which is conferred upon private gross receipts of 100M and had 50M in
persons or corporations, under such terms and accounts receivable. What is subject to the
conditions as the government and its political LFT?
subdivisions may impose in the interest of public
welfare, security, and safety. 150M (100 + 50)
SEC. 137. Franchise Tax. - Notwithstanding any All throughout the LGC, basis of taxes is usually the
exemption granted by any law or other special law, gross receipts of the preceding calendar year
the province may impose a tax on businesses except LFT which includes incoming receipts or
enjoying a franchise, at a rate not exceeding fifty uncollected gross receipts so long as there was a
percent (50%) of one percent (1%) of the gross consummated sale.
annual receipts for the preceding calendar year
This is one instance thats different. LFT is not only
NPC vs PROVINCE OF ISABELA
imposed on the gross receipts of the preceding
calendar year but it also includes as well Section 193 of the LGC withdrew, subject to limited exceptions, the
uncollected gross receipts or incoming so long as sweeping tax privileges previously enjoyed by private and public
its realized receipts from the customer. corporations. Contrary to the contention of Napocor, Section 193 of
the LGC is an express, albeit general, repeal of all statutes granting tax
If the franchise holder is operational in many LGUs exemptions from local taxes.
(i.e. PLDT operating nationwide), each LGU will
claim its own stake in every operational business It is a basic precept of statutory construction that the express mention
of one person, thing, act, or consequence excludes all others as
within the unit.
expressed in the familiar maxim expressio unius est exclusio alterius.
Not being a local water district, a cooperative registered under R.A.
Apportion the gross receipts coming from No. 6938, or a non-stock and non-profit hospital or educational
every LGU and pay thereon the taxes to which LGU institution, petitioner clearly does not belong to the exception. It is
it belongs. You have to determine the tax for each therefore incumbent upon the petitioner to point to some provisions
LGU concerned. of the LGC that expressly grant it exemption from local taxes.
But this would be an exercise in futility. Section 137 of the LGC clearly
states that the LGUs can impose franchise tax "notwithstanding any
exemption granted by any law or other special law." This particular
PLDT vs PROVINCE OF LAGUNA provision of the LGC does not admit any exception. x x x
In sum, it does not appear that, in approving 23 of R.A. No. 7925 Franchise tax may still be imposed despite any exemption enjoyed
(equality of treatment n the telecommunications industry), Congress under special laws
intended it to operate as a blanket tax exemption to all
telecommunications entities. Applying the rule of strict construction of Nonetheless, petitioner seeks to avoid paying the franchise tax by
laws granting tax exemptions and the rule that doubts should be arguing further that it is not liable therefor under Section 137 of the
resolved in favor of municipal corporations in interpreting statutory LGC because said tax applies only to a "business enjoying a franchise."
provisions on municipal taxing powers, we hold that 23 of R.A. No. It contends that it is not a private corporation or a business for profit.
7925 cannot be considered as having amended petitioner's franchise Again, we do not agree.
so as to entitle it to exemption from the imposition of local franchise
taxes. In section 131 (m) of the LGC, Congress unmistakably defined a
franchise in the sense of a secondary or special franchise. This is to
Exemptions from taxation are highly disfavored, so much so that they avoid any confusion when the word franchise is used in the concept of
may almost be said to be odious to the law. He who claims an taxation. As commonly used, a franchise tax is "a tax on the privilege
exemption must be able to point to some positive provision of law of transacting business in the state and exercising corporate
creating the right. The tax exemption must be expressed in the statute franchises granted by the state." It is not levied on the corporation
in clear language that leaves no doubt of the intention of the simply for existing as a corporation, upon its property or its income,
legislature to grant such exemption. And, even if it is granted, the but on its exercise of the rights or privileges granted to it by the
exemption must be interpreted in strictissimi juris against the government. Hence, a corporation need not pay franchise tax from the
taxpayer and liberally in favor of the taxing authority. time it ceased to do business and exercise its franchise. It is within this
context that the phrase "tax on businesses enjoying a franchise" in
Sec. 137 of the LGC provides for PLDTs liability to pay LFT despite of Section 137 of the LGC should be interpreted and understood. Verily,
the special exemption granted under the charter of PLDT. In lieu of to determine whether the petitioner is covered by the franchise tax in
all taxes exemption does not make it not be liable to local franchise question, the following requisites should concur: (1) that petitioner
taxes. 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
The withdrawal of all exemption privileges except for the 4 already within the territory of the respondent city government. Napocor fulfills
mentioned (local water district, non-stock non-profit hospitals, non- both requisites.
stock non-profit educational institutions, cooperatives registered
under the CDA) supports this principle. Only exception would be Although as a general rule, LGUs cannot impose taxes, fees or
when a special ordinance granting an exemption for special cases or charges of any kind on the National Government, its agencies and
circumstances. instrumentalities, this rule admits of an exception, i.e., when specific
provisions of the LGC authorize the LGUs to impose taxes, fees or
charges on the aforementioned entities. Section 137 of the LGC is one
of those exceptions. It authorizes the province to impose a tax on
business enjoying a franchise, at a rate not exceeding fifty percent
(50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized,
within its territorial jurisdiction.
In enacting the LGC, Congress empowered the LGUs to impose certain

taxes even on instrumentalities of the National Government.
NPC is characterized as a private enterprise for profit in the

generation and sale of electricity, thus, purely private and a
commercial undertaking, which is not usually a sovereign function of
the government. Therefore, NPC cannot invoke the last provision
under Sec. 133 on common limitations against the taxing power of
the LGU. NPC is still liable to LFT.

2. Tax on Sand, Gravel and other Quarry Resources of extraction and selling the quarry resources.
(Sec. 138) or Sand and Gravel Tax (SGT)
The activity of extraction is taxable regardless
SEC. 138. Tax on Sand, Gravel and Other Quarry of the purpose.
Resources. - The province may levy and collect not
more than ten percent (10%) of fair market value in ONLY the provinces have the authority to give
the locality per cubic meter of ordinary stones, the permit to quarry resources in all areas of
sand, gravel, earth, and other quarry resources, as the country but since every extraction would
defined under the National Internal Revenue Code, also affect the city, municipality and the
as amended, extracted from public lands or from barangay, they get a share from the SGT.
the beds of seas, lakes, rivers, streams, creeks, and
other public waters within its territorial jurisdiction. Province 30%, component city or
The permit to extract sand, gravel and other quarry municipality 30%, barangay 40%
resources shall be issued exclusively by the
provincial governor, pursuant to the ordinance of Having suffered the most from the extraction,
the sangguniang panlalawigan. The proceeds of the barangays would receive 40% share of the
tax on sand, gravel and other quarry resources shall taxes collected.
be distributed as follows:
LEPANTO CONSOLIDATED MINING CO vs HON. AMBANLOC
(1) Province - Thirty percent (30%);
Tax on the sand and gravel does not require that it must be for
(2) Component city or municipality where the business purposes or for commercial undertakings. Notwithstanding
sand, gravel, and other quarry resources are its incidental nature, as long as theres an act of extraction, there
extracted - Thirty percent (30%); and should be imposed SGT.
(3) Barangay where the sand, gravel, and The mining contract or the mining lease agreement entered into with
other quarry resources are extracted - Forty the government by Lepanto does not make it an agent of the National
Government. Entering into contracts with the government for mining
percent (40%).
or mining lease contract does not make the other party an agent nor
a representative of the state but rather an independent contractor.
Sand and Gravel tax - tax imposed on ordinary
stones, sand, gravel, earth and other quarry
resources extracted from public lands or from
the beds of seas, lakes, rivers, streams, creeks, 5. Professional Tax (Sec. 139)
and other public waters within the territorial
SEC. 139. Professional Tax. - (a) The province may
jurisdiction of the LGU concerned.
levy an annual professional tax on each person
engaged in the exercise or practice of his profession
RATE: Not more than 10% of FMV in the
requiring government examination at such amount
locality per cubic meter of the quarry resource
and reasonable classification as the sangguniang
extracted
panlalawigan may determine but shall in no case
This refers to the FMV as of the moment that exceed Three hundred pesos (P=300.00).
youve made the extraction and not the FMV
(b) Every person legally authorized to practice his
when you sell it or deliver it for sale to an end-
profession shall pay the professional tax to the
user.
province where he practices his profession or where
"Quarry resources" shall mean any common he maintains his principal office in case he practices
stone or other common mineral substances as his profession in several places: Provided, however,
the Director of the Bureau of Mines and Geo- That such person who has paid the corresponding
Sciences may declare to be quarry resources professional tax shall be entitled to practice his
such as, but not restricted to, marl, marble, profession in any part of the Philippines without
granite, volcanic cinders, basalt, tuff and rock being subjected to any other national or local tax,
phosphate: Provided, That they contain no license, or fee for the practice of such profession.
metal or other valuable minerals in
(c) Any individual or corporation employing a
economically workable quantities.
person subject to professional tax shall require
3. Land dug up from a residential area or from payment by that person of the tax on his profession
your own backyard is not subject to SGT before employment and annually thereafter.
because it is not PUBLIC LAND.
(d) The professional tax shall be payable annually,
Hence, private lands are exempted from SGT on or before the thirty-first (31st) day of January.
under the LGC. However, they are still subject Any person first beginning to practice a profession
to SGT under NIRC. after the month of January must, however, pay the
full tax before engaging therein. A line of profession
It is not a requisite that you are engaged in the does not become exempt even if conducted with
business of extraction and selling the sand and some other profession for which the tax has been
gravel to be liable for SGT. It is an excise tax on paid. Professionals exclusively employed in the
the extraction of quarry resources from public government shall be exempt from the payment of
lands or public waters and not on the business this tax.

(e) Any person subject to the professional tax shall pay the PT before engaging in such practice.
write in deeds, receipts, prescriptions, reports,
books of account, plans and designs, surveys and NOTE: Every employer who hires professionals
maps, as the case may be, the number of the official are obligated to inform there employees to
receipt issued to him. get PTRs.
Professional tax - is a tax on each person Exception to PT: Professional exclusively

engaged in the exercise or practice of his employed by the government
profession requiring government examination
(i.e. teachers, CPAs, engineers or those Hence, if you are not exclusively employed by
professions governed by the Professional the government meaning you are also
Regulations Commission or the IBP. engaging in part-time teaching or other
professional work, then you are still subject to
Other professions that do not require PT.
government examination are exempted from
professional tax (i.e. professional athletes, The PT of every professional is different from
media men). mayors permit.
2 requisites for imposition of Professional Tax: A mayors permit is a permit to operate

business while PT only applies to professionals
1. Must be a professional in a profession in order to enjoy the practice of profession (no
requiring government examination need to get mayors permit).
2. Must be engaged in the practice of such But once individuals or professionals form a
profession general professional partnership or any
partnership, a separate mayors permit is
- Both requirements should be met required for the partnership. This permit does
not preclude the professionals from paying
Such professionals are liable for a maximum of professional tax.
P300 PT every year. P300 per profession,
hence, if you are a CPA Lawyer, the maximum 6. Amusement Tax (Sec. 140)
PT that can be imposed is P600 regardless if
you are practicing in different LGUs. SEC. 140. Amusement Tax. - (a) The province may
levy an amusement tax to be collected from the
The P300 limit cannot be increased even if the proprietors, lessees, or operators of theaters,
imposing authority is the city (notwithstanding cinemas, concert halls, circuses, boxing stadia, and
its right to impose a 50% higher rate) other places of amusement at a rate of not more
than ten percent (10%) of the gross receipts from
Remember, a city can impose up to the extent the admissions fees
of 50% higher than what the provinces or
municipalities can impose but excluding the (b) In the case of theaters or cinemas, the tax shall
PT, which at all times remain at 300, and first be deducted and withheld by their proprietors,
amusement taxes. So the same rates for all lessees, or operators and paid to the provincial
kinds of LGUs with respect to PT and treasurer before the gross receipts are divided
amusement taxes unless a law is subsequently between said proprietors, lessees, or operators and
passed. the distributors of the cinematographic films.
SITUS of Professional tax: (c) The holding of operas, concerts, dramas, recitals,
paintings, and art exhibitions, flower shows,
General Rule: LGU where you practice your musical programs, literary and oratorical
profession presentations, except pop, rock, or similar concerts
shall be exempt from the payment of the tax herein
However, if you practice in different localities, imposed.
you have to pay it where your principal office
is located. (d) The sangguniang panlalawigan may prescribe
the time, manner, terms and conditions for the
Note: payment of tax. In case of fraud or failure to pay
the tax, the sangguniang panlalawigan may impose
A municipality cannot impose such surcharges, interest and penalties as it may
professional taxes. Only a city or province can deem appropriate.
impose PT. Imposition by city pre-empts the
province. (e) The proceeds from the amusement tax shall be
shared equally by the province and the municipality
PT is payable annually on or before January 31. where such amusement places are located.
This is for the purpose of issuing a PT receipt
(PTR) and then obtain a PTR number. a. Amusement - is a pleasurable diversion and
entertainment. It is synonymous to relaxation,
If you first begin practice after Jan. 31, then avocation, pastime, or fun.

b. Amusement places - includes theaters, Musical programs
cinemas, concert halls, circuses and other
places of amusement where one seeks Literary and oratorical
admission to entertain oneself by seeing or presentations
viewing the show or performances.
o Except pop, rock, or
Amusement tax (AT) is imposed for every similar concerts
admission to amusement places at 10% of the
gross receipts. The exemption also includes benefit shows,
athletic metes, physical programs and
It is a tax on the admission. Whether you are performances. Theyre still exempt from AT.
actually amused or not, it does not matter.
What is taxed is the admission. Rationale: They are artistic forms of
entertainment which the State promotes.
This is different to the amusement tax under
the NIRC c. If the ticket for an amusement place does not
detail the components of the price, it means
Cockpits, cabarets, night or day clubs, boxing to say that the 10% AT will be computed based
exhibitions, professional basketball games, Jai- on the total cost of the ticket.
Alai and racetracks taxable by amusement
taxes under the NIRC are not subject to local d. Collection of Amusement taxes does not
AT. According to the limitations of the residual preclude the collection of business taxes
taxing power, whatever is already taxed under
the NIRC, the LGU can no longer encroach. 7. Annual Fixed Tax for Every Delivery Truck or Van
of Manufacturers / Producers / Wholesalers (Sec.
However, boxing exhibitions wherein World or 141)
Oriental Championships in any division is at
stake shall be exempt from amusement tax: SEC. 141. Annual Fixed Tax For Every Delivery
Provided, further, That at least one of the Truck or Van of Manufacturers or Producers,
contenders for World or Oriental Wholesalers of, Dealers, or Retailers in, Certain
Championship is a citizen of the Philippines Products.
and said exhibitions are promoted by a
(a) The province may levy an annual fixed tax for
citizen/s of the Philippines or by a corporation
every truck, van or any vehicle used by
or association at least sixty percent (60%) of
manufacturers, producers, wholesalers, dealers or
the capital of which is owned by such citizens
retailers in the delivery or distribution of distilled
b. Statutory taxpayers for Local AT spirits, fermented liquors, soft drinks, cigars and
cigarettes, and other products as may be
They are the proprietors, lessees or operators determined by the sangguniang panlalawigan, to
(not all of them for the same activity) of the sales outlets, or consumers, whether directly or
following amusement places: indirectly, within the province in an amount not
exceeding Five hundred pesos (P500.00).
Theaters
(b) The manufacturers, producers, wholesalers,
Cinemas dealers, and retailers referred to in the immediately
foregoing paragraph shall be exempt from the tax
Concert halls on peddlers prescribed elsewhere in this Code.
Circuses Two Requisites:
Boxing stadia 1. Truck, van or any vehicle used by a.)

manufacturers, b.) producers, c.) wholesalers,
And other places of e.) dealers or f.) retailers
amusement
2. In the delivery or distribution of:
EXEMPT Amusement Places:
a. distilled spirits,
Operas
b. fermented liquors,
Concerts
c. soft drinks,
Dramas
d. cigars and cigarettes, and
Recitals
e. other products determined by
Paintings and art sangguniang panlalawigan
exhibitions
Hence, if you are in the business of delivery
Flower shows and hauling but not a manufacturer, producer,
wholesaler, dealer or retailer of the above measures.
items, then, you are not subject to this tax.
The business is not subject to local taxes a. LGUs go to wet markets to check upon the
because it is a transportation contractor weights and measures and put in stickers to
outside the reach of LGUs but subjected to tax those who have passed the test.
by the National government.
3. Fishery Rentals, Fees and Charges (Sec. 149)
Tax amount not exceeding P500 for every
delivery truck, van or vehicle SEC. 149. Fishery Rentals, Fees and Charges . - (a)
Municipalities shall have the exclusive authority to
B. Municipality (Secs. 142-150) grant fishery privileges in the municipal waters and
impose rentals, fees or charges therefor in
The scope of the taxing powers of the municipality is accordance with the provisions of this Section. (b)
limited. They may levy taxes, fees, and charges not The sangguniang bayan may:
otherwise levied by provinces.
(1) Grant fishery privileges to erect fish corrals,
1. Fees and Charges (Sec. 147) oyster, mussels or other aquatic beds or bangus fry
areas, within a definite zone of the municipal
SEC. 147. Fees and Charges. - The municipality may waters, as determined by it: Provided, however,
impose and collect such reasonable fees and That duly registered organizations and cooperatives
charges on business and occupation and, except as of marginal fishermen shall have the preferential
reserved to the province in Section 139 of this Code, right to such fishery privileges: Provided, further,
on the practice of any profession or calling, That the sangguniang bayan may require a public
commensurate with the cost of regulation, bidding in conformity with and pursuant to an
inspection and licensing before any person may ordinance for the grant of such privileges: Provided,
engage in such business or occupation, or practice finally, That in the absence of such organizations
such profession or calling. and cooperatives or their failure to exercise their
preferential right, other parties may participate in
The municipality can impose fees and charges the public bidding in conformity with the above
on businesses and occupation except for those cited procedure.
that have been subjected already to
professional taxes by the province or the city. (2) Grant the privilege to gather, take or catch
bangus fry, prawn fry or kawag-kawag or fry of
Hence, they cover only those professionals not other species and fish from the municipal waters by
requiring government examination (i.e. nets, traps or other fishing gears to marginal
computer engineers, media men) fishermen free of any rental, fee, charge or any
other imposition whatsoever.
No maximum amount fixed as long as
commensurate with the cost of regulation, (3) Issue licenses for the operation of fishing
inspection and licensing vessels of three (3) tons or less for which purpose
the sangguniang bayan shall promulgate rules and
2. Fees for Sealing and Licensing of Weights and regulations regarding the issuances of such licenses
Measures to qualified applicants under existing laws.
SEC. 148. Fees for Sealing and Licensing of Weights Provided, however, That the sanggunian concerned
and Measures. - (a) The municipality may levy fees shall, by appropriate ordinance, penalize the use of
for the sealing and licensing of weights and explosives, noxious or poisonous substances,
measures at such reasonable rates as shall be electricity, muro-ami, and other deleterious
prescribed by the sangguniang bayan. methods of fishing and prescribe a criminal penalty
therefor in accordance with the provisions of this
(b) The sangguniang bayan shall prescribe the Code: Provided, finally, That the sanggunian
necessary regulations for the use of such weights concerned shall have the authority to prosecute any
and measures, subject to such guidelines as shall be violation of the provisions of applicable fishery laws.
prescribed by the Department of Science and
Technology. The sanggunian concerned shall, by 4. Tax on Business (Sec. 143)
appropriate ordinance, penalize fraudulent
practices and unlawful possession or use of Local business tax (LBT) is the major source of
instruments of weights and measures and prescribe revenues for every city or municipality. This is not
the criminal penalty therefor in accordance with the imposable by:
provisions of this Code. Provided, however, That the
sanggunian concerned may authorize the municipal a.) province or the b.) barangay
treasurer to settle an offense not involving the
commission of fraud before a case therefor is filed What is the LBT?
in court, upon payment of a compromise penalty of
not less than Two hundred pesos (P=200.00). LBT is a tax based on gross receipts or gross
sales not on income. It is a tax on the
Municipalities and cities can impose fees for operation of the business and also as under
the sealing and licensing of weights and the police power of LGUs in regulating the

business. time, he will only pay as manufacturer
because the distribution is only incidental
It is not an income tax. So whether you are of being a manufacturer.
operating at a gain or loss, you are still subject
to local business tax. This is used as a measure However, if youre a manufacturer of one
to regulate businesses. Non-payment of LBT product and a distributor of another, you
based on the preceding calendar years gross will now be liable for both classification
sales or receipts shall not allow you to validly as manufacturer of your own product and
operate during the year. distributor of someone elses product.
It is a prerequisite for the issuance of mayors c. Exporters, and on manufacturers,

permit. millers, producers, wholesalers,
distributors, dealers or retailers of
It partake the nature of percentage tax when essential commodities enumerated
the limit of each graduated table for different hereunder:
taxpayers is reached (see Sec. 143 of LGC) i.e.
37.5% of 1% for manufacturers. 1. Rice and corn
Example: On January 20, 2011 (deadline of 2. Wheat or cassava flour, meat, dairy
LBT), every business should pay the LBT based products, locally manufactured,
on 2010 gross sales or receipts. processed or preserved food, sugar, salt
and other agricultural, marine, and fresh
Based on the gross receipts of the preceding water products, whether in their original
calendar year, whether or not the company is state or not
actually on a calendar or fiscal year basis.
(Review: calendar year Jan Dec, fiscal year 3. Cooking oil and cooking gas
any 12 month period starting on a month
other than January) 4. Laundry soap, detergents, and
medicine
The basis of computation of the LBT remains
fixed at gross sales or receipts of the preceding 5. Agricultural implements, equipment
calendar. There could be no other basis not and post- harvest facilities, fertilizers,
the income, not the production, not the pesticides, insecticides, herbicides and
output, and not the fiscal year. other farm inputs
Businesses subject to LBT 6. Poultry feeds and other animal feeds
a. Manufacturers, assemblers, repackers, 7. School supplies; and

processors, brewers, distillers, rectifiers,
and compounders of liquors, distilled 8. Cement
spirits, and wines or manufacturers of
RATE: Not exceeding of the rates
any article of commerce of whatever
prescribed under manufacturers,
kind or nature
wholesalers, and retailers.
There is a fixed tax up to the point of the
Hence, the maximum rates are:
highest bracket wherein it becomes
already a percentage tax of 37 % of 1%.
Manufacturers of 37.5% of 1%
b. Wholesalers, distributors, or dealers in
Wholesalers of 50% of 1%
any article of commerce of whatever
kind or nature Retailers of 2% or of 1%
(depending on amount)
These are businessmen who do not have
anything to do with the manufacturing or This category actually is a concession
production or processes of the products since it has a lower rate compared to
that they are dealing, distributing, or other categories. Rationale: It involves
delivering wholesale. exportation which is favored by the State
and essential commodities (non-luxury
They shall be taxed at fixed amount of
goods or items)
taxes depending on its bracket of sales or
receipts but the highest bracket is not This category contemplates two
exceeding 50% of 1%. However, such rate classification:
may be raised by the cities to more than
the limit provided so long as its not more A. Exporters whether essential or non-
than 50% higher. essential commodity
EXAMPLE: When one is a manufacturer B. Manufacturers, millers, producers,
and wholesaler or distributor at the same wholesalers, distributors, dealers or
retailers of essential commodities RATE: not exceeding 50% of 1% of gross
receipts of the preceding calendar year
If you are a manufacturer, wholesaler,
distributor, or retailer of an essential Contractors - includes persons, natural or
commodity, you need to pay only of juridical, not subject to professional tax
what is due to other manufacturers, under Section 139 of this Code, whose
wholesalers, distributors, or retailers. activity consists essentially of the sale of
all kinds of services for a fee, regardless
d. Retailers of whether or not the performance of the
service calls for the exercise or use of the
Retailers are those who are engaged in a physical or mental faculties of such
sale where the purchaser buys the contractor or his employees.
commodity for his own consumption,
irrespective of the quantity of the The term "contractor" shall include
commodity sold. They are those who sell general engineering, general building and
products to end-users. specialty contractors as defined under
applicable laws; filling, demolition and
RATE: 2% or 1% salvage works contractors; proprietors or
operators of mine drilling apparatus;
If gross sales or receipts for the preceding proprietors or operators of dockyards;
calendar year is: persons engaged in the installation of
water system, and gas or electric light,
400k or less 2% heat, or power; proprietors or operators
of smelting plants; engraving, plating,
More than 400k 1%
and plastic lamination establishments;
proprietors or operators of
However, barangays shall have the
establishments for repairing, repainting,
exclusive power to levy taxes on gross
upholstering, washing or greasing of
sales or receipts of the preceding
vehicles, heavy equipment, vulcanizing,
calendar year if:
recapping and battery charging;
A.) 50k or less, in case the barangay is proprietors or operators of furniture
located in cities shops and establishments for planing or
surfacing and recutting of lumber, and
B.) 30k or less, if located in sawmills under contract to saw or cut logs
municipalities. belonging to others; proprietors or
operators of dry- cleaning or dyeing
This is one area wherein the barangays establishments, steam laundries, and
can pre-empt both the municipalities and laundries using washing machines;
the cities in imposing LBT to retailers. proprietors or owners of shops for the
repair of any kind of mechanical and
When you are both a wholesaler and a electrical devices, instruments, apparatus,
retailer, you are subject to BOTH as or furniture and shoe repairing by
wholesaler and retailer. You have machine or any mechanical contrivance;
different sales as wholesaler and retailer. proprietors or operators of
establishments or lots for parking
Unlike if both wholesaler and purposes; proprietors or operators of
manufacturer wherein you pay the lesser tailor shops, dress shops, milliners and
rate as manufacturer only. This is because hatters, beauty parlors, barbershops,
he usually has no income for the massage clinics, sauna, Turkish and
distribution, therefore, only as a Swedish baths, slenderizing and building
manufacturer. saloons and similar establishments;
photographic studios; funeral parlors;
EXAMPLE: proprietors or operators of hotels, motels,
and lodging houses; proprietors or
If youre a retailer of both essential operators of arrastre and stevedoring,
commodities and non-essential warehousing, or forwarding
commodities, how will you be taxed? establishments; master plumbers, smiths,
and house or sign painters; printers,
There would be a separate computation bookbinders, lithographers; publishers
for essential commodities and for non- except those engaged in the publication
essential commodities. or printing of any newspaper, magazine,
review or bulletin which appears at
2% or 1% on non-essential commodities regular intervals with fixed prices for
and 50% of 2% or 50% of 1% if essential. subscription and sale and which is not
devoted principally to the publication of
e. Contractors and other independent
advertisements; business agents, private
contractors
detective or watchman agencies,

commercial and immigration brokers, and thereunder.
cinematographic film owners, lessors and
distributors. Pawnshops and Money changers are
included
General Professional Partnerships are
considered as independent contractors. Insurance companies are included.
f. Banks and other financial institutions Gross receipts of insurance companies

include:
This is the exception on the limitation
wherein income tax are computed for The premiums collected, interest
banks and other financial institutions earnings, if it owns property and rentals
coming from such property is also
RATE: Not exceeding 50% of 1% on the included, income from acquired assets,
gross receipts of the preceding calendar cash dividends, etc.
year
g. Peddlers engaged in the sale of any
Gross receipts of banks and financial merchandise or article of commerce
institutions --
Peddler - means any person who, either
It is derived from interest, commissions for himself or on commission, travels
and discounts from lending activities, from place to place and sells his goods or
income from financial leasing, dividends, offers to sell and deliver the same.
rentals on property and profit from
exchange or sale of property, insurance RATE: annual tax of not exceeding 50.
premium.
It is a fixed tax.
It appears that this is an exclusive list of
what will comprise the gross receipts of h. Any business not otherwise specified
banks and other financial institutions.
Categories A - G are not exclusive. This is
Hence, fees or charges not among the a catch all provision.
gross receipts stated above, then, it will
not be covered by the LBT on banks and Special requirement for this catch-all
financial institutions. provision to apply:
Example: filing fees, service fees, 1. Having a special ordinance for that
administrative charges imposed by banks. purpose
They will not be covered by this provision.
2. With a prior public hearing
There are 2 taxes to which the bank will
be liable for under the LGC: 3. It must not be excessive, unjust,
confiscatory or following the fundamental
1. Income tax principles of taxation and
2. LBT 4. It must not violate the common

limitations found under Sec. 133.
Income tax is based on income. LBT is
based on gross receipts. Tax rates within the Metro Manila Area (Sec. 144)
Note: There is no law yet which SEC. 144. Rates of Tax within the Metropolitan
clarifies what is the basis of income tax Manila Area. - The municipalities within the
on banks. Not even the LGC provides for Metropolitan Manila Area may levy taxes at rates
it. In fact, the IRR proscribe LGUs from which shall not exceed by fifty percent (50%) the
imposing taxes against the income of maximum rates prescribed in the preceding Section.
banks.
The tax rates within the Metro Manila Area may be
Nonetheless, it would appear that banks 50% more than what the municipalities can impose.
are subject to these 2 taxes.
The rate for municipalities within Metro Manila
"Banks and other financial institutions" Area is the same as a city.
include non-bank financial intermediaries,
lending investors, finance and investment Tax period (Sec. 165)
companies, pawnshops, money shops,
SEC. 165. Tax Period and Manner of Payment. -
insurance companies, stock markets,
Unless otherwise provided in this Code, the tax
stock brokers and dealers in securities
period of all local taxes, fees and charges shall be
and foreign exchange, as defined under
the calendar year. Such taxes, fees and charges may
applicable laws, or rules and regulations
be paid in quarterly installments.

Tax period calendar year (whether or not the
Mobil Phils. vs. City Treasurer of Makati, GR No. 154092
taxpayer follows calendar of fiscal year for income
(2005)
tax purposes)
Local business tax v. income tax
Accrual of tax (Sec. 166)
Business taxes imposed in the exercise of police power for regulatory
SEC. 166. Accrual of Tax. - Unless otherwise purposes are paid for the privilege of carrying on a business in the
provided in this Code, all local taxes, fees, and year the tax was paid. It is paid at the beginning of the year as a fee
charges shall accrue on the first (1st) day of January to allow the business to operate for the rest of the year. It is deemed
of each year. However, new taxes, fees or charges, a prerequisite to the conduct of business.
or changes in the rates thereof, shall accrue on the
Income tax, on the other hand, is a tax on all yearly profits arising
first (1st) day of the quarter next following the
from property, professions, trades or offices, or as a tax on a persons
effectivity of the ordinance imposing such new income, emoluments, profits and the like. It is tax on income,
levies or rates. whether net or gross realized in one taxable year. It is due on or
st
before the 15th day of the 4th month following the close of the
LBT accrues on the 1 day of January of each year. taxpayers taxable year and is generally regarded as an excise tax,
levied upon the right of a person or entity to receive income or
However for new taxes, fees or charges or changes profits.
st
in the rates, they shall accrue on the 1 day of
quarter next following the effectivity of the The business tax, like income tax, is computed based on the previous
ordinance imposing such new levies or rates years figures. This is the reason for the confusion. A newly-started
business is already liable for business taxes (i.e. license fees) at the
start of the quarter when it commences operations. In computing the
TAX BASIS : Gross sales or receipts excluding
amount of tax due for the first quarter of operations, the business
returns, discounts and allowances capital investment is used as the basis. For the subsequent quarters
of the first year, the tax is based on the gross sales/receipts for the
Time and manner of payment (Sec. 167) previous quarter. In the following year(s), the business is then taxed
based on the gross sales or receipts of the previous year. The
SEC. 167. Time of Payment. - Unless otherwise business taxes paid in the year 1998 is for the privilege of engaging in
provided in this Code, all local taxes, fees, and business for the same year, and not for having engaged in business for
charges shall be paid within the first twenty (20) 1997.
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 for
Erricson Case
payment of such taxes, fees, or charges without
surcharges or penalties, but only for a period not Gross Receipts for income tax purposes vs. Gross Receipts for LBT
exceeding six (6) months. purposes
Time for payment : On or before January 20 Gross Receipts for income tax purposes computed on accrual basis.
Includes those actually or constructively received plus those which are
Otherwise you will be subject to surcharges and yet to be received
penalties. In addition, no mayors permit is issued
when local taxes are not paid. Gross Receipts for LBT purposes only includes those actually or
constructively received (smaller in scope)
However, the sanggunian concerned may extend
SC ruled that you cannot change the basis for computation of the LBT.
the time to not exceeding 6 months
Do not confuse it with the computation of gross receipts for income
tax purposes.
Local taxes can also be paid quarterly - Within 20
days of each quarter
If you opt to pay quarterly, simply divide your LBT When you say that business taxes accrue on Jan. 1
into 4 and you pay by installment on or before the of each year, it does not mean that it is a tax of the
th
20 day of the first month of every quarter (Jan. 20, previous year. It accrues Jan. 1 of each year payable
Apr. 20, Jul. 20, Oct. 20). on or before Jan. 20 and payment of which gives
you the right to carry-on legally your business.
This does not apply to other fees and charges. You
cannot pay in installments the other fees and The basis is the preceding year, however, it is a
charges of the government. Only the LBT can be tax on the current year. i.e. business tax for year
payable quarterly. 2012 is based on gross receipts during year 2011
but paid on year 2012 (on or before January 20)
In income taxes, the tax paid this year the basis is

the preceding year and it also pertains to income
taxes last year. i.e. income tax for year 2011 is
based on gross receipts during year 2011 but paid
on year 2012 (on or before April 15)
LBT are somewhat imposed in the exercise of the

regulatory power of the state in order to regulate
businesses and is a prerequisite before a permit can
be given. Any tax that accrues on Jan. 1 as a LBT is a and plantations in the pursuit of their business:
tax really for that current year.
(1) Thirty percent (30%) of all sales recorded in
Payment of business taxes, multiple business the principal office shall be taxable by the city or
establishment / lines (Sec. 146) municipality where the principal office is located;
and
SEC. 146. Payment of Business Taxes. - (a) The
taxes imposed under Section 143 shall be payable (2) Seventy percent (70%) of all sales recorded in
for every separate or distinct establishment or place the principal office shall be taxable by the city or
where business subject to the tax is conducted and municipality where the factory, project, office,
one line of business does not become exempt by plant or plantation is located; and
being conducted with some other business for
which such tax has been paid. The tax on a business (c) In case of a plantation located at a place other
must be paid by the person conducting the same. than the place where the factory is located, said
70% mentioned in subparagraph (b) of subsection
(b) In cases where a person conducts or operates (2) above shall be divided as follows:
two (2) or more of the businesses mentioned in
Section 143 of this Code which are subject to the (1) 60% to the city or municipality
same rate of tax, the tax shall be computed on the
combined total gross sales or receipts of the said (2) 40% to the city or municipality where the
two (2) or more related businesses. plantation is located
(c) In cases where a person conducts or operates (d) In cases where a manufacturer, assembler,
two (2) or more businesses mentioned in Section producer, exporter or contractor has two (2) or
143 of this Code which are subject to different rates more factories, project offices, plants, or
of tax, the gross sales or receipts of each business plantations located in different localities, the
shall be separately reported for the purpose of seventy percent (70%) sales allocation mentioned in
computing the tax due from each business. subparagraph (b) of subsection (2) above shall be
prorated among the localities where the factories,
If a person operates 2 or more businesses project offices, plants, and plantations are located
mentioned in Sec. 143 which are taxed; in proportion to their respective volumes of
computation shall be based on: production during the period for which the tax is
due.
1. Combined total gross sales/receipts if subject to
the same tax rate (e) The foregoing sales allocation shall be applied
irrespective of whether or not sales are made in the
Rationale: the Higher your gross receipts, the locality where the factory, project office, plant, or
higher bracket you belong, the higher tax that plan is located.
will be due from you until you reach the limit.
Situs for LBT:
2. Separate reports on gross sales/receipts if
subject to different tax rates (i.e. retailer and Its the place where the sale is consummated
manufacturer) associated with the delivery of the articles of
commerce, which are the subject matter of the
Situs of the tax (Sec. 150) contract.
SEC. 150. Situs of the Tax. - (a) For purposes of Branch - an extension of the principal office of the
collection of the taxes under Section 143 of this business. There must really be business operation.
Code, manufacturers, assemblers, repackers,
brewers, distillers, rectifiers and compounders of This does not include an office displaying products
liquor, distilled spirits and wines, millers, producers, but does not maintain stocks or items for sale. It is
exporters, wholesalers, distributors, dealers, merely a display office and not a branch. LGUs
contractors, banks and other financial institutions, having jurisdiction over the display area would not
and other businesses, maintaining or operating have a right to share in the taxes of the gross
branch or sales outlet elsewhere shall record the receipts for the entire operation.
sale in the branch or sales outlet making the sale or
transaction, and the tax thereon shall accrue and Rules as to the collection of LBT
shall be paid to the municipality where such branch
or sales outlet is located. In cases where there is no Rule 1: In case of persons maintaining/operating a
such branch or sales outlet in the city or branch or sales outlet making the sale or
municipality where the sale or transaction is made, transaction, the sale shall be recorded in said
the sale shall be duly recorded in the principal office branch or sales outlet and the tax shall be paid to
and the taxes due shall accrue and shall be paid to the municipality/city where the branch or sales
such city or municipality. outlet is located.
(b) The following sales allocation shall apply to Rule 2: Where there is no branch or sales outlet in
manufacturers, assemblers, contractors, producers, the city/municipality where the sale is made, sale
and exporters with factories, project offices, plants, shall be recorded in the principal office and the tax

shall be paid to the city/municipality where such Whenever theres a factory and/or plantation
principal office is located. operated by the principal office, it will
automatically share in whatever is reflected or
ILLUSTRATION: recorded as sales by the principal office.
Oslob (principal office) 100M ILLUSTRATION:
Santander (branch) 25M Oslob (principal office) 100M
Sale of 50M was made in Dalaguete where there was no Santander (branch) 25M
branch or any office.
Balamban (plantation) 0
How is the 175M (100 + 25 + 50) divided?
Boljoon (factory) 0
Oslob 150M
Santander 25M
How is the 125M allocated?
Dalaguete - 0
Oslob 30% of 100M = 30M
Since a branch is presumed to conduct its own operations
as an extension of the principal office, it would maintain its Balamban and Boljoon 70% of 100M
own sets of books and issues receipts and invoices for its
sales. Any sales generated by the branch or sales outlet, Further subdivided into:
such as in Santander, the taxes due from it would be fully
payable, 100%, to the LGU having jurisdiction over the Boljoon (factory) 60% of 70% = 42% of 100M =
branch. 42M
Mandaue City 100% of 25m receipts Balamban (plant) 40% of 70% = 28% of 100M =
28M
If at all a sale is made as well by the principal office, the
entire of it would be collected by the LGU having
Santander (branch 100%) 25M
jurisdiction over the principal place of business in the
absence of factories, project offices, plants, and
If a plantation also has a branch then everything will go to
plantations (FPOP). So 100% of whatever is recorded in the
the branch.
principal office would be collected by the LGU having
jurisdiction over the principal office. Oslob 100% of
100M Rule 5: In case of 2 or more FPOP in different
localities, the 70% shall be prorated among the
For mobile sales in Dalaguete, since there is no branch
operating, therein, hence, it will be recorded in the localities where the FPOP are located in proportion
principal office. So the 50m receipts will be recorded to to their respective volume of production.
the principal office in the absence factory, project offices,
plants and plantation (FPOP). Oslob 100% of 50M PRORATED based on volume of production (not
distributed equally)
Note: if the sale is consummated in a place

Rule 3: In the case of manufacturers, contractors,
where there is no branch however the place where
producers, and exporters having FPOP, proceeds
it was sourced can be traced, then 100% of such
shall be allocated as follows:
sale will accrue to the source as if there was a
30% of sales recorded in the principal branch there.
office shall be made taxable by the
Example:
city/municipality where the principal office is
located
Same illustration as above. Sale was made in
Dalaguete where there was no branch however, it
70% shall be taxable by the
can be traced that the goods sold were from the
city/municipality where the FPOP is located
factory in Boljoon. 100% of such sale will accrue to
Boljoon as if there was a branch there.
Plant is somewhat similar to a factory. Project
offices include construction projects and the like.
Collecting authority (Sec. 170)
Rule 4: In case the plantation is located in a place
SEC. 170. Collection of Local Revenues by
other than the place where the factory is located,
Treasurer. - All local taxes, fees, and charges shall
the 70% in Rule 3 will be divided as follows:
be collected by the provincial, city, municipal, or
barangay treasurer, or their duly authorized
60% to the city/municipality where the
deputies. The provincial, city or municipal treasurer
factory is located
may designate the barangay treasurer as his deputy
to collect local taxes, fees, or charges. In case a
40% to the city/municipality where the
bond is required for the purpose, the provincial, city
plantation is located
or municipal government shall pay the premiums

thereon in addition to the premiums of bond that Interest rate not exceeding 2% per month of the
may be required under this Code. unpaid taxes including surcharges up to 36
months based on unpaid taxes plus surcharge
The collection of taxes BY the LGUs shall be under
the local treasurers for every LGU. ILLUSTRATION:
Examination of books of accounts (Sec. 171) Unpaid taxes in 2008 100M
SEC. 171. Examination of Books of Accounts and Penalties =

Pertinent Records of Businessmen by Local
Treasurer. - The provincial, city, municipal or Surcharge = 25% of 100M = 25M
barangay treasurer may, by himself or through any
of his deputies duly authorized in writing, examine Interest = 2% per month of 125M
(100M + 25M) up to 36 months
the books, accounts, and other pertinent records of
any person, partnership, corporation, or association = 90M (125 x 2% x 36)
subject to local taxes, fees and charges in order to
ascertain, assess, and collect the correct amount of
the tax, fee, or charge. Such examination shall be Although the LGUs are allowed to assess within 5
made during regular business hours, only once for years, so that means to say that your books of
every tax period, and shall be certified to by the accounts and your tax liabilities would remain open
examining official. Such certificate shall be made of for tax examination for as long as 5 years, the
record in the books of accounts of the taxpayer imposition of interest could only be up to 36
examined. In case the examination herein months of deficiency.
authorized is made by a duly authorized deputy of
the local treasurer, the written authority of the What is peculiar is that surcharges are actually
deputy concerned shall specifically state the name, computed of interest also. The basis of interest is
address, and business of the taxpayer whose books, not only the tax deficiency but also the surcharges
accounts, and pertinent records are to be examined, as well.
the date and place of such examination, and the
procedure to be followed in conducting the same. Retirement of business (Sec. 145)
For this purpose, the records of the revenue district
office of the Bureau of Internal Revenue shall be SEC. 145. Retirement of Business. - A business
made available to the local treasurer, his deputy or subject to tax pursuant to the preceding sections
duly authorized representative. shall, upon termination thereof, submit a sworn
statement of its gross sales or receipts for the
LGUs have the right to examine the books of current year. If the tax paid during the year be less
accounts of every entity covered by it. than the tax due on said gross sales or receipts of
the current year, the difference shall be paid before
Books of accounts are kept usually for at least 5 the business is considered officially retired.
years.
Requirement: Submit sworn statement of gross
Although the law does not say that you have to sales or receipts for the current year.
keep your books of accounts for 5 years, since the
assessment period is 5 years, its impliedly required 2 SCENARIOS:
that you keep your books of account for 5 years.
A. If the tax paid during the year be less than the
Examination of the books of accounts can be tax due on said gross sales or receipts of the
performed only once every tax period current year:
Surcharges and penalties on unpaid taxes (Sec. the difference shall be paid before the
168) business is considered officially retired
SEC. 168. Surcharges and Penalties on Unpaid B. If the tax paid during the year is more than the
Taxes, Fees, or Charges. - The sanggunian may tax due on said gross sales or receipts of the
impose a surcharge not exceeding twenty-five current year:
percent (25%) of the amount of taxes, fees or
charges not paid on time and an interest at the rate no more liability
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.
Ground: Not paid on time
Penalties: Surcharge + Interest
Surcharge - 25% of the taxes not paid on time

ILLUSTRATION: provided in this Code, the city, may levy the taxes, fees,
and charges which the province or municipality may
I. Jan. 20 paid 10M LBT based on preceding year gross receipts impose: Provided, however, That the taxes, fees and
charges levied and collected by highly urbanized and
Feb. 14 retired. LBT based on GR for current year is 8M. independent component cities shall accrue to them and
distributed in accordance with the provisions of this
No more payment required before retiring (10M > 8M) Code. The rates of taxes that the city may levy may
exceed the maximum rates allowed for the province or
II. Jan. 20 paid 10M LBT based on preceding year GR
municipality by not more than fifty percent (50%) except
March 26 retired. LBT based GR for current year is 11M. the rates of professional and amusement taxes.
Pay difference of 1M before retiring (10M < 11M) The cities have the right to impose taxes 50% higher
than what the municipalities and provinces can impose
except for:
Termination of business or retirement of business
under the LGC simply means that you terminate 1. Professional tax (maximum is P300)
your business operations in a certain LGU not
necessarily your operations in the country. 2. Amusement tax (10% of gross receipts from
admissions)
You need not entirely dissolve your business
or corporation. It also includes transfer to PT and AT remains fixed at what the LGC provides. The
another LGU. You are considered as retired in city cannot impose higher than what the municipalities
the old LGU that you belong to. and provinces can impose.
Mere change of name of your business or D. Barangays (Sec. 152)

assumption of a new owner in your business does
not equate to retirement of business for payment Scope of Taxing Power
of local taxes.
1. Taxes on Stores or Retailers
It is merely a change in the records existing
Taxes - On stores or retailers with fixed business
with the LGU. It does not mean that your
establishments with gross sales or receipts of the
operations: your gross sales or gross receipts
preceding calendar year of Fifty thousand pesos
for the year have changed. You are continually
(P=50,000.00) or less, in the case of cities and Thirty
operational.
thousand pesos (P=30,000.00) or less, in the case of
If payment of LBT is in installments, the unpaid municipalities, at a rate not exceeding one percent
balance/installments has to be paid before retiring. (1%) on such gross sales or receipts.
Before retiring, if you paid only 125K during the Covers only STORES or RETAILERS with gross receipts
first quarter, you still have to pay the remaining of:
375k.
a. P50,000 or less if located in city
Not all businesses, which retire, will have additional
b. P30,000 or less if located in municipality
payment of taxes.
Stores or retailers meaning it has a fixed place of
If you retire early, theres a big chance that you are
business unlike peddlers. The rate imposed is fixed
not going to pay additional taxes assuming that the
at 1%.
growth of your sales or receipts would be the same
as that of the preceding year.
It is a type of LBT. It is an exclusive power of the
barangay. Hence, it preempts the other LGUs from
If you retire in November, probably, you will be
collecting.
paying additional taxes if your sales Jan. to Nov. is
higher than your Jan. to Dec. last year.
If more than 50k or more than 30k, exclusive right
falls to the municipalities and the cities.
MOBIL CASE:
When you say retailers, it has a fixed place of
On the year an establishment retires or terminates its business unlike peddlers. And if you notice as well,
business within the municipality, it would be required to the rate imposed is 1%.
pay the difference in the amount if the tax collected, based
on the previous years gross sales or receipts, is less than
2. Service Fees or Charges
the actual tax due based on the current years gross sales
or receipts.
Service Fees or Charges - barangays may collect
reasonable fees or charges for services rendered in
connection with the regulation or the use of
barangay-owned properties or service facilities
C. City (Sec. 151) such as palay, copra, or tobacco dryers.
SEC. 151. Scope of Taxing Powers. - Except as otherwise Fees connected to regulation or the use of
barangay-owned properties or service facilities Barangay treasurer can be deputized to collect taxes.
such as palay, copra, or tobacco dryers
If the barangay is deputized to collect the CT, there will
3. Barangay Clearance be 50-50 sharing of the proceeds.
Barangay Clearance - No city or municipality may Taxpayers covered:

issue any license or permit for any business or
activity unless a clearance is first obtained from the A. Individual
barangay where such business or activity is located
or conducted. For such clearance, the sangguniang 1. An inhabitant of the Phils.
barangay may impose a reasonable fee. The
application for clearance shall be acted upon within 2. 18 years of age or over
seven (7) working days from the filing thereof. In
the event that the clearance is not issued within 3. Falling under any of the following 4 categories:
the said period, the city or municipality may issue
i. Who has been regularly employed on a wage
the said license or permit.
or salary basis for at least 30 consecutive
Reasonable fee = no limit fixed by the LGC. Varies working days during any calendar year, or
from barangay to barangay
ii. Who is engaged in business or occupation,
Barangay given 7 days to issue clearance. If theres or
inaction by the barangay to issue the clearance
iii. Who owns real property with an aggregate
after valid application by the taxpayer, the city
assessed value of 1k or more, or
mayors office or the municipal mayors office can
proceed to issue the mayors permit or license.
iv. Who is required by law to file an income tax
return
4. Other Fees and Charges
Other Fees and Charges - The barangay may levy

reasonable fees and charges:
All 3 requisites must concur.
(1) On commercial breeding of fighting cocks,
Hence, if you are a resident and earning income,
cockfights and cockpits;
however you are below 18, you are still not
required to pay CT.
(2) On places of recreation which charge
admission fees (i.e. discoral); and
Non Resident Aliens-Not Engaged in Trade or
Business are not automatically exempt from CT.
(3) On billboards, signboards, neon signs, and
outdoor advertisements.
He may be liable for CT if he is a transient
visitor whose stay in the Phils. exceeds 3
months.
XI. AUTHORITY OF LGUS TO ADJUST RATES OF NRAs-NETB may or may not be liable because
TAX ORDINANCES (Sec. 191) the exemption granted under the LGC extends
only to transient visitors whose stay in the
SEC. 191. Authority of Local Government Units to Phils. does not exceed 3 months while the
Adjust Rates of Tax ordinances. - Local government definition of NRA-NETB is one whose stay in
units shall have the authority to adjust the tax rates as the Phils. does not exceed 180 days.
prescribed herein not oftener than once every five (5)
years, but in no case shall such adjustment exceed ten In the case of husband and wife, the tax imposed
percent (10%) of the rates fixed under this Code. shall be based upon the total property owned by
them and the total gross receipts or earnings
Not oftener than once every 5 years, the rates may be derived by them
increased but such adjustments or increase shall not
exceed 10% of the rates fixed. Computation:
An annual CT of P5.00 and an annual additional tax

of P1.00 for every 1k of income regardless of
XII. COMMUNITY TAX (Secs. 156-164) whether from business, exercise of profession or
from property which in no case shall exceed 5k.
Only the following can collect or impose the community
tax: ILLUSTRATION: You have 10m worth of real
property. You have no other income. How much CT
A. Cities will you pay?
B. Municipalities 5,005.
Barangays can collect but they cannot impose CT. It could have been 10k but since the maximum

additional tax is 5k, plus the P5.00 fixed basic residence of the individual, or in the place where
amount, then the total CT is P5,005. the principal office of the juridical entity is located.
B. Juridical persons Time of Payment of CT
Corporations no matter how created or organized The community tax shall accrue on the first (1st)
whether domestic or resident foreign engaged in or day of January of each year which shall be paid not
doing business in the Philippines are also liable to later than the last day of February of each year. If a
pay an annual community tax. person reaches the age of eighteen (18) years or
otherwise loses the benefit of exemption on or
Hence, Non Resident Foreign Corporation are not before the last day of June, he shall be liable for the
required to pay community tax community tax on the day he reaches such age or
upon the day the exemption ends.
No corporation is issued a mayors permit if no
proof of CT payment is given to the local treasurer However, if a person reaches the age of eighteen
(18) years or loses the benefit of exemption on or
Exemptions granted to particular corporations from before the last day of March, he shall have twenty
payment of CT: (20) days to pay the community tax without
becoming delinquent. Persons who come to reside
1. Cooperatives duly registered under the CDA in the Philippines or reach the age of eighteen (18)
years on or after the first (1st) day of July of any
LGC provides for absolute exemption from all year, or who cease to belong to an exempt class on
local taxes to such cooperatives. or after the same date, shall not be subject to the
community tax for that year.
2. Corporations located within the economic
zones Corporations established and organized on or
before the last day of June shall be liable for the
Theyre granted exemption from all local and
community tax for that year. But corporations
national taxes in lieu of paying the 5% income
established and organized on or before the last day
tax on their gross income.
of March shall have twenty (20) days within which
to pay the community tax without becoming
Computation:
delinquent. Corporations established and organized
An annual CT of P500 and an annual additional tax, on or after the first day of July shall not be subject
which, in no case, shall exceed 10k in accordance to the community tax for that year. If the tax is not
with the following schedule: paid within the time prescribed above, there shall
be added to the unpaid amount an interest of
(1) For every 5k worth of real property in the twenty-four percent (24%) per annum from the due
Philippines owned by it during the preceding date until it is paid.
year based on the valuation used for the
payment of the real property tax under It accrues Jan. 1 but is payable on or before the last
existing laws, found in the assessment rolls of day of Feb.
the city or municipality where the real
If you are employed and turned 18 or a corporation
property is situated P2.00; and
who loses exemption during the year:
(2) For every 5k of gross receipts or earnings
a. anytime up to end of March - you have 20
derived by it from its business in the
days after such date to pay before you are
Philippines during the preceding year - P2.00.
considered delinquent
The dividends received by a corporation from
b. from April 1 to last day of June pay on
another corporation however shall, for the purpose
such date
of the additional tax, be considered as part of the
gross receipts or earnings of said corporation.
c. first day of July and onwards no longer
liable to pay CT
Juridical TPs of CT shall be liable for a basic annual
tax of 500 plus for any income, for any real
Penalty for delinquency or late payment:
property owned, or for any dividends received, will
be liable for 2 pesos for every fraction of 5k. The CT due plus an additional interest of 24% per
annum from the due date until it is paid
So for every fraction of 5k income, 5k FMV of real
property, or 5k dividend, there will be 2 peso Exemptions granted:
additional CT. But not exceeding 10k.
1. Absolute exemption Diplomatic and consular
So maximum CT for corporation is only to the representatives
extent of P10,500.00.
2. Relative exemption Transient visitors when
Place of Payment of CT their stay in the Philippines does not exceed 3
months
The community tax shall be paid in the place of
If the transient visitor exceeds the 3 months In such case, the local treasurer or his deputy shall
maximum period provided by law, then, the issue a duly authenticated certificate based upon
exemption is lost. the records of his office showing the fact of
delinquency and the amounts of the tax, fee, or
If youre still 17 years of age or below, you are charge and penalty due. Such certificate shall serve
exempt but if you turn 18 any time during the year as sufficient warrant for the distraint of personal
before July 1, then you are liable to pay CT. property aforementioned, subject to the taxpayer's
right to claim exemption under the provisions of
existing laws. Distrained personal property shall be
sold at public auction in the manner herein
XIII. GOVERNMENT REMEDIES FOR COLLECTION provided for.
OF TAX DELINQUENCIES, FEES, CHARGES AND
- Only applies to personal property
OTHER REVENUES (Secs. 172-185)
- Duly authenticated certificate issued which
Local Governments Lien
serves as warrant
SEC. 173. Local Government's Lien. - Local taxes, fees,
(b) Accounting of distrained goods - The officer
charges and other revenues constitute a lien, superior to
executing the distraint shall make or cause to be
all liens, charges or encumbrances in favor of any
made an account of the goods, chattels or effects
person, enforceable by appropriate administrative or
distrained, a copy of which signed by himself shall
judicial action, not only upon any property or rights
be left either with the owner or person from whose
therein which may be subject to the lien but also upon
possession the goods, chattels or effects are taken,
property used in business, occupation, practice of
or at the dwelling or place of business of that
profession or calling, or exercise of privilege with respect
person and with someone of suitable age and
to which the lien is imposed. The lien may only be
discretion, to which list shall be added a statement
extinguished upon full payment of the delinquent local
of the sum demanded and a note of the time and
taxes fees and charges including related surcharges and
place of sale.
interest.
(c) Publication - The officer shall forthwith cause a
The lien of the government begin to attach from
notification to be exhibited in not less than three (3)
the time the payment of the local tax is due and
public and conspicuous places in the territory of the
theres non-payment.
local government unit where the distraint is made,
specifying the time and place of sale, and the
The LGUs, through its local treasurer, can enforce
articles distrained. The time of sale shall not be less
the remedy of lien by instituting a a.) judicial action
than twenty (20) days after notice to the owner or
or an b.) administrative action.
possessor of the property as above specified and
the publication or posting of the notice. One place
It attaches not only upon any property or rights
for the posting of the notice shall be at the office of
therein which may be subject to the lien but also
the chief executive of the local government unit in
upon property used in business, occupation,
which the property is distrained.
practice of profession or calling, or exercise of
privilege.
- NOTE: Distraint does not require publication in
a newspaper.
It would extend to any other properties regardless
of the ownership so long as that property is used in
- Notification in not less than 3 public and
trade, business, occupation or practice of
conspicuous places in the territory of the LGU
profession.
(one of which is the office of the chief
executive of the LGU)
Lien is Extinguished only upon full payment of
delinquent taxes plus surcharges and penalties - Time of sale shall not be less than twenty (20)
days after notice to the owner or possessor of
ADMINISTRATIVE ACTION
the property as above specified and the
publication or posting of the notice
1. By distraint
(d) Release of distrained property upon payment
SEC. 175. Distraint of Personal Property. - The
prior to sale - If at any time prior to the
remedy by distraint shall proceed as follows:
consummation of the sale, all the proper charges
(a) Seizure - Upon failure of the person owing any are paid to the officer conducting the sale, the
local tax, fee, or charge to pay the same at the time goods or effects distrained shall be restored to the
required, the local treasurer or his deputy may, owner.
upon written notice, seize or confiscate any
(e) Procedure of sale - At the time and place fixed in
personal property belonging to that person or any
the notice, the officer conducting the sale shall sell
personal property subject to the lien in sufficient
the goods or effects so distrained at public auction
quantity to satisfy the tax, fee, or charge in
to the highest bidder for cash. Within five (5) days
question, together with any increment thereto
after the sale, the local treasurer shall make a
incident to delinquency and the expenses of seizure.
report of the proceedings in writing to the local

chief executive concerned. Should the property distraint of personal property belonging to the
distrained be not disposed of within one hundred delinquent taxpayer. To this end, the provincial, city
and twenty (120) days from the date of distraint, or municipal treasurer, as the case may be, shall
the same shall be considered as sold to the local prepare a duly authenticated certificate showing
government unit concerned for the amount of the the name of the taxpayer and the amount of the
assessment made thereon by the Committee on tax, fee, or charge, and penalty due from him. Said
Appraisal and to the extent of the same amount, certificate shall operate with the force of a legal
the tax delinquencies shall be cancelled. Said execution throughout the Philippines. Levy shall be
Committee on Appraisal shall be composed of the effected by writing upon said certificate the
city or municipal treasurer as chairman, with a description of the property upon which levy is
representative of the Commission on Audit and the made. At the same time, written notice of the levy
city or municipal assessor as members. shall be mailed to or served upon the assessor and
the Registrar of Deeds of the province or city where
- Public auction to Highest Bidder for CASH the property is located who shall annotate the levy
on the tax declaration and certificate of title of the
- If not disposed of within one hundred and property, respectively, and the delinquent taxpayer
twenty (120) days from the date of distraint, or, if he be absent from the Philippines, to his agent
the same shall be considered as sold to the or the manager of the business in respect to which
local government unit concerned the liability arose, or if there be none, to the
occupant of the property in question. In case the
- Amount of the property if not sold during levy on real property is not issued before or
public auction would be assessed by simultaneously with the warrant of distraint on
Committee on Appraisal personal property, and the personal property of the
taxpayer is not sufficient to satisfy his delinquency,
- Assessment pertains to the appraisal of the the provincial, city or municipal treasurer, as the
value of the property. If property is assessed case may be, shall within thirty (30) days after
to be less than the delinquency, then execution of the distraint, proceed with the levy on
additional properties are distrained or proceed the taxpayer's real property. A report on any levy
with judicial action shall, within ten (10) days after receipt of the
warrant, be submitted by the levying officer to the
(f) Disposition of proceeds - The proceeds of the
sanggunian concerned.
sale shall be applied to satisfy the tax, including the
surcharges, interest, and other penalties incident to - Levy may be done before, simultaneously or
delinquency, and the expenses of the distraint and after distraint
sale. The balance over and above what is required
to pay the entire claim shall be returned to the - After the execution of the duly authenticated
owner of the property sold. The expenses certificate by treasurer showing the name of
chargeable upon the seizure and sale shall embrace the TP and the amount of liability, there is a
only the actual expenses of seizure and preservation need to serve the notice of the warrant of
of the property pending the sale, and no charge levy. The 3 persons who must be notified of
shall be imposed for the services of the local officer the issuance of levy are the following:
or his deputy. Where the proceeds of the vgsale are
insufficient to satisfy the claim, other property may, 1. Local assessor for the purpose of
in like manner, be distrained until the full amount annotating the levy on the tax declaration
due, including all expenses, is collected. of the RP
- Proceeds of the sale is applied to: 2. RD for the purpose of annotating the
levy on the certificate of title of the RP
Tax, including the surcharges, interest,
and other penalties incident to 3. Owner of the property himself, or in the
delinquency, and the expenses of the absence of the owner, his duly authorized
distraint and sale representative or agent
Balance over and above what is required SEC. 178. Advertisement and Sale. - Within thirty
to pay the entire claim shall be returned (30) days after levy, the local treasurer shall
to the owner of the property sold proceed to publicly advertise for sale or auction the
property or a usable portion thereof as may be
If proceeds is insufficient, then additional necessary to satisfy the claim and cost of sale; and
personal properties would be distrained such advertisement shall cover a period of at least
until sufficient or proceed to judicial thirty (30) days. It shall be effected by posting a
action notice at the main entrance of the municipal
building or city hall, and in a public and conspicuous
2. By levy place in the barangay where the real property is
located, and by publication once a week for three
SEC. 176. Levy on Real Property . - After the
(3) weeks in a newspaper of general circulation in
expiration of the time required to pay the
the province, city or municipality where the
delinquent tax, fee, or charge, real property may be
property is located. The advertisement shall contain
levied on before, simultaneously, or after the

the amount of taxes, fees or charges, and penalties The provincial, city or municipal treasurer or his
due thereon, and the time and place of sale, the deputy, upon surrender by the purchaser of the
name of the taxpayer against whom the taxes, fees, certificate of sale previously issued to him, shall
or charges are levied, and a short description of the forthwith return to the latter the entire purchase
property to be sold. At any time before the date price paid by him plus the interest of not more than
fixed for the sale, the taxpayer may stay the two percent (2%) per month herein provided for,
proceedings by paying the taxes, fees, charges, the portion of the cost of sale and other legitimate
penalties and interests. If he fails to do so, the sale expenses incurred by him, and said property
shall proceed and shall be held either at the main thereafter shall be free from the lien of such taxes,
entrance of the provincial, city or municipal fees, or charges, related surcharges, interests, and
building, or on the property to be sold, or at any penalties. The owner shall not, however, be
other place as determined by the local treasurer deprived of the possession of said property and
conducting the sale and specified in the notice of shall be entitled to the rentals and other income
sale. Within thirty (30) days after the sale, the local thereof until the expiration of the time allowed for
treasurer or his deputy shall make a report of the its redemption.
sale to the sanggunian concerned, and which shall
form part of his records. After consultation with the - Redeem the property upon payment to the
sanggunian, the local treasurer shall make and local treasurer of the:
deliver to the purchaser a certificate of sale,
showing the proceedings of the sale, describing the a. Total amount of taxes, fees, or charges,
property sold, stating the name of the purchaser and
and setting out the exact amount of all taxes, fees,
charges, and related surcharges, interests, or b. Related surcharges, interests or
penalties: Provided, however, That any excess in the penalties from the date of delinquency to
proceeds of the sale over the claim and cost of sales the date of sale,
shall be turned over to the owner of the property.
The local treasurer may, by ordinance duly c. Plus interest of not more than two
approved, advance an amount sufficient to defray percent (2%) per month on the purchase
the costs of collection by means of the remedies price from the date of purchase to the
provided for in this Title, including the preservation date of redemption.
or transportation in case of personal property, and
- During the pendency of the redemption
the advertisement and subsequent sale, in cases of
period, the owner shall not be deprived of the
personal and real property including improvements
possession of said property and shall be
thereon.
entitled to the rentals and other income
- NOTE: There must be publication in case of thereof until the expiration of the time
levy. allowed for its redemption
- Posting and Publication. SEC. 180. Final Deed to Purchaser. - In case the
taxpayer fails to redeem the property as provided
In cases of levy, since it involves real property, herein, the local treasurer shall execute a deed
it requires not only posting of the notice of conveying to the purchaser so much of the property
sale at the main entrance of municipal or city as has been sold, free from liens of any taxes, fees,
hall and in conspicuous public places but it charges, related surcharges, interests, and
also requires the publication of such notice penalties. The deed shall succinctly recite all the
once a week for 3 consecutive weeks. proceedings upon which the validity of the sale
depends.
- In both cases of levy and distraint, the TP may
always pay or stop the auction sale by settling SEC. 181. Purchase of Property by the Local
his obligations, tax liabilities, fees and charges. Government Units for Want of Bidder. - In case
Assuming that the TP is unable to pay his there is no bidder for the real property advertised
obligation, public auction will proceed. for sale as provided herein, or if the highest bid is
for an amount insufficient to pay the taxes, fees, or
SEC. 179. Redemption of Property Sold. - Within charges, related surcharges, interests, penalties and
one (1) year from the date of sale, the delinquent costs, the local treasurer conducting the sale shall
taxpayer or his representative shall have the right purchase the property in behalf of the local
to redeem the property upon payment to the local government unit concerned to satisfy the claim and
treasurer of the total amount of taxes, fees, or within two (2) days thereafter shall make a report
charges, and related surcharges, interests or of his proceedings which shall be reflected upon the
penalties from the date of delinquency to the date records of his office. It shall be the duty of the
of sale, plus interest of not more than two percent Registrar of Deeds concerned upon registration with
(2%) per month on the purchase price from the date his office of any such declaration of forfeiture to
of purchase to the date of redemption. Such transfer the title of the forfeited property to the
payment shall invalidate the certificate of sale local government unit concerned without the
issued to the purchaser and the owner shall be necessity of an order from a competent court.
entitled to a certificate of redemption from the Within one (1) year from the date of such forfeiture,
provincial, city or municipal treasurer or his deputy. the taxpayer or any of his representative, may
redeem the property by paying to the local
treasurer the full amount of the taxes, fees, SEC. 183. Collection of Delinquent Taxes, Fees, Charges
charges, and related surcharges, interests, or or other Revenues through Judicial Action. - The local
penalties, and the costs of sale. If the property is government unit concerned may enforce the collection of
not redeemed as provided herein, the ownership delinquent taxes, fees, charges or other revenues by civil
thereof shall be fully vested on the local action in any court of competent jurisdiction. The civil
government unit concerned. action shall be filed by the local treasurer within the
period prescribed in Section 194 of this Code.
- Purchased by the govt when:
Civil action in any court of competent jurisdiction -
a. no bidder for the real property Regular courts depending on the amount:
advertised for sale, or
If more than 300k RTC
b. if the highest bid is for an insufficient
amount If 300k or less MTC
Redemption period 1 year from Note: if within Metro Manila, threshold is 400K
forfeiture
Assessment and Collection Period of Local Taxes
SEC. 182. Resale of Real Estate Taken for Taxes,
Fees, or Charges. - The sanggunian concerned may, SEC. 194. Periods of Assessment and Collection.
by ordinance duly approved, and upon notice of not
less than twenty (20) days, sell and dispose of the (a) Local taxes, fees, or charges shall be assessed within
real property acquired under the preceding section five (5) years from the date they became due (and
at public auction. The proceeds of the sale shall payable, regardless of when you actually paid the tax or
accrue to the general fund. when you actually filed for the renewal of your business
permit). No action for the collection of such taxes, fees,
- Property purchased by treasurer in favor of or charges, whether administrative or judicial, shall be
the LGU may be subsequent resold after instituted after the expiration of such period: Provided,
notice of not less than 20 days. That, taxes, fees or charges which have accrued before
the effectivity of this Code may be assessed within a
Properties exempt from distraint or levy period of three (3) years from the date they became due.
SEC. 185. Personal Property Exempt from Distraint or (b) In case of fraud or intent to evade the payment of
Levy. - The following property shall be exempt from taxes, fees, or charges, the same may be assessed within
distraint and the levy, attachment or execution thereof ten (10) years from discovery of the fraud or intent to
for delinquency in the payment of any local tax, fee or evade payment.
charge, including the related surcharge and interest:
(c) Local taxes, fees, or charges may be collected within
(a) Tools and the implements necessarily used by the five (5) years from the date of assessment by
delinquent taxpayer in his trade or employment; administrative or judicial action. No such action shall be
instituted after the expiration of said period: Provided,
(b) One (1) horse, cow, carabao, or other beast of however, That, taxes, fees or charges assessed before
burden, such as the delinquent taxpayer may select, and the effectivity of this Code may be collected within a
necessarily used by him in his ordinary occupation; period of three (3) years from the date of assessment.
(c) His necessary clothing, and that of all his family; ASSESSMENT
(d) Household furniture and utensils necessary for General Rule: Within 5 years from the date they
housekeeping and used for that purpose by the become due and payable.
delinquent taxpayer, such as he may select, of a value
not exceeding Ten thousand pesos (P=10,000.00); LBT becomes due January 20 of every year.
th
(e) Provisions, including crops, actually provided for Or if its payable in installment basis, then the 20
st
individual or family use sufficient for four (4) months; day of the 1 month of every quarter.
(f) The professional libraries of doctors, engineers, For CTC, on Feb. 28.
lawyers and judges;
Exception: In case of fraud or intent to evade the
(g) One fishing boat and net, not exceeding the total payment of taxes, within 10 years from discovery of the
value of Ten thousand pesos (P=10,000.00), by the lawful fraud or intent to evade payment.
use of which a fisherman earns his livelihood; and
COLLECTION
(h) Any material or article forming part of a house or
improvement of any real property. Within 5 years from the date of assessment.
- More or less, the same items that are not However, if no assessment is made (in which case the
subject to attachment LGU directly proceeded with the collection proceedings,
whether administratively or judicially) the collection of
JUDICIAL ACTION taxes must be done within 5 years from the date they
became due and payable. If a decision comes out within 60 days, the TP is given
30 days to appeal before the court of competent
But if theres fraud or intent to evade payment of taxes, jurisdiction, which is the RTC.
collection w/o assessment shall be made within 10
years from the discovery of such fraud or intent to If no decision comes out within 60 days, its considered
evade payment of taxes. as a denial of the appeal for purposes only of filing an
appeal before the court of competent jurisdiction, RTC,
SAMPLE: within 30 days after the expiration of the 60-day
period.
2007 deficiency LBT when not assessed can be collected
only up to Jan. 20, 2012, otherwise prescribed Process:
(d) The running of the periods of prescription provided in a. Within 30 days from effectivity of ordinance - file
the preceding paragraphs shall be suspended for the appeal with SOJ
time during which:
b. Within 30 days from receipt of decision of denial by
(1) The treasurer is legally prevented from making the SOF or from 60-day inaction on such appeal file with
assessment of collection; RTC or MTC depending on amount
(2) The taxpayer requests for a reinvestigation and c. MTC to RTC to CA or RTC to CA
executes a waiver in writing before expiration of the
period within which to assess or collect; and d. CA to SC
2 Requirements PROTEST AGAINST ASSESSMENT
a. Request for reinvestigation SEC. 195. Protest of Assessment. - When the local
treasurer or his duly authorized representative finds that
b. Execute waiver in writing before expiration of correct taxes, fees, or charges have not been paid, he
period shall issue a notice of assessment stating the nature of
the tax, fee or charge, the amount of deficiency, the
(3) The taxpayer is out of the country or otherwise surcharges, interests and penalties. Within sixty (60)
cannot be located. days from the receipt of the notice of assessment, the
taxpayer may file a written protest with the local
treasurer contesting the assessment; otherwise, the
assessment shall become final and executory. The local
XIV. TAXPAYERS REMEDIES treasurer shall decide the protest within sixty (60) days
from the time of its filing. If the local treasurer finds the
PROTEST BY MEANS OF APPEAL TO THE SOJ protest to be wholly or partly meritorious, he shall issue
a notice canceling wholly or partially the assessment.
SEC. 187. Procedure for Approval and Effectivity of Tax However, if the local treasurer finds the assessment to
ordinances and Revenue Measures; Mandatory Public be wholly or partly correct, he shall deny the protest
Hearings. - The procedure for approval of local tax wholly or partly with notice to the taxpayer. The
ordinances and revenue measures shall be in accordance taxpayer shall have thirty (30) days from the receipt of
with the provisions of this Code: Provided, That public the denial of the protest or from the lapse of the sixty
hearings shall be conducted for the purpose prior to the (60) day period prescribed herein within which to appeal
enactment thereof: Provided, further, That any question with the court of competent jurisdiction otherwise the
on the constitutionality or legality of tax ordinances or assessment becomes conclusive and unappealable.
revenue measures may be raised on appeal within thirty
(30) days from the effectivity thereof to the Secretary of Appeal from the Decision of the local treasurer is not
Justice who shall render a decision within sixty (60) days included in the jurisdiction of the CTA. This means that
from the date of receipt of the appeal: Provided, the decision or inaction of the local treasurer is
however, That such appeal shall not have the effect of appealable before the regular courts, and not the CTA.
suspending the effectivity of the ordinance and the
accrual and payment of the tax, fee, or charge levied Remedy of the TP if the decision, either of the RTC or
therein: Provided, finally, That within thirty (30) days MTC or other lower courts, is still a denial of his appeal:
after receipt of the decision or the lapse of the sixty-day
period without the Secretary of Justice acting upon the File an appeal before the:
appeal, the aggrieved party may file appropriate
proceedings with a court of competent jurisdiction. CTA en banc if its a denial of RTC in the
exercise of its appellate jurisdiction (originates
In cases where the TP questions the constitutionality or from the MTC, MeTC, or MCTC)
legality of a tax ordinance, his remedy is to file an
appeal before the SOJ within 30 days from the CTA in division if its a denial of RTC in
effectivity of the ordinance without suspending the the exercise of its original jurisdiction
effects or the mandates of the ordinance unless
subsequently declared unconstitutional or illegal. Process:
The SOJ is given 60 days to decide your appeal. a. Within 60 days from receipt of notice of

assessment - file appeal with local treasurer suspends the running of the 2-year prescriptive period
and the 2-year prescriptive period will resume again
b. Within 30 days from receipt of decision of denial after the final decision comes out saying that the TP is
by local treasurer or from 60-day inaction on such exempt.
appeal file with RTC or MTC depending on
amount EXAMPLE: TP paid the tax but he found out that he is
exempt. He filed a claim for refund subject to the debate
c. Appeal to CTA en banc between the local treasurer and the TP. During the
period of debate, it suspended the 2-year prescriptive
c.1 MTC to RTC (30 days) to CA en banc period and resumes again after final decision.
c.2 RTC (30 days) to CA in division (15 days) to TARIFF AND CUSTOMS DUTIES (TCD)
CA en banc
d. CA en banc (15 days) to SC
CLAIM FOR REFUND AND TAX CREDIT

I. SCOPE OF TCD LAWS
SEC. 196. Claim for Refund of Tax Credit. - No case or The governing law is the Tariffs and Customs Code (TCC)
proceeding shall be maintained in any court for the and it includes also all other laws and regulations which
recovery of any tax, fee, or charge erroneously or are subject to enforcement by the BOC or otherwise
illegally collected until a written claim for refund or within its jurisdiction.
credit has been filed with the local treasurer. No case or
So all allied laws. It even extends to the Central Bank
proceeding shall be entertained in any court after the
circulars.
expiration of two (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
Requirements in filing a claim for refund and tax credit II. DIVISION OF THE TCC
1. There must be an administrative written claim for Book I Tariff Laws

refund or credit before the local treasurer.
Book II Customs Laws
2. The written claim for refund or credit must state
that there was an illegal collection or erroneous
payment of local taxes
III. ADMINISTRATION
3. The written claim must state the facts and the law
supporting the claim In charge of Administration:
4. The written claim must have a categorical demand 1. THE TARIFF COMMISSION
for reimbursement or credit
Functions are more on administration and tariff
5. The written claim must include attachments of relations with foreign countries (Sec. 505)
supporting documents, such as presenting official
receipts evidencing the payment of taxes, etc. Includes tariff relations with other countries
6. The written claim must be filed within 2 years from Investigation of operation of customs and tariff
the date of payment of the taxes or from the date the laws
TP is entitled to a refund or credit
Assistance to the President and Congress (Sec. 506)
Both administrative claim before the local treasurer and
2. BUREAU OF CUSTOMS
the judicial claim before the regular courts must be filed
within 2 years from the date of erroneous payment of
Enforcement, assessment & collection (Sec. 602)
taxes or from the date the TP is entitled to such refund
or credit. Prevention and suppression of smuggling and other
frauds
From the date the TP is entitled to a refund or credit
means that the supervening event applies in claims for Supervision and control over entrance and
refund in local taxes, unlike claims for refund in national clearance of vessel and aircrafts engaged in foreign
taxes. commerce and over mails
So, local taxation, insofar as claims for refund and credit, Exclusive jurisdiction over seizure and forfeiture
admits of supervening event, meaning, sometime within under TCC
the 2-year period, such period may be suspended.
Sec. 1206. Jurisdiction of Collector Over Importation of
EXAMPLE: If theres a difficult interpretation of the law Articles. The Collector shall cause all articles entering
insofar as whether the TP is exempt or not in a pending the jurisdiction of his district and destined for
case, such period when the case is still pending
importation through his port to be entered at the a. An act is done in Phil. Waters which constitutes a
customhouse, shall cause all such articles to be violation of the tariff and customs laws
appraised and classified, and shall assess and collect the
duties, taxes and other charges thereon, and shall hold b. A pursuit of such vessel began within the
possession of all imported articles upon which duties, jurisdictional water which:
taxes, and other charges have not been paid or secured
to be paid, disposing of the same according to law. i. may continue beyond maritime zone,
and
1. Cause all articles entering in its jurisdiction and
destined for importation through his port to be entered ii. the vessel may be seized on the high
at the customhouse; seas
2. Then cause such articles to be appraised and If the vessel has passed the high seas meaning it is
classified; already in the territory of a foreign or another state
(foreign waters) the hot pursuit may no longer be
3. For the purpose of assessing and collecting the duties continued
and taxes and other charges thereon;
If the act is done or originated from the high seas,
4. Then, hold possession of all imported articles until the the Philippines has no jurisdiction over it. Hot
duties, taxes and other charges have been paid or pursuit is not applicable.
secured to be paid
B. Of all other imported articles
NOTE: No release can be made without payment
of tariffs and customs duties. Imported articles which may be subject to seizure for
violation of the tariff and customs laws may be pursued
Sec. 603. Territorial Jurisdiction. For the due and in their transportation in the Philippines by land, water
effective exercise of the powers conferred by law and to or air and such jurisdiction exerted over it at any place
the extent requisite therefor, said bureau shall have the therein as may be necessary for the due enforcement of
right of supervision and police authority over: the law.
A. All seas within the jurisdiction of the Philippines - There is violation of the tariff and customs
and laws
B. All coasts, ports, airports, harbors, bays, rivers - As a consequence, they may be pursued in the
and inland waters navigable from the sea. Phils.
Sec. 604. Jurisdiction over Premises Used for Customs - With jurisdiction over them at any place
Purposes. The Bureau of Customs shall, for customs therein for the enforcement of the law
purposes, have exclusive control, direction and
management of custom-houses, warehouses, offices, NOTE: The only exception wherein BOC cannot exercise
wharves, and other premises in the respective ports of the hot pursuit is inside your dwelling, without a search
entry, in all cases without prejudice to the general police warrant.
powers of the city or municipality wherein such premises
are situated. Who has primary jurisdiction over the customs laws?
- This means to say that if the BOC is given the direct BOC
and exclusive control in a warehouse, a custom-
house or in a wharf, exclusive, so the courts cannot RTC v. BOC
touch it.
The RTCs do not have jurisdiction over seizure and
- No orders of replevin of properties, no order for forfeiture proceedings conducted by the BOC and
prohibition, certiorari, can be made by the courts, to interfere with its proceedings because the COC
unless the LGU will be exercising its general police has exclusive jurisdiction over all questions
powers. touching on the seizure and forfeiture of dutiable
goods.
Doctrine of Hot Pursuit (Extraterritorial jurisdiction):
No petitions for certiorari, prohibition or
A. Of a Vessel mandamus can be filed with the RTC because these
are, in reality, an attempt to review the
When a vessel becomes subject to seizure by reason Commissioners actuations. Neither replevin be
of an act done in Philippine waters in violation of filed with the RTC.
the tariff and customs laws, a pursuit of such vessel
begun within the jurisdictional waters may continue RATIONALE: Doctrine of Primary Jurisdiction.
beyond the maritime zone, and the vessel may be
seized on the high sea. Even if a Customs seizure or forfeiture is illegal,
exclusive jurisdiction still belongs to the Bureau of
Requisites: Customs to the exclusion of the regular courts.
EXCEPTION: The only instance, probably, that you can

question actuations of the BOC before the RTC is when it duty upon each importation, even though
involves general police powers of the state. previously exported from the Philippines, except as
otherwise specifically provided for in this Code or in
If youre not agreeable with the BOC, you cannot other laws.
question their actions before the RTC. First,
question the actions of the Collector of Customs Generally, all importations are dutiable.
before the Collector himself and follow the
procedure later discussed. 2. Prohibited Importations
a. Absolutely Prohibited (Sec. 102 TCC)
IV. TARIFF AND CUSTOMS DUTIES In sum:
TARIFFS custom duties, toll or tribute payable upon a. Weapons of war

merchandise of govt
b. Immoral / obscene or insidious articles
CUSTOM DUTIES tax assessed upon merchandise from
or exported to a foreign country c. Articles for treason
NOTE: d. Prohibited drugs / narcotics
Tariff and customs duties are generally synonymous e. Gambling paraphernalia devices
under the custom laws.
NOTE: But if its used for gambling that is
Goods for Customs Duty Purposes sanctioned by the Philippine
Government, it can be covered by the
The law imposes duty on both imported as well as exemption but conditionally-free
exported goods. importation.
All articles when imported from any foreign country into f. Those prohibited under special laws
the Philippines shall be subject to duty upon each
importation even though previously exported from the b. Qualifiedly Prohibited
Philippines, except as otherwise specifically provided for
Where such conditions as to warrant a lawful
in the Code or other laws. (Sec. 100, Title III, Book I, TCC)
importation do not exist, the legal effects of the
NOTE: importation of qualifiedly prohibited articles are
the same as those of absolutely prohibited
Except as otherwise specifically provided refers articles.
to those exempted from customs duties.
NOTE: This actually refers to items that can
NOTE: actually be imported legally but because of some
conditions existing that cannot warrant the
Right now, we concentrate imposing customs lawful importation, and other circumstances
duties on importations. Exportations, as a general surrounding it, it becomes qualifiedly prohibited
rule, are tax-free because we encourage and it would have the same effects as if youre
exportation in order to have influx of foreign actually importing an absolutely prohibited
currencies, which actually supports our local importation.
Philippine currency.
c. Conditionally free importations
Goods for customs duty purposes are anything that may
be made the subject of importation or exportation. Certain imported articles are exempt from
import taxes upon compliance with certain
Articles, when used with reference to importation or requirement. These are:
exportation, includes goods, wares and merchandise
and, in general, anything that may be made the subject a. Those provided for in Sec. 105 of the
of importation or exportation. (Sec. 3514, TCC) TCC
In general anything that may be made the subject of b. Those granted to government
importation or exportation is sufficiently clear and agencies, GOCC with agreements with
comprehensive to include checks and money orders. It foreign countries;
even includes foreign currencies, moneys and bills.
c. Those given to international
Kinds of Goods/Merchandise or Classes of Importations institutions entitled to exemption by
agreement or special law
1. Articles subject to duty
d. Those that may be granted by the
Section 101. Imported Articles Subject to Duty. President upon NEDAs recommendation
All articles, when imported from any foreign
country into the Philippines, shall be subject to NOTE: Once you import a product, even if its

those listed among the conditionally free When importation begins and When deemed
importations, you cant automatically withdraw terminated?
such goods from the port of the BOC without
presenting documents complying with the Sec. 1202. When Importation Begins and Deemed
requirements but not necessarily pay the Terminated.
customs duties because youre exempt. Theres
no absolutely-free importations. Importation begins when the carrying vessel or aircraft:
If an article that was imported into the Phils., A. Enters the jurisdiction of the Philippines
like imported articles of raw materials for
processing and manufacturing in the Phils., are B. With intention to unload therein.
re-exported back as finished goods, you can ask
for exemption from customs duties, provided: Importation is deemed terminated upon:
A bond is filed with the COC in an amount equal A. Payment of the duties, taxes and other charges
to one and one-half (1 ) times the ascertained due upon the articles, or secured to be paid, at a
duties, taxes and other charges thereon, port of entry and
conditioned for the exportation thereof or
B. The legal permit for withdrawal shall have been
payment of the corresponding duties, taxes and
granted, OR in case said articles are free of duties,
other charges.
taxes and other charges, until they have legally left
Seeking for exemption from customs duties on the jurisdiction of the customs.
an importation of products for processing, for
How to Prove Intent (as it is only a state of mind)
repair, or for reconditioning is conditional
because your exemption can only be fully
It does not require actual unloading. The TCC provides
guaranteed once youre able to re-export the
that even if theres no actual unloading yet, but if there
products within a period of 1 year.
is, in the vessel, unmanifested cargoes, it becomes proof
already that theres the intent to violate the customs
Personal effects and household effects of
laws because every vessel must list down, in its
returning Phil. Residents limit is P10,000
manifest, the cargoes.
Returning resident shall mean those Filipino
When theres unmanifested cargoes, it will
nationals who have stayed in a foreign
automatically be considered as if importation has begun.
country for at least 6 months.
Importation is terminated:
Importations of goods and items that will be
delivered and distributed to the Philippine
i. Upon payment of the duties and other charges and
National Red Cross for those in need will not be
theres already a legal permit for the withdrawal; or
subject to importation. As long as the relief
organization is not organized for profit and ii. When such duties and other charges are secured to
certified by DSWD or DepEd as the case may be. be paid and theres legal permit for withdrawal; or
iii. In cases of those that are exempt from taxes, you

dont pay the tax, but simply get the legal permit
V. IMPORTATION for withdrawal and from the time that these
imported products, which are free of duties, have
When are Tariff and Customs Applied? legally left the jurisdiction of the customs,
importation is already terminated
Section 1201. Articles to Be Imported Only Through
Customhouse. All articles imported into the NOTE: You cant terminate the importation of an
Philippines, whether subject to duty or not, shall be exempt article right then and there. It must have
entered through a customhouse at a port of entry. legally left the jurisdiction of the customs because
even if its exempt, it may happen that it will be
- It is applied only after the importation has begun
assessed of customs duties if its found out that it
and before importation is terminated.
did not satisfy the conditions of conditionally free
importations.
- So the tariff and customs laws would only apply
whenever theres an importation or exportation
that has begun but prior to its termination.
- NOTE: Termination would actually mean payment

of taxes.
- Hence, there can be no tariff and customs applied

whenever its not an importation or exportation or
theres no importation or exportation that has
begun.

article is actually being used by the government or any
Commissioner of Customs vs. CTA, GR No. 171516-17
of its political subdivision concerned, the amount of duty,
(2009)
tax, fee or charge shall be refunded to the government
Under Section 1202 of the TCCP, importation takes place when or the political subdivision which paid it.
merchandise is brought into the customs territory of the Philippines
with the intention of unloading the same at port. NOTE: But a refund can be made thereafter so long as
theres a certification from the head of the department
An exception to this rule is transit cargo28 entered for immediate with the approval of the Auditor General that its
exportation. Section 2103 of the TCCP provides: actually being used by the government.
Section 2103. Articles Entered for Immediate Exportation. Where Owners of imported articles
an intent to export the article is shown by the bill of lading, invoice,
manifest or other satisfactory evidence, the whole or part of a bill
The owners of imported articles are:
(not less than one package) may be entered for immediate
exportation under bond. The Collector shall designate the vessel or
aircraft in which the articles are laden constructively as warehouse 1. To whom the same are consigned
to facilitate the direct transfer of the articles to the exporting vessel
or aircraft. 2. The holder of a bill of lading duly indorsed by the
consignee therein named
Unless it shall appear by the bill of lading, invoice, manifest, or other
satisfactory evidence, that the articles arriving in the Philippines are 3. If consigned to order, by the consignor, shall be
destined for transshipment, no exportation thereof shall be deemed the consignee thereof
permitted except under entry for immediate exportation under
irrevocable domestic letter of credit, bank guaranty or bond in an 4. The underwriters of abandoned articles and the
amount equal to the ascertained duties, taxes and other charges.
salvors of articles saved from a wreck at sea, along
a coast or in any area of the Phils. may be regarded
Upon the exportation of the articles, and the production of proof of
lading of same beyond the limits of the Philippines, the irrevocable as the consignees
domestic letter of credit, bank guaranty or bond shall be released.
Entry through Customhouse
For an entry for immediate exportation to be allowed under this
provision, the following must concur: 1. CARGO MANIFEST
(a) there is a clear intent to export the article as shown in - It is important to determine the owners of the
the bill of lading, invoice, cargo manifest or other imported articles since they can be imposed of
satisfactory evidence; criminal or civil liability depending on what
violations have been made.
(b) the Collector must designate the vessel or aircraft
wherein the articles are laden as a constructive
warehouse to facilitate the direct transfer of the articles
- A Cargo Manifest is required whenever importation
to the exporting vessel or aircraft; is entered through the customhouse
(c) the imported articles are directly transferred from the - Cargo Manifest pertains to the manifest of the
vessel or aircraft designated as a constructive warehouse carrying vessel or aircraft of the correct items that
to the exporting vessel or aircraft and are carried by the vessel or aircraft.
(d) an irrevocable domestic letter of credit, bank - All cargoes, whether its an importation or
guaranty or bond in an amount equal to the ascertained exportation, must be included in the cargo
duties, taxes and other charges is submitted to the
manifest.
Collector (unless it appears in the bill of lading, invoice,
manifest or satisfactory evidence that the articles are
destined for transshipment). EXCEPTION: The products of the ships
stores, such as canteen.
Government Importations - Right after receiving the cargo manifest, the BOC
will make appraisal and classification of the cargoes
G.R. and it will try to assess and collect the taxes.
Government importations are subject to customs 2. IMPORT ENTRY

duties
The importer owner must file the:
Sec. 1205. Importations by the Government. Except
as otherwise specifically provided, all importations by Import entry declaration, which is a
the government for its own use or that of its declaration to the BOC showing the
subordinate branches on instrumentalities, or description of the cargo, value, tariff
corporations, agencies or instrumentalities owned or classification and their particulars to allow the
controlled by the government, shall be subject to the BOC to correctly determine what are the
duties, taxes, fees and other charges provided for in duties and taxes that must be paid.
this Code:
Sec. 1301. Persons Authorized to Make Import
Provided, however, That upon certification of the head of Entry. Imported articles must be entered in the
the department or political subdivision concerned, with customhouse at the port of entry within thirty (30)
the approval of the Auditor General, that the imported days, which shall not be extendible, from the date
of discharge of the last package from the vessel or 2. Implied Abandonment
aircraft either
a. When the owner, importer, consignee or
(a) by the importer, being holder of the bill of interested party after due notice, fails to file
lading, an entry within thirty (30) days, which shall
not be extendible, from the date of discharge
(b) by a duly licensed customs broker acting under of the last package from the vessel or aircraft,
authority from a holder of the bill or or
(c) by a person duly empowered to act as agent or b. Having filed such entry, fails to claim his
attorney-in-fact for each holder: Provided, That importation within fifteen (15) days, which
where the entry is filed by a party other than the shall not likewise be extendible, from the date
importer, said importer shall: of posting of the notice to claim such
importation.
Himself be required to declare under oath and
under the penalties of falsification or perjury that c. Failure to mark the articles within 30 days
the declarations and statements contained in the from notice
entry are true and correct:
Effects of abandonment
Provided, further, That such statements under oath
shall constitute prima facie evidence of knowledge Any person, who abandons an article, shall be
and consent of the importer of violations against deemed to have renounced all his rights and
applicable provisions of this Code when the interests therein
importation is found to be unlawful.
An abandoned article shall ipso facto be deemed
- The import entry declaration must be filed within the property of the government
30 days from the date of discharge of the last
package from the vessel or aircraft The government has the full right to dispose of the
abandoned article.
- If there is import entry declaration (IED) filed within
30 days, the imported articles are deemed It shall not be construed as relieving the owner or
abandoned. importer from any criminal liability which may arise
from any violation of law committed in connection
- All articles imported into the Phils. whether subject with the importation of the abandoned article.
to duty or not shall be entered through a customs
house at a port of entry Any official or employee of the Bureau of Customs
or of other government agencies who, having
- ENTRY in customs law means: knowledge of the existence of an abandoned article
or having control or custody of such abandoned
a. The documents filed at the Customs house article, fails to report to the Collector within
twenty-four (24) hours from the time the article is
b. the submission and acceptance of the deemed abandoned, shall be punished with the
documents penalties prescribed in Paragraph 1, Section 3604
of this Code.
c. The procedure of passing goods through the
customs house CIVIL LIABILITY is extinguished but CRIMINAL
LIABILITY survives
Kinds of abandonment (Sec. 1801)
Taxes and duties that correspond to the
1. Express Abandonment importation of the abandoned articles are no
longer required to be paid by the owner, because
When the owner, importer or consignee of the the extent of every importers liability extends only
imported article expressly signifies in writing to to the value of the merchandise. So, taxes usually
the Collector of Customs his intentions to do not exceed 100% of the value of the
abandon within 10 days. merchandise, so therefore, a person who abandons
his importation is deemed to have been relieved
If you want to expressly abandon your imported
from payment of customs duties.
goods, the owner, importer, or consignee must
expressly signify in writing and under oath his NOTE: The maximum civil penalty under remedies
intention to abandon the shipment in favor of of the government is forfeiture of the articles.
the government within 10 days after filing of the
import entry declaration.
Possible reason for abandonment:
The taxes are so high vis--vis the imported

articles. If you are not willing or cannot pay
the custom duties, the abandonment of the
imported articles extinguishes the civil liability.
otherwise conforming to the definition
Chevron Phils. V. COC GR No. 178759 (2008)
from being regarded as identical.
Both the IED and IEIRD should be filed within 30 days
from the date of discharge of the last package from the vessel or This pertains to the transaction value of
aircraft. identical goods sold for export to the
Philippines at or about the date of
In order for a shipment to be considered abandoned, exportation of the goods being valued
it is already sufficient that an importer fails to file the required
import entries within the indicated reglementary period as the METHOD THREE Transaction value of
law no longer requires that there be acts or omissions where similar goods
intent to abandoned may be inferred.
If there are no identical goods, then the
More importantly, notice to Chevron is no longer
necessary as it was aware that the shipments already arrived at basis will then be the transaction value of
the Port of Batangas, aside from the fact that the Company similar goods sold for export to the
already had actual physical possession of the property. Since the Philippines at or about the date of
purpose of posting an "urgent notice to file entry" pursuant to exportation of the goods being valued
Section B.2.1 of CMO 15-94 is only to notify the importer of the
"arrival of its shipment" and the details of said shipment. Similar goods mean goods which,
Compliance with the notice requirement is no longer required in although not alike in all respects, have
the instant case. Finally, the SC ruled that the commencement of like characteristics and like component
abandonment proceedings is not a necessary requirement in
materials which enable them to perform
order to effect the transfer of ownership of the abandoned
articles to the government. Section 1802 of the TCC makes use of the same functions and to be
the term ipso facto, which may be translated as by the fact commercially interchangeable. The
itself. quality of the goods, their reputation and
the existence of a trademark shall be
Accordingly, there was no need for any affirmative among the factors to be considered in
act on the part of the government with respect to the abandoned determining whether goods are similar.
imported articles since the law itself provides that the abandoned
articles shall ipso facto be deemed the property of the METHOD FOUR Deductive value
government. Ownership over the abandoned importation was
transferred to the government by operation of law under Section
Deductive value is based on the unit price
1802 of the TCC, as amended by R.A. 7651.
at which the imported goods or identical
or similar imported goods are sold in the
Philippines, in the same condition as
when imported, in the greatest aggregate
VI. CLASSIFICATION OF CUSTOMS DUTIES quantity, at or about the time of the
importation of the goods being valued, to
A. ORDINARY OR REGULAR CUSTOMS DUTIES these persons not related to the persons from
are usually or generally imposed on all articles that whom they buy such goods
are subject to duty.
In great numbers (greatest aggregate
1. Ad valorem duty based on the value of the quantity) meaning at a very discounted
imported article. price, assuming that it would have been
the cost had it been for export to the
Basis of dutiable value Phils.
The basis for ad valorem rate is the METHOD FIVE Computed value
transaction value as found on the import
entry declaration and its attachments. Computed value is derived from
However, the BOC cannot fully rely on the accounting the raw materials and all
import entry declaration of an importer. other costs in producing the product plus
(METHOD ONE TRANSACTION VALUE freight, insurance and packing expenses
actually paid or payable)
METHOD SIX Fallback value
If the BOC determines that there is
reasonable doubt on the transaction Fallback value is such value that can be
value stated the following methods are determined by using other reasonable
resorted by BOC in determining the true means and on the basis of data available
value, (Sec. 201) in chronological order: in the Phils.
METHOD TWO Transaction value of Export Value value used during the
identical goods transition from Home Consumption Value
to Transaction Value
Identical goods mean goods, which are
the same in all respects, including Home Consumption Value value based
physical characteristics, quality and on wholesale price in home country
reputation. Minor differences in
appearances shall not preclude goods 2. Specific duty based on the dutiable weight

of goods. products
Gross Weight is its weight plus the weight of - Question the imposition made by the SOA and
all containers, packages, holders and packing, SOTI with the CTA
of any kind, in which said articles are
contained, held or packed at the time of 2. Countervailing duty imposed upon foreign
importation. goods enjoying specific subsidy upon the
production, manufacture or exportation of such
Legal Weight is its weight plus the weight of product, commodity or article and the importation
the immediate containers, holders and/or of such subsidized product has caused or threaten
packing in which such articles are usually to cause material injury to a domestic industry
contained, held or packed at the time of
importation and/or, when imported in retail - To prevent unfair competition
packages, at the time of their sale to the public
in usual retail quantities: AMOUNT/RATE Equivalent to the bounty or
subsidy
Provided, That when articles are packed in
single container, the weight of the latter shall Subsidy includes fiscal incentives like granting
be included in the legal weight. of tax exemption in the country of origin, such
that it can export product to the Phils., which
Net weight refers to only the actual weight of will result to importation to us at a very low
the articles at the time of importation, price because it was not subject to tax in its
excluding the weight of the immediate and all country of origin.
other containers, holders or packing in which
such articles are contained, held or packed IMPOSING AUTHORITY - The SOTI for non-
agricultural products and SOA for agricultural
3. Alternating duty not ad valorem and not products
specific. It means the duty which alternates
from being subject to ad valorem to specific 3. Marking duty This is a duty on an ad valorem basis
duty. imposed for improperly marked articles. The law
requires that foreign importations must be marked in
4. Compound duty when a specific imported any official language of the Phils. with the name of the
article would be computed of customs duties country of origin of the article.
using both ad valorem and specific duties.
NOTE: What it requires simply is that the
B. SPECIAL CUSTOMS DUTIES source or country of origin of the articles must
be indicated in the official language of the
These are additional customs duties actually Phils.
computed on top of what you pay as ordinary or
regular customs duties to protect the local AMOUNT/RATE - 5% ad valorem (based on the
industries against foreign competition (dumping value of the article) accruing at the time of
and countervailing duties); in order to protect importation
consumers from possible deceptions (marking
duty); and to protect the country and national EXCEPTION: Not required to pay marking duty
interest (retaliatory or discriminatory duty) when it is - Exported or destroyed under
customs supervision and prior to the final
These cannot be imposed without regular duties liquidation of the corresponding entry
because the law says that it is to be in addition to
such. NOTE: Imported article held in customs
custody for examination may not be delivered
1. Dumping Duty (or Anti-Dumping Duty) This is until marked. Further, the article shall be
a duty levied on imported goods where it appears deemed abandoned upon failure to mark
that a specific kind or class of foreign article is being them within 30 days from notice.
imported into or sold or is likely to be sold in the
Phils. at a price less than its fair value, the IMPOSING AUTHORITY Commissioner of
importation and sale of which might injure, or Customs
retard the establishment of, or is likely to injure, an
industry producing like goods in the Philippines, to 4. Retaliatory or Discriminatory Duty This is a duty
the extent of the under-pricing of the value. imposed on imported goods whenever it is found that
the country of origin discriminates against the
- To prevent unfair competition commerce of the Phils. like imposing any unreasonable
charge, exaction, limitation or regulation not equally
AMOUNT/RATE Difference between the enforce upon like articles of other countries or
actual price and the normal value of the article discriminating in such a manner as to place the
(extent of the under-pricing) commerce of the Phils. at a disadvantage compared with
the commerce of any foreign country
IMPOSING AUTHORITY - The SOTI for non-
agricultural products and SOA for agricultural

AMOUNT / RATE - Not exceeding 100% ad 6. Tonnage dues
valorem
Sec. 3201. Definition. Tonnage due is the amount
IMPOSING AUTHORITY - The President as paid by the owner, agent, operator or master of a
provided under the Constitution and translated vessel engaged in foreign trade coming to the
in the TCC (FLEXIBLE TARIFF CLAUSE - President Philippines from a foreign port or going to a foreign
has the right to increase, reduce, or remove any port from the Philippines based on the net tonnage
existing protective rates of import duty). of the vessel or weight of the articles discharged or
laden.
Remedy of the government if the foreign
country persists in importing discriminatory 7. Other fees and charges
foreign articles
Sec. 3302. Other Charges. When any article is
The discriminatory foreign articles shall be sold or any service rendered by the Bureau of
forfeited in favor of the government and shall Customs in any matter for which a charge may be
be seized, prosecuted and condemned. collected legally, no fee therefor having been fixed
by law, such charge shall be on such amount as may
If still persistent, then banning of such from time to time be fixed by regulation or order of
discriminatory foreign articles. the Commissioner and approved by the department
head; and the payment of such charge may be
C. OTHER CUSTOMS FEES, DUES OR CHARGES PAYABLE- made by affixing and cancelling the documentary
All stages are actually imposed charges customs stamps.
1. Harbor fees Whenever a vessel engaged in foreign trade drops

anchor in the Philippine waters, liable for anchorage fee.
Section 2701. Definition. Harbor fee is the
amount which the owner, agent, operator or Whenever a vessel engaged in domestic trade drops
master of a vessel has to pay for each entrance into anchor at any port in the Phils., liable for usage fee.
or departure from a port of entry in the Philippines.
Whenever a vessel engaged in domestic trade
2. Wharfage dues temporarily lays up, like parking, liable for lay-up fee.
Sec. 2801. Definition. Wharfage due is the

amount assessed against the cargo of a vessel
engaged in the foreign trade, based on the VII. FLEXIBLE TARIFF CLAUSE
quantity, weight or measure received and/or
discharged by such vessel. The owner, consignee, or Flexible tariff import duties which are modified by the
agent of either, of the article is the person liable for President upon investigation by the Tariff Commission
such charge. and recommendation of NEDA in the interest of national
economy, general welfare and national security.
3. Berthing fees
(1) to increase, reduce or remove existing protective
Sec. 2901. Definition. Berthing charge is the rates of import duty (including any necessary change in
amount assessed against a vessel for mooring or classification).
berthing at a pier, wharf, bulkhead-wharf, river or
channel marginal wharf at any port in the The existing rates may be increased or decreased to any
Philippines; or for mooring or making fast to a level, in one or several stages but in no case shall the
vessel so berthed; or for berthing or mooring within increased rate of import duty be higher than a maximum
any slip, channel, basin river or canal under the of one hundred (100) per cent ad valorem
jurisdiction of any port of the Philippines. The
owner, agent, operator or master of the vessel is for protective tariff rates only (refers to special
liable for this charge. custom duties)
4. Storage fees (2) to establish import quota or to ban imports of any

commodity, as may be necessary; and
Sec. 3001. Definition. Storage charge is the
amount assessed on articles for storage in customs (3) to impose an additional duty on all imports not
premises, cargo shed and warehouses of the exceeding ten (10%) per cent ad valorem whenever
government. The owner, consignee or agent of necessary;
either, of the articles, is liable for this charge.
for ordinary or regular customs duties
5. Arrastre Charges
Except for (3), the Commission shall:
Sec. 3101. Definition. Arrastre charge is the
amount which the owner, consignee, or agent of Conduct an investigation in the course of which
either, of article or baggage has to pay for the they shall hold public hearings wherein interested
handling, receiving and custody of the imported or parties shall be afforded reasonable opportunity to
exported article or the baggage of the passengers. be present, produce evidence and to be heard.

The Commission shall also hear the views and B. Extent of Importers Liability
recommendations of any government office,
agency or instrumentality concerned. The Sec. 1204. Liability of Importer for Duties. Unless
Commission shall submit their findings and relieved by laws or regulations, the liability for duties,
recommendations to the NEDA within thirty (30) taxes, fees and other charges attaching on importation
days after the termination of the public hearings. constitutes a personal debt due from the importer to the
government which can be discharged only by payment
The power of the President to increase or decrease in full of all duties, taxes, fees and other charges legally
rates of import duty shall include the authority to accruing. It also constitutes a lien upon the articles
modify the form of duty. imported which may be enforced while such articles are
in custody or subject to the control of the government.
In modifying the form of duty, the corresponding
ad valorem or specific equivalents of the duty with NOTE: Once the imported article legally leaves the
respect to imports from the principal competing premises of the BOC, the lien no longer attaches to such
foreign country for the most recent representative imported article.
period shall be used as bases.
REMEMBER: The extent of the importers liability is
Any Order issued by the President pursuant to the limited only to the value of the imported articles.
provisions of this section shall take effect thirty
(30) days after promulgation, So, if the importer cannot settle the taxes and duties,
assuming its more than 100% of the value of the
Except: Imposition of additional duty not exceeding imported articles, your remedy as an importer is simply
ten (10) per cent ad valorem which shall take effect to abandon the imported articles. To that extent, your
at the discretion of the President. abandoned articles will be considered as the full
payment of whatever your liability is.
RATIONALE:
C. Drawbacks
a. For expediency purposes
Drawback is a device resorted to for enabling an
b. For the interest of the national economy, imported commodity affected by taxes to be exported
national security and for general welfare. back and sold in foreign markets upon the same terms
as if it had not been taxed at all.
c. For the protection of the Philippine
economy by regulating importation and RATIONALE: To enable a local manufacturer to compete
exportation in foreign markets by relieving them of the payment of
taxes that will surely form part of the cost of the
product.
VIII. LIABILITY FOR CUSTOMS DUTIES In sum, you pay during importation but it will be
refunded when it will be re-exported.
A. General Rule and Exceptions
NOTE: If the goods are to be re-exported the importer
GR: has two options:
No exemptions from customs duties. A. File a bond upon importation
The provisions of general and special laws, including Govt will use this as security if you will not re-
those granting franchises, to the contrary export the articles
notwithstanding, there shall be no exemptions
whatsoever from the payment of the customs duties. B. Pay customs duty but later on seek for refund
(drawback)
EXC:
Commodities for which drawbacks are allowed:
1. If provided under the TCC (e.g. conditionally-free
importations) 1. Articles Made from Imported Materials (which are
subsequently re-exported)
2. Exemptions granted to GOCCs with existing
contracts, commitment, agreements or Conditions for grant of drawback:
obligations with foreign countries
1.1. Imported material (now a component of the
3. Exemptions of international institutions, finished good) was actually used in the production
associations or organizations pursuant to of the finished good to be re-exported.
agreements and special laws
1.2. Refund or credit shall not exceed 100% of
4. Exemptions granted by the President of the duties paid on the imported material
Phils., upon recommendation from the NEDA in
the interest of national economic development 1.3. No determination by NEDA of the requirement
for certification on non-availability of locally
produced or manufactured competitive substitutes
for the imported material (no local substitute for X. FAILURE TO PAY DUTIES AND TAXES;
the materials) FRAUDULENT PRACTICES
1.4. Exportation must be made within 1 year from
3 Degrees of Culpability in the Failure to Pay correct
the date of acceptance of the import entry and
Duties and Taxes on Imported Goods
claim for refund or credit must be made within 6
months from exportation (a) Negligence - When the deficiency results from an
offender's failure, through an act or acts of omission or
1.5. When 2 or more result from the use of same
commission, to exercise reasonable care and
imported material, apportionment shall be made.
competence to ensure that a statement made is correct,
it shall be determined to be negligent.
2. Fuels used for propulsion of vessels
PENALTY = a fine equivalent to not less than one-
Refund or tax credit shall be allowed not exceeding
half (1/2) but not more than two (2) times the
ninety-nine (99) per cent of the duty imposed by
revenue loss. [1/2 2]
law upon such fuel
(b) Gross Negligence - When a deficiency results from an
3. Petroleum Oils and Oils Obtained from Bituminous
act or acts of omission or commission done with actual
Minerals, Crude Eventually Used for Generation of
knowledge or wanton disregard for the relevant facts
Electric Power and for the Manufacture of City Gas
and with indifference to or disregard for the offender's
Refund or tax credit shall be allowed not exceeding obligation under the statute, it shall be determined to
fifty per cent (50%) of the duty imposed by law be grossly negligent
upon such oils
PENALTY = a fine equivalent to not less than two
- Every application for drawback must pay P500 and a half (2) but not more than four (4) times the
filing, processing, and supervision fees revenue loss. [2 - 4]
- Claims shall be paid by BOC within 60 days after (c) Fraud - When the material false statement or act in
receipt of properly accomplished claims connection with the transaction was committed or
omitted knowingly, voluntarily and intentionally, as
established by clear and convincing evidence, it shall be
IX. LIQUIDATION
determined to be fraudulent
LIQUIDATION AND RECORD OF ENTRIES
PENALTY =
Every import entry declaration that an importer files
A. a fine equivalent to not less than five (5) times
must be liquidated by the COC.
but not more than eight (8) times the revenue loss
[5 8] and
Liquidation - to determine with exact finality how much
is the customs duty liability.
B. Imprisonment of not less than two (2) years but
not more than eight (8) years. [2 years 8 years]
It can either be tentative or final liquidation.
The decision of the Commissioner of Customs, upon
Tentative Liquidation - some future action is
proper hearing, to impose penalties as prescribed in this
required, the liquidation shall be deemed to be
Sec. may be appealed in accordance with Sec. 2402
tentative as to the item or items affected and shall
hereof.
to that extent be subject to future and final
readjustment and settlement.
Fraudulent Practices
Final Liquidation - after the expiration of three (3)
1. Smuggling or unlawful importation
years from the date of the final payment of duties
be final and conclusive upon all parties Illegal entry of goods other than the port of entry
Exception: Persons who commit smuggling:
a. Fraud or protest or compliance audit a. Those who fraudulently import or bring goods
into the Philippines,
b. Liquidation of the import entry was merely
tentative b. Those who assist in so doing or
NOTE: Liquidation, even if its finally made, is still open c. Those who receive, conceal, buy, sell, or in any
for questions within 3 years from the date of final manner facilitate the transportation,
payment of duties. After the 3 years, it shall prescribe. concealment, or sale of such article after
importation, knowing the same to have been
imported contrary to law
Note: For (a) and (b), knowledge not required. Only

in (c) is knowledge required.

PENALTY = a fine of not less than six hundred pesos b. Criminal Action
nor more than five thousand pesos and
imprisonment for not less than six months nor NOTE: Criminal action for unlawful importation is
more than two years and, if the offender is an alien, against the person, not the property.
he shall be deported after serving the sentence.
[P600 5,000] and [6 months 2 years The best remedy for government to take:
imprisonment] and [deportation if alien]
A. If imported goods are still within the jurisdiction
Evidence for conviction in Smuggling cases or control of the BOC
Mere Possession of the article in question, such - administrative remedies (seizure and
possession shall be deemed sufficient evidence forfeiture)
to authorize conviction unless the defendant
shall explain the possession to the satisfaction of B. If legally left BOC jurisdiction
the court
- judicial remedies
Payment of the tax after apprehension is not a
valid defense C. If illegally let BOCs jurisdiction or there was
illegal importation / smuggling
2. Makes or attempts to make entry of imported
article: - administrative remedy (jurisdiction will
now extend beyond BOC)
A. By means of fraudulent invoices, declaration,
affidavit, letter, paper, or B. TAXPAYER / IMPORTER
B. By means of false statement, written or verbal, 1. Administrative

or
a. Protest
C. By means of false or fraudulent practice
whatsoever, or Protest with Collector of Customs upon
payment or within 30 days thereafter.
D. Guilty of any willful act or omission by means Payment under protest required if
whereof the Government might be deprived of the correctness or accuracy of assessment is
lawful duties, taxes and other charges, or any protested.
portion thereof
Protest Exclusive Remedy in Protestable
PENALTY = same with smuggling Cases except as to matters correctible for
manifest error
3. Entry of goods without the declaration of the correct
or true weight or measures or upon a qualification as In seizure cases, the Collector, after a
to quality or value hearing, shall in writing make a
declaration of forfeiture or fix the amount
4. Payment of taxes less than the correct taxes of the fine or take such other action as
may be proper.
5. False entry in filing for refunds or drawbacks
b. Refund
Manifest clerical errors made in an invoice or

XI. Tax Remedies entry, errors in return of weight, measure and
gauge, when duly certified to by the surveyor or
A. GOVERNMENT examining official (when there are such officials
at the port), and errors in the distribution of
1. Administrative charges on invoices not involving any question of
law and certified to by the examining official,
a. Tax Lien may be corrected in the computation of duties, if
such errors be discovered before the payment of
It attaches to the property, regardless of duties, or, if discovered within one year after the
whoever owns it and regardless of whether the final liquidation, upon written request and notice
importer is known or unknown. of error from the importer, or upon statement of
error certified by the Collector.
b. Seizures and Forfeiture
Collector is authorized to reliquidate entries and
c. Administrative Fines collect additional charges, or to make refunds on
statement of error within the statutory time
d. Reduction of Customs Duties / Compromise limit.
2. Judicial Sec. 1708. Claim for Refund and Mode of
Payment. All claims for refund of duties shall
a. Civil Action

be made in writing, and forwarded to the when required
Collector to whom such duties are paid, who
upon receipt of such claim shall verify the same 2. Then, hearing will be conducted by the Collector
by the records of his office, and if found to be of Customs within 15 days from receiving the
correct and in accordance with law, shall certify protest
the same to the Commissioner with his
recommendation together with all necessary 3. Collector of Customs decision within 30 days
papers and documents. Upon receipt by the upon termination of the hearing
Commissioner of such certified claim he shall
cause the same to be paid if found correct. If favorable automatic review/appeal by the
Commissioner of Customs within 5 days from
c. Settlement of any seizure by payment of fine or promulgation of decision
redemption
REASON: For the protection of the government,
d. Appeal lifeblood doctrine, and the Commissioner of
Customs has direct supervision over the Collector
2. Judicial of Customs.
a. Appeal If unfavorable appeal within 15 days from

notification in writing by the Collector of his
b. Action to question the legality of the seizure decision before the Commissioner
c. Abandonment 4. Commissioner of Customs decision within 30

days from receipt of the records of the case
If favorable or inaction (affirmed Collectors

XII. KINDS OF PROCEEDINGS IN CUSTOMS CASES decision) automatic review/appeal by the SOF
within 5 days from promulgation of decision
A. Customs Protest Cases
If unfavorable appeal to the CTA in division
1. File Customs Protest upon payment under within 30 days from receipt of decision
protest or within 15 days thereafter before the
Collector of Customs 5. SOFs decision within 30 days from receipt of the
records of the case
NOTE: Payment under Protest (PUP) is necessary
before you can protest the assessment on its If favorable or inaction (affirmed Collectors
correctness and legality. Unlike in real property decision) decision shall become final and
protests, in Custom protests legality of assessment executory if no appeal is made by the
is already a question of the computation. government
If PUP is done, there is an annotation that youve If unfavorable (reversed Collectors decision)
paid under protest. appeal to the CTA in division within 30 days from
receipt of decision
Requirements for protest to be valid, it must:
6. CTAs decision
A. Be in writing
If favorable decision shall become final and
B. Point out the particular decision or executory if no appeal is made by the
ruling of the Collector of Customs to government
which exception is taken or objection
made If unfavorable motion for reconsideration or
motion for new trial (if there is new evidence)
C. State the grounds relied upon for relief within 15 days from receipt of notice
D. Be limited to the subject matter of a If still unfavorable CTA en banc

single adjustment
If still unfavorable SC
NOTE: Single adjustment refers
to the entire contents of one Note: Customs protest is not required when
liquidation, including all duties, there is no dispute but the claim for refund
fees, surcharges or fines arises by reason of the happening of
incident thereto (not prohibited supervening events such as when the raw
to show independent material imported is utilized in the production
statements or information) off finished products subsequently reported
and a duty drawback is claimed.
E. Be filed when the amount claimed is
paid or within 15 days after the payment B. Seizure and Forfeiture Cases (SFC)
F. Furnish samples of goods under protest Automatic review of cases is also applicable to
SFCs E to E:
Who has the authority to enforce SFC? The Common carrier
Sec. 2203. Persons Having Police Authority. For the a.) actually knows of the unlawful importation or
enforcement of the customs and tariff laws, the
following persons are authorized to effect searches, b.) the vessel is privately chartered or hired, in
seizures and arrests conformably with the provisions of which case, with or without knowledge, its subject
said laws: to forfeiture
a. Officials of the Bureau of Customs, collectors, Note: If a motor vehicle is hired to carry smuggled
assistant collectors, deputy collectors, surveyors, goods but it has no CPC, it is not a common carrier.
security and secret-service agents, inspectors, port It is thus subject to forfeiture and lack of personal
patrol officers and guards of the Bureau of knowledge of the owner or carrier is not defense to
Customs. forfeiture
b. Officers of the Philippine Navy when authorized El Greco v. COC case

by the Commissioner.
The penalty of forfeiture is imposed on any vessel engaged in
c. Any person especially authorized in writing by smuggling, provided that the following conditions are present:
the Commissioner.
(1) The vessel is used unlawfully in the importation or
d. Officers generally empowered by law to effect exportation of articles into or from the Philippines;
arrests and execute processes of courts, when
acting under direction of the Collector. (2) The articles are imported to or exported from any
Philippine port or place, except a port of entry; or
e. Any person especially authorized by a Collector,
(3) If the vessel has a capacity of less than 30 tons and is used
subject to the restrictions stated in the next in the importation of articles into any Philippine port or place
succeeding section. other than a port of the Sulu Sea, where importation in such
vessel may be authorized by the Commissioner, with the
Persons exercising the powers hereinabove approval of the department head."
conferred shall, in the exercise thereof, have the
same authority, be entitled to the proper
protection, and shall be governed by the same law, Also, in seizure and forfeiture cases:
not inconsistent with the provisions of this section,
as other officers exercising police authority in A.) if the value is less than 5M - go through the
general. Commissioner of Customs
NOTE: This may include BIR officials B.) if value is 5M or more proceed directly to Sec.
of Finance, skip the COC
Nature of SFC
Port of entry a domestic port open to both
SFC are actually actions in rem which are directed foreign and coastwise trade including airport of
against the property itself, and not directed against entry
the owner.
Properties not subject to forfeiture
So, when property imported is illegal or prohibited,
the penalty is directed against the property itself. GR: The forfeiture of the vehicle, vessel or aircraft
Its civil in nature. shall not be effected if it is established that the
owner thereof or his agent in charge of the means
Articles subject to Confiscation of the conveyance used as aforesaid has no
knowledge of or participation in the unlawful act
GR: Anything that was used for smuggling or
unlawful importation is subject to confiscation, Exc: A prima facie presumption shall exist against
regardless of whoever the owner is. (May include the vessel, vehicle, or aircraft under any of the
not only the article itself but the vehicles and following circumstances:
machineries used)
1. If the conveyance has been used for smuggling
Exc: Common Carriers holding a CPC (Certificate of at least twice before
public convenience)
2. If the owner is not in the business for which
REASON: Common carriers are open to the public, the conveyance is generally used
thus, they do no go into the legality of the articles
that are loaded or unloaded on its vessel, vehicle, 3. If the owner is financially not in the position to
or aircraft, such that if the common carrier has no own such conveyance
knowledge of the unlawful importation, the vessel
cannot be subject to forfeiture Places where search and seizure may be conducted
1. Enclosures, buildings

2. Dwelling house there must be search warrant The property would be answerable for having
issued by a judge of a court after a sworn transported illegal articles, then the property would
application has been filed detailing therein the have to be forfeited or seized, unless its exempt.
description of the place to be searched and the
things to be seized Customs compromise does not extinguish criminal
liability.
3. Vessels or aircrafts or vehicles and persons or
articles conveyed therein Administrative and Judicial Procedures relative to
Customs Seizure and Forfeitures
4. Persons arriving from foreign countries
i. Determination of probable cause and issuance of
5. Warehouse (as long as there is probable cause) warrant
A warehouse not be considered a ii. Actual seizure of the articles

dwelling place if the employer stays therein as a
watchman together with his family because to be iii. Listing of description, appraisal and classification of
considered as a dwelling place, such must be used seized property
exclusively only for residential purposes.
iv. Report of seizure to COC and the Chairman of COA
6. Vehicles, beasts or persons
v. Issuance by the Collector of warrant of detention
Goods in Customs Custody Beyond Reach of
Attachment vi. Formal hearing (Notice for 15 days)
Goods in the customs custody pending payments of vii. District Collector renders his decision
customs duties are beyond the reach of
attachment. As long as the importation has not Payment under protest is not necessary before you
been terminated, the imported goods remain question the seizure if there is no assessment yet. If
under the jurisdiction of the BOC. it was still a determination of the illegality of the
imported articles, then payment under protest not
Burden of Proof required.
The burden of proof is on the importer-claimant so You can ask for the release of the goods if file a
long as probable cause has already been shown by cash bond. A surety or property bond does not
the BOC satisfy this requirement.
Importer-owner of a seized article may offer to pay in If you posted a bond and you want to collect the
lieu of seizure or forfeiture. refund, the action is converted into a contractual
liability. You have 10 years to file this claim before
GR: There can be settlement of SFC by payment of it prescribes.
fine or redemption of forfeited property.
If the decision of the Collector is finally adverse to
Exception: you, the imported articles will be seized and
forfeited and the remedy would have to be the
1. The importation is absolutely prohibited same as in customs protest cases.
2. The surrender of the property to the person The difference is that payment under protest is not
offering to redeem would be contrary to law, or required. You may put up a bond or
settle/compromise at this stage, by paying the fees.
3. Where there is fraud
ABATEMENT is allowed in SFC when:
- If the importer is criminally charged and
subsequently acquitted of the criminal charge, 1. The imported articles suffered any damage
the seized and forfeited articles are not during the voyage
automatically released.
2. Loss or destruction of articles after arrival
Acquittal in Criminal Charge Not Res Judicata in SFC
3. Death or Injury of animals
Criminal charge is different from SFC. The acquittal
in the criminal charge is not res judicata in SFC 4. Deficiency in the contents package
because the criminal case is directed against the
person himself while SFC is directed against the NOTE: Abatement in TCC pertains to the reduction
property itself. In the same way that if the civil or non-imposition of customs duties (not only the
liability is discharged by abandoning the article, total waiver of collection)
such act would not relieve the importer from his
criminal liability. Written claim for Refund allowed when:
Criminal proceedings are action in personam while 1. Drawback cases where the goods are re-
SFC are actions in rem. exported

2. Wherein you have already paid the customs
duties and you found out that goods have suffered
damages or are already deficient (All abatement
cases)
3. Wherein you have actually paid the customs

duties and within the 3-year period after final
liquidation, you found out that there was an
excessive payment
4. Manifest clerical errors
When the goods are lost within customs custody

and goods not illegally imported BOC would
reimburse the importer the acquisition cost of the
goods at the time of payment
NOTE: Keep books for 3 years from final liquidation

since government has 3 years to examine
This 3 year period benefits the government and the

taxpayer
The claim for refund must also be made within the

same 3 year period

CUSTOMS PROTEST CASES
Payment under protest

15 days
Written protest to
Collector of Customs
15 days
Hearing
30 days
Decision
Favorable Unfavorable
5 days 15 days
Automatic Review by Appeal to Commissioner of Customs

Commissioner of Customs (30 days to decide) (30 days to decide)
Favorable (F) No Decision (ND) Unfavorable (U)
5 days
Automatic Review w/ Appeal to SoF

(30 days to decide)
F ND U
30 days
Decision becomes final &

executory when it is not
appealed by the govt CTA in division
F U
15 days
Motion for Reconsideration

or Motion for New Trial
F U
15 days
CTA En Banc
F U
15 days
SC

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LOCAL TAX 5.

Common limitations on the taxing power of LGUs

(Sections 128 to 196 of R.A. No. 7160) Exclusionary Rule

- Where the Natl govt elects to tax a particular area,

4. Barangays Natl govt > LGU

SEC. 186. Power To Levy Other Taxes, Fees or Charges. - Local

1 TAXATION2 FINALS | maru.mhealler | 404

A. natural calamities, 1. Taxation shall be uniform in each LGU

B. civil disturbance, 2. Taxes, fees, charges and other impositions shall:

C. general failure of crops, or a. be equitable and based as far as practicable on

(c) The local chief executive may veto an ordinance or

a. Substantive due process - If vetoed, the Sanggunian may override the

3 TAXATION2 FINALS | maru.mhealler | 404

- SOJ given 60 days after receipt of appeal to

4 TAXATION2 FINALS | maru.mhealler | 404

- Local tax on every product exported is not

5 TAXATION2 FINALS | maru.mhealler | 404

- It contravenes the existing govt policy or

IX. COMMON REVENUE-RAISING POWERS OF Least taxing power Barangay

3. Toll fees or charges Taxing power of Province and municipality is mutually

6 TAXATION2 FINALS | maru.mhealler | 404

Constitutional exemption only relate when it is 3. Notary public (NP)

7 TAXATION2 FINALS | maru.mhealler | 404

Except: Printing and/or publishing of books or Notwithstanding any exemption granted by

Example: Includes receivables for consummated sales

2013 10k (1/2 of 1% of 2M) Holders of Certificate of Public Convenience

1. Franchise Tax (Sec. 137) EXAMPLE:

Franchise - is a right or privilege, affected with A telecommunications company in 2012 had

In enacting the LGC, Congress empowered the LGUs to impose certain

NPC is characterized as a private enterprise for profit in the

9 TAXATION2 FINALS | maru.mhealler | 404

10 TAXATION2 FINALS | maru.mhealler | 404

Professional tax - is a tax on each person Exception to PT: Professional exclusively

2 requisites for imposition of Professional Tax: A mayors permit is a permit to operate

11 TAXATION2 FINALS | maru.mhealler | 404

Circuses Two Requisites:

Boxing stadia 1. Truck, van or any vehicle used by a.)

13 TAXATION2 FINALS | maru.mhealler | 404

It is a prerequisite for the issuance of mayors c. Exporters, and on manufacturers,

Businesses subject to LBT 6. Poultry feeds and other animal feeds

a. Manufacturers, assemblers, repackers, 7. School supplies; and

15 TAXATION2 FINALS | maru.mhealler | 404

f. Banks and other financial institutions Gross receipts of insurance companies

2. LBT 4. It must not violate the common

16 TAXATION2 FINALS | maru.mhealler | 404

In income taxes, the tax paid this year the basis is

LBT are somewhat imposed in the exercise of the

18 TAXATION2 FINALS | maru.mhealler | 404

Oslob (principal office) 100M ILLUSTRATION:

Santander (branch) 25M Oslob (principal office) 100M

Note: if the sale is consummated in a place

19 TAXATION2 FINALS | maru.mhealler | 404

Examination of books of accounts (Sec. 171) Unpaid taxes in 2008 100M

SEC. 171. Examination of Books of Accounts and Penalties =

Ground: Not paid on time

Penalties: Surcharge + Interest

Surcharge - 25% of the taxes not paid on time

20 TAXATION2 FINALS | maru.mhealler | 404

Mere change of name of your business or D. Barangays (Sec. 152)

Barangay Clearance - No city or municipality may Taxpayers covered: