LOCAL TAXES WHO MAY EXERCISE LOCAL TAXATION

 pertains to the taxes collected by provinces, POWER

cities, municipalities, and barangays through
their taxing and other revenue-raising powers. • Sangguniang Panlalawigan (Provincial Board)
for the Provincial Level

OBJECTIVES: • Sangguniang Pambayan (Municipal Board) for

 to promote self-sufficiency of local government the Municipal Level
units (LGUs), and
 to strengthen and make LGUs more • Sangguniang Panlungsod (City Council) for
autonomous the City Level

LIMITATION OF LOCAL TRANSITION • Sangguniang Pambarangay (Barangay

a. Taxpayers must not be over-burdened with multiple Council) for the Barangay Level
and unreasonable impositions.
TAX POWERS OF LOCAL GOVERNMENT
b. Each local government must have its fair share of UNITS
available resources.
Provinces – provinces are authorized to impose the
c. The resources of the national government must not following taxes on:
be unduly disturbed.
1. Transfer of Real Property Ownership
d. Local taxation must be fair, uniform, and just.  rate of not more than fifty percent (50%) of one
percent (1%) of the total consideration involved
ENACTMENT AND EFFECTIVITY OF LOCAL TAX
ORDINANCES in the acquisition of the property or of the fair
market value in case the monetary
The following stages are observed to enact and effect consideration involved in the transfer is not
tax laws: substantial, whichever is higher.
Passage – The tax ordinances deliberated by the
sanggunian shall not be enacted without prior public
hearing conducted for the purpose 2. Business of Printing and Publication
 rate not exceeding fifty percent (50%) of one
Approval – Local tax ordinances enacted shall be percent (1%) of the annual gross receipts.
approved and signed by the local chief executive
concerned. If vetoed, it could be overridden by a 2/3
3. Franchise Tax
vote of sanggunian members.
 rate of fifty percent (50%) of one percent (1%)
Effectivity - An ordinance, unless otherwise provided, of the gross annual receipts realized.
shall take effect 10 days after the date of its posting
4. Sand, Gravel and Other Quarry Resources
SCOPE OF LOCAL TAXATION
 not more than ten percent (10%) of fair market

LOCAL GOVERNMENT TAXATION value.

 Covering the imposition of license taxes, fees 5. Professional Tax

and other impositions, including community tax.  not exceeding three hundred pesos (P300.00)
per profession.
REAL PROPERTY TAXATION

 A system of levy on real property imposed on a 6. Amusement Tax

countrywide basis but authorizing LGUs to vary  rate of not more than thirty percent (30%) of the
the rates of taxation. gross receipts from admission fees.
 5. Contractors and other independent contractors
7. Annual Fixed Tax For Every Delivery Truck or
 from a minimum of P27.50 to maximum of fifty
Van of Manufacturers or Producers,
percent (50%) of one percent (1%) of gross
Wholesalers of, Dealers, or Retailers in, Certain
receipts.
Products
 not exceeding five hundred pesos (P500.00) 6. Banks and other financial institutions
per unit.
 at a rate not exceeding fifty percent (50% of
one percent (1) on the gross receipts.
Municipalities – municipalities may levy taxes, fees, and
7. Peddlers engaged in the sale of any
charges that are levied by provinces. They are
merchandise or article or commerce
authorized specifically to impose the following taxes on:
 at a rate not exceeding P50.00 per peddler
A. BUSINESS TAXES annually.

1. Manufacturers, assemblers, re-packers, processors,

8. Any business
brewers, distillers, rectifiers, and compounders of
 rate not exceeding 2% of gross sales or
liquors, distilled spirits, and wines or manufacturers of
receipts.
any article of commerce of whatever kind of nature
B. FEES AND CHARGES
 from a minimum of P165.00 to a maximum of
thirty-seven and a half percent (37 1/2%) of one 1. The municipality may impose and collect such
percent (1%) based on the gross sales or reasonable fees and charges on business and
receipts of the preceeding year. occupation and, except as reserved to the province, on
the practice of any profession or calling, commensurate
with the cost of regulation, inspection and licensing.
2. Wholesalers, distributors, or dealers in any article of
2. The municipality may levy fees for the sealing and
commerce of whatever kind or nature
licensing of weights and measures at such reasonable
 from a minimum of P18.00 to a maximum of rates as shall be prescribed by the Sangguniang
fifty percent (50%) of one percent (1%) on the Bayan.
gross sales or receipts for the preceeding
3. Municipalities shall have the exclusive authority to
calendar year.
grant fishery privileges in the municipal waters, as well
3. Exporters, and on manufacturers, millers, producers, as issue licenses for the operation of fishing vessels of
wholesalers, distributors, dealers or retailers of three tons or less.
essential commodities
Cities – the city,(have the broadest tax powers) may
 A fixed rate not exceeding one-half (1/2) of the levy the taxes, fees, and charges which the province or
rates under subsections (a), (b) and (d). municipality may impose . The rates of taxes that the
city may levy may exceed the maximum rates allowed
4. Retailers for the province or municipality by not more than fifty
percent (50%) except the rates of professional and
 1% or 2% of the gross sales or receipts.
amusement taxes.
Barangays shall have the exclusive power to
levy taxes if the gross receipts of the retailers
do not exceed P50,000 in the case of cities or
P30,000 in the case of municipalities. Barangays – the barangays may levy, to the exclusion
of other LGUs, the following taxes, fees and charges:
1. Taxes on stores or retailers with fixed business
establishments 2. AN ANNUAL ADDITIONAL TAX OF P1 FOR
EVERY P1,000 OF INCOME REGARDLESS
 with gross sales or receipts of the preceding
OF WHETHER FROM BUSINESS, EXERCISE
calendar year of P50,000 or less in the case of
OF PROFESSION OR FROM PROPERTY
cities and P30,000 or less in the case of
WHICH IN NO CASE SHALL EXCEED P5,000.
municipalities, at a rate not exceeding one
percent (1%) on such gross sales or receipts. COMMUNITY TAXPAYERS: Corporation

2. Service fees or charges  Every corporation no matter how created or

organized, whether domestic or resident
 for services rendered in connection with the
foreign, engaged in or doing business in the
regulation or the use of barangay-owned
Philippines.
properties or service facilities such as palay,
copra, or tobacco dryers. IT SHALL PAY:

3. Reasonable fees and charges 1. AN ANNUAL COMMUNITY TAX OF P500.

2. AN ANNUAL ADDITIONAL TAX WHICH IN
(1)On commercial breeding of fighting cocks,
NO CASE SHALL EXCEED P10,000.
cockfighting and cockpits;
THE FOLLOWING ARE EXEMPT FROM THE
(2) On places of recreation which charge COMMUNITY TAX:
admission fees; and
1. Diplomatic and consular representatives;
(3) On billboards, signboards, neon signs, and 2. Transient visitors when their stay in the Philippines
outdoor advertisements. does not exceed three months.

COMMON LOCAL TAXES Payment of Community Tax

A. COMMUNITY TAX 1. If the individual or corporation is liable to pay

community tax as of January 1 of the year, then the
 Tax imposed on all the inhabitants of the
community tax should be paid not later than the last day
community who are 18 years old and above as
of February of the same year
well as to juridical persons (corporation) doing
business in the community or whose office or 2. If the taxpayer becomes liable after end of February
establishment is located in the community. and any day thereafter up to March 31 of the year, then
the community tax shall be paid within twenty days from
COMMUNITY TAXPAYERS: individual
the date the taxpayer becomes liable
 Eighteen (18) years of age or over
3. If the taxpayer becomes liable after March 31 of the
 Regularly employed on a wage or salary basis
year, then for the current year the taxpayer is exempt,
for at least thirty (30) consecutive working days
the payment shall be on or before February 28 of the
during any calendar year
following year
 Engaged in business or occupation
 Owns real property with an aggregate 4. If the taxpayer becomes liable after June 30 of the
assessed value of P1,000.00 or more year, then for the current year the taxpayer is exempt,
 Required by law to file an income tax return the payment shall be on or before February 28 of the
following year.
HE SHALL PAY:

1. AN ANNUAL COMMUNITY TAX OF P5.

5. Late payment of community tax is subject to  Annual ad valorem tax imposed by local
additional 25% surcharge on the basic amount of tax, government on real property within their
or 50% if due to willful neglect; and 2% interest jurisdiction determined on the basis of a fixed
per month from the last day of required date of proportion of the value of the property.
payment.
 Real properties located within the jurisdiction of
Optional Community Tax the local government unit are required to pay
the tax based on their assessed value.
 One peso (P1.00) for an individual or
corporation which is exempt from community REAL PROPERTIES INCLUDE THE FOLLOWING:
tax for whatever legal purposes they may
 Land and improvements thereon
desire to make use of it.
 Buildings
 Machinery attached to the ground
B. PROFESSIONAL TAX  Self-powered, self-propelled machinery
necessary to manufacturing, mining,
 Imposed on the practice of profession.
commercial, industrial or agricultural purposes
Profession means a calling which requires the
passing of an appropriate government board or FUNDAMENTAL PRINCIPLES
bar examination. The tax rate for each
The appraisal, assessment, levy and collection of real
profession shall be determined by the
property tax shall be guided by the following
Sangguniang Panlalawigan or Sangguniang
fundamental principles:
Panlungsod, but shall not exceed P300, in any
case. A. Real property shall be appraised at its current and
 Each profession shall be required with a fair market value;
professional tax. It is not necessary that an
income be derived from the practice of B. Real property shall be classified for assessment
profession for it to be taxed with professional purposes on the basis of its actual use;
tax
C. Real property shall be assessed on the basis of a
 Professional tax receipt is just an evidence of
uniform classification within each local government unit;
payment of the tax and could not be considered
an authority to practice a profession. D. The appraisal, assessment, levy and collection of
real property tax shall not be let to any private person;
TIME OF PAYMENT
and
 This shall be payable annually, on or before the
E. The appraisal and assessment of real property shall
31st day of January. Any person who will
be equitable.
practice his profession for the first time after
January must however, pay the full tax before FAIR MARKET VALUE
engaging therein.
 price at which a property may be sold by a
PLACE OF PAYMENT seller who is not compelled to sell and bought
by a buyer who is not compelled to buy
 Every person authorized to practice his profession shall
pay the professional tax to the province where he
practices his profession or where he maintains his
principal office in case he practices his profession in
several places

B. REAL ESTATE TAX

ASSESSED VALUE
  fair market value of the real property multiplied  All lands, buildings, and other improvements
by the assessment level. actually, directly and exclusively used for
 It is synonymous to taxable value. The hospitals, cultural, or scientific purposes, and
following are the classification and usage of those owned and used by local water districts,
properties: and government-owned or -controlled
corporations rendering essential public services
in the supply and distribution of water and/or
A.AGRICULTURAL LAND
generation and transmission of electric power
 is a land devoted principally to the planting of shall be classified as special.
trees, raising of crops, livestock and poultry,
ASSESSMENT
dairying, salt making, inland fishing and similar
aquacultural activities, and other agricultural  Act or process of determining the value of a
activities, and is not classified as mineral, property, or proportion thereof subject to tax,
timber, residential, commercial or industrial including the discovery, listing, classification,
land. and appraisal of properties.

B. COMMERCIAL LAND ASSESSMENT LEVELS

-- is a land devoted principally for the object of profit  Percentage applied to the fair market value to
and is not classified as agricultural, industrial, mineral, determine their assessed values or taxable
timber, or residential land. values. It shall be fixed by ordinances of the
Sangguniang Panlalawigan, Sangguniang
C. INDUSTRIAL LAND
panlungsod or Sangguniang bayan of a
 is a land devoted principally to industrial activity municipality within the Metropolitan Manila
as capital investment and is not classified as Area, at the rates not exceeding the following:
agricultural, commercial, timber, mineral or
MAXIMUM ASSESSMENT LEVELS
residential land.
LANDS
D. MINERAL

 are lands in which minerals, metallic or non- Class Assessment level

metallic, exist in sufficient quantity or grade to
Residential 20%
justify the necessary expenditures to extract
and utilize such materials.
Agricultural 40%
E. TIMBER LAND
Commercial 50%
 is a land devoted to be a source of timber
materials. Industrial 50%
F. RESIDENTIAL LAND
Mineral 50%
 is a land principally devoted to habitation.
Timberland 20%

G. SPECIAL CASES OF PROPERTY

BUILDINGS AND OTHER STRACTURES
 10,000,000 OVER 80%

FAIR
FAIR VALUE NOT
VALUE NOT ASSESSMENT
ASSESSMENT
MARKET
MARKET OVER
OVER LEVEL
LEVEL
OVER
OVER FAIR MARKET VALUE ASSESSMENT
OVER NOT OVER LEVEL
RESIDENTIAL
AGRICULTURAL PP 0
25%
300,000 TIMBERLAND P 45%
175,000
300,000
P
175,00 500,000
300,000 30%
10%
P 500,000 50%
0300,000 300,000
500,000 750,000 35%
300,000 500,000 20% 500,000 750,000 55%

500,000
750,000 750,000
1,000,000 25%
40% 750,000 1,000,000 60%

750,000
1,000,000 1,000,000
2,000,000 30%
45% 1,000,000 2,000,000 65%

1,000,000 2,000,000 35% 2,000,000 OVER 70%

2,000,000 OVER 50%
2,000,000 5,000,000 40%

5,000,000 10,000,000 50% Machineries:

10,000,000 OVER 60% CLASS Assessment level

Agricultural 40%

Residential 50%

Commercial 80%

Industrial 80%

Special Classes:
FAIR VALUE NOT ASSESSMENT
MARKET OVER LEVEL
ACTUAL USE Assessment level
OVER
Cultural 15%
COMMERCIAL P 30%
300,000
INDUSTRIAL
Scientific 15%
P 500,000 35%
300,000 Hospital 15%
500,000 750,000 40%
Local water districs 10%
750,000 1,000,000 50%
Government 10%
1,000,000 2,000,000 60%
owned/controlled
2,000,000 5,000,000 70% corporation

5,000,000 10,000,000 75% Engaged in

supply/distribution of
 water/ electric power approved by proper authorities, the ownership
of which has been transferred to individual
owners, who shall be liable for the additional
RATES OF LEVY tax. However, individual lots of such
subdivisions, the ownership of which has not
 A province or city or a municipality within the
been transferred to the buyer shall be
Metropolitan Manila Area shall fix a uniform
considered as part of the subdivision, and shall
rate of basic real property tax applicable to their
be subject to the additional tax payable by
respective localities as follows:
subdivision owner or operator.
 (A) in the Case of a province, at the rate not
exceeding one percent (1%) of the assessed EXEMPTION
value of real property.
 The local government unit concerned may
 (B) in the case of a city or a municipality within
exempt idle lands from the additional levy by
the metropolitan manila area, at the rate not
reason of force majeure, civil disturbances,
exceeding two percent (2%) of the assessed
natural calamity, or any cause or circumstances
value of real property.
which physically or legally prevents the owner
SPECIAL LEVIES of the property or person having legal interest
therein from improving, utilizing, or cultivating
SPECIAL EDUCATION FUND
the same.
 A province or city, or a municipality the
EXEMPTIONS FROM REAL PROPERTY TAX
Metropolitan Manila Area, may levy an annual
tax on idle lands at the rate of one percent (1%) The following are exempted from payment of the real
of the assessed value of the property which property tax:
shall be in addition to the basic real property
a. Real property owned by the Republic of the
tax.
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;

ON IDLE LANDS
b. Charitable institutions, churches, parsonages or
 Agricultural lands, more than one (1) hectare in
convents appurtenant thereto, mosques, non-profit or
area, suitable for cultivation, dairying, inland
religious cemeteries and all lands, buildings, and
fishery, and other agricultural uses, one-half
improvements actually, directly, and exclusively used
(1/2) of which remain uncultivated or
for religious, charitable or educational purposes;
unimproved by the owner of the property or
person having legal interest therein. Agricultural c. All machineries and equipment that are actually,
lands planted to permanent or perennial crops directly and exclusively used by local water districts and
with at least fifty (50) fruit-bearing trees to a government-owned or -controlled corporations engaged
hectare shall not be considered idle lands. in the supply and distribution of water and/or generation
 Lands, other than agricultural, located in a city and transmission of electric power;
or municipality, more than one thousand 1,000)
d. All real property owned by duly registered
square meters in area one-half (1/2) of which
cooperatives as provided for under R. A. No. 6938; and
remain unutilized or unimproved by the owner
of the property or person having legal interest e. Machinery and equipment used for pollution control
therein. Residential lots in subdivisions duly and environmental protection. Except as provided
herein, any exemption from payment of real property and charges provided for in the local tax
tax previously granted to, or presently enjoyed by, all ordinance.
persons, whether natural or juridical, including all  The local business tax should not exceed 2% of
government-owned or - controlled corporations are annual gross sales or receipts of the business
hereby withdrawn upon the effectivity of this Code. which are subject to VAT or percentage tax
under the NIRC
REMEDY ON DISPUTED ASSESSMENT

 Any dispute regarding the assessment may be
contested in the form of writing by the taxpayer
by filing a formal complaint to the Board of
Assessment Appeal within 60 days from the
receipt of the assessment.
 If the Board has issued a resolution of the case
and still the taxpayer is not satisfied, he can
make an appeal within 30 days from the receipt
of the resolution to the Central Board of
Assessment Appeal.

PAYMENT ON REAL PROPERTY TAX

At the option of the taxpayer all the property tax, he

could pay in two ways he deems to do so:

-IN JANUARY UNTIL MARCH 31

-- FOUR EQUAL INSTALLMENTS PAYABLE IN THE FOLLOWING

SCHEDULE

• 1st payment: March 31

• 2nd payment: June 30

• 3rd payment: September 30

• 4th payment: December 31

BUSINESS PERMIT

 In order that a business operation would be

made legal, a business must first acquire a
business permit
 A business permit is a license given to a person
by the local executive to engage in business
upon payment of required licensing or annual
fee
 The fee is intended to cover the cost of proper
enforcement of existing laws and ordinances
and the supervision of the business profession
or occupation
 The business permit could be issued only upon
payment of local business tax and other fees