PROFESSIONAL ELECTIVE 2:

Strategic Tax Management

LOCAL TAXATION

Presenters:

ADAY, Joey
CELESTINO, Angelica M.
ESPLAGO, Joan A.
LOPEZ, Myre Diane
PADUA, Mary Joyce Ann H.
ROYO, Aszel Ann R.
TAN, Katherine

GREEN GROUP
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TABLE OF CONTENTS:

Scope of Taxation……………………………………………………………………2

Fundamental Principles…………………………………………………………….5

Taxing Authority……………………………………………………………………...6

Tax Ordinances and Revenue Measures…………………………………………...8

Collection…………………………………………………………………………….10

Remedies of Local Taxes……………………………………………………………12

a. Government
b. Taxpayer

Types of Local Taxes………………………………………………………………18

a. Provincial
b. Municipal
c. City
d. Barangay
e. Community Tax
f. Real Property and Related Taxes

Bibliography……………………………………………………………………….28
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SCOPE OF TAXATION

Comprehensive – as it covers persons, businesses, activities, professions,

rights, and privileges.

Unlimited – In the absence of limitations prescribed by Law or the

constitution, the Power of tax is unlimited and comprehensive.

Plenary – as it is complete; BIR may avail of certain remedies to ensure the

collection of taxes.

Supreme – so far as the selection of the subject of taxation

A. Inherent limitation

1. Territoriality of taxation

Government can only demand tax obligation upon its subject or residence within its
territorial jurisdiction.

2. International Comity

In the UN Convention, countries of the world agreed to one fundamental concept of

coequal such that one cannot exercise its inherent sovereign powers over another,
including the power to tax.

3. Public purpose

Taxation must be exercise absolutely for public purpose. The tax proceeds must be
used either to support the State or some recognized objective of government or
directly to benefit the community's well-being.

4. Exemption of the government

The government can exercise the tax power upon anything, including self. However,
the government normally does not tackle itself as this will not raise additional funds
but will only include additional costs.
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5. Non delegation of the taxing power

The legislative taxing power is vested exclusively in Congress and is not delegable

B. Constitutional limitations

1. Due process of law – No one should be the rival of his life, liberty, or property
without due process.

2. Equal protection of the law – No person shall be denied the equal protection.
Taxpayer should be treated equally, both in terms of rights conferred and
obligations imposed.

3. Uniformity rule in taxation – Taxation should be uniform and equitable. Taxpayers

under same dissimilar circumstances should not be taxed.

4. Progressive system of taxation – Tax rates increase as the tax base increases.

5. Non imprisonment for nonpayment of debt or poll tax – No one shall be

imprisoned because of his poverty, and no one shall be imprisoned for mere
inability to pay.

6. Non impairment of obligation and contract – Tax exemptions granted under the
contract should be honored and should not be cancelled by you unilateral
government action.

7. Free worship rule – The Philippine government adopts free exercise of religion
and does not subject it to taxation.

8. Exemption of religious or charitable entities, nonprofits, cemeteries, churches, and

mosques from property taxes – This constitutional exemption. Applies for
properties actually, directly, and exclusively used for charitable, religious and
educational purposes.

9. Non appropriation of public funds or property for the benefit of any church, sect,
or system of religion – to support freedom of religion, the government should not
favor any particular system of religion by appropriating public funds or property
in support.

10. Exemption from taxes of the revenues and assets of nonprofit non-stock
educational institution – Tax exemptions on revenues and assets of nonprofit
Educational Institutions applies only on revenues and assets that are actually,
directly, and exclusively devoted for educational purposes.

11. Concurrence of in majority of all members of Congress for the passage of a law
granting tax exemption – The grant exemption can only be granted on a valid
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basis. As a safety net, the constitution requires a majority of all members of

Congress to vote in favor of granting tax exemptions.

12. Non-diversification of tax collections - Taxes should only be used for public
purposes. It should not be shifted or used for private purposes.

13. Non-delegation of the power of taxation - The concept of checks and balances in
a republican state that mandates that taxation authority as part of lawmaking be
vested solely in Congress.

14. Non-impairment of the jurisdiction of the Supreme Court to review tax cases -
Notwithstanding the presence of the court of tax appeals, which is a separate
court, any disputes regarding taxes can be raised to and ultimately determined by
the supreme court of the Philippines.

15. The requirement that appropriations, revenue, or tariff bills shall originate
exclusively in the House of Representatives – Laws that provide revenue to the
national treasury and enable for expenses must originate in the House of
Representatives, while the Senate may concur with amendments. The fact that a
house bill has been submitted in Congress does not ensure that it will become law.

16. The delegation of taxing power to local government units – this is a

constitutional recognition of the local autonomy of local governments as well as
an unexpressed delegation of the taxing power.
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FUNDAMENTAL PRINCIPLES
- The following shall govern the exercise of taxing and revenue raising powers of the
LGU:
● Taxation shall be uniform in each Local Government Unit
● Taxes, fees, charges, and other impositions shall:
➢ Be equitable
➢ Be levied and collected
➢ Not be unjust, excessive, oppressive, or confiscatory
➢ Not be contrary to law
● The collection of local taxes, fees, charges, and other impositions shall in no
case be let to any private person
● The revenue collected pursuant to the provisions of LGC shall insure solely to
the benefit of, and be subject to disposition by, the LGU levying the tax, fee,
charge, or other imposition unless otherwise specifically provided in the LGC
● Each LGU shall evolve a progressive system of taxation
Revenue Raising Power
- Each LGU has the power to create its own sources of revenue and to levy taxes, fees,
and charges
- The grant of power to create sources of revenue is consistent with the basic policy of
local autonomy
- The taxes, fees, and charges shall accrue exclusively to the LGUs
The Common Revenue Raising Powers
- Service Fees
- Public Utility
- Toll Fees or Charges
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TAXING AUTHORITY
SECTION 132. Local Taxing Authority - The power to impose a tax, fee, or charge or to
generate revenue under this Code shall be exercised by the Sanggunian of the local
government unit concerned through an appropriate ordinance.

Section 132 LGC allows local governments to create and collect taxes and fees, but this must
be done formally.

Types of Taxes, Fees, and Charges

The types of taxes, fees, and charges that LGUs can impose include:

1. Real Property Tax: Tax on land and buildings within the LGU’s jurisdiction.
2. Business Taxes: Fees or taxes on business operations, including permits and licenses.
3.
4.
5. Service Fees: Charges for specific services provided by the LGU, such as market stall
rentals or public utility services.
6. Regulatory Fees: Fees for regulatory functions, like environmental compliance or
health inspections.

Sanggunian:

- The Sanggunian is each LGU's legislative body. It is responsible for creating and
enacting local laws, including those related to taxation and revenue collection.
○ Sangguniang Barangay: For barangays (the smallest administrative units).
○ Sangguniang Bayan: For municipalities. Focus on: Municipal services,
infrastructure, and business regulations.
○ Sangguniang Panlungsod: For cities.
○ Sangguniang Panlalawigan: For provinces.
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Process of local taxing authority:

● Who Can Impose Taxes, Fees, or Charges: Local governments (like provincial, city,
municipal, and barangay) have the authority to set taxes and fees to earn money for
the local government.
● How It’s Done: They must pass a local law called an ordinance.
- Every tax imposed must be levied according to a valid ordinance.
- Enactment and Effectivity of Local Tax Ordinance:
1. Passage - due process & public hearing
2. Approval
3. Effectivity - publication and/or posting
● Purpose: To raise revenue for the local government to fund local services. This can
include infrastructure, health services, education, and other community needs.
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TAX ORDINANCES AND REVENUE

MEASURES
REVENUE MEASURES
refers to various laws, policies, and strategies implemented by the government, may it be
national or local to generate income which are for the funding of government operations,
projects, and services.

- Taxation (like Income Tax, VAT, Excise Tax, Estate and Donor’s Taxes)
- Custom Duties and Tariffs (Import Duties and Export Taxes)
1. Rice Tariffication Law
- Tax Reform Programs - modification or overhaul of the tax systems to achieve
specific goals such as boosting economic growth, making the tax system fairer, and
improving revenue collection.
examples:
1. Tax Reform for Acceleration and Inclusion Act (TRAIN LAW)
2. Corporate Recovery and Tax Incentives for Enterprises Act
3. Sin Tax Law
- Non-Tax Revenues
- Administrative and Enforcement Measures

The state has three inherent powers: taxation, eminent domain, and police power which again
inherently exists upon the creation of the state.

Local Government also has the power to tax in accordance with Republic Act 7610 or the
Local Government Code, meaning it is not an inherent power but rather, a fruit of
decentralization of power through the aforementioned code.

REPUBLIC ACT 7610 | LOCAL GOVERNMENT CODE

- is a primary law that discusses the Local Government Unit powers that forwards local
autonomy which is substantial, meaning does not contradict the National Government,
and still abiding to National Laws.
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SECTION 132. Local Taxing Authority - The power to impose a tax, fee, or charge or to
generate revenue under this Code shall be exercised by the Sanggunian of the local
government unit concerned through an appropriate ordinance.
- This is for the purpose of obtaining funds for LGU services and projects within that
specific locality.

This is done through passing of local laws in the form of a tax ordinance.
● Ordinances shall not be enacted prior without public hearing conducted for the
purpose.

EXAMPLE OF TAX ORDINANCE:

The 2017 Revised Revenue Code and Market Code of San Fernando, Pampanga

REAL PROPERTY TAX of 1% of the assessed value of real property a resident owns.
SPECIAL EDUCATION FUND (SEF) TAX of 1% of the assessed value of the real
property in addition to real property tax which is SPECIFICALLY allocated to fund public
education.
IDLE LANDS TAX of 5% of the assessed value of idle lands, which are left unused or
undeveloped.
TRANSFER OF REAL PROPERTY OWNERSHIP TAX of 0.75% of the higher between
total consideration and fair value. Transfer referring to sale of donation.
PROFESSIONAL TAX of a flat rate of PhP 300.00, this is a fixed annual tax for
professionals who have passed government exams and are practicing their profession.
FRANCHISE TAX of 0.75% of GROSS annual receipts of businesses operating under a
franchise agreement.
AMUSEMENT TAX of 10% of gross receipts from admission fees to places of amusement
such as theaters and concert halls.
ANNUAL FIXED TAX FOR DELIVERY TRUCKS/VANS of PhP 750.00 annually for
every vehicle used by manufacturers, wholesalers, and retailers for the delivery of certain
products within the city.
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COLLECTION
TAX PERIOD AND MANNER OF PAYMENT (section 165)
- Unless otherwise provided in the LGC (Local Government Code), the tax period of all
local taxes, fees, and charges shall be the calendar year. Such taxes, fees, and charges
may be paid in quarterly installments.

ACCRUAL OF TAX (section 166)

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

TIME OF PAYMENT (section 167)

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

SURCHARGES AND PENALTIES ON UNPAID TAXES, FEES, OR CHARGES

(section 168)
- The Sanggunian may impose a surcharge not exceeding twenty-five percent (25%)
of the amount of taxes, fees or charges not paid on time and an interest at the rate
not exceeding two percent (2%) per month of the unpaid taxes, fees or charges
including surcharges, until such amount is fully paid but in no case shall the total
interest on the unpaid amount or portion thereof exceed thirty-six (36) months.
● The surcharge is not imposed for unpaid real property and related taxes.

INTERESTS ON OTHER UNPAID REVENUES (section 169)

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

COLLECTION OF LOCAL REVENUES BY TREASURER (section 170)

- All local taxes, fees, and charges shall be collected by the provincial, city, municipal,
or Barangay treasurer, or their duly authorized deputies.
● The provincial, city municipal treasurer may designate the Barangay treasurer
as his deputy to collect local taxes, fees, or charges.
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REMEDIES OF LOCAL TAXES

Remedies of Local Taxes

I. Government, courses of action provided by or allowed in the law to implement the

tax laws or enforce tax collection.
II. Taxpayer, legal actions which a taxpayer can avail of or seek relief from the undue
burden or oppressive effect of tax laws, or as a means to check possible excesses by
revenue officers in the performance of their duties.

Process of Assessment

GR: No LoA or eLoA, No valid assessment.

1. BIR conducts an audit by issuing letter of Authority.

- Any tax assessment without LoA is a violation of the taxpayer’s right to due
process and is therefore “inescapably void”.
2. Notice of Discrepancy.
- The objective of issuing the NOD is to inform the taxpayer, in writing, of the
discrepancies noted by the BIR during their investigation and provide the
taxpayer the opportunity to present and explain (within 5 days from receipt of
NOD and may be extended only up to 30 days if taxpayer needs more time)
the alleged discrepancies with relevant supporting schedules and documents.
3. Issuance of Deficiency Tax Assessment through Preliminary Assessment Notice
(PAN).
- PAN shall show in detail the facts, the law, rules and regulations, or
jurisprudence on which the proposed assessment is based. Shall be in writing,
otherwise assessment is void.
- There are exceptions to the issuance of PAN: Republic Act 8424 Chapter 3
Sec. 228
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a. When the finding for any deficiency tax is the result of mathematical error
in the computation of the tax appearing on the face of the tax return filed by
the taxpayer; or
b. When a discrepancy has been determined between the tax withheld and the
amount actually remitted by the withholding agent; or
c. When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have carried
over and automatically applied the same amount claimed against the estimated
tax liabilities for the taxable quarter or quarters of the succeeding taxable year;
or
d. When the excise tax due on excisable articles has not been paid; or
e. When an article locally purchased or imported by an exempt person, such
as, but not limited to, vehicles, capital equipment, machineries and spare parts,
has been sold, traded or transferred to non-exempt persons.

In the above-cited cases, a FLD/FAN shall be issued outright.

- Remedy of Taxpayer to PAN: Taxpayer has 15 days to reply contesting the

findings in the PAN.

4. Final Letter of Demand (FLD) and Final Assessment Notice (FAN).

- Calling for payment of the taxpayer’s deficiency tax liability, inclusive of the
applicable penalties.
- Shall be issued by the Commissioner or his duly authorized representative.
Same as PAN, FLD and FAN shall state the facts, the law, rules and
regulations, or jurisprudence on which assessment is based; otherwise, the
assessment shall be void (RR 18-2013).

If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days from
date of receipt thereof, the assessment shall become final, executory and demandable. No
request for reconsideration or reinvestigation shall be granted on tax assessments that have
already become final, executory and demandable.

PRESCRIPTIVE PERIOD : Republic Act 8424 Chapter 3 Sec. 203

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Three (3) years from:

a. Actual filing of return; or
Return filed is not fraudulent b. Deadline for filing

Whichever is LATER.

1. Return filed is fraudulent; or

2. No return was filed Ten (10) years from discovery.

TAXPAYER’S REMEDIES: BEFORE PAYMENT

PROTEST OF ASSESSMENT

1. File a protest to the CIR or his authorized representative within 30 days from date of
receipt of FAN.

Types of Protest:
a. Request for Reconsideration
- Refer to a plea for re-evaluation of an assessment on the basis of existing
records
without need of additional evidence.
b. Request of Reinvestigation
- Refer to a plea for re-evaluation of an assessment on the basis of newly
discovered
or additional evidence that a taxpayer intends to present in the reinvestigation.

The taxpayer shall state in his protest:

● The nature of protest.

● Date of the assessment notice; and
● The applicable law, rules and regulations, or jurisprudence, otherwise
void and without force and effect.
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2. Submit all supporting documents within 60 days from filing of protest (incase of
request for reinvestigation under RR 18-2013).

Final Decision On A Disputed Assessment (FDDA)

If the BIR do not agree with the protest, then an FDDA will be issued, that gives the taxpayer
the right to elevate the case to the court of tax appeal.

DENIAL OF PROTEST: Ways to Deny Protest (of the taxpayer)

1. Direct Denial
2. Indirect Denial

REMEDY OF THE TAXPAYER: To the Denied Protest

1. File an appeal with the CTA division within 30 days from receipt of letter of denial.
2. File an appeal with the CTA division within 30 days from the lapse of 180 day period.
OR Await the final decision of the CIR or his duly authorized representative and
appeal such final decision to the CTA within 30 days after the receipt of a copy of
such decision (RR 18-2013).

REMEDIES OF TAXPAYER TO THE DENIED APPEAL: By the Court of Tax Appeal

and Supreme Court

1. If the appeal to the CTA Division is denied, file an appeal to the CTA en banc within
15 days from receipt of the decision.
2. If the appeal to the CTA en banc is denied, file an appeal with the Supreme Court
Division within 15 days from receipt of the decision, then, finally, to the SC en banc.

TAXPAYER’S REMEDIES: AFTER PAYMENT

1.) Claim for tax refund (reimbursement)

2.) Claim for tax credit (tax certificate)
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GOVERNMENT'S REMEDIES : Republic Act 8424 Chapter 2

1.) Tax lien

Section 219. Nature and Extent of Tax Lien. - If any person, corporation,
partnership, joint-account (cuentas en participacion), association or insurance
company liable to pay an internal revenue tax, neglects or refuses to pay the same
after demand, the amount shall be a lien in favor of the Government of the Philippines
from the time when the assessment was made by the Commissioner until paid, with
interests, penalties, and costs that may accrue in addition thereto upon all property and
rights to property belonging to the taxpayer: Provided, That this lien shall not be valid
against any mortgagee purchaser or judgment creditor until notice of such lien shall
be filed by the Commissioner in the office of the Register of Deeds of the province or
city where the property of the taxpayer is situated or located.

2.) Compromise

a. A reasonable doubt as to the validity of the claim against the taxpayer exists;
or
b. The financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax.

3.) Abatement

a. The tax or any portion thereof appears to be unjustly or excessively assessed;

or
b. The administration and collection costs involved do not justify the collection
of the amount due.

METHODS OF COLLECTING DELINQUENT INTERNAL REVENUE TAXES

THAT MAY BE AVAILED BY THE BIR WHEN THE ASSESSMENT BECOMES
FINAL, EXECUTORY AND DEMANDABLE:
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4.) Distraint - the seizure by the government of personal, tangible or intangible to

enforce the payment of taxes.

a. Actual
b. Constructive

5.) Levy - the seizure by the government of real properties and interest in or rights to
such properties in order to enforce the payment of taxes.

6.) Civil Action

a. When a tax is assessed and the assessment becomes final and unappealable
(because the taxpayer failed to file an administrative protest with BIR within
30 days from receipt of assessment).
b. When an administrative protest is denied or is not acted upon within 180 days
from submission of documents and taxpayer fails to appeal to the CTA.

7.) Criminal Action

- Before the lapse of 5 years (prescription period).

- Prima Facie showing failure to file a required tax return or a willful attempt
to evade
taxes; no need for assessment.

8.) Other Remedies

a. Civil Penalties
b. Forfeiture
c. Suspension of Business Operations
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TYPES OF LOCAL TAXES

I. Provincial
II. Municipal
III. City
IV. Barangay
V. Community Tax
VI. Real Property and Related Taxes

PROVINCES (Sec. 134, LGC)

Except as otherwise, provinces may levy only the taxes, fees, and charges under the Local
Government Code of 1991, as follows:

1. Tax on transfer of real property ownership

2. Tax on the business of printing and publication
3. Franchise tax
4. Tax on sand, gravel and other quarry resources
5. Professional tax
6. Amusement tax
7. Annual fixed tax for every delivery truck or van of manufacturers or producers,
wholesalers of dealers or retailers in certain products.

TAX ON TRANSFER OF REAL PROPERTY OWNERSHIP (TRANSFER TAXES)

- The province may impose a tax on the sale, donation, barter, or on any other mode of
transferring ownership or title of real property at the rate of not more than fifty
percent (50%) of the one percent (1%) of the total consideration involved in the
acquisition of the property or of the fair market value in case the monetary
consideration involved in the transfer is not substantial, whichever is higher. The sale,
transfer or other disposition of real property according to R.A. No. 6657, shall be
exempt from this tax.
- It shall be the duty of the seller, donor, transferor, executor or administrator to pay the
tax herein imposed within sixty (60) days from the date of the execution of the deed
or from the date of the decedent's death.

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, handbills, certificates, receipts,
pamphlets, and others of similar nature, at a rate not exceeding fifty percent (50%) of
one percent (1%) of the gross annual receipts for the preceding calendar year.
- In the case of newly started business, the tax shall not exceed one-twentieth (1/20) of
one percent (1%) of the capital investment.
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- The receipts from the printing and/or publishing of books or other reading materials
prescribed by the Department of Education, Culture and Sports as school texts or
references shall be exempt from the tax herein imposed.

FRANCHISE TAX

- Notwithstanding any exemption granted by any law or other special law, the province
may impose a tax on businesses enjoying a franchise, at the 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 the case of a newly started business, the tax shall not exceed one- twentieth (1/20)
of one percent (1%) of the capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the tax shall be based on the gross
receipts for the preceding calendar year, or any fraction thereon, as provided herein.

TAX ON SAND, GRAVEL AND OTHER QUARRY RESOURCES

- The province may levy and collect not more than ten percent (10%) of fair market
value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other
quarry resources, as defined under the National Internal Revenue Code, as amended,
extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks,
and other public waters within its territorial jurisdiction.
- The permit to extract sand, gravel and other quarry resources shall be issued
exclusively by the provincial governor, pursuant to the ordinance of the sangguniang
panlalawigan.

PROFESSIONAL TAX

- The province may levy an annual professional tax on each person engaged in the
exercise or practice of his profession requiring government examination at such
amount and reasonable classification as the sangguniang panlalawigan may determine
but shall in no case exceed Three hundred pesos (P300.00).
- The professional tax shall be payable annually, on or before the thirty-first (31st)
day of January. Professionals exclusively employed in the government shall be
exempt from the payment of this tax.

AMUSEMENT TAX

- The province may levy an amusement tax to be collected from the proprietors,
lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement at a rate of not more than thirty percent (30%) of the
gross receipts from admission fees.

EXCEPTION: The holding of operas, concerts, dramas, recitals, painting and art
exhibitions, flower shows, musical programs, literary and oratorical presentations,
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except pop, rock, or similar concerts shall be exempt from the payment of the tax
hereon imposed.

ANNUAL FIXED TAX FOR EVERY DELIVERY TRUCK OR VAN OF

MANUFACTURERS OR PRODUCERS, WHOLESALERS OF, DEALERS, OR
RETAILERS IN, CERTAIN PRODUCTS

- The province may levy an annual fixed tax for every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or retailers in the delivery or
distribution of distilled spirits, fermented liquors, soft drinks, cigars and cigarettes,
and other products as may be determined by the sangguniang panlalawigan, to sales
outlets, or consumers, whether directly or indirectly, within the province in an amount
not exceeding Five hundred pesos (P500.00)

MUNICIPALITIES (Sec. 142, LGC)

Taxation System

- Per person
- Per municipality
- Per activity

CLASSIFICATION OF BUSINESS TAXPAYER

1. On manufacturers, assemblers, repackers, processors, brewers, distillers,

rectifiers, and compounders of liquors, distilled spirits, and wines or
manufacturers of any article of commerce.
2. On wholesalers, distributors, or dealers in any article of commerce of whatever
kind or nature.
3. Exporters, manufacturers, millers, producers, wholesalers, distributors, dealers,
or retailers of essential commodities.
1. Rice and corn;
2. Wheat or cassava flour, meat, dairy products, locally manufactured, processed
or preserved food, sugar, salt, and other agricultural, marine, and freshwater
products, whether in their original state or not;
3. Cooking oil and cooking gas;
4. Laundry soap, detergents, and medicine;
5. Agricultural implements, equipment, and post-harvest facilities, fertilizers,
pesticides, insecticides, herbicides, and other farm inputs: cdt
6. Poultry feeds and other animal feeds;
7. School supplies, and
8. Cement
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4. Retailers

- With gross sales or receipts or the preceding calendar year of P400,000.00 - 2%

- More than P400,000.00 Rate of Tax per annum - 1%
- Provided, however, that barangays shall have the exclusive power to levy taxes, as
provided under Section 152 hereof, on gross sales or receipts of the preceding
calendar year of Fifty thousand pesos (P50,000.00) or less in the case of cities. Thirty
thousand pesos (P30,000.00) or less, in the case of municipalities

5. Contractors and other independent contractors

6. Banks and other financial institutions

- On banks and other financial institutions, at a rate not exceeding fifty percent (50%)
of one percent (1%) on the gross receipts of the preceding calendar year derived from
interest, commissions and discounts from lending activities, income from financial
leasing, dividends, rentals on property and profit from exchange or sale of property,
insurance premium

7. On peddlers engaged in the sale of any merchandise or article of commerce

- Tax rate not exceeding Fifty pesos (P50.00) per peddler annually

8. On any other business

- The tax rate shall not exceed two percent (2%) of gross sales or receipts of the
preceding calendar year.

RATES OF TAX WITHIN THE METROPOLITAN MANILA AREA

- The municipalities within the Metropolitan Manila Area may levy taxes at rates which
shall not exceed fifty percent (50%) of the maximum rates prescribed in the preceding
Section.

RETIREMENT OF BUSINESS

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

FEES AND CHARGES

- The municipality may impose and collect reasonable fees on businesses and
occupations and the practice of any profession. However, the fee or charge shall NOT
be based on capital investment gross sales or taxpayer receipts.
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FEES FOR SEALING AND LICENSING OF WEIGHTS AND MEASURES

- The municipality may levy fees for sealing and licensing weights and measures at
reasonable rates prescribed by the sangguniang bayan.

PAYMENT OF BUSINESS TAXES

- The taxes imposed under Section 143 shall be payable for every separate or distinct
establishment or place where business subject to the tax is conducted. One line of
business does not become exempt by being undertaken with some other company for
which such tax has been paid. The tax on a business must be paid by the person
conducting the same.

CITIES

The city may impose the following:

Levy and collect any of the taxes, fees, charges, and other impositions the province
and the municipality may impose.

The rates of taxes that the city may levy may exceed the maximum rates allowed for
the province or municipality by not more than fifty percent (50%). But the rate for
professional and amusement taxes should be uniform for the city and the province.

- Professional tax shall not exceed 300.00

- Amusement tax, the rate of which shall not be more than 30% of the gross
receipts from admission fees.

BARANGAYS

The Barangays may levy taxes, fees, and charges, as provided under the LGC, which shall
exclusively accrue to them:

1. Taxes on stores or retailers with fixed business establishments with gross sales or
receipts of the preceding calendar year of Fifty Thousand pesos (50,000.00) or less, in
the case of cities and thirty thousand pesos (30,000.00) or less, in the case of
municipalities, at a rate not exceeding one percent (1%) on such gross sales or
receipts.
2. Service Fees or Charges – Barangays may collect reasonable fees or charges for
services rendered concerning the regulation or the use of Barangay-owned properties
or service facilities such as play, copra, or tobacco dryers.
3. Barangay Clearance – No city or municipality may issue any license or permit for
any business or activity unless a clearance is obtained from the Barangay where such
business or activity is located or conducted. For such clearance, the Sangguniang
Barangay may impose a reasonable fee. The application for clearance shall be acted
upon within seven (7) working days from the filing thereof. If the clearance is not
 23

issued within the said period, the city or municipality may issue the said license or
permit.
4. Other Fees or Charges – The Barangay may levy reasonable fees and charges:
a. a. On commercial breeding of fighting cocks, cockfighting, and cockpits:
b. b. On places of recreation which charge admission fees: and
c. c. On billboards, signboards, neon signs, and outdoor advertisements.

COMMUNITY TAX

Sec. 156. – Cities or municipalities may levy a community tax in accordance with the
provisions of this Article.

PERSONS LIABLE

➢ Individuals at least 18 years of age

➢ Corporations

INDIVIDUALS

- Every inhabitant of the Philippines eighteen (18) years of age or over who has been
regularly employed on a wage or salary basis for at least thirty (30) consecutive
working days during any calendar year or who is engaged in business or occupation,
or who owns a real property with an aggregate assessed value of one thousand pesos
(1,000) or more, or who is required by law to file an income tax return shall pay an
annual community tax of Five pesos (5.00) and an annual additional tax of One peso
(1.00 for every one thousand pesos (1,000) of income regardless of whether from
business, exercise of profession or from property which in no case shall exceed 5,000.

JURIDICAL PERSONS

- Every corporation, no matter how created or organized, whether domestic or resident

foreign, engaged in or doing business in the Philippines, shall pay an annual
community tax.
- It shall pay an annual community tax of 500 and an annual additional tax, which, in
no case, shall exceed 10,000 by the following schedule:

(1) For every Five thousand pesos (P5,000) worth of real property in the Philippines
owned by it during the preceding year based on the valuation used for the payment of the
real property tax under existing laws, found in the assessment rolls of the city or
municipality where the real property is situated - Two pesos (P2.00); and

(2) For every Five thousand pesos (P5,000) of gross receipts or earnings derived by it
from its business in the Philippines during the preceding year - Two pesos (P2.00).
 24

PERSONS EXEMPT TO PAY THE COMMUNITY TAX

The following are exempt from the community tax:

1. Diplomatic and consular representatives; and

2. Transient visitors when their stay in the Philippines does not exceed three (3) months

DEADLINES AND PENALTIES

- The community tax shall accrue on the first (1st) day of January of each year which
shall be paid not later than the last day of February of each year. If a person reaches
the age of eighteen (18) years or otherwise loses the benefit of exemption on or before
the last day of June, he shall be liable for the community tax on the day he reaches
such age or upon the day the exemption ends. However, if a person reaches the age of
eighteen (18) years or loses the benefit of exemption on or before the last day of June,
he shall be liable for the community tax on the day he reaches such age or upon the
day the exemption ends. However, if a person reaches the age of eighteen (18) years
or loses the benefit of exemption on or before the last day of March, he shall have
twenty (20) days to pay the community tax without becoming delinquent.
- If the tax is not paid within the time prescribed above, an interest of twenty-four
percent (24%) per annum shall be added to the unpaid amount from the due date
until it is paid.

REAL PROPERTY TAX AND RELATED TAXES

Related taxes

➔ SEF – Special Education Fund

➔ ILT – Idle land tax
➔ Local transfer tax

Administration of Real Property Tax

Section 232 of the LGC provides that the provinces and cities, including the municipalities
within the Metropolitan Manila Area, shall be primarily responsible for the proper, efficient,
and effective administration of the real property tax.

Exemptions from Real Property Tax (Sec. 234, LGC)

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

1. Real Property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
 25

2. Charitable institutions, churches, parsonages or convents appurtenant thereto,

mosques, non-profit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;
3. All machineries and equipment that are actually, directly and exclusively used by
local water districts and government owned or controlled corporations engaged in the
supply and distribution of water and/or generation and transmission or electric power;
4. All property owned by duly registered cooperatives as provided for under R.A. No.
6938; and
5. Machinery and equipment used for pollution and control and environmental
protection.

Property classification and Assessment levels

➔ Residential - 20%
➔ Agricultural - 40%
➔ Commercial - 50%
➔ Industrial - 50%
➔ Mineral - 50%
➔ Timberland - 20%
➔ Special Cultural/ Scientific - 15%
➔ Hospital/ Water Districts - 10%

Assessment levels – Fraction of the fair value of the property that the local government is
authorized to tax.

RATES OR LEVY

- A province city or municipality within the Metropolitan Manila Area shall fix a
uniform rate of basic real property tax applicable to their respective localities as
follows:
- a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed
value of real property, and
- b) In the case of a city or a municipality within the Metropolitan Manila Area, at the
rate not exceeding two percent (2%) of the assessed value of real property.

DEADLINES AND PENALTIES

- The real property tax for any year shall accrue on the 1st day of January, and from that
date, it shall constitute a lien on the property, which shall be superior to any other lien,
mortgage, or encumbrance of any kind whatsoever and shall extinguished only upon
the payment of the delinquent tax.
- It should be settled on or before January 31.
 26

SPECIAL EDUCATION FUND TAX (SEF)

SEC. 235 (LGC) – Additional levy on Real Property for the Special Education Fund (SEF)

- A province, city, or municipality within the Metropolitan Manila Area may levy and
collect an annual tax of one percent (1%) on the assessed value of real property, which
shall be in addition to the basic real property tax. The proceeds shall exclusively
accrue to the Special Education Fund (SEF).

ADDITIONAL AD VALOREM TAX ON IDLE LANDS

- A province, city, or municipality within the Metropolitan Manila Area may levy an
annual tax on idle lands at the rate not exceeding five percent (5%) of the assessed
value of the property, which shall be in addition to the basic real property tax.

WHAT IS IDLE LAND?

Idle lands shall include the following:

- Agricultural land with more than 1 hectare and area – ½ of which remain uncultivated
or unimproved
- Land other than agricultural with more than 1,000 square meters, ½ of which remain
unutilized
- Residential lots in subdivision

IDLE LANDS EXEMPT FROM TAX

- A province or city municipality within the Metropolitan Manila Area may exempt idle
lands from the additional levy because of force majeure, civil disturbance, natural
calamity, or any cause or circumstance that physically or legally prevents the owner of
the property or person having legal interest therein from improving, utilizing, or
cultivating the same.

WHERE TO PAY?

- The location of the property.

TAX DISCOUNT FOR ADVANCED PROMPT PAYMENT

- If the basic real property tax and the additional tax accruing to the Special Education
Fund (SEF) are paid in advance under the prescribed schedule of payment as provided
under Section 250 LGC, the sanggunian concerned may grant a discount not
exceeding twenty percent (20%) of the annual tax due.
 27

PAYMENT OF REAL POPERTY TAXES IN INSTALLMENTS

- The owner of the real property or the person having legal interest therein may pay the
basic real property tax and the additional tax for Special Education Fund (SEF) due
thereon without interest in four (4) equal installments:
➔ First Installment is to be due and payable on or before March 31st
➔ Second Installment, on or before June 30
➔ Third Installment, on or before September 30; and
➔ Fourth Installment on or before December 31st

INTEREST ON UNPAID REAL PROPERTY TAX

- In case of failure to pay the basic real property tax or any other tax levied under this
Title upon the expiration of the period as provided in Section250, or when due, as the
case may be, shall subject the taxpayer to the payment of interest at the rate of two
percent (2%) per month on the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid: Provided, however, that in no case shall the
total interest on the unpaid tax or portion thereof exceed thirty-six (36) months.
 28

Bibliography:

References:

Baliuag University. (n.d.). Tax remedies of the government (1–6). Studocu.

https://www.studocu.com/ph/document/baliuag-university/strategic-management/tax-remedie
s-of-the-government-1-6/36531561?fbclid=IwY2xjawE70utleHRuA2FlbQIxMAABHRUMi
bHdDcxDnv4iOCc84J0WzaiNrx5I7NH95B-RY0iADhwomB1FseztiQ_aem_rqEpgt_7Aowe
kxbjAuLrCA

Banggawan, R. B. (2023–2024). Income taxation.

City of San Fernando, Pampanga. (2017). 2017 Revised Revenue Code and Market Code
(Ordinance No. 2017-033

Republic Act No. 8424 (Tax Reform Act of 1997). (n.d.). RA. No. 8424.

Scribd. (n.d.). Tax remedies summary.

https://www.scribd.com/doc/296136934/Tax-Remedies-Summary?fbclid=IwY2xjawE70vFle
HRuA2FlbQIxMAABHYzyNm-LhMCtr2RkzS8bGES2XfUeIJesoGq3D-FMz8PVU2LnNrL
MIcoQLQ_aem_oGPUK6J4MFUIRi7B71HtAw

Studocu. (n.d.). Taxes - Scope of taxation - Summary scope of the power of taxation.
https://www.studocu.com/ph/document/misamis-university/management-accounting/taxes-sc
ope-of-taxtion/31778844

Tabag, E. D. (2022). CPA reviewer in taxation.

The Local Government Code of the Philippines. (n.d.). The Local Government Code of the
Philippines. Official Gazette.