Professional Documents
Culture Documents
Aban
(PROF. CABANEIRO) A2011 1
JUICY NOTES
Ad valorem tax
Ad valorem tax is a levy on real property on the basis of a
fixed proportion of the value of the property. [Section
199, Local Government Code]
Nature and scope of power to impose realty tax
The taxing power of local governments in real property
taxation is a delegated power.
The real estate tax is not a local tax. It has always been
imposed by the law- making body before the 1973
Constitution, and later, the defunct Batasang Pambansa
before the advent of Aquino Administration in 1986. The tax
is imposed throughout the Philippines, levied on every real
property that is located thereat (Meralco Securities
Industrial Corp. Vs Central Board of Assessment, Mar 31,
1982).
However, there seems to be no question that the realty tax
is veritably a local tax.
The previous case was ruled that way because Real Property
Tax Code (PD 464, as amended) provides that real property
tax were not levied by local government.
Who has the power to impose realty tax?
1. provinces
2. cities
3. municipalities within the Metro Manila area [Section 232,
Local Government Code]
Rates of levy
A province or city or a municipality within the Metro Manila
area shall fix a uniform rate of basic real property tax
applicable to their respective localities as follows:
1. In the case of a province, at the rate not exceeding 1%
of the assessed value of real property; and
2. In the case of a city or a municipality within the Metro
Manila area, at the rate not exceeding 2% of the
assessed value of real property. [Section 233, Local
Government Code]
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 2
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
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Proof of exemptions
Taxpayer claiming exemption must submit sufficient
documentary evidence to the local assessor within 30 days
from the date of the declaration of real property; otherwise,
it shall be listed as taxable in the assessment roll (Sec 206,
LGC).
Real properties subject to tax
Real property tax is imposed on lands, buildings,
machineries and other improvements.
The Local Government Code contains no definition of real
property. Therefore, it is necessary to fall back on the
definition of real property of Art. 415 of the Civil Code.
Improvement
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 4
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Machinery
Machinery embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus, which
may or may not be attached, permanently or temporarily, to
the real property. [Section 199(o), Local Government Code]
Fernandez v Shearer:
Sugar mills with appropriate
machinery on real estate are improvements subject to real
estate tax.
QUESTION
OF
THE
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 5
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(PROF. CABANEIRO) A2011 6
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Assessment level
Assessment level is the percentage applied to the fair
market value to determine the taxation value of the
property, [Sec. 199(g), Local Government Code].
Assessment value
Assessed value is the fair market value of the real property
multiplied by the assessment level. It is synonymous to
taxable value. [Sec. 199(h) Local Government Code].
Fair Market Value
Fair market value is the price at which a property may be
sold by a seller who is not compelled to sell, and bought by
buyer who is not compelled to buy, [Sec. 199 (l) Local
Government Code].
Actual use
Actual use refers to the purpose for which the property is
principally or predominantly utilized by the person in
possession thereof,[Sec. 199(b) Local Government Code].
Classes of real property for assessment purposes
1. Residential
2. Agricultural
3. Commercial
4. Industrial
5. Mineral
6. Timberland
7. Special
Residential land
Land principally devoted to habitation, [Sec. 199(u) Local
Government Code].
Agricultural land
Land devoted principally to the planting of trees, raising of
crops, livestock and poultry, dairying, salt making, inland
fishing and similar aquacultural activities, and other
agricultural activities, [Sec. 199(d) Local Government Code].
Commercial land
Land devoted principally for the object of profit and is not
classified as agricultural, industrial, mineral, timber, or
residential land, [Sec. 199(i) Local Government Code].
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(PROF. CABANEIRO) A2011 7
Industrial Land
Land devoted principally to industrial activity as a capital
investment and is not classified as agricultural, commercial,
timber, mineral or residential land, [Sec. 199(n) Local
Government Code].
Mineral land
Lands in which minerals, metallic, or non-metallic, exist in
sufficient quantity or grade to justify the necessary
expenditures to extract and utilize such materials, [Sec.
199(p) Local Government Code].
Special classes of real property
All lands, buildings, and other improvements thereon
actually, directly, and exclusively used for hospitals, cultural
or scientific purposes, and those owned and used by local
water districts, and government-owned and controlled
corporations rendering essential public services in the
supply and distribution of water and/or generation and
transmission of electric power shall be classified as special,
[Sec. 216, Local Government Code].
Assessment of property subject to back taxes
Real property declared for the first time shall be assessed
for taxes for the period during which it would have been
liable but in no case for more than 10 years prior to the date
of initial assessment.
Assessment of machinery
The fair market value of a brand new machinery is its
acquisition cost.
In other cases, its adjusted value (depreciation).
Lopez v City of Manila enumerated the procedural steps in
computing real property tax, as follows:
1. Ascertain the assessment level of the property
2. Multiply the market value by the applicable assessment
level of the property
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COLLECTION OF TAX
Date of accrual of tax and tax lien
The real estate tax for any year shall accrue on the first day
of January and from that date it shall constitute a lien on the
property which shall be superior to any other lien, mortgage
or encumbrance of any kind whatsoever and shall be
extinguished only upon the payment of the delinquent tax.
[Section 246, Local Government Code]
Payment of real property tax in installments
The owner of the real property or the person having legal
interest therein may pay the basic real property tax and the
additional tax for the special education fund thereon without
interest in four (4) equal installments; except the special
levy, the payment of which shall be governed by an
ordinance of the sanggunian concerned. [Section 250, Local
Government Code]
Tax discount
In case of payment in advance of the basic real property tax
and additional SEF tax, sanggunian may grant a discount in
an amount not exceeding 20% of the annual tax due.
[Section 251, Local Government Code]
Prescriptive periods of collection
The basic real property tax and any other tax levied under
the Local Government Code shall be collected within five (5)
years from the date they become due.
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 8
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2. judicial action
A formal demand for the payment of the delinquent tax is
not required for the initiation of either remedy.
The collection of local taxes may be enforced through either
or both the above mentioned remedies, alternatively or
simultaneously, and the use or non-use of either remedy
shall not be a bar to avail of the other remedy.
Assessment appeals
Procedure for protest of imposition of real property tax
1. Payment under protest
No protest shall be entertained unless the taxpayer first
pays the tax. [Section 252(a), Local Government Code]
The protest in writing must be filed with the local treasurer
within thirty (30) days from payment of the tax. [Section 252(a),
Local Government Code]
Treasurer must decide the protest within sixty (60) days
from receipt thereof. [Section 252(a), Local Government Code]
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b.
EXERCISES
TAXATION):
(LOCAL
TAXATION
JUICY NOTES
AND
REAL
PROPERTY
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 11
the purpose.
The City of Cebu passed an ordinance imposing a tax of P5.00
on every kilo of lechon taken out of the City. Is the tax valid?
No, it is not valid. Section 133 of the Local Government Code
clearly proscribes the imposition of a tax by local government units
concerning all articles that are going in or out, or passing through, the
territorial jurisdiction of the local government unit.
K is engaged in the business of producing mineral water. In
order to trim down the cost of operations, K decided to
produce her own plastic bottles for her mineral water. K is
producing the said plastic bottles exclusively for her mineral
water business.
The City of Cebu, where K has her principal place of business,
enacted an ordinance levying taxes on the business of
producing mineral water. It also enacted an ordinance levying
taxes on the production of plastic bottles. K asked your learned
advice whether or not she should pay the said taxes. Discuss
your advice.
I would advise K to pay the tax on her business of
producing mineral water, but not on her production of plastic bottles.
This is because her main line of business is the production of mineral
water, for which she is liable for the local business tax. On the other
hand, her production of plastic bottles is done exclusively for her
mineral water business; hence, the same should not be treated as a
separate business. It is well-settled that where a taxpayer is engaged
in a distinct business and, as a feature thereof, in an activity merely
incidental which serves no other person or business, the incidental
activity should not be separately or additionally taxed.
Real Property Taxation: Fundamental Principles (1997)
State the fundamental principles underlying real property taxation in
the Philippines.
SUGGESTED ANSWER:
The following are the fundamental principles governing
real property taxation:
1) Real property shall be appraised at its current and
fair market value;
2) Real property shall be classified for assessment purposes on the
basis of its actual use:
3) Real property shall be assessed on the basis of a uniform
classification within each local government unit;
4) The appraisal, assessment, levy, and collection of real property tax
shall not be let to any private person; and
5) The appraisal and assessment of real property shall be equitable.
Real Property Taxation; Exempted Properties (2006)
What properties are exempt from the real property tax?
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SUGGESTED ANSWER:
The following properties are exempt from the real property
tax (Section 234, Local Government Code):
(1) Real property owned by the REPUBLIC OF THE PHILIPPINES or any of its
political subdivisions except when the beneficial use thereof has been
granted for consideration or otherwise to a taxable person;
(2) CHARITABLE INSTITUTIONS, churches, parsonages or convents
appurtenant thereto, mosques,
non-profit or religious cemeteries, and all lands, buildings, and
improvements actually, directly and exclusively used for religious,
charitable or educational purposes;
(3) All machineries and equipment that are actually, directly and
exclusively used by LOCAL WATER UTILITIES and government-owned or
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;
(4) All real property owned by duly REGISTERED COOPERATIVES as
provided for under R.A. 6938; and
(5) Machinery and equipment used for POLLUTION CONTROL and
ENVIRONMENTAL PROTECTION.
Property Tax; Reqts; Auction Sales of Property for Tax
Delinquency (2006)
Quezon City published on January 30, 2006 a list of delinquent real
property taxpayers in 2 newspapers of general circulation and posted
this in the main lobby of the City Hall. The notice requires all owners of
real properties in the list to pay the real property tax due within 30 days
from the date of publication, otherwise the properties listed shall be sold at
public auction.
Joachin is one of those named in the list. He purchased a real property in
1996 but failed to register the document of sale with the register of Deeds
and secure a new real property tax declaration in his name. He alleged
that the auction sale of his property is void for lack of due process
considering that the City Treasurer did not send him personal notice. For
his part, the City Treasurer maintains that the publication and posting of
notice are sufficient compliance with the requirements of the law.
1. If you were the judge, how will you resolve this issue?
SUGGESTED ANSWER:
I will resolve the issue in favor of Joachin. In auction sales
of property for tax delinquency, notice to delinquent landowners and to the
public in general is an essential and indispensable requirement of law, the
non-fulfillment of which vitiates the same (Tiongco v. Phil. Veterans ). The
failure to give notice to the right person i.e., the real owner, will render an
auction sale void (Tan v. Bantegui, City Treasurer of Q.C. v. CA).
2. Assuming Joachin is a registered owner, will your answer be the
same?
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(PROF. CABANEIRO) A2011 12
SUGGESTED ANSWER:
Yes. The law requires that a notice of the auction sale must
be properly sent to Joachin and not merely through publication
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