LOCAL GOVERNMENT TAXATION

Local Government Taxation: CONCEPT

- Power of the LGU to impose and collect taxes on its constituents in order
to raise revenues to enable them to perform the functions for which they
have been organized.

1. FUNDAMENTAL PRINCIPLES

a. Taxation shall be Uniform in each local government unit (LGU);

b. Taxes, fees, charges and other impositions shall:
 be Equitable and based as far as practicable on the taxpayer's
ability to pay;
 be levied and collected only for Public purposes;
 not be Unjust, excessive, oppressive, or confiscatory;
 not be Contrary to law, public policy, national economic policy, or
in restraint of trade;
c. The collection of local taxes, fees, charges and other impositions shall
not be left to any Private person;
d. The revenue collected shall Inure solely to the benefit of, and be subject
to the disposition by, the LGU levying the tax, fee, charge or other
imposition, unless otherwise specifically provided herein; and
e. Each LGU shall, as far as practicable, evolve a Progressive system of
taxation. [Sec. 130, LGC]

2. NATURE AND SOURCE OF TAXING POWER

a. Not inherent – Municipal corporations, being mere creatures of law, may

exercise the power to tax only if delegated to them by the national
legislature or conferred to them by the Constitution. The 1987
Constitution directly grants LGUs the power to tax.
b. Limited – The taxing power of LGUs is not absolute because it is subject
to such guidelines and limitations that Congress may provide. [Sec. 5,
Art. X, Constitution]
c. Legislative in nature – The power to impose taxes is vested solely in the
legislative body (i.e., the Sanggunian) of each LGU.
d. Territorial – It can only be exercised within the territorial jurisdiction of
each LGU.

A. GRANT OF LOCAL TAXING POWER UNDER THE LOCAL GOVERNMENT

CODE (LGC)
 1. Each LGU shall have the power to create its own sources of revenues and
to levy taxes, fees, and charges subject to such guidelines and limitations
as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to the
local governments. [Sec. 5, Art. X, 1987 Constitution]
2. Each LGU shall exercise its power to create its own sources of revenue
and to levy taxes, fees, and charges subject to the provisions herein,
consistent with the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the LGUs. (Sec. 129, LGC)

LOCAL TAXING AUTHORITY

The power to impose a tax, fee, or charge, or to generate revenue under

the LGC shall be exercised by the Sanggunian of the LGU concerned through
an appropriate ordinance. [Sec. 132, LGC]

 Sangguniang Panlalawigan for the province;

 Sangguniang Panlungsod for the city;
 Sangguniang Bayan for the municipality;
 Sangguniang Barangay for the barangay. [Sec. 48, LGC]

Note: The exercise of the power to tax by the local legislative assembly is
subject to the veto power of the local chief executive. [Sec. 55, LGC]

B. AUTHORITY TO PRESCRIBE PENALTIES FOR TAX VIOLATIONS

1. The sanggunian of an LGU is authorized to prescribe fines or other

penalties for violation of tax ordinances;
a. in no case shall such fines be less than P1,000 nor more than
P5,000,
b. nor shall imprisonment be less than 1 month nor more than 6
months.
2. Such fine or other penalty, or both, shall be imposed at the discretion of
the court.
3. The Sangguniang Barangay may prescribe a fine of not less than P100
nor more than P1,000. [Sec. 516, LGC]

C. AUTHORITY TO GRANT LOCAL TAX EXEMPTIONS

LGUs may, through ordinances, grant tax exemptions, incentives or reliefs

under such terms and conditions as they may deem necessary. [Sec. 192, LGC]
D. WITHDRAWAL OF EXEMPTIONS

Local tax exemptions, in general

General rule: Unless otherwise provided, tax exemptions or incentives granted

to, or presently enjoyed by all persons, whether natural or judicial, including
government owned or controlled corporations are withdrawn upon the
effectivity of the LGC. [Sec. 193, LGC]

Exceptions: Tax exemptions not withdrawn

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

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

Sec. 193 is an express and general repeal of all statutes granting exemptions
from local taxes. It withdrew the sweeping tax privileges previously enjoyed by
private and public corporations. [NPC v. Cabanatuan, G.R. No. 149110 (2003)]

E. AUTHORITY TO ADJUST LOCAL TAX RATES

LGUs shall have the authority to adjust the tax rates not oftener than once
every 5 years, but in no case shall the adjustment exceed 10% of the rates
fixed by the LGC. [Sec. 191, LGC]

F. RESIDUAL TAXING POWER OF LOCAL GOVERNMENTS

LGUs may exercise the power to levy taxes, fees, or charges on ANY base or
subject not otherwise specifically enumerated in the LGC or taxed under the
NIRC or other applicable laws.

Limitations on the taxing power of LGUs

1. Not unjust, excessive, oppressive, confiscatory, or contrary to declared
national policy [Sec. 186, LGC];
2. Pursuant to an ordinance enacted after a public hearing conducted for
the purpose [Sec. 186, LGC];
3. Subject to the constitutional limitations on the power to tax and the
common limitations on the taxing power of LGUs as provided under
Section 133 of the LGC; and
4. The principle of preemption.
Principle of preemption or exclusionary doctrine

Preemption in the matter of taxation simply refers to an instance where

the national government elects to tax a particular area, impliedly withholding
from the local government the delegated power to tax the same field. This
doctrine primarily rests upon the intention of Congress. Conversely, should
Congress allow municipal corporations to cover fields of taxation it already
occupies, then the doctrine of preemption will not apply. [Victorias Milling Co.,
Inc. v. The Municipality of Victorias, G.R. No. L-21183 (1968)]

3. SCOPE OF TAXING POWER

LGU SCOPE OF TAXING POWER

Except as otherwise provided in the
LGC, a province may levy only the
following taxes, fees, and charges:
[Sec. 134, LGC]
1. Transfer of real property
ownership [Sec. 135, LGC]
2. Business of printing and
PROVINCE publication [Sec. 136, LGC]
3. Franchise tax [Sec. 137, LGC]
4. Tax on sand, gravel and other
quarry resources [Sec. 138,
LGC]
5. Professional tax [Sec. 139, LGC]
6. Amusement tax [Sec. 140, LGC]
7. Annual fixed tax for every
delivery truck or van [Sec. 141,
LGC]
MUNICIPALITY May levy taxes, fees and charges not
otherwise levied by provinces [Sec.
142, LGC]
CITY May levy taxes, fees and charges
which the province or municipality
may impose [Sec. 151, LGC]
BARANGAY May levy only:
1. Taxes on stores or retailers
2. Service fees or charges
3. Barangay clearance
4. Other fees and charges [Sec.
152, LGC]
4. SPECIFIC TAXING POWER OF LGU’s

Page 226 UPBLOC

a. ..
b. ..
c. ..

RULES ON PAYMENT OF BUSINESS TAX

1. Taxes imposed under Sec. 143 of the LGC shall be paid for every
separate or distinct establishment or place where business subject to tax
is conducted.
2. One line of business is not exempted by being conducted with some
other businesses for which such tax has been paid.
3. The tax on a business must be paid by the person conducting it.
4. If a person operates 2 or more businesses mentioned in Sec. 143, the tax
shall be computed:
a. on the combined total gross sales or receipts, if they are subject to
the same tax rate
b. separately based on the gross sales or receipts of each business, if
they are subject to different tax rates [Sec. 146, LGC]

Note: Condominium corporations are not business entities, and are thus not
subject to local business tax. Even though the corporation is empowered to
levy assessments or dues from the unit owners, these amounts are not
intended for the incurrence of profit by the corporation, but to shoulder the
multitude of necessary expenses for maintenance of the condominium.
[Yamane v. BA Lepanto Condominium Corp., G.R. No. 154993 (2005)]

SITUS OF BUSINESS TAX

Rule 1: In case of persons maintaining/operating a branch or sales outlet

making the sale or transaction, the sale shall be recorded in said branch or
sales outlet and the tax paid to the municipality/city where the branch or sales
outlet is located. [Sec. 150(a), LGC]
Rule 2: Where there is NO branch or sales outlet in the city/municipality
where the sale is made, the sale shall be recorded in the principal office and
the tax shall be paid to such city/municipality. [Sec. 150(a), LGC]

Rule 3: In the case of manufacturers, assemblers, contractors, producers, and

exporters having factories, project offices, plants, and plantations, proceeds
shall be allocated as follows:
1. 30% of sales recorded in the principal office shall be taxable by the
city/municipality where the principal office is located; and
2. 70% shall be taxable by the city/municipality where the factory, project
office, plant, or plantation is located [Sec. 150(b), LGC]

Illustration of Rules 1 to 3

A company has a principal office in Mandaluyong, and a sales office and

a factory in Sta. Rosa:
1. Sales made in Mandaluyong will be recorded in Mandaluyong.
2. Sales made in Sta. Rosa by the Sta. Rosa sales office will be recorded in
Sta. Rosa.
3. Sales made in Los Baños, Calamba or Cabuyao [i.e., delivered to
customers located in these places and not made by the Sta. Rosa sales
office] will be recorded in Mandaluyong where the principal office is
located. The allocation shall be as follows:
a. 30% of all sales recorded in the principal office shall be taxable in
Mandaluyong;
b. 70% of all sales recorded in the principal office shall be taxable in
Sta. Rosa where the factory is located.

Rule 4: In case the plantation is located in a place other than the place where
the factory is located, the 70% in Rule 3 will be divided as follows:
1. 60% to the city/municipality where the factory is located; and
2. 40% to the city/municipality where the plantation is located. [Sec.
150(c), LGC]

Rule 5: In case of 2 or more factories, project offices, plants or plantations in

different localities, the 70% shall be prorated among the localities where they
are located in proportion to their respective volumes of production. [Sec.150(d),
LGC]

Illustration: A company has a principal office in Valenzuela and 2 factories

located in Malolos City, Bulacan and Mandaue City, Cebu, which produced
60% and 40%, respectively, of the total production for the year. It also has
branches selling merchandise in Muntinlupa, Bacolod and Cebu City.
 1. Sales made in Valenzuela will be recorded in Valenzuela;
2. Sales made in Muntinlupa, Bacolod and Cebu City shall be taxable in the
said cities;
3. Sales in all other places which do not have a sales branch shall be
distributed as follows: 30% to Valenzuela and 70% to be allocated
between Malolos City, and Mandaue City based on the factories’ volume
of production. Hence, 42% shall be taxed in Malolos City; while 28%
shall be taxed in Mandaue City.

Note: The sales allocation shall be applied irrespective of whether or not sales
are made in the locality where the factory, project office, plant, or plantation is
located. [Sec. 150(e), LGC]

MUNICIPAL FEES AND CHARGES FOR REGULATION & LICENSING

General rule: The municipality may impose reasonable fees and charges on the
conduct of business or practice of profession commensurate with the cost of
regulation, inspection and licensing. [Sec. 147, LGC]

Exception: Professional tax reserved to the province in Sec. 139 of the LGC
[Sec. 147, LGC]

Specific rules:
1. The municipality may impose reasonable fees for sealing and licensing of
weights and measures. [Sec. 148, LGC]
2. The municipality has exclusive authority to grant fishery privileges in
municipal waters and impose rentals, fees or charges therefor. [Sec. 149,
LGC]

c. TAXING POWERS OF CITIES

Scope of taxing power: The city may levy taxes, fees, charges which the
province or municipality may impose.
1. Those levied and collected by highly urbanized and independent
component cities shall accrue to them and distributed according to the
provisions of the LGC.
2. Rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than 50%. [Sec.
151, LGC]

Exception: Rates of professional and amusement taxes [Sec. 151, LGC]

 d. TAXING POWERS OF BARANGAYS

The following shall accrue exclusively to the barangays:

1. Taxes on stores or retailers with fixed business establishments with gross
sales or receipts for the preceding calendar year of P50,000 or less in case of
cities, and P30,000 or less in case of municipalities. [Sec. 152(a), LGC]
a. Tax Rate: not greater than 1%
b. Tax Base: gross sales or receipts
2. Service fees or charges – Barangays may collect reasonable fees or charges
for services rendered in connection with the regulation or the use of
barangay-owned properties or facilities. [Sec. 152(b), LGC]
3. Barangay clearance – A city or municipality cannot issue a permit for
business without a clearance from the barangay concerned. The
sangguniang barangay may impose a reasonable fee on the clearance. [Sec.
152(c), LGC]
4. Reasonable fees and charges:
a. on commercial breeding of fighting cocks, cockfights and cockpits;
b. on places of recreation which charge admission fees; and
c. on billboards, signboards, neon signs, and outdoor advertisements.
[Sec. 152(d), LGC]

5. COMMON REVENUE-RAISING POWERS

1. Service fees and charges LGUs may impose and collect such reasonable
fees and charges for services rendered. [Sec. 153, LGC]
2. Public utility charges LGUs may fix the rates for the operation of public
utilities owned, operated and maintained by them within their
jurisdiction. [Sec. 154, LGC]
3. Toll fees or charges
a. The Sanggunian may prescribe the terms and conditions and fix
the rates for the imposition of toll fees or charges for the use of any
public road, pier, or wharf, waterway, bridge, ferry or
telecommunication system funded and constructed by the LGU
concerned.
b. The Sanggunian may discontinue the collection of the tolls when
public safety and welfare so requires.
c. No toll fees or charges shall be collected from:
i. Officers and enlisted men of the AFP and members of the
PNP on mission
ii. Post office personnel delivering mail
 iii. Persons who are physically handicapped
iv. Disabled citizens who are 65 years or older. [Sec. 155, LGC]

6. COMMUNITY TAX

WHO MAY LEVY CITIES AND MUNICIPALITIES

(Sec 156, LGC)
1. Individuals who are:
a. Inhabitants of the Philippines
b. 18 years of age or over
c. Either:
● Regularly employed on a wage or
salary basis for at least 30
consecutive working days during any
PERSONS LIABLE calendar year, or
(Sec 157 & 158, LGC) ● Engaged in business or occupation,
or
● Owns real property with an
aggregate assessed value of P1,000 or
more, or
● Is required by law to file an income
tax return
2. Juridical Persons
a. Every corporation no matter how
created or organized
b. Whether domestic or resident
foreign
c. Engaged in or doing business in the
Philippines
1. Individuals
a. Annual community tax of P5.00
PLUS annual additional tax of P1.00
per P1,000 of income regardless of
whether from business, exercise of
profession or property, but which shall
RATES not exceed P5,000
(Sec 157 & 158, LGC) b. Husband and wife shall pay a
basic tax of P5.00 each PLUS an
additional tax of P1.00 for every
P1,000 of income based on the total
property owned by them and/or the
total gross receipts or earnings
derived by them [Art. 246(b)(2), LGC
IRR]
 2. Juridical Persons
a. Annual community tax of P500
PLUS annual additional tax, which
shall not exceed P10,000 according to
the following schedule:
● P2.00 for every P5,000 worth of real
property in the Philippines owned
during the preceding year, based on
the assessed value used for the
payment of the real property tax; and
● P2.00 for every P5,000 of gross
receipts or earnings derived from
business in the Philippines during
the preceding year.
b. Dividends received by a corporation
from another corporation shall be
deemed part of the gross receipts or
earnings for purposes of computing
additional tax.
1. Diplomatic and consular
PERSONS EXEMPT representatives
(Sec 159, LGC) 2. Transient visitors who stay in the
Philippines for not more than 3
months
Where individual resides, or where
the principal office of the juridical
entity is located

PLACE OF PAYMENT Note: In case of branch, sales office or

(Sec 160, LGC) warehouse where sales are made and
recorded, corresponding community
tax shall be paid to the LGU where
such branch, sales office or
warehouse is located. [Art. 246(e)(3),
LGC IRR]
Accrues on January 1 of each year to
be paid not later than the last day of
February of each year
1. If a person reaches 18 years of age
or otherwise loses the benefit of
exemption:
a. on or before June 30 – he shall be
liable on the day he reaches such
age or upon the day the exemption
 ends;
b. on or before March 31 – he shall
TIME OF PAYMENT have 20 days to pay without being
(Sec 161, LGC) delinquent.
2. If a person comes to reside in the
Philippines, or reaches 18 years old,
or
ceases to belong to an exempt class
on or after July 1, he shall not be
subject to community tax for that
year.
3. If a corporation is established and
organized:
a. on or before June 30 – it shall be
liable to community tax for that year
b. on or before March 31 – it shall
have 20 days to pay without
becoming
delinquent
c. on or after July 1 – it shall not be
subject to community tax for that
year
PENALTY If unpaid within the prescribed
(Sec 161, LGC) period, an interest of 24% per annum
shall be
added from the due date until
payment.

COMMUNITY TAX CERTIFICATE (CTC)

It is issued to every person or corporation upon payment of the community tax.

It may also be issued to any person or corporation not subject to the
community tax upon payment of P1.00. [Sec. 162, LGC]

Presentation of CTC is necessary when an individual subject to community tax:

1. acknowledges any document before a notary public;
2. takes the oath of office upon election or appointment to any position in the
government service;
3. receives any license, certificate, or permit from any public authority;
4. pays any tax or fee;
5. receives any money from any public fund
6. transacts other official business; or
7. receives any salary or wage from any person or corporation [Sec. 163(a),
LGC]
Note: Presentation of CTC is not needed in the registration of a voter. [Sec.
163(a), LGC]

COLLECTION OF COMMUNITY TAX

The city or municipal treasurer shall deputize the barangay treasurers to

collect, provided the latter be bonded. [Sec. 164(b), LGC]

DISTRIBUTION OF PROCEEDS OF COMMUNITY TAX

1. If the community tax is actually and directly collected by the city or
municipal treasurer, the proceeds shall accrue entirely to the general
fund of the city or municipality.
2. If the community tax is collected through the barangay treasurers, the
proceeds shall be apportioned equally between the city/municipality and
the barangay. [Sec. 164(c), LGC]

7. COMMON LIMITATIONS ON THE TAXING POWERS OF LGUS

Unless otherwise provided, the following cannot be levied by the local

governments:
a. Income tax, except when levied on banks and other financial
institutions under Sec. 143(f) of the LGC;
b. Documentary stamp tax;
c. Taxes on Estate, inheritance, gifts, legacies and other acquisitions
mortis causa;

Exception: Tax on transfer of real property) [Sec. 135, LGC; Art. 221(c), LGC
IRR]

d. Customs duties, registration fees of vessel and wharfage on wharves,

tonnage dues, and all other kinds of customs fees, charges and dues.

Exception: wharfage on wharves constructed and maintained by the LGU

concerned

e. Taxes, fees or charges on Goods carried into or out of, or passing

through, the territorial jurisdictions of LGUs in the guise of charges for
wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any
form
Note: Sec.133(e) prohibits the imposition, in the guise of wharfage, of fees, as
well as all other taxes or charges in any form whatsoever, on goods or
merchandise. It is therefore irrelevant if the fees imposed are actually for police
surveillance on the goods, because any other form of imposition on goods
passing through the territorial jurisdiction of the municipality is clearly
prohibited. [Palma Development Corp. v. Municipality of Malangas, G.R. No.
152492 (2003)]

f. Taxes, fees or charges on Agricultural and aquatic products when sold

by marginal farmers or fishermen;

g. Taxes on business enterprises certified to by the Board of Investments

as Pioneer or non-pioneer for a period of 6 and 4 years, respectively from
the date of registration;

h. Excise taxes on articles enumerated under the NIRC, as amended, and

taxes, fees or charges on petroleum products;

i. Percentage or VAT on sales, barters or exchanges or similar transactions

on goods or services except as otherwise provided herein;

Exceptions (Percentage taxes):

1. Tax on business of printing and publication imposed by provinces/cities
[Sec. 136, LGC]
2. Amusement tax imposed by provinces/cities [Sec. 140, LGC]
3. Tax on business imposed by municipalities/cities on manufacturers,
wholesalers, distributors, dealers, and contractors enumerated in Sec.
143 of the LGC in accordance with the schedules provided therein

j. Taxes on the gross receipts of:

a. Transportation contractors and
b. persons engaged in the transportation of passengers or freight by hire
and
c. common carriers by air, land or water

Exception: Tax on the operation and franchising of tricycles [Art. 221(j), LGC
IRR]

k. Taxes on premiums paid by way of Reinsurance or retrocession;

l. Taxes, fees or charges for the Registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof, except
tricycles;
 m. Taxes, fees, or other charges on Philippine products actually Exported;

Exception: Tax on exporters of essential commodities [Sec. 143(c), LGC, Art.

221(m), LGC IRR]

n. Taxes, fees, or charges on Countryside and Barangay Business

Enterprises and cooperatives duly registered under RA 6810 (Magna
Carta for Countryside and Barangay Business Enterprises) and RA 6938
(Cooperative Code of the Philippines), respectively; and
o. Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and LGUs. [Sec. 133, LGC]

8. REQUIREMENTS FOR A VALID TAX ORDINANCE

Local tax ordinance

The power to impose a tax, fee, or charge or to generate revenue under

the LGC shall be exercised by the Sanggunian concerned through an
appropriate ordinance. [Sec. 132, LGC]

TESTS OF A VALID ORDINANCE:

1. It must not contravene the Constitution or any statute
2. It must not be unfair or oppressive;
3. It must not be partial or discriminatory;
4. It must not prohibit but may regulate trade;
5. It must be general and consistent with public policy; and
6. It must not be unreasonable [Magtajas v. Pryce Properties, G.R. No.
111097 (1994)]

Note: An ordinance is presumed valid unless declared otherwise by a court in

an appropriate proceeding. [Rural Bank of Makati v. Municipality of Makati, G.R.
No. 150763 (2004)]

9. COLLECTION OF TAXES

Tax Period Based on a calendar year, unless

otherwise provided [Sec. 165, LGC]
May be paid annually or in quarterly
Manner of installments [Sec. 165, LGC]
Payment
 General rule: Accrues on the 1st day
of January of each year

Exception: New taxes, fees or

Accrual of charges, or changes in the rates
Tax thereof shall accrue on the 1st day of
the quarter next following the
effectivity of the ordinance imposing
such new levies or rates [Sec. 166,
LGC]

Within the first 20 days of January or

of each subsequent quarter. [i.e.,
Time of January 20, April 20, July 20, and
Payment October 20].

It may be extended by the

Sanggunian for justifiable reasons,
without surcharges or penalties, for a
period not exceeding 6 months. [Sec.
167, LGC]
1. Surcharge not exceeding 25%
on taxes, fees or charges NOT
paid on time; and
2. Interest not exceeding 2% per
Penalties on month of the unpaid taxes, fees
Unpaid or charges including
Taxes, Fees surcharges, until the amount is
or Charges fully paid
3. In no case shall the total
interest exceed 36 months.
[Sec. 168, LGC]
All local taxes, fees and charges shall
be collected by the local treasurers or
their duly authorized deputies. The
Collection of provincial, city or municipal treasurer
Taxes may designate the barangay
treasurer as deputy to collect local
taxes. [Sec. 170, LGC]
The local treasurer may, by himself
or through his deputies duly
authorized in writing, examine the
books, accounts, and other pertinent
Inspection of records of any person subject to local
Books taxes, fees and charges in order to
 ascertain, assess and collect the
correct amount of the tax, fee or
charge. Examination must be done
during business hours, only once for
every tax period and shall be certified
to by the examining official. [Sec.
171, LGC]

10. TAXPAYER’S REMEDIES

A. PROTEST OF ASSESSMENT

1. Protest: The taxpayer may file a written protest with the local treasurer
within 60 days from receipt of the notice of assessment; otherwise it shall
become final and executory.
2. Decision: The local treasurer shall decide the protest within 60 days from
the time of its filing.
a. If found to be wholly or partly meritorious, a notice cancelling
wholly or partially the assessment will be issued.
b. If denied or when the 60-day period already lapsed, the taxpayer
shall have 30 days thereafter to appeal with the court of competent
jurisdiction; otherwise, the assessment becomes conclusive and
unappealable. [Sec. 195, LGC]

COURT OF COMPETENT JURISDICTION

1. Depending on the amount involved, the taxpayer may appeal the decision
of the local treasurer to the MTC, MeTC, MCTC or the RTC in the
exercise of its original jurisdiction.
2. Local tax cases decided by the MTC, MeTC and MCTC may be appealed
to the RTC in the exercise of its appellate jurisdiction.
3. Said cases decided by the RTC in its original or appellate jurisdiction
may be elevated to the CTA.

With the passage of R.A. 9282, the authority to exercise either original or
appellate jurisdiction over local tax cases depended on the amount of the
claim. In cases where the RTC exercises appellate jurisdiction, it necessarily
follows that there must be a court capable of exercising original jurisdiction –
otherwise there would be no appeal over which the RTC would exercise
appellate jurisdiction. The RTC exercises appellate jurisdiction only from cases
decided by the Metropolitan, Municipal, and Municipal Circuit Trial Courts in
the proper cases, and not those decided by non-judicial entities such as the
City Treasurer. [China Banking Corp. v. City Treasurer, G.R. No. 204117 (2015)]
 B. CLAIM FOR REFUND OR TAX CREDIT OF ERRONEOUSLY OR
ILLEGALLY COLLECTED TAX, FEE OR CHARGE

Requisites:
1. A written claim for refund or credit must be filed with the local treasurer;
and
2. The case or proceeding must be filed in court within 2 years from the
payment of tax or from the date the taxpayer became entitled to refund
or credit. [Sec. 196, LGC]

C. QUESTION THE LEGALITY OF THE ORDINANC

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

measures may be raised on appeal to the Secretary of Justice. [Sec. 187, LGC]

Procedure:
1. Appeal must be made to the Secretary of Justice within 30 days from
effectivity of the ordinance.
2. The Secretary must render a decision within 60 days from receipt of the
appeal.

Note: The appeal shall not suspend the effectivity of the ordinance and the
accrual and payment of the tax, fee or charge levied therein.

3. Within 30 days after receipt of the decision or the lapse of the 60-day
period without any action from the Secretary of Justice, the aggrieved
party may file appropriate proceedings with a court of competent
jurisdiction. [Sec. 187, LGC]

Note: The Secretary of Justice can only review the constitutionality or legality of
the tax ordinance, and, if warranted, to revoke it on either or both of these
grounds. There is no need for a written protest when disputing an ordinance.
[Ingles]

11. ASSESSMENT AND COLLECTION OF LOCAL TAXES

A. REMEDIES OF LGUS

I. LOCAL GOVERNMENT’S LIEN

 Local taxes, fees, charges and other revenues constitute a lien, superior
to all liens or encumbrances in favor of any person, enforceable by
administrative or judicial action. [Sec. 173, LGC]

The lien may only be extinguished upon full payment of the delinquent
local taxes, fees, and charges including related surcharges and interest. [Sec.
173, LGC]

II. CIVIL REMEDIES, IN GENERAL

(A) ADMINISTRATIVE ACTION

DISTRAINT OF PERSONAL PROPERTY

Subject of distraint: goods, chattels or effects and other personal property of

whatever character, including stocks and other securities, debts, credits, bank
accounts, and interest in and rights to personal property [Sec. 174(a), LGC]

Procedure:
a. Seizure of personal property
b. Accounting of distrained goods
c. Publication of time and place of sale and the articles distrained
d. Release of distrained property upon payment prior to sale
e. Sale of the goods or effects distrained at public auction.

Note: If the property distrained is not disposed of within 120 days from the date
of distraint, the same shall be considered as sold to the LGU for the amount of
the assessment made. [Sec. 175(e), LGC]

f. Disposition of proceeds [Sec. 175, LGC]

LEVY ON REAL PROPERTY

Subject of Levy: real property and interest in or rights to real property

Procedure
a. After expiration of the time for payment of delinquent tax, fee or charge,
real property may be levied on before, simultaneously or after the
distraint of personal property.
b. Preparation of a duly authenticated certificate by the local treasurer
effecting the levy and showing:
i. the name of the taxpayer,
 ii. the amount of the tax, fee or charge, and penalty due, and
iii. the description of the property.
c. Service of written notice of levy to the assessor, Register of Deeds, and
the delinquent taxpayer (or his agent if he be absent from the
Philippines, or if none, to the occupant of the property in question)
d. Annotation of the levy on the tax declaration and the certificate of title
e. Report on any levy to be submitted to the Sanggunian within 10 days
after receipt of warrant [Sec. 176, LGC]
f. Advertisement of the sale or auction shall be held within 30 days after
the levy.
g. Before the date of sale, the taxpayer may stay the proceedings by paying
the taxes, fees, charges, penalties and interests.
h. Sale of the subject property [Sec. 178, LGC]
i. Redemption of property sold within 1 year from date of sale [Sec. 179,
LGC]
j. If not redeemed, the local treasurer shall execute a deed conveying the
property to the purchaser [Sec. 180, LGC]
k. Purchase of the real property by the local treasurer in case there is no
bidder for said property or if the highest bid is insufficient to pay the
taxes, fees, or charges, related surcharges, interests, penalties and costs;
resale of said property may be made at a public auction [Sec. 181 and
182, LGC]

Further distraint or levy

The remedies of distraint or levy may be repeated if necessary until the full
amount due, including all expenses, is collected [Sec. 184, LGC]

Note: In case the levy is not issued before or simultaneously with the warrant of
distraint, and the personal property of the taxpayer is not sufficient to satisfy
his delinquency, the local treasurer shall within 30 days after execution of the
distraint, proceed with the levy on the taxpayer's real property. [Sec. 176, LGC]

PROPERTY EXEMPT FROM DISTRAINT OR LEVY

a. Tools and implements necessarily used by the taxpayer in his trade or
employment
b. One horse, cow, carabao, or other Beast of burden, such as the
delinquent taxpayer may select and necessarily used by him in his
ordinary occupation
c. His necessary clothing, and that of all his family
d. Household furniture and Utensils necessary for housekeeping and used
for that purpose by the delinquent taxpayer, such as he may select, of a
value not exceeding P10,000
 e. Provisions, including crops, actually provided for individual or family use
sufficient for 4 months
f. The professional Libraries of doctors, engineers, lawyers and judges
g. One Fishing boat and net, not exceeding the total value of P10,000 by
the lawful use of which a fisherman earns his livelihood
h. Any material or Article forming part of a house or improvement of any
real property [Sec. 185, LGC]

Penalty on local treasurer for failure to issue and execute warrant of distraint
or levy Automatic dismissal from service after due notice and hearing [Sec.
177, LGC]

(B) JUDICIAL ACTION

The LGU may enforce the collection of delinquent taxes, fees, charges or other
revenues by civil action in any court of competent jurisdiction within 5 years
from the date they became due. [Secs. 183 and 194, LGC]
Note: Either of these remedies (administrative or judicial action) or all may be
pursued concurrently or simultaneously at the discretion of the LGU
concerned. [Sec. 174, LGC].

Injunction against collection of local taxes The LGC does not contain a
provision prohibiting courts from enjoining the collection of local taxes. Such
lapse may have allowed preliminary injunction under Rule 58 of the Rules of
Court where local taxes are involved. [Angeles City v. Angeles City Electric
Corporation, G.R. No. 166134 (2010)]

PRESCRIPTIVE PERIOD

PRESCRIPTIVE PERIOD FOR ASSESSMENT

1. General Rule: Within 5 years from the date they become due
2. Exception: In case of fraud or intent to evade tax, within 10 years from
discovery of fraud or intent to evade payment [Sec. 194(a),(b), LGC]

PRESCRIPTIVE PERIOD FOR COLLECTION

Within 5 years from the date of assessment by administrative or judicial

action. No such action shall be instituted after the expiration of said period.
[Sec. 194(c), LGC]

GROUNDS FOR SUSPENSION OF PRESCRIPTIVE PERIOD

1. The treasurer is legally prevented from making the assessment or
collection
 2. The taxpayer requests for reinvestigation and executes a waiver in
writing before the lapse of the period for assessment or collection
3. The taxpayer is out of the country or otherwise cannot be located [Sec.
194(d), LGC]

REMEDIES

TAX REMEDIES OF THE TAXPAYER

I. Administrative
A. Before Assessment

1. Question the constitutionality or legality of Tax Ordinance or

Revenue Measures on Appeal:
a. Within 30 days from effectivity thereof to the Sec of Justice
b. The decision by the Sec of Justice must be rendered within 60
days from the date of the receipt of the appeal
c. Taxpayers must file an appropriate action with a court of
competent jurisdiction within 30 days from:
i. The receipt of the decision of the Sec of Justice
ii. The lapse of the 60-day period to decide.

2. Declaratory Relief whenever applicable.

When the taxing law or ordinance is unconstitutional or illegal, a petition
for declaratory relief may be filed with the RTC to prevent an impending
violation of the rights of the taxpayer. (Rule 63, ROC)

B. AFTER ASSESSMENT
1. PROTEST
If there is a protest filed: a written protest must be filed within 60 days from
receipt of notice of assessment. (payment under protest is not necessary)

PROCEDURE:

PROTEST (within 60 days from receipt of notice of

assessment

LOCAL TREASURER (Decision: 60 days from the

filing of the protest)

If the local treasurer finds the protest meritorious If not meritorious, in whole he shall deny the
in whole or in part, he shall issue a notice protest, wholly or partly with notice to the
cancelling wholly or partly, the assessment. taxpayer.
NOTE: If no protest filed: the assessment shall become final and executory.

2. CLAIM FOR REFUND OR TAX CREDIT

In order to be entitled to a refund or credit of local taxes, the following
procedural requirements must concur:
a. Must file a written claim or refund or credit with the local
treasurer; and
b. The case or proceeding for refund has to be filed within 2 years
from the fate of the payment of the tax, fees, or charge or from the
date the taxpayer is entitled to a refund or credit.
3. RIGHT OF REDEMPTION: ONE (1) YEAR FROM THE DATE OF SALE
OR FROM THE DATE OF FORFEITURE.
The owner shall not be deprived of possession and to rentals/income thereof
until the expiration of the time allowed for its redemption.

C. COMPROMISE
- The Sanggunian concerned may authorize the city or municipal treasurer
to settle an offense not involving the commission of fraud before a case
therefore is filed in court, upon the payment of a compromise penalty of
not less than P200.
II. JUDICIAL REMEDIES

A. COURT ACTION; WHEN AVAILABLE.

1. Within 30 days after receipt of decision or lapse of 60 days in case of

Secretary of Justice’s inaction before the RTC.
2. Within 30 days from receipt when protest of assessment is denied or
lapse of 60 days in case of local treasurer’s inaction before the MTC, RTC
or CTA division depending on amount of tax; and
3. If no action is taken by the treasurer in refund cases and the 2-year
period is about to lapse before MTC, RTC, or CTA Division depending on
the amount of tax.

B. ACTION FOR DECLARATORY RELIEF

C. INJUNCTION
The LGC does not specifically prohibit an
injunction enjoining the collection of taxes. (HOWEVER, with regard to
national taxes, the NIRC explicitly prohibits courts from enjoining the
collection of taxes, with the sole exception of the CTA.
TAXPAYER’S REMEDIES FROM ASSESSMENT OF LOCAL TAXES OTHER
THAN REAL PROPERTY TAXES

Local Treasurer (LT) assesses local taxes within five

(5) years from date they become due or ten (10) years
from discovery of fraud or intent to evade payment.

LT issues notice of assessment

Taxpayer files written protest with the local treasurer

within 60 days from receipt of assessment.

If protest made within prescribed period, LT decides

within 60 days from the date of filing.

If LT does not decide within 60 days, the taxpayer

appeals to court of competent jurisdiction (REGULAR
COURTS) within 30 days from the lapse of 60 days.
It the LT issues notice cancelling
permanently/wholly the assessment or if LT
does not grant protest, same procedure as lapse of
60-day period.
 Appeal to CTA division via Rule 42 of the ROC if the
RTC has original jurisdiction.
Appeal to the CTA en banc via rule 42 of thr ROC, if
the decision is from an RTC exercising appellate
jurisdiction.

If the CTA Division decides against taxpayer, file an

MR within 15 days with the same division. If MR is
denied, petition for review with CTA en banc. Appeal
to SC
PROCEDURE viaDISTRAINT
FOR Rule 45 petition
AND for review,
LEVY FORifTHE
still decided
PURPOSE OF
against taxpayer.
SATISFYING LOCAL TAXES

Tax constitutes a lien superior to all liens and may

only be extinguished upon payment of taxes and the
related charges.

Time for payment of local taxes expires.

LT shall, upon written notice, Real property may be levied on

seize sufficient personal property to before, simultaneously, or after
satisfy the tax and other charges. distraint of personal property.

Officer post notice in office of

LGU Chief Executive where the
property us distrained and in at least
two other public places specifying the
time which is not less than 20 days
after the notice and place of sale, and
distrained goods. Before the sale,
goods or effects distrained shall be
restored to the owner if all charges are
paid.

At the time and place fixed in the notice,