local and real property tax

7/23/2019 Local and Real Property Tax

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1

Local Taxation

I. General Principles

Atty. Terence Conrad H. Bello Slide No. 2

A. Local Autonomy

1.

What is the nature and source of local taxing power?

!

Mactan Cebu Int’l Airport Authority v. Marcos, G.R. No.120082, Sept. 11, 1996 – the power to tax is primarilyvested in Congress; however, in our jurisdiction, it may beexercised by local legislative bodies, no longer by virtue ofa valid delegation as before, but pursuant to directauthority conferred by § 5, art. X of the Constitution.Under the latter, the exercise of the power may besubject to such guidelines and limitations as the Congressmay provide which, however, must be consistent with thebasic policy of local autonomy

"

Currently, Titles I (Local Taxation) and II (RPT) ofBook II, LGC prescribe the “guidelines and limitations”of local taxing power


B. Fundamental Principles

1.

What are the fundamental principles that govern the exerciseof taxing and other revenue-raising powers of LGUs?

a)

Uniformity in taxation

b) Local exactions shall (i) be equitable and based on TP’sability to pay, (ii) be for public purposes, (iii) not be unjust,excessive, oppressive or confiscatory, (iv) not be contraryto law, public policy, national economic policy, or in therestraint of trade

c)

Collection shall not be let to private persons*d)

Revenue collections shall accrue exclusively to LGUs**

e)

System of taxation must be progressive



2. Cases:! Pepsi Cola Bottling Co. of the Phils., Inc. v. Mun. of Tanauan,

L-31156, Feb. 27, 1976 - where the SC held that a tax of onecentavo (P0.01) on each gallon of volume capacity on all softdrinks, produced or manufactured, or an equivalent of 1-1/2centavos per case, cannot be considered unjust and unfair.

! An increase in the tax alone would not support the claim thatthe tax is oppressive, unjust and confiscatory. Municipalcorporations are allowed much discretion in determining therates of imposable taxes.

! This is in line with the constitutional policy of according thewidest possible autonomy to local governments in matters oflocal taxation, an aspect that is given expression in the LocalTax Code (PD No. 231, July 1, 1973).

! Unless the amount is so excessive as to be prohibitive, courtswill go slow in writing off an ordinance as unreasonable





2.

Cases:!

Matalin Coconut Co. v. Mun. Council of Malabang, 143 SCRA404 – where the SC struck down a municipal ordinanceimposing a police inspection fee of P0.30 per sack ofcassava starch flour shipped out of the municipality forthe ff. reasons:"

Imposition is unjust and unreasonable - the only servicerendered by the LGU, by way of inspection, is for thepoliceman to verify from the driver of the trucks ofthe TP passing by at the police checkpoint the numberof bags loaded per trip which are to be shipped out ofthe municipality based on the trip tickets for thepurpose of computing the total amount of tax to becollected

"

The imposition is excessive and confiscatory – the TP’smarginal average profit/bag of cassava starch flour isonly P0.40 (the police inspection fee is P0.30/bag)


C. Common Limitations on Taxing Power

1. What are the common limitations on the taxing power ofLGUs? Exercise of taxing powers of LGUs (provinces,cities, municipalities, barangays) shall not extend to thefollowing (Sec. 133):a) Income tax, except on banks and other financial

institutionsb) DSTc) Transfer taxes (estate and donor’s tax)d) Customs fees and other chargese) Taxes, fees and charges (TFC) on goods “passing

through” territorial jurisdiction of LGUf) TFC on agricultural or aquatic products when sold by

marginal farmers or fishermen


C.

Common Limitations on Taxing Power

1. What are the common limitations on the taxing power ofLGUs? Exercise of taxing powers of LGUs (provinces,cities, municipalities, barangays) shall not extend to thefollowing:g) Business tax on BOI-, PEZA-, SBMA-registered

entities, etc.h) Excise tax and TFC on petroleum productsi) VAT or any percentage tax

j)

Common carriers taxk) Taxes on reinsurance premiums

l) TFC on registration of motor vehicles, excepttricycles

m) TFC on export products



1. What are the common limitations on the taxing power ofLGUs? Exercise of taxing powers of LGUs (provinces,cities, municipalities, barangays) shall not extend to thefollowing:n) TFC on Countryside and Bgy. Business Enterprises or

Cooperatives duly registered with CDAo) TFC on the national government or LGUs





2. Cases:! Prov. of Bulacan v. CA, G.R. No. 126232, Nov. 27, 1998

– where SC held that provinces may not levy excisetaxes on articles already taxed by the NIRC (the LGUassessed TP P2.5M for extracting limestone, shaleand silica from several parcels of private land in theprovince; said minerals are quarry resources alreadysubject to excise tax under the NIRC)



2.

Cases:!

Phil. Petroleum Corp. v. Mun. of Pililla, G.R. No. 90776 June 3,1991 – which upheld the imposition of a local tax on thebusiness of manufacturing petroleum products, despite thefact that the NIRC imposes excise taxes on manufacturedpetroleum products. In so holding, the SC ruled that a tax onbusiness is distinct from a tax on the article itself"

Note that under § 133(h), LGUs are prohibited fromimposing excise taxes on articles enumerated under theNIRC and taxes, fees or charges on petroleum products.It would seem that under Pililla, the § 133(h) limitationapplies only when what is being taxed is the article itself,and not the business in which said article is manufactured

" Note, however, that under the IRR of § 133(h), the

prohibition extends to the imposition of a tax on thebusiness of manufacturing petroleum products

"

See, however, Petron Corp. v. Tiangco , GR 158881, April 16,2008, holding that LGU may not impose business taxes onentities engaged in sale of petroleum products


C.

Common Limitations on Taxing Power

2. Cases:

! San Miguel Corp. v. Mun. Council of Mandaue, L-30761,July 11, 1973 – holding that a graduated quarterlyfixed tax based on the gross value of money or actualmarket value at the time of removal of themanufactured articles from their factories isessentially a percentage tax based on sales,therefore, beyond the authority of the LGU to enact

" A percentage tax is imposed when there is a setratio between the amount of the tax and thevolume of sales

" See § 133(i) limitation

12

Local Taxation

II. Scope of Taxing Powers of LGUs




A. Provinces

1. What are the taxes, fees and charges that provinces may levy andcollect?a) Tax on transfer of real property ownership (§ 135) –

! Coverage: sale, donation, barter, or any other mode oftransferring ownership or title of real property

! Rate and base: not more than 50% of 1% of totalconsideration or FMV (if monetary consideration is notsubstantial), whichever is higher

! When payable: within 60 days from execution of deed or

death of decedentb) Printer’s or publisher’s tax (§ 136) –

!

Coverage: persons engaged in the printing and/orpublication of books, cards, posters, leaflets, handbills,etc.

! Rate and base: not more than 50% of 1% of gross annual

receipts for preceding calendar year


A. Provinces

c)

Franchise tax (§ 137) –!

Coverage: businesses enjoying a franchise!

Rate and base: not exceeding 50% of 1% of the grossannual receipts for the preceding calendar year basedon the incoming receipts, or realized within itsterritorial jurisdiction (1/20 of 1% of capitalinvestment if newly started business)

d)

Tax on sand, gravel and other quarry resources (§ 138) –

!

Coverage - ordinary stones, sand, gravel, earth, andother quarry resources extracted from public lands orfrom the beds of seas, lakes, rivers, streams, creeksand other public waters within the province’s territorial

jurisdiction!

Rate and base: not more than 10% of FMV/cubic meter


A. Provinces

e)

Professional tax (§ 139) –! Coverage: persons engaged in the exercise or practice

of a profession requiring government examination(professionals exclusively employed by gov’t areexempt)

!

Rate and base: not to exceed P300 annually!

When payable: Jan. 31f)

Amusement tax (§ 140) –! Coverage: proprietors, lessees, or operators of

theaters, cinemas, concert halls, circuses, boxing stadiaand other places of amusement (exempt: holding ofoperas, concerts, dramas, recitals, painting and artexhibitions, flower shows, musical programs, literaryand oratorical presentations, except pop, rock or similarconcerts

!

Rate and base: not more than 30% of gross receiptsfrom admission fees


A. Provinces

g) Fixed tax on delivery trucks and vans (§ 141) –! Coverage: annual tax on every truck, van or vehicle

used in the delivery or distribution of merchandise! Rate and base: not exceeding P500

h) Service fees and charges – for services rendered (§153)

i) Public utility charges (§ 154) - for the operation ofpublic utilities owned, operated and maintained by

provinces within their jurisdiction j) Toll fees or charges (§ 155) - for the use of any

public road, pier, or wharf, waterway, bridge, ferry ortelecommunication system funded and constructed bythe province




B. Municipalities

1. What is the scope of taxing powers of municipalities?! Generally, municipalities may levy taxes, fees, and charges not

otherwise levied by provinces (§ 142)2. What are the taxes, fees and charges that municipalities may levy

and collect?A. Business taxes on --

a) Manufacturers, assemblers, re-packers, processors,brewers, distillers, rectifiers, and compounders of liquors,distilled spirits and wines or manufacturers of any articleof commerce of whatever kind and nature (§ 143(a))! Rate and base: graduated annual fixed tax based on TP’s gross

sales or receipts for preceding year

! However, when gross sales or receipts amount to P6.5M ormore, tax ceases to be a fixed tax; instead, a percentage tax of37.5% of 1% is imposed


B. Municipalities

b) Wholesalers, distributors or dealers in any article ofcommerce of whatever kind and nature (§ 143(b))! Rate and base: graduated annual fixed tax based on TP’s

gross sales or receipts for preceding year

! However, when gross sales or receipts amount to P2M or

more, tax ceases to be a fixed tax; instead, a percentage

tax of 50% of 1% is imposed

c) Exporters and manufacturers, millers, producers,wholesalers, distributors, dealers or retailers ofessential commodities like rice, corn, wheat orcassava flour, cooking oil, laundry soap, etc. (§143(c)) – at a rate not exceeding ! of the rates forsales of articles mentioned in (a) and (b) above


B. Municipalities

d) Retailers – tax is not a graduated annual fixed taxbut an annual percentage tax based on gross sales orreceipts for the preceding calendar year (§ 143(d))! Note: barangays have exclusive power to tax retailers

whose gross sales or receipts for the preceding calendar

year do not exceed P50,000 (for barangays in cities) or

P30,000 (for barangays in municipalities)

e) Contractors and other independent contractors (§

143(e)) – graduated annual fixed tax based on grossreceipts for preceding calendar year. However, ifgross receipts amount to P2M or more, contractor’stax becomes a percentage tax at the rate of 50% of1%


B. Municipalities

f) Banks and other financial institutions (§ 143(f)) – tax is50% of 1% of gross receipts of preceding calendar yearderived from interests, commissions and discounts fromlending activities, income from financial leasing, dividends,rentals on property and profit from exchange or sale ofproperty, insurance premium

g) Peddlers engaged in sale of mdse or article of commerce (§143(g)) – rate not to exceed P50 per peddler annually

h) On any business not otherwise specified above, SBconcerned may impose tax it deems proper (§ 143(g))! In the case, however, of businesses subject to excise, value-

added or pct. tax, the rate shall not exceed 2% of gross sales orreceipts for the preceding calendar year

# Note: municipalities within Metro Manila may levy taxes atrates which shall not exceed by 50% the maximum rates in(a) to (h) above (§ 144)




B. Municipalities

B. Fees and charges –a) Municipalities authorized also to impose and collect

such reasonable fees and charges on business andoccupation and on the practice of any profession orcalling (other than professional tax, which onlyprovinces or cities may impose) before any personmay engage in such business, occupation or practiceof such profession (e.g., mayor’s permit) (§ 147)!

The fees and charges, however, should be commensuratewith the cost of regulation, inspection and licensing (i.e.,must not be revenue-generating)

b)

Service fees and charges (§ 153)c)

Public utility charges (§ 154)d) Toll fees or charges (§ 155)


C. Cities

1.

What are the taxes, fees and charges that cities maylevy and collect?

! Taxes, fees and charges which provinces ormunicipalities may levy and collect (§151)

! The rates of taxes that cities may levy may exceedthe maximum rates allowed for provinces ormunicipalities by not more than 50%, except therates of professional and amusement taxes


D. Barangays

1.

What are the taxes, fees and charges that barangays may levyand collect?a) Taxes – on stores or retailers with fixed business

establishments with gross sales or receipts for thepreceding calendar year of P50,000 or less (for barangaysin cities) and P30,000 or less (for barangays inmunicipalities) at a rate not exceeding 1% of such grosssales or receipts

b)

Service fees or charges – for services rendered inconnection with the regulation or the use of barangay-

owned properties or service facilities such as palay, copraor tobacco dryersc) Barangay clearance – for purposes of mayor’s/business

permit application/renewald)

Other fees and charges – on commercial breeding offighting cocks, cockfights and cockpits; on places ofrecreation charging admission fees; on billboards, etc.

24

Local Taxation

III. Community Tax Certificate




A. Who are Liable

1. Who are authorized to levy and collect community taxes?

! Cities or municipalities (§ 156)

2. Who are liable?

a) Individuals (§ 157):

! 18 years or over (i) regularly employed on a wageor salary basis for at least 30 consecutive workingdays during any calendar year; or (ii) engaged inbusiness or occupation; or (iii) own real propertywith FMV of P1,000 or more; or (iv) required tofile ITR

! Rate and base: annual tax of P5, plus P1/P1,000income


A. Who are Liable

b) Juridical persons (§ 158):

! Every corporation engaged in or doing business inthe Philippines

! Rate and base: annual tax of P500 and an annualadditional tax based on FMV of real property andgross receipts (the additional tax, however, shallnot exceed P10,000)


B. Exemptions from Community Tax

1. Who are exempt from community tax (§ 159)?

a) Diplomatic and consular representatives

b) Transient visitors


C. Place and Time of Pay’t of Tax

1. Where shall the community tax be paid?

! Residence of individual

! Place where principal office of juridical entity islocated

2. When shall community tax be paid?

! On or before last day of Feb.

! Special rules for individuals and corporations who

become liable for community tax during the year



29

Local Taxation

IV. Time, Manner and Place of Payment ofLocal Business Tax


A. Time of Pay’t

1. Tax period – generally calendar year basis (§ 165)

2. Manner of payment – may be made quarterly (§ 165)

3. Accrual of tax – generally Jan. 1; in case of new ordinancelevying new tax or increasing rates – 1st day of quarternext following effectivity of ordinance (§ 166)

4. Time of payment – generally first 20 days of Jan. orquarter, as the case may be (§ 167);

! In case of retirement from business – if the tax paidduring the year be less than the tax due on said grosssales or receipts of the current year, the differenceshall be paid before the business is consideredofficially retired (§ 145)


B. Place of Pay’t (Situs Rules)

1.

Where should local business taxes be paid?Branch or Sales Office Rulea)

LGU where branch or sales office is located – all salesmade in a locality where there is a branch or sales officeor warehouse shall be recorded in said branch or salesoffice or warehouse and the tax shall be payable to thecity or municipality where the same is located"

Branch or sales office – a fixed place in a locality whichconducts operations of the business as an extension ofthe principal office; offices used only as display areas

of the products where no stocks or items are storedfor sale, although orders for the products may bereceived thereat, are not branch or sales office. Awarehouse which accepts orders and/or issues salesinvoices independent of a branch with sales office shallbe considered as a sales office



Branch or Sales Office Rule

b) In case where there is no such branch, sales office orwarehouse in the locality where the sale is made, thesale shall be recorded in the principal office alongwith the sales made by said principal office and thetax shall accrue to the city or municipality where saidprincipal office is located

"

Principal office – head of main office appearing inthe AOI or DTI registration





Allocation Rule:

# Impt.: allocation rule applies only manufacturers,assemblers, contractors, producers and exporterswith factories, project offices, plants and plantationsin the pursuit of business

a) 30% of all sales recorded in the principal office shallbe taxable by the city or municipality where theprincipal office is located, and 70% of all salesrecorded in the principal office shall be taxable bythe city or municipality where the factory, projectoffice, plant or plantation is located



Allocation Rule: b) In case of a plantation located at a place other the place

where the factory is located, said 70% in (a) shall be dividedas follows:

i. 60% (of the 70%) to the city or municipality where thefactory is located; and

ii. 40% (of the 70%) to the city or municipality where theplantation is located

c) In case where a manufacturer, assembler, producer, exporteror contractor has 2 or more factories, project offices, plantsor plantations located in different localities, the 70% salesallocation shall be pro-rated among the localities where thefactories, project offices, plants or plantations are located inproportion to their respective volumes of production duringthe period for which the tax is due. In the case of projectoffices of service or other independent contractors,“production” = cost of projects undertaken during the taxperiod



Sales Made by Route Trucks, Vans or Vehicles:

a)

For route sales made in locality where a manufacturer,producer, wholesaler, retailer or dealer has a branch orsales office or warehouse, the sale shall be recorded in thebranch or sales office or warehouse and the tax duethereon shall be paid to the city or municipality where suchbranch or sales office or warehouse is located

b)

For route sales made in locality where a manufacturer,

producer, wholesaler, retailer or dealer has no branch orsales office or warehouse, the sale shall be recorded in thebranch or sales office or warehouse from where the routetrucks withdraw their products for sale, and the tax duethereon shall be paid to the city or municipality where suchbranch or sales office or warehouse is located

36

Local Taxation

V. Enactment of Tax Ordinances and Other

Revenue Measures




A. Public Hearing and Publication

of Tax Ordinances1. What are the procedural requirements for the enactment

of tax ordinances! Public hearing and publication

2. §§ 186 and 187 state that no ordinance levying taxes,fees and charges shall be enacted without public hearing;this is a mandatory requirement! Figuerres v. CA, G.R. No. 119172, March 25, 1999 – SC

confirmed that the holding of a public hearing is amandatory requirement for the enactment of a taxordinance; the SC however upheld the validity of theassailed ordinance for failure of the TP to adduceevidence that the requisite public hearings were notconducted by the LGU (presumption of validity ofordinances)


A. Public Hearing and Publication of

Tax Ordinances3. What is the procedure for the publication of tax

ordinances?

! Within 10 days from approval, certified true copiesof the ordinance shall be published for 3 consecutivedays in a newspaper of local circulation

! In LGUs where there are no newspapers of localcirculation, the tax ordinance may be posted in atleast 2 conspicuous and publicly accessible places


B. Appeal of Tax Ordinances

1. What is the procedure for the appeal of tax ordinances?

a) Secretary of Justice –

! Any question on the constitutionality or legality oftax ordinances or revenue measures may be raisedon appeal within 30 days from the effectivitythereof to the Secretary of Justice

! Secretary of Justice must render a decision on

the appeal within 60 days from receipt of appeal! Pendency of the appeal does not suspend the

effectivity of ordinance or accrual and payment oftaxes, fees and charges levied thereon



!

Drilon v. Lim, G.R. No. 112497, Aug. 4, 1994 – Secretaryof Justice declared a Manila tax ordinance illegalbecause of certain ultra vires provisions and non-compliance with the prescribed procedure fore na c t me nt t h e re o f ; RT C de c l a re d § 1 87unconstitutional because said provision violatesconstitutional provision on local autonomy; SC held thatno constitutional rule on local autonomy was violatedbecause no control, but only supervision was exercisedby the Sec. of Justice in declaring as illegal the assailedordinance

!

Hagonoy Market Vendor Assoc. v. Mun. of Hagonoy,Bulacan, 376 SCRA 376 – where an appeal to theSecretary of Justice more than 1 year after theeffectivity of the ordinance in question was held to betime-barred on the ground that the periods stated in §187 are mandatory





b)

Court of competent jurisdiction (RTC) – within 30 daysfrom receipt of adverse decision or from the lapse of the60 day period without the Sec. of Justice acting on theappeal, aggrieved party may file appropriate proceedingswith a court of competent jurisdiction

42

Local Taxation

VI. Remedies of Local Government andTaxpayer


Remedies of the LGU and TP

1. What are the remedies of LGUs in the collection of taxesand revenues?

a) Examination of taxpayer’s books of accounts (§ 171)

b) Issuance of deficiency assessment (§§ 194 - 195)

c) Imposition of surcharge and interest (§§ 168 - 169)

d) Summary remedies for the collection of taxes:

i. Distraint of personal property (§ 175)

ii.

Levy on real property (§§ 176, 178-182)

iii. Further distraint and levy (§ 184)

e) Judicial action for collection of taxes (§ 183)


Remedies of the LGU and TP

2. What are the remedies of taxpayers?a) Protest the assessment (§ 195):

i. File protest with local treasurer within 60 daysfrom receipt of assessment, otherwiseassessment becomes final and executory (CMC,Inc. v. City of Las Piñas, CTA AC No. 4, Sept. 28,2005 ); local treasurer has 60 days to decide onthe protest

ii.

Appeal to court of competent jurisdiction (RTC)within 30 days from receipt of denial of protest orfrom lapse of the 60-day period without the localtreasurer acting on the protest

b) Claim for refund or tax credit (§ 196)



45

Real Property Taxation

I. General Principles and Definitions


General Principles

1. What are the fundamental principles governing theappraisal, assessment, levy and collection of real propertytax (“RPT”)?a) Real property shall be appraised at its current and

fair market value;b) Real property shall be classified for assessment

purposes on the basis of its actual use;c) Real property shall be assessed on the basis of a

uniform classification within each LGU;d) The appraisal, assessment, levy and collection of RPT

shall not be let to any private person; ande) The appraisal and assessment of real property shall

be equitable.


General Principles

Cases:!

Province of Nueva Ecija v. Imperial Mining Co., Inc., 118 SCRA632 (1982) – where it was held that the policy of taxing realproperty is on the basis of actual use even if the user is not theowner. Hence, gov’t property leased to a private person becomestaxable

!

Ty v. Trampe, 250 SCRA 500 (1995) – where the SC declaredillegal the 400% to 570% increase in real estate taxes imposedon landowners in Pasig

!

Lopez v. City of Manila, 303 SCRA 448 (1999) – where the SC

enumerated the procedural steps in computing real propertytax, as follows: (1) ascertain assessment level; (2) multiply theFMV by the applicable assessment level; and (3) find the taxrate corresponding to the class (use) of the property andmultiply the assessed value by that rate; where the SC alsoenumerated the steps for the mandatory conduct of generalrevision of real property assessments

48


II. Real Property Tax and

Additional or Special Levies




Real Property Tax and Additional

or Special Levies1.

What are the taxes that LGUs may levy on real property?a)

Basic RPT (§ 233)! 1% for provinces!

2% for cities and municipalities within MMAb)

1% special education fund (SEF) (§ 235)c)

5% tax on idle lands (§§ 236 - 237)!

Agricultural lands more than 1 hectare in area!

Lands other than agricultural more than 1,000 sqm.!

Residential lots in subdivisions regardless of land aread)

Special levy due to improvements (§§ 240 - 243)! Lands specially benefited by public works projects or

improvements funded by the LGU concerned!

Special levy shall not exceed 60% of the cost of theproject or improvement

50


III. Exemptions from RPT


Exemptions from RPT

1.

What is the procedure for claiming exemption from RPT?

!

File documentary evidence in support of claimed exemptionwith the local assessor within 30 days from date ofdeclaration of real property (§ 206)

2.

What types of real property are exempt from RPT (§ 234)?

a)

Property owned by Gov’t or any of its political subdivisions

!

LRTA v. CBAA, 342 SCRA 692 (2000) – where the SCheld that the LRT carriageways and terminal stations

are not exclusively for public use but rather patrimonialproperty, and therefore are subject to RPTnotwithstanding that LRTA is a GOCC


Exemptions from RPT

b) Those actually, directly and exclusively used forreligious, charitable or educational purposes, and non-profit or religious cemeteries

! BLGF Opinion dated Nov. 20, 1992 addressed tothe Mun. Assessor of Tuguegarao, Cagayan – whereonly real properties owned by the Phil. UnionCollege which are a/d/e/ used for educationalpurposes are exempt, including the studentdormitories, cafeterias, and the food servicesbuilding. The guardhouses garages, perimeterfences, water tanks and pumps, generator houses,stockrooms and faculty/personnel residentialquarters are not exempt




Exemptions from RPT

!

BLGF Opinion dated March 15, 1993 addressed to Mr.Elmer Lee of QC – where the real properties of theChinese General Hospital were held exempt because theonly purpose for which it was formed was forcharitable, benevolent, civic, and educational purposes

!

BLGF Opinion dated April 22, 1999 – where the AndresSoriano Training Center, owned and operated by SMC,was held subject to RPT although it was used foreducational purposes because (a) it also caters to otherprivate offices who wish to avail of their trainingcourses, (b) its courses are not the regular subjectsoffered in schools or universities, and (c) it is notaccredited by DECS


Exemptions from RPT

c) Machineries and equipment a/d/e used by local waterdistricts and GOCCs in the supply and distribution ofwater and electricity

! Machineries and equipment used by a privatepower plant not exempt

d) Real properties owned by cooperatives dulyregistered with the CDA and in accordance with theprovisions of RA 6938

e) Machinery and equipment used for pollution controland environmental protection

55


IV. Payment of RPT and Special Levies


Payment of RPT and SpecialLevies

1.

When does RPT accrue?!

January 1 (§ 246)2.

When does a special levy accrue?!

On the first day of the quarter next following theeffectivity of the ordinance imposing such levy (§ 245)

3.

For TPs electing to pay RPT and SEF in installments, what arethe due dates for payment of the installments?!

4 equal installments payable on March 31, June 30, Sept.

30 and Dec. 31 (§ 250)4. Is there a tax discount for advanced prompt payment of RPTand SEF?! Yes, if RPT and SEF are paid in advance of March 31, June

30, Sept. 30 and Dec. 31, SB concerned may grant discountnot exceeding 20% of annual tax due (§ 251)



57


V. Appraisal and Assessment of Real Property


A. Appraisal

1. What is the applicable rule regarding the appraisal of realproperty (land, buildings and other improvements)?

! Real property, whether taxable or exempt, shall beappraised at the current and FMV prevailing at thelocality where the property is located (schedule offair market values) (§ 201)

2. What is the applicable rule regarding the appraisal ofmachinery?

! If machinery is brand new – FMV is acquisition cost

! If machinery is imported – FMV is total landed cost


A. Appraisal

3. What are the modes by which real property is appraised?a) Voluntary declarationb) Involuntary declaration

4. What is the obligation of owners or administrators of realproperty as regards the declaration thereof?! File sworn statement with the local assessor

declaring the true value of the property once every 3 years from Jan. 1 to June 30 (§ 202)

5.

What is the obligation of a person acquiring realproperty?! File sworn statement with the local assessor

declaring the true value of the property within 60days from acquisition


A. Appraisal

6. What is the remedy of the local assessor in case theowner or administrator of real property fails to file thesworn statement under § 202?

! Declare the real property on behalf of the defaultingowner (§ 204)

! For purposes of § 204, local assessor is authorized totake evidence (§ 213)

7.

What is the obligation of owners or administrators of realproperty as regards the declaration thereof?

! File sworn statement with the local declaring the truevalue of the property once every 3 years from Jan. 1to June 30 (§ 202)




B. Assessment

1.

What is the fundamental rule regarding the assessment of realproperty?!

Real property shall be classified, valued and assessed onthe basis of its actual use regardless of where located,whoever owns it, and whoever uses it (§ 217)

2.

What are the classes of real property for assessmentpurposes?!

Residential, agricultural, commercial, industrial, mineral,timberland or special

3.

What are the special classes real property?!

lands, buildings, and other improvements thereon actually,directly and exclusively used for hospitals, cultural, orscientific purposes, and those owned and used by localwater districts, and GOCCs rendering essential publicservices in the supply and distribution of water and/orgeneration and transmission of electric power


B. Assessment

4. What are the steps in the assessment of real property?a) Determine FMV

b) Determine classification

c) Apply assessment level to determine assessed value or taxablevalue

d) Determine RPT due by multiplying the rate against assessedvalue

5.

What is an assessment level?

!

It is the percentage applied to the FMV (depending on theclass of real property) to determine the taxable value of theproperty (see § 218)

6. What are the classes of real property for assessment purposes?

! Residential, agricultural, commercial, industrial, mineral,timberland or special


B. Assessment

Fair Market Value P1,000,000

Assessment Level(Residential)

20%

Assessed Value 200,000.00

Basic Real Property Tax(2%)

P4,000

Special Education Fund 2,000Total P6,000


B. Assessment

7. What are the special classes real property?! lands, buildings, and other improvements thereon actually,

directly and exclusively used for hospitals, cultural, orscientific purposes, and those owned and used by local waterdistricts, and GOCCs rendering essential public services in thesupply and distribution of water and/or generation andtransmission of electric power

8. When can the local assessor make an assessment or reassessmentof real property (§ 220)?

a)

Real property is declared and listed for taxation purposes forthe first time;b) there is an ongoing general revision of property classification

and assessment; andc) a request is made by the person in whose name the property is

declared




B. Assessment

9. How often can the assessed value of real property bemade?

! Only once every 3 years except in case of newimprovements substantially increasing the value ofsaid property or of any change in its actual use (§220)


B. Assessment

10. When does the assessment or re-assessment take effect(§§ 220 - 221)?! Gen. rule: Jan. 1 of the following year (prospective

application)! Exception: the reassessment of real property due to its

(i) partial or total destruction, or to a (ii) major changein its actual use, or to any great (iii) and sudden inflationor deflation of real property values, or to the (iv) grossillegality of the assessment when made or to any otherabnormal cause, shall be made within 90 days from thedate any such cause or causes occurred, and shall takeeffect at the beginning of the quarter next followingthe reassessment

! Exception: for previously undeclared real property(property being declared for the first time), effectivityof assessment retroacts to the period during which itwould have been liable (max. of 10 years)

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VI. Remedies of Local Government


Remedies of LGU

1. What are the remedies of LGUs in the collection of RPT?

a) Posting of notice of delinquency (§ 254)

b) Imposition of interest (§ 255)

c) Administrative remedies (§§ 256 - 257)

d) Judicial action for collection (§§ 256, 266, 270)

e) Unpaid tax constitutes a lien (§ 257)



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VII. Remedies of Taxpayer


Remedies of Taxpayers

1.

What are the remedies of taxpayers?!

Dispute the assessment! Pay under protest!

Claim for refund or credit2.

What are the procedures for disputing an assessment?a)

Appeal to LBAA (§ 226) – within 60 days from receipt ofassessment!

Callanta v. Office of the Ombudsman - where it wasruled that filing with the local assessor of a request fora review or readjustment of an assessment is not aproper remedy, but instead an appeal should have beenlodged with the LBAA

b)

Appeal to CBAA – within 30 days, if LBAA denies appeal (§229(c))

c)

Appeal to CTA – within 30 days, if CBAA denies appeal (§7, RA 1125, as amended by RA 9282)


Remedies of Taxpayers

3. What is the effect of an appeal of an assessment?

! It does not suspend collection of RPT

4. What is the requirement if TP wishes to protest thecollection of RPT?

! TP must pay the disputed RPT under protest

! National Power Corp. v. Prov. of Quezon and Mun. ofPagbilao, CTA E.B. No. 46 (CBAA Case No. L-29) –

payment under protest applies only if TP isquestioning the reasonableness of the amountassessed, and not when the TP is questioning the verylegality of the assessment

local and real property tax

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