TAX II 3rd Exam TSN

TAXATION LAW 2 TRANSCRIPT
From the lectures of Atty. Percy Donalvo, CPA

Ateneo de Davao College of Law | Tres Manresa SY 2015 2016
constitution, the final arbiter which determines the

January 12, 2016 (ZM)
tax liability of a taxpayer and also as to the
constitutionality of a tax law rests upon the SC.
BIR AS AN ORGANIZATION
In simple words BIR is actually concerned in the enforcement
Before we go to the tax remedies proper I think its better for of NIRC.
us to understand first how the organization of the BIR works.
We all know about the taxation already, we all know the Sige tayo BIR. So what is the role of the Department of
income taxation, VAT, we already have an idea what the Finance?
estate or donors tax is all about. But how does it go within Aside from having control and supervision of the BIR, the
the BIR? powers and functions of the department of finance are also
Lets have an overview of it xxx national internal revenue being manifested on the several provisions of the NIRC.
code and also referring to some of the revenue regulations SEC. 4. Power of the Commissioner to Interpret Tax Laws
and revenue memorandum issuances of the BIR. and to Decide Tax Cases. - The power to interpret the
SEC. 2. Powers and Duties of the Bureau of Internal provisions of this Code and other tax laws shall be under the
Revenue. - The Bureau of Internal Revenue shall be under exclusive and original jurisdiction of the Commissioner,
the supervision and control of the Department of Finance subject to review by the Secretary of Finance.
and its powers and duties shall comprehend the assessment So if there is anything that the BIR will do the Secretary of
and collection of all national internal revenue taxes, fees, and finance has the authority to review whatever kim henares is
charges, and the enforcement of all forfeitures, penalties, doing.
and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Section 224 says that the power to promulgate rules and
Tax Appeals and the ordinary courts. The Bureau shall give regulations rests upon the Secretary of finance. (I think sir is
effect to and administer the supervisory and police powers referring to section 244)
conferred to it by this Code or other laws.
SEC. 244. Authority of Secretary of Finance to Promulgate
By reading this provision you can deduce that the BIR is Rules and Regulations. - The Secretary of Finance, upon
under the department of finance which is one of the revenue recommendation of the Commissioner, shall promulgate all
generating agencies of the government. Specifically the BIR needful rules and regulations for the effective enforcement of
is part of the revenue operations group of the department of the provisions of this Code.
finance kasama na dito yung bureau of customs. As you can
see the BIR is under the supervision and control of the Its not actually the commissioner of revenue who
promulgates rules. The power of the CIR is merely
department of finance.
recommendatory. He has expertise on that matter because
What are the powers and duties of the BIR in general? the xxx is specific its just the enforcement of the NIRC.
This is just found in the provision so lets just dissect.
The CIR will make these rules and recommend it to the
1. It has the power to assess and collect all national secretary of finance and ultimately the secretary of finance is
internal revenue taxes, fees, and charges. the approving authority for these revenue regulations.
So take note its just the enforcement of the NIRC, Lets just breeze through who are the BIR officers. Marami
internal revenue na eh. tayong officials sa BIR but lets just discuss those which are
xxx (naay ni ubo pastilan) the NIRC.
2. Enforcement of all forfeitures, penalties, and fines
connected therewith. SEC. 3. Chief Officials of the Bureau of Internal
So this has already something to do with the Revenue. The Bureau of Internal Revenue shall have a chief
assessment once the BIR assesses deficiency taxes to be known as Commissioner of Internal Revenue,
against these taxpayers, and these assessments hereinafter referred to as the Commissioner, and four (4)
become final and executor, the BIR may now assistant chiefs to be known as Deputy Commissioners.
enforce the collection of these tax liabilities due So hindi yan siya Luzon Visayas Mindanao ha because they
from the taxpayers. are all holding office in manila. One commissioner is assigned
3. The execution of judgments in all cases decided in in legal, while the other is assigned in the assessment and I
its favor by the Court of Tax Appeals and the forgot the other two.
appropriate courts. Why? Bakit appropriate courts? You also have the revenue regional directors or what you call
Because later on you will find out that its not just as RDs. The specific functions of the RD are provided under
the CTA who has the power to decide. You will find sec 10
out that the BIR also has the power to xxx tax
cases, you will find out that the RTC also has the
SEC. 10. Revenue Regional Director. Under rules and
power to decide tax cases and under the
regulations, policies and standards formulated by the
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Third Exam Coverage | To God be the Glory
Commissioner, with the approval of the Secretary of Finance, 2. Aid the prevention of tax frauds
the Revenue Regional director shall, within the region
3. To examine the efficiency of all officers and
and district offices under his jurisdiction, among others:
employees of the Bureau of Internal Revenue under
(a) Implement laws, policies, plans, programs, rules his supervision, and to report in writing to the
and regulations of the department or agencies in Commissioner, through the Regional Director, any
the regional area; neglect of duty, incompetency, delinquency, or
malfeasance in office of any internal revenue officer
(b) Administer and enforce internal revenue laws, and of which he may obtain knowledge, with a
rules and regulations, including the assessment and statement of all the facts and any evidence
collection of all internal revenue taxes, charges and sustaining each case
fees;
So basically these are the officer which composes the BIR in
(c) Issue Letters of authority for the examination of general. But we are more concerned of the CIR kasi siya ang
taxpayers within the region; head. Most if not all of the powers of the BIR are exercised
(d) Provide economical, efficient and effective service by the CIR being the head of the tax agency
to the people in the area; So lets go to specifics. What are the powers of the
(e) Coordinate with regional offices or other CIR?
departments, bureaus and agencies in the area;
SEC. 4. Power of the Commissioner to Interpret Tax Laws
(f) Coordinate with local government units in the area; and to Decide Tax Cases. The power to interpret the
provisions of this Code and other tax laws shall be under the
(g) Exercise control and supervision over the officers
exclusive and original jurisdiction of the Commissioner,
and employees within the region; and
subject to review by the Secretary of Finance.
(h) Perform such other functions as may be provided
The power to decide disputed assessments, refunds of
by law and as may be delegated by the
internal revenue taxes, fees or other charges, penalties
Commissioner.
imposed in relation thereto, or other matters arising under
this Code or other laws or portions thereof administered by
Ano yang letters of authority na yan? Letter of authority is the Bureau of Internal Revenue is vested in the
that document which authorized the revenue officers to audit Commissioner, subject to the exclusive appellate jurisdiction
the taxpayer. Pag wala yang letter of authority na yan there of the Court of Tax Appeals.
is no assessment to speak of. You can even prevent the BIR
officers from entering your establishment. So basically there are two powers mentioned
And then you have the revenue district officers and other 1. The power to interpret tax laws
internal revenue officers. That is provided under section 11.
2. The power to decide tax cases
What are the functions of these people? Yung mga nasa
baba ng foodchain. So meron siyang quasi-legislative function and meron ring
siyang quasi-judicial function. How does the BIR interpret tax
SEC. 11. Duties of Revenue District Officers and Other laws?
Internal Revenue Officers. It shall be the duty of every
Revenue District Officer or other internal revenue officers Tax Rulings. The interpretation of tax laws come from BIR
and employees to ensure that all laws, and rules and rulings. What do we understand of tax rulings? According to
regulations affecting national internal revenue are faithfully the revenue memorandum order, tax rulings are the official
executed and complied with, and to aid in the prevention, position of the BIR on inquiries of taxpayers who request
detection and punishment of frauds of delinquencies in clarification on certain provisions in the NIRC other tax laws
connection therewith. or their implementing regulations, usually for the purpose of
seeking tax exemptions.
It shall be the duty of every Revenue District Officer to
examine the efficiency of all officers and employees of the The bureau also issues rulings to answer written questions of
Bureau of Internal Revenue under his supervision, and to individuals and juridical entities regarding their status as tax
report in writing to the Commissioner, through the Regional payers and the effects of their transactions for taxation
Director, any neglect of duty, incompetency, delinquency, or purposes.
malfeasance in office of any internal revenue officer of
So basically what happens is that if you are doubtful, what
which he may obtain knowledge, with a statement of all the
are the two things which are usually asked for a BIR ruling.
facts and any evidence sustaining each case.
Request for a tax exemption. Under the NIRC if you a non-
They have the duty to: stock non-profit educational institution, your revenue, assets
1. Execute or to see to it that the NIRC and revenue and income are actually directly and exclusively used.. diba it
regulations are executed and complied with. is supposed to be tax exempt. If you read the provision xxx.
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But in practice before you can actually claim ana exemption 1. xxx BIR officers of the laws which are entrusted to
you must first ask a ruling from the BIR. the administration is entitled to great respect. In
consequence of that the rulings has the
So what do you do? You inquire with the BIR, you lay down
presumption of legality in its favor. What is the
your facts after laying down your facts para kang nag susulat
reason behind that? I think it is basic administrative
ng memorandum ba and then in the end magtanong ka lang
laws. The BIR has already acquire expertise over
anong tax implication nito? Or because of these
the subject matter because their jurisdiction is only
circumstances supported by evidence you will have to submit
confined to a specific matter in this case the NIRC.
your supporting documents to substantiate your claim then
the BIR will render a ruling. But the problem is the BIR ruling 2. The BIR rulings have the force and effect of law.
takes forever to be released. Matagal siya masyado. So This is especially when theya re found to be in
people will just pay the tax. harmony with the NIRC
For example, do you know the tax implication of exchange or 3. Can BIR rulings be used as a precedent by other tax
barter of capital asset? Real property considered as capital payers? Gets niyo and idea? Because in court we
asset? What is the tax implication? Now supposing I have have this particular set of facts and then get some
this property consisting of 1000 square meters of land xxx jurisprudence that will fall you know (unsa daw)
and then there is also this lot 1000 square meters parin. I most likely than now manalo ka sa case. But how
have the title and yet later on we realized that the title I am about dito sa BIR rulings? The principle is that a
holding is actually the title of the other property. So in the taxpayer cannot use another BIR ruling as a
end the lot that I occupy is that persons property and that precedent for his own case. So the taxpayer must
person is actually occupying my property. So if we sold secure his own ruling, so ano ang gawa ng BIR
everything things would have been very simple so exchange ruling? Of course it has functions because the BIR
total its the same thing. But what is the tax implication? Diba ruling can still provide useful information on how
sabi natin barter sale or exchange subject to capital gains the bureau may treat a similar transaction.
tax. Right? But if you come to think about it there is really no
In other words the BIR ruling will only apply to the
exchange at all. Its just that nagkamali lang sa title. Is there
requesting tax payer and to the specific transaction
a real exchange that happened? No. so I dont want to pay
from which the ruling was called for.
the capital gains tax because there is no exchange to begin
with so just correct the error. So I write to the BIR. But I 4. Is the commissioner of internal revenue bound by
think there is a ruling like that issued by the BIR. But the the ruling of his predecessors? CIR is not bound by
point is before we are able to get that ruling sobrang tagal. the ruling of his predecessors. The overruling
decision is actually inherent in the implementation
What are the kinds of BIR ruling?
of tax laws.
1. Ruling of first impression.
Those which are made for the first time on a This is actually in the case of Misamis oriental
particular set of facts without any established assoc vs. Department of finance:
precedence. It also involves the reversal While the interpretations made by the officers of the
modification or revocation of any existing ruling. BIR are entitled to great respect, the courts are not
What are the principles in rulings of first bound by it if such interpretation is inconsistent with
impression? the basic law.
a. The ruling of first impression must not be Revenue Regulations. Who promulgates the RR? The
against the law. It must be issued only by the secretary of finance upon recommendation of the CIR.
CIR. Meaning it cannot be delegated. That is Same principles in admin law applies. The issuance is
the first thing you have to think of. So in authorized by law and it has the force and effect of law and
harmony with law and of course it must be in case of conflict between the NIRC and RR the NIRC will
issued by the CIR alone. prevail. This is the ruling in the case of CIR vs. Fortune
b. Rulings of first impression shall not be valid Tobacco.
unless it is approved and reviewed by the For the benefit of those students who were not under me in
secretary of finance. tax 1 the story goes like this: there is a certain RR issued by
2. Rulings reiterating established precedence. the BIR. RR provided for a certain floor on the tax base of
certain articles including tobacco. So this was challenged by
Wala tayong problema dito. So same particular set fortune tobacco. Sabi ng SC that is not possible because the
of facts then the BIR will issue a ruling. RR issued by the BIR is actually void. The BIR cannot
provide for a floor for the tax base of excisable articles
What are the principles that you have to remember with
mainly because the NIRC does not provide for any floor.
respect to BIR rulings?
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While the BIR may increase the rate of course hindi siya Especially if the LA is valid the taxpayer has to show his
pwede mag gawa2 xxx. accounting records to the BIR representative.
What are revenue regulations? These are issuances signed Is the examination of the BIR limited to the taxpayers
by the secretary of finance upon recommendation of the books? No it is not limited in fact section 5 further provides
CIR that specify, prescribe or define rules and regulations the power of the BIR to access third party information to be
for the effective enforcement of the provisions of the NIRC able to ascertain the correctness of any return.
of 1997 and related statutes.
(B) To obtain on a regular basis from any person other than
You also have a few terms like the revenue the person whose internal revenue tax liability is subject to
memorandum orders I think its defined in your book audit or investigation, or from any office or officer of the
(Casasola), revenue memorandum rulings. Please take note national and local governments, government agencies and
of the definitions they dont require any further instrumentalities, including the BSP and GOCC, any
explanations. information such as, but not limited to, costs and volume of
Can the BIR rulings be given retroactive effect? That is production, receipts or sales and gross incomes of taxpayers,
and the names, addresses, and financial statements of
provided under section 246 of the NIRC.
corporations, mutual fund companies, insurance companies,
This is the general rule. Rulings and regulations do not have regional operating headquarters of multinational companies,
retroactive effect especially when it will prejudice the joint accounts, associations, joint ventures of consortia and
taxpayer registered partnerships, and their members;
SEC. 246. Non-Retroactivity of Rulings. Any revocation, This refers to the xxx of the BIR. Ano ba yan siya? Like for
modification or reversal of any of the rules and regulations instance diba you are engaged in the selling of goods so ano
promulgated in accordance with the preceding Sections or gawin niya? The BIR will inquire on the purchases of your
any of the rulings or circulars promulgated by the customers. Tama ba ang nideclare mo na benta? In the
Commissioner shall not be given retroactive application if same way in order to check your inventory the BIR will too in
the revocation, modification or reversal will be prejudicial to turn check your suppliers. So if something is off the BIR will
the taxpayers, probably issue a tax assessment based on your under or over
declaration, the point is the BIR is not limited to your own
XXX
books accounting and inventory. It has the power to secure
What are the exceptions? information from third parties to determine your tax
compliance and your tax liabilities.
XXX
For instance ano ba ang mangyari? Like there was this one
except in the following cases: person who went to the office. An assessment was issued.
xxx ang accountant niya because the assessment of the BIR
(a) Where the taxpayer deliberately misstates or omits
became final and executor. They werent able to avail of the
material facts from his return or any document required of
protest mechanism under the NIRC. So compromise. Hangyo
him by the Bureau of Internal Revenue;
ka. So before you can ask for a compromise, not because of
(b) Where the facts subsequently gathered by the Bureau of financial incapacity, you have to prove your point especially
Internal Revenue are materially different from the facts on when there is reasonable doubt on the assessment. So how
which the ruling is based; or do we attack that kind of situation? First tingnan natin ang
tax period. The client uses his office calendar (?) mag start
(c) Where the taxpayer acted in bad faith.
siya ng July and yet yung information na kinuha ng BIR from
Lets go to the next power of the BIR. First, to decide tax the supplier and customers of the client they were using
cases and second we have another set of power enumerated calendar method so hindi talaga siya magtugma. So in the
under section 5 na medyo mahaba. end they were just looking for third party sources.
SEC. 5. Power of the Commissioner to Obtain Information, The BIR also has the power to summon persons.
and to Summon, Examine, and Take Testimony of Persons. - (C) To summon the person liable for tax or required to file a
In ascertaining the correctness of any return, or in making a return, or any officer or employee of such person, or any
return when none has been made, or in determining the person having possession, custody, or care of the books of
liability of any person for any internal revenue tax, or in accounts and other accounting records containing entries
collecting any such liability, or in evaluating tax compliance, relating to the business of the person liable for tax, or any
the Commissioner is authorized: other person, to appear before the Commissioner or his duly
(A) To examine any book, paper, record, or other data which authorized representative at a time and place specified in the
may be relevant or material to such inquiry; summons and to produce such books, papers, records, or
other data, and to give testimony;
So thats the first thing so if the BIR issue a letter of
authority you have to surrender your book of accounts. Of course in relation to that, the BIR also has the power to
take the testimony of such person.
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(D) To take such testimony of the person concerned, under January 14, 2016 (ZM)
oath, as may be relevant or material to such inquiry; and Previously we discussed the powers of the BIR and this is
The BIR has the authority to secure information relating to one of the additional powers of the BIR
the tax matters of a particular entity. But is it necessary to
SEC. 6. Power of the Commissioner to Make
secure the consent of that individual? So sabihin ni BIR na
Assessments and Prescribe Additional Requirements
magkuha kami ng information sa supplier mo ha. Does the for Tax Administration and Enforcement. -
BIR need to do that? Of course not. The BIR does not need
to get the consent of the taxpayer involved. (A) Examination of Return and Determination of Tax
Due. After a return has been filed as required under the
Like what happened in the case of Fitness by Design Inc. provisions of this Code, the Commissioner or his duly
vs. CIR GR 177982 October 17, 2008 what happened authorized representative may authorize the examination of
was this: There is this CPA na emplyado siya ng kompanya. any taxpayer and the assessment of the correct amount of
Tinopak siguro or siguro nag lagot sa iyang amo. That CPA tax: Provided, however, That failure to file a return shall not
actually deleted all the information accounting records of that prevent the Commissioner from authorizing the examination
companyand gihatag niya sa BIR so gisumbong niya. Grabe of any taxpayer.
ka A** so after that he disappeared. Nawala siya. and The tax or any deficiency tax so assessed shall be paid upon
because of the information that was acquired by the BIR notice and demand from the Commissioner or from his duly
they discovered anomalies. Because of that the BIR issued authorized representative.
assessments so there was a protest etc. now, this was
actually challenged by fitness. The documents were taken Any return, statement of declaration filed in any office
without his consent in fact gikawat na sa ako unya gihatag authorized to receive the same shall not be withdrawn:
sa imuha. Provided, That within three (3) years from the date of such
filing, the same may be modified, changed, or amended:
But what did the SC say? Petitioners lack of consent does Provided, further, That no notice for audit or investigation of
not, however, imply that the BIR obtained them illegally or such return, statement or declaration has in the meantime
that the information received is false or malicious. Nor does been actually served upon the taxpayer.
the lack of consent preclude the BIR from assessing
deficiency taxes on petitioner based on the documents. This The CIR or his duly authorized representative has the
is the power of the BIR to secure information from third authority or power to take an assessment in determining the
party sources. To require the consent of the taxpayer would tax of a taxpayer. Take note that usually when the BIR
defeat the intent of the law to help the BIR assess and makes an assessment it is based on income tax return filed
collect the correct amount of taxes. by the taxpayer. But the lack of any ITR or any supporting
documents will not prevent the BIR from making an
So reading section 5 and the power of the BIR to obtain assessment and investigating that corresponding taxpayer.
information from third party sources you would realize that In fact the codal provides that the failure to file a return shall
BIR is a strong entity. The only limit to the BIRs power is not prevent the commissioner from authorizing the
actually they cannot see your bank accounts unless the fall examination of any taxpayer. Again it will not affect the
under the exceptions or other than that, pwede ang BIR mag authority of the BIR assess the proper taxes in case the
kuha ng agent na mag spy on you. Thats possible because taxpayer will not submit his return or probably the
BIR has these powers as provided by law. documents that he supposed to submit to the BIR is lacking.
(E) To cause revenue officers and employees to make a So question, how will the BIR asses a certain taxpayer if he
canvass from time to time of any revenue district or region or she did not file anything to begin with? If there is no ITR
and inquire after and concerning all persons therein who may filed take a look at section 6b
be liable to pay any internal revenue tax, and all persons
(B) Failure to Submit Required Returns, Statements,
owning or having the care, management or possession of
Reports and other Documents. - When a report required
any object with respect to which a tax is imposed.
by law as a basis for the assessment of any national internal
The provisions of the foregoing paragraphs notwithstanding, revenue tax shall not be forthcoming within the time fixed by
nothing in this Section shall be construed as granting the laws or rules and regulations or when there is reason to
Commissioner the authority to inquire into bank deposits believe that any such report is false, incomplete or
other than as provided for in Section 6(F) of this Code. erroneous, the Commissioner shall assess the proper tax on
the best evidence obtainable.
What would the BIR do with this information? Of course,
suing this information, the BIR will have to come up with an In case a person fails to file a required return or other
assessment of taxes the power to make assessment. Section document at the time prescribed by law, or willfully or
6 of the NIRC. otherwise files a false or fraudulent return or other
document, the Commissioner shall make or amend the return
from his own knowledge and from such information as he
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can obtain through testimony or otherwise, which shall be 1. The law allows BIR to access all relevant or
prima facie correct and sufficient for all legal purposes. material record or data in the person of the
taxpayer. It doesnt really matter what type of
So best evidence rule. In other words you relate this with data because one of the arguments of hantex here
the power of the BIR to secure third party information and is probably that the BIR only allowed to inspect
from there even if there is no accounting records and even if records. Bakit ka magpunta sa inventory or
there is no supporting documents the BIR can actually assess computer etc. so the SC said that there is no
the taxpayer by estimates only using the best evidence limit or cognition on the type or form of the
obtainable. medium by which the record subject to the
The BIR may also resort in the constructive method of BIR order is kept. The purpose of the law is to
determining income. You dont have to record but you make enable the BIR to get at the taxpayers records in
estimates based on the records of the other party or whatever form that they may be kept especially
probably there is a change in the net worth of a taxpayer. now when everything is slowly becoming
Its easy to determine WON a taxpayer has undeclared computerized. So it doesnt really matter. it does
income. because icompare mo ang net worth niya for not have to be paper as long as it has information
example if the taxpayers net worth this year is larger than which involves tax matters over which the BIR has
his net worth the previous year so meaning there is an the authority to inquire on it.
increase of whatever he has received during that period. So 2. The CIR has the duty to investigate any
he has some sort of an income which is not taxed xxx or circumstances which led him to believe that
which was not reported by the taxpayer. the taxpayer ha income larger than that what
Now, when can the CIR assess the tax on the basis of the is reported. The duty to investigate is not limited
best evidence obtainable rule? to the taxpayer himself but he can also get it from
third parties. Which brings us to the best evidence
1. When the report required by law as a basis for the obtainable. It doesnt mean that it should be the
assessment shall not be forthcoming. Meaning there best evidence that would prove that the taxpayer
was no tax return that was filed. has not properly paid his taxes. Best evidence
2. When there is reason to believe that any such obtainable may consist of hearsay evidence. What is
report is false, fraudulent, incomplete or erroneous. an example of hearsay evidence? Theres an
informant. Sabi ng informant that this company has
(Chismis pero related sa topic) I personally have an not been paying taxes etc. so you have to
experience when there is this one person na lumapit sa akin investigate it. Meron bang basis yan? Sometimes
because there was an assessment given by the BIR so nag anonymous report man yan. There are sometimes
ask siya sa akin what am I going to do. So the first thing I uncorroborated statements. But the BIR may
asked asa na ang accounting records? May problema kasi nevertheless investigate such company if he deems
hindi ako naka keep ng records. So how am I supposed to so. The reason for this is that the BIR is not
help you? When I look at the assessment, there is really bound by the rules on evidence.
something wrong sobrang laki ng undeclared income niya
and sobrang laki gn tax liability and yet I know that the 3. When you talk about best evidence
business of that person is not that profitable but then how obtainable it does not include mere
am I supposed to help him? So this person went to an photocopies of documents because they do
accountant and I dont know what happened. Gumawa lang not have probative value.
rin siguro ng numero ang accountant so nag magic. So ano 4. The access of the taxpayers accounting
ang supporting documents mo dito? Wala lagi akong record records, his tax liability may be determined
bai. Diba? So ganun ang power ng BIR so kung wala kang by estimation. Its okay for the BIR to estimate
accounting record they can make an assessment based on the taxes as long as this estimation is arrived at
the best evidence obtainable. Alam niyo saan nag tanong with basis. The rule on approximation does not
ang BIR? Sa suppliers and customers niya. So that is the apply where the estimation is arrived at arbitrarily
problem. You know sometimes sabi nila you have to keep or capriciously. So there has to basis. Probably
something for yourself. Huwag mong ideclare lahat. A lot of based on the net worth or probably the inventory.
lawyers and accountants would advice people na wag ibigay
lahat because in the end the BIR will still assess you of taxes.
So I dont know. Yeah it happens in reality.
So even if you go by the codal diba authority to conduct
CIR vs Hantex inventory taking, surveillance and to prescribe presumptive
gross sakes and receipts. So the BIR will acquire information
The entirety of the case I can summarize into 6: [Note: Wala that the taxpayer has not been paying his correct taxes, so
niya ginumber pero gi bold nalang nako ang murag apil sa pwede under surveillance. The BIR will assess you and the
enumeration based sa akong feelings] assessment or the amended return made by the BIR is
presumed to be correct, prima facie correct so it is
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incumbent upon the taxpayer to prove that the assessment 1. When the taxpayer is retiring from business subject
or the amendment made by the BIR in the ITR is actually to tax. So magclose sila so wala ng tacable period,
incorrect. no need for assessment then the BIR will send a
FDL
(C) Authority to Conduct Inventory-taking,
Surveillance and to Prescribe Presumptive Gross 2. When the taxpayer intends to leave the Philippines
Sales and Receipts. - The Commissioner may, at any time or to remove his property there from or hides or
during the taxable year, order inventory-taking of goods of conceal his property
any taxpayer as a basis for determining his internal revenue
3. When the taxpayer performs any act tending to
tax liabilities, or may place the business operations of any obstruct the proceedings for the collection of the
person, natural or juridical, under observation or surveillance
taxes.
if there is reason to believe that such person is not declaring
his correct income, sales or receipts for internal revenue tax Lets go to the commissioners authority to inquire into bank
purposes. The findings may be used as the basis for accounts
assessing the taxes for the other months or quarters of the
same or different taxable years and such assessment shall be (F) Authority of the Commissioner to Inquire into
deemed prima facie correct. Bank Deposit Accounts and Other Related information
held by Financial Institutions. [4] - Notwithstanding any
When it is found that a person has failed to issue receipts contrary provision of Republic Act No. 1405, Republic Act No.
and invoices in violation of the requirements of Sections 113 6426, otherwise known as the Foreign Currency Deposit Act
and 237 of this Code, or when there is reason to believe that of the Philippines, and other general or special laws, the
the books of accounts or other records do not correctly Commissioner is hereby authorized to inquire into the bank
reflect the declarations made or to be made in a return deposits and other related information held by financial
required to be filed under the provisions of this Code, the institutions of:
Commissioner, after taking into account the sales, receipts,
income or other taxable base of other persons engaged in (1) A decedent to determine his gross estate; and
similar businesses under similar situations or circumstances (2) Any taxpayer who has filed an application for
or after considering other relevant information may prescribe compromise of his tax liability under Section 204(A)(2) of this
a minimum amount of such gross receipts, sales and taxable Code by reason of financial incapacity to pay his tax liability.
base, and such amount so prescribed shall be prima facie
correct for purposes of determining the internal revenue tax In case a taxpayer files an application to compromise the
liabilities of such person. payment of his tax liabilities on his claim that his financial
position demonstrates a clear inability to pay the tax
Next you have the authority to terminate the taxable period assessed, his application shall not be considered unless and
until he waives in writing his privilege under Republic Act No.
(D) Authority to Terminate Taxable Period. - When it 1405, Republic Act No. 6426, otherwise known as the
shall come to the knowledge of the Commissioner that a Foreign Currency Deposit Act of the Philippines, or under
taxpayer is retiring from business subject to tax, or is other general or special laws, and such waiver shall
intending to leave the Philippines or to remove his property constitute the authority of the Commissioner to inquire into
therefrom or to hide or conceal his property, or is performing the bank deposits of the taxpayer.
any act tending to obstruct the proceedings for the collection
of the tax for the past or current quarter or year or to render (3) A specific taxpayer or taxpayers subject of a request for
the same totally or partly ineffective unless such proceedings the supply of tax information from a foreign tax authority
are begun immediately, the Commissioner shall declare the pursuant to an international convention or agreement on tax
tax period of such taxpayer terminated at any time and shall matters to which the Philippines is a signatory or a party of:
send the taxpayer a notice of such decision, together with a Provided, That the information obtained from the banks and
request for the immediate payment of the tax for the period other financial institutions may be used by the Bureau of
so declared terminated and the tax for the preceding year or Internal Revenue for tax assessment, verification, audit and
quarter, or such portion thereof as may be unpaid, and said enforcement purposes.
taxes shall be due and payable immediately and shall be
In case of a request from a foreign tax authority for tax
subject to all the penalties hereafter prescribed, unless paid
information held by banks and financial institutions, the
within the time fixed in the demand made by the
exchange of information shall be done in a secure manner to
Commissioner.
ensure confidentiality thereof under such rules and
What do you mean by a pre-termination of a taxable period? regulations as may be promulgated by the Secretary of
Normally we have a period for assessment but when it falls Finance, upon recommendation of the Commissioner.
under the circumstances there is no need for an assessment The Commissioner shall provide the tax information obtained
from the BIR. The BIR may send you a Final Demand from banks and financial institutions pursuant to a
Letter(FDL). What are these instances when the BIR may convention or agreement upon request of the foreign tax
terminate the taxpayers period? authority when such requesting foreign tax authority has
[Page 7 of 79]
provided the following information to demonstrate the Exceptions:

foreseeable relevance of the information to the request:
1. When it involves the decedent in determining his
(a) The identity of the person under examination or gross estate. The bank will not be allowed to
investigation; release money to the extent of 10,000.
(b) A statement of the information being sought, including its 2. Any taxpayer who has filed an application for
nature and the form in which the said foreign tax authority compromise of his tax liability on the ground of
prefers to receive the information from the Commissioner; financial incapacity. If the taxpayer wants to eneter
into a compromise with the BIR especially when the
(c) The tax purpose for which the information is being
assessment is already final and executor. Sabi ng
sought;
taxpayer na wala talaga akong pera. What the BIR
(d) Grounds for believing that the information requested is will do is to let the taxpayer sign a waiver based on
held in the Philippines or is in the possession or control of a the secrecy of bank deposits. And then the BIR will
person within the jurisdiction of the Philippines; inquire that indeed this person does not have
money
(e) To the extent known, the name and address of any
person believed to be in possession of the requested 3. A taxpayer subject of a request for the supply of tax
information; information from a foreign tax authority. This is the
new provision added take note when there is a
(f) A statement that the request is in conformity with the law foreign tax authority that would request tax related
and administrative practices of the said foreign tax authority, matters of certain taxpayers in the Philippines of
such that if the requested information was within the course the BIR would have to comply because this
jurisdiction of the said foreign tax authority then it would be is international law. It is from an international
able to obtain the information under its laws or in the normal agreement, treaty or tax treaty in which the
course of administrative practice and that it is in conformity Philippines is a signatory.
with a convention or international agreement; and
So what about the information taken by the BIR under that
(g) A statement that the requesting foreign tax authority has provision? Can they use it for some other purpose? The law
exhausted all means available in its own territory to obtain says yes the BIR can also use that for any other purpose. As
the information, except those that would give rise to to the other powers, yung dalawa jan you just read that they
disproportionate difficulties. are not important.
The Commissioner shall forward the information as promptly Lets go to the delegation of powers.
as possible to the requesting foreign tax authority. To ensure
a prompt response, the Commissioner shall confirm receipt of SEC. 7.Authority of the Commissioner to Delegate
a request in writing to the requesting tax authority and shall Power. - The Commissioner may delegate the powers
notify the latter of deficiencies in the request, if any, within vested in him under the pertinent provisions of this Code to
sixty (60) days from receipt of the request. any or such subordinate officials with the rank equivalent to
a division chief or higher, subject to such limitations and
If the Commissioner is unable to obtain and provide the
restrictions as may be imposed under rules and regulations
information within ninety (90) days from receipt of the
to be promulgated by the Secretary of Finance, upon
request, due to obstacles encountered in furnishing the
recommendation of the Commissioner: Provided, however,
information or when the bank or financial institution refuses
That the following powers of the Commissioner shall not be
to furnish the information, he shall immediately inform the
delegated:
requesting tax authority of the same, explaining the nature
of the obstacles encountered or the reasons for refusal. (a) The power to recommend the promulgation of rules and
regulations by the Secretary of Finance;
The term "foreign tax authority," as used herein, shall
refer to the tax authority or tax administration of the (b) The power to issue rulings of first impression or to
requesting State under the tax treaty or convention to which reverse, revoke or modify any existing ruling of the Bureau;
the Philippines is a signatory or a party of.
(c) The power to compromise or abate, under Sec. 204 (A)
The general rule is found in section 5 and (B) of this Code, any tax liability: Provided, however,
That assessments issued by the regional offices involving
The provisions of the foregoing paragraphs notwithstanding, basic deficiency taxes of Five hundred thousand pesos
nothing in this section shall be construed as granting the (P500,000) or less, and minor criminal violations, as may be
commissioner the authority to inquire into bank deposits determined by rules and regulations to be promulgated by
other than as provided for in section 6(f) of this code. the Secretary of finance, upon recommendation of the
Commissioner, discovered by regional and district officials,
So the general rule is that the BIR commissioner or his
may be compromised by a regional evaluation board which
representatives is not authorized to inquire the bank deposits
shall be composed of the Regional Director as Chairman, the
of a taxpayer based on bank secrecy law.
Assistant Regional Director, the heads of the Legal,
[Page 8 of 79]
Assessment and Collection Divisions and the Revenue District What is the importance in knowing these remedies? In order
Officer having jurisdiction over the taxpayer, as members; for you to know the procedure. Aside from the bar exams
and you will know what to do later on and there is a difference in
the procedure when you talk about tax matters. For now we
(d) The power to assign or reassign internal revenue officers
will discuss about the NIRC and later on LGC and tariff and
to establishments where articles subject to excise tax are
customs code. So there are minor differences in the
produced or kept.
procedures we will have to take. Of course this is useful in
The general rule is that the CIR may delegate its powers to real life kung may business kayo and nakatanggap kayo ng
its subordinates assessment you will know what to do.
Exceptions: Overview:
1. Power to recommend the promulgation of the rules 1. The BIR will audit. They will go to your office and
and regulations to the secretary of finance. audit you. But before they can conduct this audit,
the BIR must be armed with a Letter of Authority
The recommendation of these rules rests upon the (LOA). Your obligation is to show your records, you
CIR alone. It cannot be delegated to anyone must be able to accommodate these officers and
2. The power to issue rulings of first impression or to produce the documents they will require. Upon
reverse, revoke or modify any existing ruling of the audit if the BIR will discover discrepancies in the
Bureau. In the first place the rulings are made by data, ITR and documents and actual audit, the
the CIR. It would be absurd if the subordinates will revenue officer will inform the taxpayer. So the
revoke or revise these. taxpayer may either agree with the discrepancy or
probably disagree. If the taxpayer will agree
3. The power to compromise and abate under section babayaran niya ang tax but if the taxpayer will
204A and B of this code. There are two things disagree the revenue officer will go to the
involved here. First the power to compromise taxes assessment division of the BIR.
and second the power to abate taxes. When you
talk about the power to abate taxes it is the 2. So dito sa assessment division ng BIR they will
complete abrogation of the tax liability of a review the work of the revenue officer. If there is
taxpayer. Also the power to abate is limited to the no basis for the assessment okay dismissed siya but
commissioner alone. It cannot be delegated. But if therewill be a basis, the BIR will give a Preliminary
what about the power to compromise? The power Assessment Notice (PAN) to the taxpayer.
to compromise is like this. 3. Pagkatanggap ng PAN the taxpayer can do three
things, agree, or disagree or even ignore it. The
taxpayer agrees, magbayad siya. if he disagrees,
As a general rule, the power to compromise cannot within 15 days the taxpayer must be able to
be delegated. There are two instances wherein the write to the BIR that the assessment is wrong, he
commissioner may delegate this to the regional must be able to provide reasons and substantiate
evaluation board of the BIR. the reasons why the assessment is incorrect.
a. Assessments issued by the regional offices 4. The BIR will either agree with the explanation of the
involving basic deficiency taxes of P500,000 or taxpayer so dismissed or disagree or inaction.
less and these were made by the regional Eventually the BIR will send a Final Assessment
offices Notice or Final Letter of Demand (FLD) That
means that the BIR does not agree with the
b. Minor criminal violations.
taxpayers explanation or the taxpayer has not
4. The power to assign or reassign internal revenue respond to the PAN. The taxpayer cannot ignore the
officers to establishments where articles subject to FAN otherwise the assessment will become final and
excise tax are produced or kept. So the regional executor and the BIR may avail if its remedies to
director cannot shuffle these officers only the CIR collect the taxes due based on the demand letter
can. together with all the surcharges penalties and
interests etc.
TAX REMEDIES- These are the procedural steps that may
be undertaken by the taxpayer or the government for 5. From the receipt of the FAN the taxpayer has two
resolution of disputes concerning the levy imposition options either to agree or disagree. I think walang
assessment collection and refund of taxes. problema kung mag agree kasi bayaran lang man
yan. But what if nag disagree? The taxpayer must
In simple words, it refers to the procedures that may be
be able to file his protest within 30 days from
taken by the government in the collection of taxes or the
receipt of the FAN. Otherwise the assessment will
taxpayer when the government will start assessing and
become final and executor and the BIR may avail of
collect taxes against them and it involves refunds.
[Page 9 of 79]
its remedies to collect the taxes due from the deduction income and of course his tax. The
taxpayer. computation of the tax
6. How do you protest? There are two kinds of 2. Deficiency assessment- this is an assessment by the
protest: taxing authority xxx the correct amount of tax after
examination or investigation which is conducted by
a. Reconsideration- you are asking the BIR to
the BIR. Meaning kulang ang binayaran na tax,
review the documents already on hand.
there is a difference between the tax due and paid
b. Reinvestigation- you are basically telling the as per your ITR and te taxes that should be due as
BIR that you have documents which tend to found out by the BIR during his audit
prove the BIR wrong. You are given 60 days
3. Jeopardy assessment- this is related to the
within which to submit your supporting
estimation of tax liabilities. An assessment made by
documents if you did not submit the documents
the authorized revenue officer without the benefit of
within the period or you did not submit
a complete or partial audit in the light of the ROs
anything at all and you asked for
belief that the assessment, collection of the
reinvestigation the assessment will become
deficiency tax will be jeopardized as it is caused by
final and executory.
the taxpayers failure to comply with the audit and
7. Either way, if you have filed your protest the CIR the investigation requirements to present his book
has 180 days to decide. When do you count the of account or pertinent records or to substantiate all
180 day period? If it is reinvestigation you count it of his deductions, credit, exemption,s claim in his
from the date of submission of your supporting return, meaning, the BIR, pagpunta mo doon, mag
documents. If it is reconsideration, from the receipt audit, no I will not show it to you so the BIR will say
of reconsideration (liboga ba ni sir oi) from here the okay you will not give the records to me I will make
BIR has three things, its either the BIR agrees or a jeopardy assessment based on estimates.
disagrees or inaction. Does not do anything
lingkuran lang niya.
Another instance is this, it is usually institute by the
8. If the BIR agrees then dismissed but if the BIR
statutory prescriptive period for the assessments or
disagrees the next step is to appeal it to the CTA
collections of taxes or about to lapse due principally
in division. If the CIR does not do anything within
to the statutory taxpayers fault. BIR has a certain
the 180 day period, the taxpayer can choose two
period to collect the tax, kung malapit na maglapse
actions, wait for the decision or directly appeal
because of the taxpayers lack of cooperation the
to the CTA division for 30 days from the lapse of
BIR will issue a jeopardy assessment.
the 180 day period to decide.
Or probably the investigation is ongoing in the
9. From CTA division, pangit parin ang decision sa
corporation or taxpayer xxx business hindi siya
taxpayer you go to the CTA en banc by way of
matapos within 3 years and then when the BIR
petition for review and finally pag pangit parin, SC
asked for a waiver or extension of the prescriptive
rule 45.
period the taxpayer will not concede so ayoko. So
That is the overview of everything. So isa-isahin natin yan. jeopardy assessment.
So mag audit siya and the BIR will assess you of taxes. What
The main purpose of an assessment is actually to
do you understand of an assessment?
notify the taxpayer of the facts and law and
An assessment is a statement that the amount therein jurisprudence on which the assessment is based.
stated is due from a taxpayer as a tax. Another definition of There must be a factual and legal basis for the
assessment is that its a xxx by the taxing authority authority assessment this is in order to comply with the due
that the taxpayer has not paid the correct taxes. In tax 1 process requirements of the constitution.
meron tayong 2 kinds of assessment: assessment as to
Requisites of a valid assessment:
figures meaning its about money and second assessment as
a document and we are talking of the Pan and Fan this si the 1. It must be issued during the prescriptive period
document wherein the BIR tells you hey taxpayer you have
2. It may be issued only after a PAN received by
not paid the correct taxes.
the taxpayer as a general rule
What are the kinds of assessments?
3. It must state the facts laws rules and regulation
1. Self assessment- as we said before, internal or jurisprudence upon which the assessment is
revenue taxes are self-assessing taxes meaning the based
taxpayer himself will make an assessment of his
4. The taxpayer must have received the
own tax liabilities indicating in the ITR his sales,
assessment.
[Page 10 of 79]
When one requisite is lacking the assessment will be void. Any return, statement of declaration filed in any office
Usually the problem here in the cases is this the taxpayer authorized to receive the same shall not be withdrawn:
says there is no facts law or jurisprudence in the assessment Provided, That within three (3) years from the date of such
or I have not received any assessment from you. It is the filing, the same may be modified, changed, or amended:
CIR who issues the assessment or his duly authorized Provided, further, That no notice for audit or investigation of
representative. such return, statement or declaration has in the meantime
When should an assessment be made? So lets talk about been actually served upon the taxpayer.
prescriptive periods. So as a general rule the taxpayer can amend his income tax
return. Walang problema
SEC. 203. Period of Limitation Upon Assessment and
Collection. - Except as provided in Section 222, internal exception: if the BIR has already started its investigation or
revenue taxes shall be assessed within three (3) years after notified the taxpayer of any investigation of his taxes.
the last day prescribed by law for the filing of the return, and
So hindi na pwede mag amend. Kalian pa siya pwede mag
no proceeding in court without assessment for the collection
amend? Within 3 years from the date of filing. So if there is
of such taxes shall be begun after the expiration of such
an amendment made by the taxpayer when will you reckon
period: Provided, That in a case where a return is filed
the 3 year period? It will depend if the amendment is
beyond the period prescribed by law, the three (3)-year
substantial or not. If the tax return is amended substantially
period shall be counted from the day the return was filed.
you reckon the 3 period from date of the filing of the
For purposes of this Section, a return filed before the last
amendment otherwise youre xxx from the original date of
day prescribed by law for the filing thereof shall be
filing. What do you understand of substantial? In taxation
considered as filed on such last day.
parlance the amendment is substantial if the new return
Lets simplify. The general rule is that the BIR has 3 years declaring losses which can be done either by reducing the
reckoned from the date of the filing of the return or the gross income or increasing the items in your deductions. In
deadline for filing of such return whichever comes later. This simple terms it is substantial if it has a bearing in your
is for the assessment of a national internal revenue tax. income because the income would be reduced kasi mag
change ang tax mo. Pwede ka ba mag amend without
What is the reason behind the prescriptive period? If you touching the income? of course what if namali ang address
remember in tax 1 if there is no prescriptive period provided or probably you want to inform the BIR that you have
by law then the government has the power to assess taxes changed your principal office. Pwede yan.
forever. The prescriptive period would actually benefit the
government. Why? Because the government would not act, Take note there is a difference between assessment and
of course they would not be able to collect money. On the collection of taxes. Collection will only happen when there is
other hand it is also beneficial to the taxpayer because this already a final and executor assessment.
gives some sort of security on the part of the taxpayer for
Lets go to the exception to the 3 year prescriptive period
unreasonable tax examination, investigation assessments wherein the BIR has a longer prescriptive period.
and procedure that are taken by the government.
SEC. 222. Exceptions as to Period of Limitation of
How do we interpret provisions relating to prescription? In
Assessment and Collection of Taxes. -
the case of BPI vs CIR GR139736 October 16 2005 the
statute of limitation on the assessment and collection of (a) In the case of a false or fraudulent return with intent to
taxes is for the protection of the taxpayer and should be evade tax or of failure to file a return, the tax may be
construed liberally in favor of the taxpayer and strictly assessed, or a proceeding in court for the collection of such
against the government. tax may be filed without assessment, at any time within ten
(10) years after the discovery of the falsity, fraud or
Sabi 3 year period. How do we compute? Iang araw ba siya?
omission: Provided, That in a fraud assessment which has
according to the same SC decision its 1095. Kasi 365 days
become final and executory, the fact of fraud shall be
multiplied by 3 man daw kasi sabi ng Civil Code a year is
judicially taken cognizance of in the civil or criminal action for
construed to be 365 days. Pano kung leap year sir? Actually
the collection thereof.
or laws do not consider leap year. But for purposes of bar
exam questions, lets just say 3 years. Wag na magpaatik na So in this provision you can see that there are three
1095. exceptions.
Can the taxpayer amend his tax return? 1. If what is filed is a false return
SEC. 6. Power of the Commissioner to Make 2. If what is filed is a fraudulent return
Assessments and Prescribe Additional Requirements
for Tax Administration and Enforcement. - 3. When there is failure to file a return
(A) Examination of Return and Determination of Tax (b) If before the expiration of the time prescribed in Section
Due. xxxx 203 for the assessment of the tax, both the Commissioner
and the taxpayer have agreed in writing to its assessment
[Page 11 of 79]
after such time, the tax may be assessed within the period How do you define substantial? What is substantial under
agreed upon. The period so agreed upon may be extended declaration of sales and what is substantial over statement of
by subsequent written agreement made before the expiration expenses or dedcuctions which will give rise to the prima
of the period previously agreed upon. facie evidence of fraud? With respect to under declaration of
sales
So what is the last? It is the case of extended assessment.
Over statement naman still the same the claim of deductions
So false return. What do you understand by false return? A exceed 30% of your actual deductions. It means that there is
return is false when the entries made therein are not true more than 30% discrepancy between the sales or deductions
and correct. So ten years na ang prescriptive period mo, the which you have entered in your ITR and as per audit of the
falsity of the return must go along xxx if there is a design to BIR. In that case there is a presumption that the ITR is false
mislead or defraud BIR or probably the mistake is because of or fraudulent. Mahirap yan kasi there is a big discrepancy on
gross negligence. so it ended up that the tax return you filed the penalty to be imposed. Meron tayong surcharge when it
with the BIR is false. This is the case of CIR vs BF comes to false or fraudulent return the surcharge is 50% of
Goodrich Philippines GR No. 104171 February 24 the tax due. Dako kayo na.
1999 this is a good case so please read this case.
Lets go to extended assessment.
Fraudulent return it is fraud naman it comprises anything to
deceive someon in taxation parlance it is anything that is SEC. 222. Exceptions as to Period of Limitation of
calculated to deceive the BIR with the intent to avoid taxes Assessment and Collection of Taxes.
illegally. How do you prove fraud? Allegations of fraud must
(b) If before the expiration of the time prescribed in Section
be specific. You must be able to allege the acts which
203 for the assessment of the tax, both the Commissioner
constituted the fraud. Take note that to prove fraud the BIR
and the taxpayer have agreed in writing to its assessment
has the burden of proof in showing fraud and it is not
after such time, the tax may be assessed within the period
enough that the BIR will be able to show fraud on the basis
agreed upon. The period so agreed upon may be extended
of preponderance of evidence because to prove fraud it
by subsequent written agreement made before the expiration
requires clear and convincing evidence. Normally the
of the period previously agreed upon.
taxpayer enjoys the presumption of good faith which is the
only proper that the BIR should prove fraud but the NIRC So under this provision the 3 year period under this section
provides for instances wherein there is a prima facie case of 203 may be extended. What are the requirements for the
fraud validity of such extension?
SEC. 248. Civil Penalties. 1. It must be in writing
(B) In case of willful neglect to file the return within the 2. It must be signed by both the taxpayer and
period prescribed by this Code or by rules and regulations, or commissioner
in case a false or fraudulent return is willfully made, the
penalty to be imposed shall be fifty percent (50%) of the tax 3. It must be entered before the expiration of the
or of the deficiency tax, in case, any payment has been 3year prescriptive period
made on the basis of such return before the discovery of the 4. Waiver must be for a definite period
falsity or fraud: Provided, That a substantial under-
declaration of taxable sales, receipts or income, or a 5. Taxpayer must be furnished of a copy of such
substantial overstatement of deductions, as determined by waiver
the Commissioner pursuant to the rules and regulations to be 6. The waiver must be able to conform to the form as
promulgated by the Secretary of Finance, shall constitute provided in the revenue regulations
prima facie evidence of a false or fraudulent return:
Provided, further, That failure to report sales, receipts or
RCBC vs. CIR
income in an amount exceeding thirty percent (30%) of that
declared per return, and a claim of deductions in an amount There are two issues in this case
exceeding (30%) of actual deductions, shall render the
1. Is the waiver valid?
taxpayer liable for substantial under-declaration of sales,
receipts or income or for overstatement of deductions, as The waiver is not valid because it was not signed by
mentioned herein. the CIR or its authorized representative.
So there at least two 2. Should RCBC be made liable to pay the tax
deficiency?
1. Substantial under declaration of taxable sales
receipts or income. you under declare Yes because it was held to be in estoppel. In the
end the RCBC paid the taxes and thats the reason
2. You overstate your deductions or expenses para
why they RCBC was considered to be in estoppel.
lumiit yung income mo.
Even if the waiver is valid, the RCBC cannot deny
anymore the validity of such assessment because it
[Page 12 of 79]
has already paid the taxes based on such you.

assessment.
In CIR vs. Sony, the CIR issued a letter of assessment to
Sony for assessment of several internal revenue taxes.
Lets compare this with the case of CIR vs standard Anong context ng LA? Ang sabi n LA is we will inspect your
chartered bank the issue whether CIRs right to assess corporate books from 1997 and unverified prior years. When
standard charter has already prescribed for the year 1998 the preliminary assessment and the final assessment came,
and assuming that the right of CIR has prescribed whether what happened was that the assessment was based on the
standard chartered is already stopped from questioning the 1998 records. Sony protested. What did the Supreme Court
validity of the waiver executed by chartered bank. The say?
waiver was invalid because they did not comply with the
formal requirements and then the BIR said that standard That is not legally possible. BIR cannot do that. The BIR
chartered is estopped from questioning the validty of the cannot make an assessment of the year 1997 using the 1998
waiver because standard chartered made partial payments if records of the taxpayer. The authority given to the BIR is to
deficiency taxes. But the SC said that the doctrine of examine only the 1997 records and also the previous
estoppels does not apply. What makes it different from accounting records of the taxpayer. If the BIR actually
RCBC? It is because when standard charted paid its intended the 1998 records, probably what the BIR could
deficiency assessments BIR accepted the payments without have done is to include it in the LA or probably the BIR could
any opposition which extinguished their obligation to pay. issue another LA for that matter.
When did the BIR raised the issue of estoppel? This is In this case was the LA valid to begin with? It is invalid
different from the RCBC case because both of them partially because the LA is issued in violation of the rules. There is a
paid their deficiency taxes but standard chartered is different certain Revenue Regulation that says the LA must specify the
because right from the start they already challenged the particular year to which the audit will be conducted. The
waiver. And second, the BIR only raised the defense of assessment is likewise void because the LA is void to begin
estoppels only when it filed its motion for reconsideration with. If there is any investigator, this LA is actually very
before the CTA. So thats why standard chartered is different important because if it is void it will not toll the prescriptive
because right from the start chinallenge na niya ang waiver period for the assessment of tax. Diba may 3-year period
nagbayad lang siya but that was it. tayo for assessment.
Next is who issues this letter of authority?

April 5, 2016 (EAE) It is issued by the Commissioner of Internal Revenue or it
authorized representative, for audit of taxpayers under the
[Na-late by a few seconds, sorry. Definition of letter of jurisdiction of the National Office. And you also have the
authority ata ni] record books and accounting books of the Regional Director for the Regional Offices. They are the
taxpayer for the purpose of collection of the correct amount officers who are allowed to issue a letter of authority.
of tax.
When do you serve the letter of authority?
So that is a very important document because it has several
implications. What is the basis for this LA? The basis for this When you receive the LA, you look at the date of issuance.
LA is Section 6 of your NIRC. Why? Because the LA must be served within 30 days from
the date of its issuance. What happens if the LA was served
Sec. 6 (A) Under this Section, the Commissioner has the to you and it is already beyond the 30 days for issuance? The
power to examine the taxpayer, the wealth of the taxpayer, LA is no longer valid. Whatever assessment or audit that will
and at the same time the Commissioner can also delegate be conducted on the taxpayer is already null and void.
this power to an authorized representative.
What will the BIR people do in that case?
What happens if the Revenue Officer is not armed with an
LA? Punta lang siya sa opisina niyo and he cannot show an The BIR will just revalidate it. What about the revalidation?
LA. Well the taxpayer can prevent the Revenue Officer from For the LAs issued by the National Office, it may be
investigating. If the Revenue Officer will proceed with his revalidated twice. If it is issued by the Regional Office it can
investigation, that investigation is null and void without any only be revalidated once.
effect. Mainly because the BIR or that Officer is not
Are there any cases wherein the BIR may conduct an audit
authorized by the BIR.
even if the BIR officer considered is not armed with an LA?
In CIR vs. Sony, the Supreme Court said that there must be Of course there are. There are two cases:
a grant of authority before any Revenue Officer can conduct
1. Under existing Revenue Regulations, you have tax
an examination or assessment. Without such authority, the
fraud cases. If it involves tax fraud you dont need
examination or assessment is a nullity. Thats why its the
any LA.
first thing you have to look into if the BIR officer or any of
the BIR officers would come to your office and try to harass
[Page 13 of 79]
2. When it involves policy cases under audit by special Regional Office will review the findings of this Revenue
teams, under the National Office. Officer.
Next is sabi natin ang LA is the authority of the BIR to If the CIR determines that there is no legal or factual basis
investigate the taxpayer. How often should the BIR on the report, then the case is dismissed. If the CIR finds
investigate the taxpayer? that there is a legal basis or a factual basis of the audit
report, then the BIR now will issue the Preliminary
Sec. 235 of NIRC, the general rule is that the BIR can only
Assessment Notice or what you call as PAN.
examine the taxpayer once a year. Under Sec. 235 two
things are being provided there: Before that, dati kasi, under the LA, the BIR guy reports to
the taxpayer, the taxpayer will not agree, meron pang
1. The taxpayer must preserve its accounting books
informal conference. But such informal conference is no
and records within the period prescribed in Sec,
longer applicable because of a Revenue Regulation. Informal
203, that is the prescription period for assessment:
conference is like mediation. But right now tinanggal na siya,
3 years from the date of filing or the last day,
diretso na tayo sa issuance of PAN. Or if you will follow the
whichever comes later.
codal its pre-assessment notice.
2. For income tax purposes, such inspection and
What is a PAN?
examination of the books shall be made only once
in a taxable year. Exceptions: Its a communication issued by the BIR informing the
taxpayer who had been audited of the findings of the
a. When there is fraud, irregularity or
Revenue Officers, following the review and evaluation of
mistakes as determined by the CIR.
these findings. It is in writing and shows the facts, laws,
b. If the taxpayer requests for rules, regulations and jurisprudence on which the proposed
reinvestigation. assessment is based.
c. Verification of compliance with withholding In other words, in simple terms, this is just a letter of
tax laws. information. Its just a letter informing the taxpayer that an
audit has been conducted, they have reviewed the audit
d. Verification of capital gains tax liabilities. findings, and they have legal and factual basis that the
e. If the BIR or CIR will exercise its power to taxpayer has not paid the correct taxes. Of course the PAN
obtain information from some other must contain the facts, the laws, the rules, and jurisprudence
persons. on which the assessment was based. What is the effect if
that is not followed? Then the PAN is null and void. Thats a
What about tax-exempt persons? Are they required to keep violation of the taxpayers due process. Any subsequent
their accounting books? actions to be done by the BIR will also be rendered as null
Of course they are required to keep their accounting books. and void for violation of due process.
It does not preclude the CIR from investigating or requiring Is PAN mandatory?
or examining their accounting records for purposes of
compliance. Hindi pwedeng youre exempt from tax, youre As a general rule, preliminary assessment is mandatory
already exempted from keeping records. especially na provided siya sa Sec. 228 ng NIRC. If it is not
served, magfollow siya ng forms, there is a format, and of
The BIR will conduct an audit. LA. Pagkatapos ng audit, how course the PAN must be served to the taxpayer. Kailangan
long does the audit go? Im not sure but I think its in matanggap ng taxpayer yan. The taxpayer must always be
Casasola, 120 days ba? 120 days or 4 months. What will notified.
happen after that is the BIR officer who investigated your
office will render or issue a report. Is the taxpayer entitled to How do you serve it?
know that? Yes of course. The BIR Officer who examined or According to the new Revenue Regulation, the PAN must be
investigated the taxpayer must show to the taxpayer his served at the taxpayers registered address. After serving the
report. taxpayer at the registered address, the BIR can also serve it
Two things may happen: to the known address of the taxpayer or alternatively, there
can be simultaneous service of the notice. Posible ba yan? Of
1. The taxpayer may agree with the report or course. Known address niya is residential address. Registered
2. The taxpayer will disagree. address niya is business address. So posible yan.
If the taxpayer agrees to the report, the taxpayer will pay What should the taxpayer do when he sees the PAN?
the tax. But if the taxpayer disagrees, what will happen? The 1. The taxpayer may agree.
BIR Officer will then go back to his office, will submit his
report to the CIR or the Regional Office as the case may be. 2. The taxpayer may disagree. How does the taxpayer
And then what will happen next is the BIR or the CIR or the disagree on the findings? The taxpayer must make
a reply. Kelan niya gawin reply niya? He must make
[Page 14 of 79]
such reply within 15 days from the receipt of the Its pretty much like the PAN: the registered address or the
PAN. What if he belatedly filed his reply? Does he known address, or the BIR can serve it simultaneously on
need to worry? No he need not worry because he both addresses.
will only be considered in default. Default means
If the FAN is duly served then it enjoys the prima facie
you have not filed your reply on time.
presumption of correctness. In other words, the taxpayer has
3. The taxpayer may not even do anything about it. the burden of proving that the FAN is wrong. All
Ah, PAN pa lang man yan wala pa akong pakialam presumptions are in favor of the correctness of the tax
diyan. Still, if the taxpayer will not do anything, he assessment unless proven otherwise.
will still be considered in default.
Lets go now to simple cases.
Now, I said earlier that when the taxpayer is in default, the
taxpayer need not worry. What will happen now is that if the CIR vs. Pastor ALT
taxpayer makes the reply, and the CIR or his authorized
representative does not agree, or probably the taxpayer is What happened here is that a criminal complaint was filed
already in default, what will happen now is that the CIR will against the corporation and officers. Nung nagfile sila sa
issue the Final Assessment Notice or the FAN, and DOJ, these corporations, sabi nila, they filed an urgent
formal letter of demand. request for reconsideration and or reinvestigation with the
BIR. Of course the BIR denied this. Wala pa ganing
By the way, before that, are there instances when a PAN is assessment bakit kayo nagarequest for reconsideration. So
not required? Of course, its codal. denied.
1. When the finding of a deficiency tax is the result of When the case went to the Court of Tax appeals, it said, BIR,
a mathematical error on the face of the return. you are wrong, because the criminal complaint is already an
2. When there is a discrepancy between the tax assessment in itself. It has a computation of tax, and of
withheld and the tax remitted by the taxpayer or course the fact that you have filed a criminal complaint, it
remitted by the withholding agent. means you are demanding payment from the taxpayers. Of
course the BIR went to the Supreme Court, raising this issue.
3. When the taxpayer opted to claim a refund of a tax
credit for a taxable period and who was determined The Supreme Court said that not all documents coming from
to have been carried over and actually applied the the BIR containing a computation of tax liability can be
same amount against tax liabilities for the taxable deemed assessments. An assessment contains not only a
quarter computation of tax liabilities but also a demand for payment
within a prescribed period. So dalawa: its a demand for
4. Excise tax payment, and a computation of taxes.
5. When an article purchased or imported by an With respect to criminal actions, or affidavit or complaint,
exempt person has been sold or transferred to non- macomply ba yung requirements? Ano man ang complaint
exempt persons. affidavit natin? Diba its a recital of facts constituting the
crime. It may convey the computation of the tax liability but
FAN or Final letter of demand. Who issues this?
it does not contain a demand for payment. Anyway, thats
The FAN is issued either by the CIR or the duly authorized about it. The Supreme Court said that an affidavit which was
representative of the CIR. What should the FAN contain? executed by Revenue Officers with the tax liability of a
taxpayer and attached to a criminal complaint for tax evasion
The FAN essentially contains two things: cannot be deemed an assessment that can be questioned
1. The demand for payment of taxes before the Court of Tax Appeals.
2. It shall state the facts, the law, the rules and

CIR vs. Caltex
regulations on which the assessment is based,
otherwise the assessment is void. The general rule is that tax assessments are presumed
correct and made in good faith, but this prima facie
What is the significance of this? The FAN is actually a final
presumption does not apply if the tax assessment is utterly
demand letter sent by the BIR for the payment of taxes. If
without proof or without any basis, otherwise known as a
you dont do anything about this, the FAN will become final
naked assessment.
and executory. Iba yung final assessment and final and
executory assessment. Now sabi natin kanina, FAN, the taxpayer must do something
about this otherwise the FAN will become final and
It also signals the time when the penalties and the interest
executory. When the FAN becomes final and executory, the
begin to accrue against the taxpayer.
BIR may now avail of its own remedies to collect the tax
How do you serve the FAN? either administratively or judicially.
[Page 15 of 79]
What should the taxpayer do? The taxpayer should now to its case. The BIR can only inform the taxpayer to submit
contest. Protesta na siya. What is a protest? additional evidence. The BIR cannot demand on what type of
document the taxpayer should submit.
A protest is the act of a taxpayer questioning the validity of
the imposition of the corresponding delinquency increments
for internal revenue taxes as shown in the FAN. Distinguish the two remedies: reconsideration and
reinvestigation.
In other words this is an administrative way of challenging
the FAN of the BIR. Reconsideration Reinvestigation
When should the protest be made?
As to submission No need to submit Required to submit
It must be made within 30 days from receipt of the FAN. of relevant
supporting
What are the two kinds of protest? documents
1. Reconsideration You go to reconsideration if its
a plea for reevaluation of the assessment based on 60-day period to Does not apply Applies
existing records in the BIR. You dont have to submit
submit anything.
Suspension of Request which is
2. Reinvestigation If you avail of reinvestigation, prescriptive granted suspends
its a plea for reevaluation of the assessment on the period running of
basis of newly-discovered evidence, or additional prescriptive period
evidence that the taxpayer intends to present for
reinvestigation. There is a requirement of Period to appeal After recon is filed, 180-day period is
submission of relevant supporting documents. to the CTA CIR has 180 days to reckoned from the
decide on protest. If time of submission of
When should the relevant supporting documents be the CIR does not act relevant supporting
submitted? within 180-day documents.
period, the taxpayer
It must be submitted within 60 days from filing of the may appeal the
protest. File ka ng protest, you have an additional 60 days inaction to the CTA.
within which to submit your relevant supporting documents.
There is a requirement for submission of those documents. This 180-day period is
What will happen if the taxpayer fails to submit those reckoned from the
documents within the required period? time of filing of the
recon.
The FAN will become final and executory and the
government can avail of its remedies for collection of the
taxes. Kailangan niya iassail, kailangan siya magsubmit, that
is a mandatory requirement. January 28, 2016 (JT)
Next question is, what are these relevant supporting [Absent si Shelu.]
documents? Last time we stopped with request for reconsideration and
Under the Rules, these refer to documents necessary to request for reinvestigation. Let us try to review.
support the legal and/or factual basis in disputing the First, the Letter of Authority by now you should be able to
taxpayers assessment. grasp the significance of this LA. It has something to do with
Who determines the supporting documents? the tax audit. After the LA, of course, if the taxpayer does
not agree, the report will be sent back to the BIR then it will
Its the taxpayer who determines the relevant supporting send a Preliminary Assessment Notice (PAN) to the taxpayer.
documents to be submitted to the BIR. And the taxpayer has three choices, it is either he will agree,
Next question is, can the BIR say, Hey taxpayer, can you disagree or ignore the PAN. Theres no problem if the
submit these kinds of documents to us? In other words, can taxpayer will agree because he will just pay the tax. But the
the BIR dictate what kind of documents the taxpayer should moment that he ignores the notice or makes a reply within
submit before the BIR to form part of the relevant supporting 15 days but the BIR does not agree with the reply, a Final
documents? Assessment Notice will be issued by the BIR.
This time the taxpayer should not ignore because if he
Let us look at the case of CIR vs. First Express ignores it, the assessment will become final, executory and
Pawnshop. In effect, the Supreme Court said that the BIR demandable, the government can now exercise its remedies
cannot insist the submission of specific documents because to collect the tax. In case the taxpayer would like to
the taxpayer should be the one to determine what is relevant challenge the FAN, what should he do? The taxpayer should
[Page 16 of 79]
protest. He should do the protest within 30 days from receipt there are several issues involved you have to challenge them
of the FAN. all.
How will the taxpayer do it? Basically there are 2 ways: After the filing of the protest, what happens? Sabi natin
meron tayong 180 days to decide. The BIR will either:
1. Reconsideration: this is just basically a protest
on the basis of the documents already submitted to 1. Agree with the protest or grant it.
the BIR.
2. The BIR will deny the protest wholly or in part.
2. Reinvestigation: this a protest where the What do you do next in case there is denial?
taxpayer will have to submit additional supporting Take note that you will file the protest with the
documents to the BIR in support of his/her defense. CIR or his authorized representative. What will
you do in case of an adverse decision? So
From recon and reinvestigation, the BIR has 180 days to
dalawang tao ito, let us dissect.
decide. The difference is that, when it comes to
reconsideration you begin counting the period from the time If the protest was filed with the authorized
the protest is filed. If it is reinvestigation you reckon the 180 representative and the decision is adverse the
days from the date of submission of the relevant supporting taxpayer has 2 choices: 1) he appeals immediately
documents. When do you submit the relevant supporting to the CTA within 30 days from receipt of the
documents? You submit them within 60 days after the filing decision or 2) elevate the protest to the CIR also 30
of the protest. So para syang may extra, 30 days then 60 days from receipt of the decision, kailangan pa niya
days then you count the 180 days. mag motion for recon? No need na for an MR
because the rule say na appeal na derecho. If you
To whom should the protest be filed? So basically there are 2
appeal to the CIR we call it as an administrative
persons to whom the protest should be filed: 1) Before the
appeal. In this case, hindi na ito panibagong
CIR or 2) his duly authorized representative, so
reconsideration or reinvestigation ha this is already
dalawang tao.
an appeal.
What should be the contents of the protest? You have to
3. The BIR can also not do anything. Meaning
state the nature of your protest, whether it is for
there is inaction of the part of the BIR on the
reconsideration or reinvestigation. Does it matter? Of course
protest of the taxpayer. Ano na ang
it matters. There is a big difference between the two as
mangyayari dyan? If the protest was filed to
discussed previously. If you chose reinvestigation you must
the authorized representative and he failed to
be able to specify in your protest your supporting documents
act within 180 days the taxpayer again has 2
(newly discovered evidence or additional evidence) that you
choices:
are going to submit to the BIR. Take note ha, it is not
necessary that the evidence is newly discovered it is enough 1) appeal immediately to the CTA within 30 days
na it is a document which support your protest. from the lapse of the 180 day period or
What else? You have to put the date of the assessment 2) he will for the decision of the authorized
notice. Apart from the evidentiary documents, you must be representative and then make an administrative
able to cite the facts, law, jurisprudence and the rules and appeal before the CIR.
regulations that is applicable to your case. Yan ang contents
Supposing the taxpayer decides to wait for the
sa protest.
decision of the representative and then he makes
What if you lack one? Let us say nag file ka ng protest and an appeal to the CIR and the CIRs decision is still
the nature is reinvestigation but you did not specify the adverse, he has 30 days to appeal the decision of
documents that you are going to submit, what is the effect? the CIR before the CTA. To be precise CTA in
It is a fatal defect. The assessment will become final and division not en banc.
executory and of course it will also become demandable. And
If the taxpayer makes an administrative appeal and the CIR
you will pay the taxes stated in the assessment.
makes an adverse decision, kailangan pa bang mag motion
What if you protested and there are several issues involved? for recon? It is no longer necessary. Take note that when
For example, tatlong klaseng taxes meron kang income you receive the decision of the CIR you must appeal. What
tax, VAT and DST. Pretty much like the banks. In your will happen if you file a motion for recon? According to the
protest, you must be able to address all issues. Specify rules, the filing of a motion for recon before the CIR does not
anong defect: bakit hindi ka liable for income tax, VAT or toll the 30-day period to appeal. Klaro na sya sa rules.
DST etc. You must identify the issues and argue them
What if the protest was filed with the CIR? The protest was
otherwise if you will not file a protest for a particular tax that
filed with the CIR and there is an adverse decision the next
you want to challenge that particular tax assessment will
step is to appeal to the CTA in division within 30 days from
become final and executory. Pwede pa bang reconsideration
the receipt of the CIR decision. Ganun lang ka simple.
as to that particular tax? NO, because the rule says that if
[Page 17 of 79]
What if there is inaction on the part of the CIR? The CIR pay taxes assessed. There is no payment under protest
does not do anything within that 180-day period. If there is under the NIRC.
no action on the part of the CIR this time the taxpayer has 2
But there are 2 exceptions:
choices:
1. If there are several issues involved and the taxpayer
1) He will immediately appeal to the CTA in division
appealed only a few or some of these issues.
within 30 days from the lapse of the 180-day period
to decide, or 2. If there are several issues in the disputed
assessment and the taxpayer fails to state the facts,
2) He will wait for the decision of the CIR and when he
rules and regulations and jurisprudence to support
receives the decision of the CIR he will file an
some of his issues.
appeal to the CTA in division within 30 days upon
receipt of such decision. As you can see, di ba But if you come to think about it, these exceptions are not
maraming choices ang taxpayer. I think klaro really exceptions to begin with. Because kung hindi mo e-
naman yung rules so you should be able to map out appeal yung isang issue naging final and executory siya. Or if
kung ano siya. you fail to state the facts, rules and regulations and
jurisprudence to support your claim, what is your issue, that
If you notice, the taxpayer is allowed to file his protest
issue or tax assessment will become final and executory di
before the authorized representative of the CIR and if theres
ba?
an adverse decision the taxpayer has an option to appeal
immediately to the CTA. So derecho and pretty much the What is the effect if you fail to protest or appeal to the CTA?
same if there is inaction on the part of the authorized The assessment will become final and executory. The taxes
representative, the taxpayer can appeal to the CTA within 30 under that assessment will become due and demandable and
days from the lapse of the 180-day period. the government may now avail of its own remedies to collect
the taxes. So initially, the protests, yan na ang remedy ng
But the problem here is this: If you look at RA 9282
taxpayer essentially.
(Jurisdiction of the CTA), Section 7 par. 1 and 2 says that
the CTA has exclusive and appellate jurisdiction of the Before we proceed to collection, yung kanina yung sinabi
adverse decision of the CIR. So meaning the CTA will only nating protest2x stuff, that is the administrative remedy.
have jurisdiction over the decision of the CIR. So what is the Lets go now to the judicial remedies. This is now in the CTA
rule now? The rule now expands the meaning of the law. level,
Diba parang na-expand? Actually there are authors who say
na mali man yung bagong regulations, why can you Where should the taxpayer file his appeal if theres an
immediately appeal if it is only a decision of an authorized adverse decision or FDDA? You appeal to the CTA division
representative? But there are some authors who would say within 30 days from the receipt of the CIR or his authorized
na thats valid naman because under the NIRC the CIR can representative as the case may be. What if the CTA in
delegate its authority to make assessments. division renders an adverse decision against the taxpayer?
Motion for recon muna. When will he file the motion for
So which is which? The fact is, right now wala pang desisyon recon before the division? You can file the motion within 15
yan. But in case, I would suggest you follow the rules (RR- days from the receipt of the decision of the division.
18-2013) in the meantime kasi meron nman kayong
principle na the rules and regulations are presumed valid After that, what happens? What if the CTA in division
until annulled diba. So wag nyo nalang piliti. Another that resolves the motion adverse against the taxpayer? The next
would counter that though is the principle of exhaustion of step is for the taxpayer to file a petition for review, not an
administrative remedies, di ba? So before you appeal you go appeal, before the CTA en banc. How long? (Check your
first to the CIR so the agency concerned will be able to books daw, I checked RA 9282 it doesnt say the period)
correct itself if there are mistakes to begin with. If still the decision is adverse (CTA en banc), you file a
What if sa bar exam? You follow the rules of the BIR as of petition for review on certiorari before the SC within 15 days
the moment. What is important is that you are allowed to do from the receipt of the adverse decision (Rule 45 of the
that, there is an existing rule and here is the law you just Rules on Civil Procedure). Can it be extended? Extension for
provide an explanation and be direct and concise. 30 days if you file before the lapse of the 15-day period and
for meritorious reasons.
What if the final decision of the CIR or his authorized
representative, technically called the final decision on a If the SC denies your petition for review, mag-MR ka pa and
disputed assessment or the FDDA. This FDDA must contain then that decision will become final and executory and the
the facts, law and jurisprudence on which the decision is government may now avail of its remedies to collect the tax
based otherwise the decision is void pretty much the
decisions we have in ordinary courts.
REMEDIES OF THE STATE
Does the taxpayer need to pay the tax when he protests?
The general rule is that there is no need for him to
[Page 18 of 79]
When the assessment is already final, demandable and follows the 5 years whether ordinary or
executory, the assessment will contain a certain period within extraordinary. For purposes of our discussion and
which the taxpayer should pay the taxes. Kung magbayad answering the questions you use the 5-year period.
siya within that period then okay lang, including the
When do you begin counting the prescriptive period? Section
penalties, surcharges and interests. But what happens if the
222 letter c says: Any internal revenue tax which has been
taxpayer fails to pay within the given period? Lets say 30
assessed within the period of limitation as prescribed in
days, you are given 30 days within which to pay the taxes.
paragraph (a) hereof may be collected by distraint or levy or
The taxpayer now becomes a delinquent taxpayer. There is
by a proceeding in court within five (5) years following the
delinquency taxes. The tax is considered delinquent where
assessment of the tax. So there must be an assessment in
the assessment for the deficiency tax has become final,
the first place. There is an assessment for purpose of the
executory and demandable.
running of the prescriptive period to collect the tax upon the
receipt of the taxpayers assessment. In other words, from
Section 203. Period of Limitation Upon Assessment and the date of service of the Final Assessment or the FAN.
Collection. Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years after What if theres no prior assessment made? According to
the last day prescribed by law for the filing of the return, and Casasola, the 3 year prescriptive period would start from the
no proceeding in court without assessment for the collection date of the filing of return or the deadline, whichever comes
of such taxes shall be begun after the expiration of such later.
period: Provided, That in a case where a return is filed
When can the prescriptive period for collection be
beyond the period prescribed by law, the three (3)-year
interrupted? You go back to Section 223 it applies to both
period shall be counted from the day the return was filed.
assessment and collection of taxes.
For purposes of this Section, a return filed before the last
day prescribed by law for the filing thereof shall be
considered as filed on such last day. Section 223. Suspension of Running of Statute of
Limitations. The running of the Statute of Limitations
provided in Sections 203 and 222 on the making of
Section 222. Exceptions as to Period of Limitation of
assessment and the beginning of distraint or levy a
Assessment and Collection of Taxes.
proceeding in court for collection, in respect of any
xxx deficiency, shall be suspended for the period during which
the Commissioner is prohibited from making the assessment
(d) Any internal revenue tax, which has been assessed within or beginning distraint or levy or a proceeding in court and for
the period agreed upon as provided in paragraph (b) sixty (60) days thereafter; when the taxpayer requests for a
hereinabove, may be collected by distraint or levy or by a reinvestigation which is granted by the Commissioner; when
proceeding in court within the period agreed upon in writing the taxpayer cannot be located in the address given by him
before the expiration of the five (5) -year period. The period in the return filed upon which a tax is being assessed or
so agreed upon may be extended by subsequent written collected: Provided, that, if the taxpayer informs the
agreements made before the expiration of the period Commissioner of any change in address, the running of the
previously agreed upon. Statute of Limitations will not be suspended; when the
warrant of distraint or levy is duly served upon the taxpayer,
The next question is, what is the prescriptive period for the his authorized representative, or a member of his household
collection of taxes? There are actually 2 views for this matter with sufficient discretion, and no property could be located;
because if you read Section 203 and 222 (NIRC) magulo siya and when the taxpayer is out of the Philippines.
eh. Like if you read Section 203 is there anything there that
has something to do with collection? Di ba assessment lang? So lets outline:
But in Section 222 its very clear, 5 years.
1. The Commissioner is prohibited from making the
1. The first rule is that the period for collection assessment or beginning distraint or levy or a
prescribes in 5 years as provided in 222 simply proceeding in court and for sixty (60) days
because there is nothing 203 that would refer to thereafter.
collection of taxes.
2. When the taxpayer requests for a reinvestigation
2. The other view is that the period for collection which is granted by the Commissioner. Please take
prescribes in 3 years under ordinary circumstances note that the request for reinvestigation must be
or 5 years under extraordinary circumstances. granted by the CIR before the prescriptive period
Meaning the 5 year period refers only when there is for collection (5 years) will lapse.
a filing of a false or fraudulent return or failure to
file a return. So which is which again? I consulted When do you know when its granted? You will
Dean about this matter. (Sir informs Dean that he know if the reinvestigation is granted when there is
read quite a number of books about this). Sabi ni another assessment issued by the Commissioner.
Dean follow Mamalateo. As per Mamalateo, he On top of that, pag sa reinvestigation to validly
[Page 19 of 79]
interrupt the prescriptive period you read the case

of BPI vs. CIR, GR No. 13736 (must-read case Section 218. Injunction not Available to Restrain Collection
daw). Who has the burden of proving that the of Tax. - No court shall have the authority to grant an
reinvestigation is granted? The burden of proving injunction to restrain the collection of any national internal
falls before the BIR. revenue tax, fee or charge imposed by this Code.
3. Next is when the taxpayer cannot be located in the If the government has already started taking the
address given by him in the return filed upon which mechanisms for the collection of taxes, the GR is that it
a tax is being assessed or collected: Provided, that, cannot be enjoined by any court, RTC etc. Exception is
if the taxpayer informs the Commissioner of any under the CTA. The CTA has the authority to grant
change in address, the running of the Statute of injunction to restrain the collection of any internal revenue
Limitations will not be suspended. charge (under RA 9282 but I tried to look its not there).
4. When the warrant of distraint or levy is duly served What are the requisites for the grant of this injunction?
upon the taxpayer, his authorized representative, or There are 3 essential requisites:
a member of his household with sufficient
discretion, and no property could be located. Take 1) There must been a valid appeal filed before the CTA
note that the requirement is service, gihatag sa imo from a decision of the CIR.
unya gidawat nimo. 2) In the opinion of the CTA the collection may
Supposing a warrant of distraint and levy was given jeopardize the interests of the government and/or
and my properties were sold at public auction but the taxpayer. Parang mahirap isipin na ma-
the proceeds of the sale was not enough to cover jeopardize ang interests sa government in the
my tax liabilities. Kasi kulang the BIR can serve collection of taxes. Sa taxpayer madali lang like
another warrant of distraint and levy but this time it when the liability is really big or the assessment is
is already beyond the prescriptive period. Can I defective.
raise the defense of prescription? According to the 3) The taxpayer posts a bond twice the amount of the
BPI case earlier that I mentioned the SC said that it taxes being claimed. So dako gihapon na siya.
is not essential that the warrant of distraint or levy
be fully executed so it can suspend the prescriptive Lets go now to the tax collection proper. You read Section
period for tax collection theres a big difference 205 of the NIRC.
between the service of the warrant of distraint or
levy from the execution itself. Section 205. Remedies for the Collection of Delinquent
Taxes. The civil remedies for the collection of internal
When you talk about the execution of distraint or
revenue taxes, fees or charges, and any increment thereto
levy, you refer to the sale. It is enough that the
resulting from delinquency shall be:
warrant is served and it is enough that the
proceedings have validly begun that their execution (a) By distraint of goods, chattels, or effects, and other
have not been suspended by reason of the personal property of whatever character, including stocks
voluntary desistance of the BIR. When does the and other securities, debts, credits, bank accounts and
distraint or levy begin? It begins from the issuance interest in and rights to personal property, and by levy upon
of warrant and service thereof to the taxpayer. So real property and interest in rights to real property; and
there must be valid service. This is very important
(b) By civil or criminal action.
because non-receipt of any notice a good defense
for a taxpayer. Either of these remedies or both simultaneously may be
pursued in the discretion of the authorities charged with the
5. Lastly, when the taxpayer is out of the Philippines.
collection of such taxes: Provided, however, That the
Take note that this suspension of the prescriptive period remedies of distraint and levy shall not be availed of where
applies to both ordinary and extraordinary cases of the the amount of tax involve is not more than One hundred
collection of taxes. pesos (P100).
The next in your outline is the no injunction rule. Parang The judgment in the criminal case shall not only impose the
hindi ko kasi alam kung saan siya ilagay so I placed it after penalty but shall also order payment of the taxes subject of
the interruption of the prescriptive period. Because you can the criminal case as finally decided by the Commissioner.
always go to court and get an injunction. Make no mistake
The Bureau of Internal Revenue shall advance the amounts
about it when you go to practice injunction is very important.
needed to defray costs of collection by means of civil or
(Review on injunction sa Prov Rem )
criminal action, including the preservation or transportation
Can you get an injunction when it comes to taxes? The of personal property distrained and the advertisement and
general rule is Section 218. sale thereof, as well as of real property and improvements
thereon.
[Page 20 of 79]
You will notice that there are 4 civil remedies available. Preventive Embargo. This prevents the
taxpayer from disposing the property. If the
A. Distraint of personal properties;
taxpayer disobeys or disposes of his personal
B. Levy of real properties; properties despite the constructive distraint he
can be held criminally liable under the NIRC. It
C. Civil action; and is a criminal offense.
D. Criminal action. 2. Actual Distraint: Section 207: [Note: The
The first 2 civil remedies are distraint of personal properties questions raised by Atty. Donalvo can be
and levy of real properties fall under the summary remedies answered by the provision such as who are the
for tax collection. They are specifically outlined in Section officials who can exercise distraint.] This
207 of the NIRC. distraint can be lifted provided that a request is
filed by the taxpayer and a bond is posted.
DISTRAINT
Let us start with distraint. How do you understand distraint? Section 207. Summary Remedies.
It is the seizure of someone's property in order to obtain (A) Distraint of Personal Property. Upon the
payment of rent or other money owed. So distraint is strictly failure of the person owing any delinquent tax
about personal property. or delinquent revenue to pay the same at the
What are the 2 kinds of distraint? time required, the Commissioner or his duly
authorized representative, if the amount
1. Constructive Distraint: Section 206 NIRC. involved is in excess of One million pesos
(P1,000,000), or the Revenue District Officer,
Section 206. Constructive Distraint of the if the amount involved is One million pesos
Property of A Taxpayer. - To safeguard the (P1,000,000) or less, shall seize and distraint
interest of the Government, the Commissioner any goods, chattels or effects, and the
may place under constructive distraint the personal property, including stocks and other
property of a delinquent taxpayer or any securities, debts, credits, bank accounts, and
taxpayer who, in his opinion, is retiring from interests in and rights to personal property of
any business subject to tax, or is intending to such persons ;in sufficient quantity to satisfy
leave the Philippines or to remove his the tax, or charge, together with any
property therefrom or to hide or conceal his increment thereto incident to delinquency,
property or to perform any act tending to and the expenses of the distraint and the cost
obstruct the proceedings for collecting the tax of the subsequent sale.
due or which may be due from him.
A report on the distraint shall, within ten (10)
The constructive distraint of personal property days from receipt of the warrant, be
shall be affected by requiring the taxpayer or submitted by the distraining officer to the
any person having possession or control of Revenue District Officer, and to the Revenue
such property to sign a receipt covering the Regional Director: Provided, That the
property distrained and obligate himself to Commissioner or his duly authorized
preserve the same intact and unaltered and representative shall, subject to rules and
not to dispose of the same ;in any manner regulations promulgated by the Secretary of
whatever, without the express authority of the Finance, upon recommendation of the
Commissioner. Commissioner, have the power to lift such
order of distraint: Provided, further, That a
In case the taxpayer or the person having the
consolidated report by the Revenue Regional
possession and control of the property sought
Director may be required by the
to be placed under constructive distraint
Commissioner as often as necessary.
refuses or fails to sign the receipt herein
referred to, the revenue officer effecting the
constructive distraint shall proceed to prepare Let us go now to the procedure. What are the types of
a list of such property and, in the presence of properties under the NIRC which can be the subject to an
two (2) witnessed, leave a copy thereof in the actual distraint? There are 4:
premises where the property distrained is 1) Personal properties in general;
located, after which the said property shall be
deemed to have been placed under 2) Stocks and securities;
constructive distraint. 3) Debts and credits; and
So the properties are not actually seized. 4) Bank accounts

Another term for constructive distraint is
[Page 21 of 79]
How do you effect a distraint of property in general? Otherwise, the sale will proceed. At the time and place fixed
in the notice, the revenue officer shall sell the goods,
This is Section 208. The seizure agent shall serve a warrant
chattels, or effects, or other personal property, including
of distraint and levy. He will prepare a list of properties and
stocks and other securities so distrained, at public auction, to
leave a copy of such with the taxpayer. He will also indicate
the highest bidder for cash, or with the approval of the
there the time and place of the sale. This is the most
Commissioner, through duly licensed commodity or stock
important. If this is not indicated in the warrant then the
exchanges.
seizure is void.
What if there are no bidders? The government will purchase
What about for the stocks and securities to whom shall the
the properties and the properties so purchased may be
warrant be served? Stocks and other securities shall be
resold by the Commissioner or his deputy, subject to the
distrained by serving a copy of the warrant of distraint upon
rules and regulations prescribed by the Secretary of Finance,
the taxpayer and upon the president, manager, treasurer or
the net proceeds therefrom shall be remitted to the National
other responsible officer of the corporation, company or
Treasury and accounted for as internal revenue.
association, which issued the said stocks or securities. The
taxpayer must also receive the warrant. So both the
corporate officer and the taxpayer shall be served with the
warrant. Feb 1, 2016 (DJG)
What about for debts and credits? Debts and credits shall be LEVY OF REAL PROPERTY
distrained by leaving with the person owing the debts or How do you define levy?
having in his possession or under his control such credits, or
with his agent, a copy of the warrant of distraint. The Levy is an act of collecting the tax by means of seizing real
warrant of distraint shall be sufficient authority to the person properties in order to be sold at a public auction and the
owning the debts or having in his possession or under his proceeds be used to satisfy the assessed tax. So it concerns
control any credits belonging to the taxpayer to pay to the of real property.
Commissioner the amount of such debts or credits.
This is found under Section 207(B).
For bank accounts? Bank accounts shall be garnished by
serving a warrant of garnishment upon the taxpayer and Section 207 (B). After the expiration of the time required
upon the president, manager, treasurer or other responsible to pay the delinquent tax or delinquent revenue as
officer of the bank. Upon receipt of the warrant of prescribed in this Section, real property may be levied upon,
garnishment, the bank shall turn over to the Commissioner before, simultaneously or after the distraint of personal
so much of the bank accounts as may be sufficient to satisfy property belonging to the delinquent. xxx
the claim of the Government.
The first 2, actual distraint or levy yan and the last 2 is So first things first. Take note that when we talk about the
garnishment. In the case of garnishment once the proper remedies of the government there is no such thing as
persons receive the warrant they shall deliver to the BIR the hierarchy of remedies. That means the government can avail
debts and credits or the bank accounts. When you deliver of these remedies either successively or simultaneously. wala
the bank accounts to the BIR is this a violation of the bank tayong problema dyan. Kung gusto ng government mag avail
secrecy law? [Note: No, because there is no disclosure being sabay-sabay, pwede siya. Even when you look at Section
made by the bank. But this is only an opinion. Look for the 207, the remedy may be availed of before, simultaneously
reason why NO daw] or after the distraint of personal property.
So tapos na tayo mag-distraint and garnishment, ayaw pa rin Now, how does the BIR do the levy?
magbayad ng taxpayer. What will happen next? What will the The BIR will issue an authenticated certificate. So papeles pa
government do? The government will now proceed to the din siya.
sale. This is a public auction and shall not be less than 20
days after notice. Notice here means not less than two (2) What are the contents of this certificate?
public places in the municipality or city where the distraint is We have:
made, specifying; the time and place of sale and the articles
distrained. One mandatory place of posting such notice shall a) Name of the taxpayer;
be at the Office of the Mayor of the city or municipality in
b) Amounts of the tax;
which the property is distrained.
c) Penalty due from him; and
Can the properties distrained be released prior to the sale?
Section 210 says that if at any time prior to the d) Description of the property sought to be levied.
consummation of the sale all proper taxes and charges are
What is the extent or scope of this certificate?
paid to the officer conducting the sale, the goods or effects
distrained shall be restored to the owner. Said certificate shall operate with the force of a legal
execution throughout the Philippines.
[Page 22 of 79]
The authenticated certificate will be mailed to or served to taxes, penalties and interest and of course the expenses.
entities: This is what is called the right of pre-emption, the right of
the taxpayer to pre-empt the sale.
a) Register of deed of the province or city where the
property is located; What if the taxpayer will not pay?
b) The delinquent taxpayer; If he does not do so, the sale shall proceed and shall be held
either:
c) If absent from the Philippines, to his agent or manager
of the business in respect to which the liability arose; or 1. at the main entrance of the municipal building or
city hall; or
d) If there be none, to the occupant of the property in
question. 2. on the premises to be sold.
The process server will report back to the BIR kung ano ang After the sale, what will happen? Second paragraph of
ginawa niya, san niya binigay. Section 213.
Next is Advertisement.
Within five (5) days after the sale, a return by the
SEC. 213. Advertisement and Sale. - Within twenty (20) distraining or levying officer of the proceedings shall be
days after levy, the officer conducting the proceedings shall entered upon the records of the Revenue Collection Officer,
proceed to advertise the property or a usable portion thereof the Revenue District officer and the Revenue Regional
as may be necessary to satisfy the claim and cost of sale; Director. The Revenue Collection Officer, in consultation with
and such advertisement shall cover a period of a least thirty the Revenue district Officer, shall then make out and deliver
(30) days. xxx to the purchaser a certificate from his records xxx
Section 213 talks about the ad for sale. It happens, sabi ng
batas, 20 days after the levy. When you come to think about Now, a return of proceedings will be made and then after, a
it, levy is just serving of notices of the certificate issued by certificate of sale will be issued which will be recorded in the
the BIR and the advertisement is for the entire or portion of Register of deeds. This is very important because this marks
the property just enough to satisfy the claim of the the start of the one(1) year redemption period. The excess
government. At the end of the day, if there be any excess, it will be returned to the owner of the property.
will be given back to the taxpayer. When the property is sold to the winning bidder, what
There are two requirements for the advertisement: is the remedy of the taxpayer here?
1. Posting a notice at the main entrance of the Section 214.

municipal building or city hall and in public and
conspicuous place in the barrio or district in which SEC. 214. Redemption of Property Sold. - Within one
the real estate lies; and (1) year from the date of sale, the delinquent taxpayer, or
any one for him, shall have the right of paying to the
2. Publication once a week for three (3) weeks in a Revenue District Officer the amount of the public taxes,
newspaper of general circulation in the municipality penalties, and interest thereon from the date of delinquency
or city where the property is located. to the date of sale, together with interest on said purchase
How long will the ad go? price at the rate of fifteen percent (15%) per annum from
the date of purchase to the date of redemption, and such
Such advertisement shall cover a period of a least thirty (30) payment shall entitle the person paying to the delivery of
days. the certificate issued to the purchaser and a certificate from
What will the ad contain? the said Revenue District Officer that he has thus redeemed
the property, and the Revenue District Officer shall forthwith
The advertisement shall contain; pay over to the purchaser the amount by which such
property has thus been redeemed, and said property
1. a statement of the amount of taxes and penalties so
thereafter shall be free form the lien of such taxes and
due;
penalties.
2. the time and place of sale;
The owner shall not, however, be deprived of the possession
3. the name of the taxpayer against whom taxes are of the said property and shall be entitled to the rents and
levied; and other income thereof until the expiration of the time allowed
for its redemption.
4. a short description of the property to be sold.
Can the taxpayer stop the sale? Within what period may you redeem? Within one (1)
year from the date of sale.
Yes. At any time before the day fixed for the sale, the
taxpayer may discontinue all proceedings by paying the Who may redeem? Its either the delinquent taxpayer, or
[Page 23 of 79]
any one for hi. order from a competent court.

Where will you pay the redemption price? To the Within one (1) year from the date of such forfeiture, the
Revenue District Officer (RDO) the amount of the public taxpayer, or any one for him may redeem said property by
taxes, penalties, and interest thereon from the date of paying to the Commissioner or the latter's Revenue
delinquency to the date of sale, together with interest on Collection Officer the full amount of the taxes and penalties,
said purchase price at the rate of fifteen percent (15%) per together with interest thereon and the costs of sale, but if
annum from the date of purchase to the date of redemption. the property be not thus redeemed, the forfeiture shall
become absolute.
What is the effect of redemption?
You are entitled to two things: When is there forfeiture of property?
a) The certificate of sale issued to the purchaser; and 1. When there is no bidder at all; or
b) A certificate of redemption from the said Revenue 2. If the highest bid is for an amount insufficient to
District Officer that you have redeemed the property. pay the taxes, penalties and costs.
Who has the right to possess the property? If forfeited, what is the remedy of the taxpayer?
Habang nandiyan pa ang redemption period, the buyers If forfeited, it is as if the government bought it for itself and
right is still inchoate and therefore the owner or the there still is the one(1) year redemption period. If however
possessor of the property is the real owner the property until the taxpayer fails to pay, the title will be consolidated and
the lapse of the redemption period. the property will be owned by the government.
What happens if the owner fails to redeem? What will the government do with the property?
The ownership of the property will be consolidated and a
final deed of sale will be issued in favor of the buyer who will Section 216. Resale of Real Estate Taken for Taxes.
thereafter have the full ownership of the property. The Commissioner shall have charge of any real estate
obtained by the Government of the Philippines in payment
or satisfaction of taxes, penalties or costs arising under this
SEC. 202. Final Deed to Purchaser. - In case the
Code or in compromise or any adjustment of any claim
taxpayer shall not redeem the property as herein provided
therefor; and said Commissioner may, upon giving of not
the Revenue District Officer shall, as grantor, execute a
less twenty (20) days notice, sell and dispose of the same at
deed conveying to the purchaser so much of the property as
public auction, or with the prior approval of the Secretary of
has been sold, free from all liens of any kind whatsoever,
Finance, dispose of the same at private sale. In either case
and the deed shall succintly recite all the proceedings upon
the proceeds of the sale shall be deposited with the National
which the validity of the sale depends.
Treasury, and an accounting of the same shall be rendered
to the Chairman of the Commission of Audit.
So the assumption there is that there is a bidder. But what
about if there are no bidders?
In other words, pwede ibenta uli.
In normal courts, what happens is that mag bidding lanag
Under existing rules, there must be public auction
sila uli. But in this case, when we talk about taxation, the
first.
government will have the right to forfeit the property. Paano
ba yan? It is just a declaration by the government that the If the bidding fails again, this is the time the BIR will
property is thereby forfeited. There is no need for a court enter into a negotiated sale.
order.
Take note that these remedies of levy or distraint we
discussed are summary remedies. But there are also judicial
SEC. 215. Forfeiture to Government for Want of
levy and judicial distraint.
Bidder. - In case there is no bidder for real property
exposed for sale as herein above provided or if the highest This is where the BIR shall avail of court processes. Then the
bid is for an amount insufficient to pay the taxes, penalties court will render a decision in favor of the BIR. Part of the
and costs, the Internal Revenue Officer conducting the sale execution process, you apply Section 39 (Rule?)
shall declare the property forfeited to the Government in
satisfaction of the claim in question and within two (2) days What if nag-distraint or levy, then public auction but
thereafter, shall make a return of his proceedings and the still not enough?
forfeiture which shall be spread upon the records of his
office. It shall be the duty of the Register of Deeds SEC. 217. The remedy by distraint of personal property and
concerned, upon registration with his office of any such levy on realty may be repeated if necessary until the full
declaration of forfeiture, to transfer the title of the property amount due, including all expenses, is collected.
forfeited to the Government without the necessity of an
So walang limit. As much as needed for the satisfaction of
[Page 24 of 79]
the tax. 3) A criminal action may be executed along with the other
modes of collection.
ENFORCEMENT OF TAX LIEN
4) Filing of criminal action is not an implied assessment by
What is tax lien?
the CIR.
A tax lien is a legal claim or charge to the property whether
5) Subsequent payment of tax does not extinguish the
real or personal as a security for a tax obligation. Take note
taxpayers criminal liability.
that this lien is available to third persons if the same is
registered in the Registry of deeds of the province or city COMPROMISE
where the property of the taxpayer is situated or located.
If the decision rendered by the court is already final
What is the coverage? and executory, what is the remedy?
Personal and real property. Remedy of compromise.
What are the tax liens under the NIRC?
SEC. 204. Authority of the Commissioner to
Compromise, Abate and Refund or Credit Taxes. - The
SEC. 219. Nature and Extent of Tax Lien. - If any
Commissioner may -
person, corporation, partnership, joint-account (cuentas en
participacion), association or insurance company liable to (A) Compromise the payment of any internal revenue tax,
pay an internal revenue tax, neglects or refuses to pay the when:
same after demand, the amount shall be a lien in favor of
(1) A reasonable doubt as to the validity of the claim against
the Government of the Philippines from the time when the
the taxpayer exists; or
assessment was made by the Commissioner until paid, with
interests, penalties, and costs that may accrue in addition (2) The financial position of the taxpayer demonstrates a
thereto upon all property and rights to property belonging to clear inability to pay the assessed tax. xxx
the taxpayer:
Provided, That this lien shall not be valid against any Compromise is a civil construct that is encouraged even in
mortgagee, purchaser or judgment creditor until notice of the area of taxation.
such lien shall be filed by the Commissioner in the office of Can all taxes be subject to a compromise? NO. The
the Register of Deeds of the province or city where the following are not subject:
property of the taxpayer is situated or located.
1) Withholding tax cases, unless the applicant-taxpayer
So kanina we are talking about administrative and summary invokes provisions of law that cast doubt on the
remedies. Right now, we have judicial actions or remedies: taxpayers obligation to withhold;
civil or criminal. 2) Criminal tax fraud cases confirmed as such by the
CIR or his duly authorized representative;
SEC. 220. Form and Mode of Proceeding in Actions
Arising under this Code. - Civil and criminal actions and 3) Criminal violations already filed in court;
proceedings instituted in behalf of the Government under 4) Cases where final reports of reinvestigation or
the authority of this Code or other law enforced by the reconsideration have been issued resulting to
Bureau of Internal Revenue shall be brought in the name of reduction in the original assessment;
the Government of the Philippines and shall be conducted by
legal officers of the Bureau of Internal Revenue but no civil 5) Cases which become final and executory after final
or criminal action for the recovery of taxes or the judgment of a court, where compromise is
enforcement of any fine, penalty or forfeiture under this requested on the ground of doubtful validity of the
Code shall be filed in court without the approval of the assessment; and
Commissioner. 6) Estate tax cases.
Jurisdiction for civil and criminal cases: the Court of What may be compromised?
Tax Appeals has original jurisdiction over civil case where the 1) Delinquent accounts;
principal amount of taxes and fees (exclude charges and
penalties) as at least one(1) million pesos. If below one (1) 2) Pending administrative protest after issuance of
million, we go to the Regular courts and apply BP 129. Final Assessment Notice (FAN)
Principles for criminal cases: 3) Civil cases being disputed before courts;
1) Tax assessment is not a requirement for the filing of a 4) Collection cases filed in courts;
criminal action. 5) Criminal violations other than those already filed in
2) A criminal action is not a necessity(?). court or involving criminal tax fraud.
[Page 25 of 79]
What are the grounds? What is financial incapacity?

1) Doubtful validity of Assessment: A reasonable doubt It means that the financial position of the taxpayer
as to the validity of the claim against the taxpayer demonstrates a clear inability to pay the assessed tax.
exists; or
What are the grounds for denial?
2) Financial Incapacity: The financial position of the
1) The taxpayer has an existing tax credit certificate;
taxpayer demonstrates a clear inability to pay the
assessed tax. 2) Those with pending tax refunds or tax credits;
When is there a Doubtful validity of Assessment? 3) An *** agreement which would change the
taxpayers financial standing; and
The Revenue Regulations actually provides for several
instances: 4) Other present circumstances.
1) The delinquent account or disputed assessments is No offer of compromise shall be entertained until and unless
one resulting from a jeopardy of assessment; the taxpayers signs a waiver of secrecy of bank deposits.
This is mandatory.
2) The assessment seems to be arbitrary in nature,
appearing to be based on presumptions and there is How about the compromise amount?
reason to believe that it is lacking in legal and/or
factual basis; It will depend on the ground.
3) The taxpayer failed to file an administrative protest Section 204. xxx

on account of the alleged failure to receive notice of
assessment and there is reason to believe that the The compromise settlement of any tax liability shall be
assessment is lacking in legal and/or factual basis; subject to the following minimum amounts:
4) The taxpayer failed to file a request for For cases of financial incapacity, a minimum compromise
reinvestigation/reconsideration within 30 days from rate equivalent to ten percent (10%) of the basic assessed
receipt of FAN and there is reason to believe that tax; and
the assessment is lacking in legal and/or factual For other cases, a minimum compromise rate equivalent to
basis; forty percent (40%) of the basic assessed tax.
5) The taxpayer failed to elevate to the CTA an Where the basic tax involved exceeds One million pesos
adverse decision of the Commissioner, or his (P1,000.000) or where the settlement offered is less than
authorized representative, in some cases, within 30 the prescribed minimum rates, the compromise shall be
days from receipt thereof and there is reason to subject to the approval of the Evaluation Board which shall
believe that the assessment is lacking in legal be composed of the Commissioner and the four (4) Deputy
and/or factual basis; and Commissioners. xxx
6) Assessments made bases on the best evidence
obtainable rule and there is reason to believe that
the same can be disputed by sufficient and
ABATEMENT
competent evidence. *Sir Stopped here*
What is abatement? Abatement is the diminution or
7) *Additional instances under Casasola:*
cancellation of the amount of tax imposed. It has two
8) The assessments were issued on or after Jan. 1 grounds:
1998, where the demand notice allegedly failed to
1) The tax or any portion thereof appears to be
comply with the formalities prescribes under Section
unjustly or excessively assessed; or
228 of the NIRC;
2) The administration and collection costs involved do
9) The assessment was issued within the prescriptive
not justify the collection of the amount due.
period for assessment as extended by the
taxpayers execution of Waiver of the Statute of
Limitation the validity or authenticity of which is Compromise Abatement
being questioned or at issue and there is strong
reason to believe and evidence to prove that it is As to effect compromise is the whereas abatement
reduction of tax is the cancellation of
not authentic; or
liability tax liability
10) The assessment is based on an issue where a court
of competent jurisdiction made an adverse decision As to authority it is the the CIR, the whereas the CIR has
against BIR, but for which the SC has not decided National Evaluation the sole authority to
upon with finality. Board(NEB) or the abate a tax liability
Regional Evaluation
[Page 26 of 79]
Board(REB) which 2. The BIR will issue a Tax Credit Certificate (TCC).
are authorized to We will discuss more about that later on.
enter into a
compromise What is the Nature of Tax Refunds?
As the law/jurisprudence would say, Tax Refunds are in the
As to grounds the grounds for whereas, abatement
nature of tax exemptions.
compromise are has the following
grounds: (1) the tax Going from that there are concepts that are involved:
(1) a reasonable or any portion
doubt as to the thereof appears to 1. Construed strictly against the taxpayer and in favor
validity of the claim be unjustly or of the government;
against the taxpayer excessively
exists; or assessed; or (2) the 2. It is incumbent upon the taxpayer to prove his
(2) the financial administration and claims for refund. He must be able to show that
position of the collection costs there is a law authorizing refund;
taxpayer involved do not
demonstrates a justify the collection 3. He must be able to prove that he is really entitled to
clear inability to pay of the amount due. the refund of taxes. The facts to the law to the
the assessed tax; facts.
Philippine Phosphate vs. CIR GR No. 141973: The

general rule is that claimants of tax refunds bear the burden
February 4, 2016 (AL) of proving the factual basis of their claims. This is because
We all know the mechanics, the distinctions between tax refunds are in the nature of tax exemptions, the statutes
compromise and abatement. We also know who are those of which are construed strictissimi juris against the taxpayer
persons authorized to grant a compromise and who is the and liberally in favor of the taxing authority. Taxes are the
officer authorized to grant abatement. This type of remedy, lifeblood of the nation, therefore statutes that allow
this is TAX REFUNDS and TAX CREDITS. exemptions are construed strictly against the grantee and
liberally in favor of the government
What is a TAX REFUND?
Tax Refund in the context of NIRC remedies is the return to So strict construction. Basically that is the essence of the
the taxpayer of taxes. Why? Because he has erroneously decision there.
paid the taxes because: In CIR vs. Fortune Tobacco however, the SC actually
1. He is exempted by law qualifies the strict interpretation of the tax refund provision.
Meron tayong strict interpretation, meaning you strictly
2. He has erroneously paid the same believing that he construed it against taxpayer.
is subject to tax
But in the case of Fortune Tobacco, baliktad. They did not
3. The collection of the BIR in its belief that there is a apply the provisions on tax exemption. Rather ang sabi ng
law that authorizes the collection. Meaning the BIR SC dito:
made a mistake in collecting
4. The BIR collected more than that it is allowed by From FT: A claim for tax refund may be based on statutes
law. granting tax exemption or tax refund. In such case, the rule
of strict interpretation against the taxpayer is applicable as
So those are the 4 instances wherein a tax refund/tax credit the claim for refund partakes of the nature of an exemption,
may be available to the taxpayer. a legislative grace, which cannot be allowed unless granted
Is a TAX REFUND the same with TAX CREDIT? Are they the in the most explicit and categorical language. The taxpayer
same? must show that the legislature intended to exempt him from
the tax by words too plain to be mistaken.
In terms of the effect, essentially they are the same. Because
it entails the return of taxes that were wrongfully paid by the Tax refunds (or tax credits), on the other hand, are not
taxpayer or wrongfully collected by the BIR. So the same founded principally on legislative grace but on the legal
effect, but they differ on the manner of the return. When you principle which underlies all quasi-contracts abhorring a
say tax refund there is an actual return of the money. Iuli sa persons unjust enrichment at the expense of another.The
imo ang kwarta, dawat ka ug kwarta. Whereas in tax credit dynamic of erroneous payment of tax fits to a tee the
normally you will either: prototypic quasi-contract, solutio indebiti, which covers not
only mistake in fact but also mistake in law.
1. apply it to the next taxable year depending on what
type of tax credit that you have; or The tax refunds may be based on statutes granting tax
exemption in such a case if your tax refund is based on a
[Page 27 of 79]
statute or a provision which provides for a tax exemption you is a discrepancy between the income taxes paid and
apply the strict interpretation against the taxpayer principle. also the taxes due as per Final Adjustment Return
or annual income tax return? SO its either:
But if you come to think about it not all Tax refunds are
actually based on law because they are founded on a. magbayad siya ng tax or;
erroneous collection of the taxes. There is a lack of law
b. carry-over niya whatever excess payments
imposing such tax, walang tax law but the BIR collected that
will be carried over to the next taxable
so ano yan siya on the part of the government? On the part
quarter. Meaning its a credit. It will reduce
of the government, because there is no tax law involved
the tax liability of the corporation; and
there is unjust enrichment. In other words, the government
lastly
is not exempt from this so-called solutio indebiti, payment by
mistake, mistake of fact, mistake of law. The government is c. the taxpayer may ask for a tax refund or
not exempt from that provision so that is why the the issuance of a TCC (Tax Credit
government has to return to the taxpayer whatever they duly Certificate)
received by virtue of the wrongful collection of taxes. In such
a case, in case the ground for refund is actually the lack of Those are the options available to the taxpayers.
law, you apply the general rule on interpretation of tax law Who has the option? Of course the option is with
which is: The tax law shall be construed strictly against the the taxpayer. The taxpayer must indicate in his
government and in favor of the tax payer. income tax return whether or not he will carry over
the excess taxes paid or make a claim for refund.
What are the legal basis of tax refund? Where can we
find this in our NIRC? When some of the tax refund or tax Next, one thing we have to know about this section
credit (isahin ko nalang) are found in different portions of the 76 is, I dont want to call it this way, pero parang
NIRC. forever doctrine. Once you have chosen the
option to carry over you cannot convert it later on
1. For one we have in income taxation, Section 76: to a tax refund. Inassociate ko nalang sya sa
forever. There was one student nilagay niya
SEC. 76. Final Adjustment Return. Every forever, Nilagyan ko ng circle WALANG FOREVER
corporation liable to tax under Section 27 shall file a
(T_T).
final adjustment return covering the total taxable
income for the preceding calendar or fiscal year. If Q: What if the corporation is not able to carry
the sum of the quarterly tax payments made during over the entire amount of taxes overpayment
the said taxable year is not equal to the total tax [Note: Sorry di jud maklaro] during that year?
due on the entire taxable income of that year, the
The corporation cannot convert it later on to a tax
corporation shall either:
credit, just for that particular year in which the
(A) Pay the balance of tax still due; or taxpayer carry over the excess tax payments.
Because each year you will have entirely new
(B) Carry-over the excess credit; or
choices, either to carry over or you claim for a
(C) Be credited or refunded with the excess amount refund.
paid, as the case may be.
EXCEPTION: IF THE CORPORATION would
In case the corporation is entitled to a tax credit or eventually close its corporation and it was NOT
refund of the excess estimated quarterly income ABLE TO UTILIZE FULLY the overpayment of taxes.
taxes paid, the excess amount shown on its final
2. VAT (Section 112)
adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities Zero-Rated
for the taxable quarters of the succeeding taxable
Effectively Zero Rated
years. Once the option to carry-over and apply the
excess quarterly income tax against income tax due If you close your business
Diba nadiscuss natin yan? Because a corporation is If you change your status from a VAT Taxpayer
required to pay their income taxes quarterly or the to a Non-VAT Taxpayer. You are entitled to
basis of cumulative income and Philippine expenses, claim for a refund
diba? So kung magbayad ka ng quarterly there is a
[Ayaw jud na kalimti (VAT) kay ginapangutana na
possibility that by the end of the year you have
sa Bar Exam pabalik-balik]
overpaid the government. Loss ka pala sa year pero
meron kang binayaran na first quarter taxes. The So those who are covered by Zero-Rated VAT. How
corporation is at a loss, probably the corporation is may they do it? How will they claim the refund?
not subject to income. Or probably that tax would They will file an application to the BIR. Siyempre
be based on MCIT not the 30% Normal Corporate mag-apply sila. When do they do it?
Tax Rate. What will the corporation do in case there
[Page 28 of 79]
Q: When is the prescriptive period to file a 4. Section 229

claim for refund for VAT purposes? Section
112(A) Sec. 229. Recovery of Tax Erroneously or Illegally
Collected. No suit or proceeding shall be maintained
in any court for the recovery of any national internal
xxx any VAT-registered person, whose sales are
revenue tax hereafter alleged to have been
zero rated or effectively zero-rated may, within 2
erroneously or illegally assessed or collected, or of
years after the close of the taxable quarter when
any penalty claimed to have been collected without
the sales were made, apply for the issuance of a tax
authority, of any sum alleged to have been
credit certificate or refund of creditable input tax
excessively or in any manner wrongfully collected
due xxx
without authority, or of any sum alleged to have
been excessively or in any manner wrongfully
After the taxpayer will file the claim for refund the collected, until a claim for refund or credit has been
BIR has 120 days within which is to grant or deny duly filed with the Commissioner; but such suit or
the claim. Walang problema kung ma-deny ang proceeding may be maintained, whether or not such
claim you can always appeal with the CTA. You go tax, penalty, or sum has been paid under protest or
through the process, CTA division, en banc, and SC. duress.
What if the CIR will not do anything, you will have
to wait for the 120-day period to be finished In any case, no such suit or proceeding shall be
because under CIR vs. Geothermal na case the filed after the expiration of two (2) years from the
120-day plus 30 day period is mandatory or date of payment of the tax or penalty regardless of
jurisdictional for the claim of VAT. You should any supervening cause that may arise after
always remember that. payment:
3. Section 204 (C) Provided, however, That the Commissioner may,
even without a written claim therefor, refund or
Sec. 204. Authority of the Commissioner to credit any tax, where on the face of the return upon
Compromise, Abate and Refund or Credit Taxes. which payment was made, such payment appears
The Commissioner may clearly to have been erroneously paid.
xxx You have Section 204 (C) and in relation to that, is
(C) Credit or refund taxes erroneously or illegally Section 229. You read them together because they
received or penalties imposed without authority, are related. This is pretty much a long provision,
refund the value of internal revenue stamps when lets just simplify.
they are returned in good condition by the Q: What are the grounds for refunds as
purchaser, and, in his discretion, redeem or change provided under Section 204 (C) and 229? So
unused stamps that have been rendered unfit for generally:
use and refund their value upon proof of
destruction. No credit or refund of taxes or penalties Credit or Refund taxes erroneously or illegally
shall be allowed unless the taxpayer files in writing received;
with the Commissioner a claim for credit or refund
Credit or refund penalties imposed without
within two (2) years after the payment of the tax or
authority;
penalty: Provided, however, That a return filed
showing an overpayment shall be considered as a Credit or refund any sum of money alleged to
written claim for credit or refund. have been excessively or in any manner
wrongfully collected;
A Tax Credit Certificate validly issued under the
provisions of this Code may be applied against any Refund the value of internal revenue stamps
internal revenue tax, excluding withholding taxes, when they are returned in good condition by
for which the taxpayer is directly liable. Any request the purchaser; and
for conversion into refund of unutilized tax credits
may be allowed, subject to the provisions of Section In the discretion of the Commissioner, redeem
230 of this Code: Provided, That the original copy of or change unused stamps that have been
the Tax Credit Certificate showing a creditable rendered unfit for use and refund their value
balance is surrendered to the appropriate revenue upon proof of destruction.
officer for verification and cancellation: Provided, So yon lang yon. If you want magandang answer
further, That in no case shall a tax refund be given you just copy the erroneously or illegally collected.
resulting from availment of incentives granted
pursuant to special laws for which no actual Q: What are the true conditions that must be
payment was made. complied before a refund will be allowed?
There are at least two conditions:
[Page 29 of 79]
1. First there must be evidence to show that you are xxx Provided, however, That the Commissioner may, even
entitled or the tax has been erroneously or illegally without a written claim therefor, refund or credit any tax,
assessed or collected. where on the face of the return upon which payment was
made, such payment appears clearly to have been
2. There must be a written application for refund or credit
filed within the period of 2 years from the time the tax erroneously paid.
was paid. The two-year period is reckoned from the time Kung talagang may overpayment bakit hindi pa ibalik?
of tax payment.
Q: Who may claim or apply for a tax refund/tax
Q: When are taxes or its related penalties, surcharges credit? We are talking about the person here.
considered as erroneously or illegally collected?
Siyempre the taxpayer. But who is the taxpayer for
Taxes and its related penalties and surcharges are purposes of collecting tax refund?
erroneously or illegally collected when there is no authority
or without authority. Walang batas or merong batas na man The GR it is the statutory tax payer. Because the statutory
sobra siya, without authority pa rin. If you notice Casasola, taxpayer is the person who is ultimately liable for tax even if
she tried to distinguish erroneously and illegally paid. he/she will shift the burden of taxation to some other
Practically its the same diba. person. So he is the one entitled to refund. But in some
cases, the SC said in case the Taxpayer does not file a claim
The requirement of proof is understandable because tax for a tax refund or tax credit the Withholding Agent may file
refunds are strictly construed against the taxpayer. The the same.
burden of proving that he is entitled to the tax [refund],
must prove the law, prove the facts, rests upon the taxpayer. Q: Is a withholding Agent considered a taxpayer?
Q: What is the quantum of proof required? Withholding agent is I will just hold the taxes for you and
remit it to the Government. In effect the withholding Agent is
Preponderance of evidence only as per CIR vs. Fortune an agent of the Taxpayer and also of the government. Yong
Tobacco. Dami nataman na concepts sa Fortune Tobacco, tax na hinahawakan niya is the tax of some other person. A
You should at least know that case. withholding agent holds the money in trust, in favor of the
Then there must be a written application for refunds. The government. So ganun lang ang concept ng withholding
written application as a general rule is required. You write a agent. But some court decision would say na for purposes of
letter to the CIR (state your grounds etc., your intent etc., tax refund the withholding agent may be considered as a
you have your supporting documents etc.) and the BIR will taxpayer. Because a Taxpayer is defined in the NIRC as any
act upon it. Is there a form required? I tried searching the person subject to tax. If the withholding agent will not remit
internet but I could not find the form, but maybe sa the taxes, the withholding agent will be liable for penalties,
Casasola. I dont know if there is a specific form Basta in surcharges and all sorts of interest as allowed by the Tax
writing siya. But take note the last sentence in section 204 Code. In effect there is still a liability on the tax of the
(C). withholding agent, therefore for purposes of tax refund he is
allowed to claim for a refund. But it doesnt mean that the
money belongs to the Withholding Agent. No. Once the
xxx That a return filed showing an overpayment shall be
Withholding Agent will refund the tax, the withholding agent
considered as a written claim for credit or refund xxx
has the responsibility to turn it over to the person who is
really entitled to such tax refund.
You indicate in your tax return that there is an overpayment
of tax. This is specially true for corporate taxpayers. That is Q: What are the conditions in order that a claim for
enough already. That is an implied application for a refund. refund of withholding taxes may be granted?
Before the 1997 Internal Revenue Code hindi pa to
There are three:
applicable. You must actually write the BIR but right now
after the 1997 IRC this is already applicable. I think there 1. A written claim must be filed with the Commissioner
was one case before, I happened to read that case but I within 2 years from the date of payment of the tax;
forgot the citation. Ganun ang nangyari. Basically the taxes
involved were prior to 1997. It was already on appeal with 2. It is shown on the return if the recipient that the
the CTA (I think) or CA. The taxpayer states in his income income payment received was declared as part of
tax return na meron naman akong overpayment pinapakita the gross income; and
naman talaga dito sa ITR ko. The SC said NO. For one 3. The fact of withholding is established by a copy of a
reason the NIRC is not retroactive in nature. Number 2, the statement duly issued by the payor to the payee
previous requirements for tax refunds apply. So prospective showing the amount paid and the amount of the tax
application of taxes sabi ng SC. withheld therefrom.
Q: Is there an instance where the BIR may refund or Q: When should the taxpayer file his claim for refund?
credit taxes without any written claim? Yes there is
section 229 last paragraph: 2 years reckoned from the date of payment of taxes. Take
note this is different from VAT ha. This is one of the
[Page 30 of 79]
differences between the VAT tax credit and base refund or penalty regardless of any supervening cause that may
here. arise after payment: xxx
Q: What if the tax is paid by installments? Or rather So the two year period will always run. Again both the
pwede ba installment payment ang tax? administrative and judicial claim for refund must be filed
PWEDE. But there are certain conditions. So when do you within the 2-year prescriptive period. The taxpayer need not
wait for the CIR decision for his claim of refund. If the 2-year
reckon the two-year period? You reckon it from the date of
the last installment period is already expiring then the claim must be filed still
within the 2-year period, Otherwise the prescription will set
Q: How about for corporation? They should file their ITR in.
and pay their income taxes quarterly. When do you reckon
Q: Can the 2-year period be suspended? Yes it can be
the two-year period?
suspended.
In existing jurisprudence/rules, the two year period should
There are two known instances:
be reckoned from the date of the filing of the Final
Adjustment Return (FAR) or the Annual ITR. So meaning sa 1. If there is an agreement between the taxpayer and
ikaapat na. Isnt it parang weird? Its already in excess of the BIR, the BIR will waive the 2-year period;
what is provided for by law. Because the law is specific, its
within two years from the date of payment. But how come 2. If the Taxpayer was made to believe by the CIR
when it comes to corporation you reckon it from the filing of that the overpayment will be credited for other tax
FAR. liabilities. In short, for reasons of equity.
Unlike in one case merong inissue sa BIR extending
In a case, CIR vs. CA, GR 117254, there is actually no the 2-year period to 10 years, that was
conflict between the rules and what is provided for by the subsequently declared barred by the SC. During the
code. Because it is only upon the filing of the FAR that the interim period the taxpayer has all the reasons to
corporation will be able to determine if it has overpaid its rely on the revenue issuance so that should not
taxes. How do we compute for the tax due of the prejudice him.
corporation? You file every quarter but you compute
cumulatively. So its possible that you have paid taxes for the So what happens? If the judicial claim was already filed with
first two quarters and yet at the end of the year the the CTA, of course the CTA will decide.
corporation incurred a loss. So walang taxes, so refund siya. If the decision is good, then okay.
How do you claim, you file it with the CIR. What happens If the decision is adverse then file a MR.
next? If the resolution of the MR is still adverse, file a
The taxpayer files it with the CIR, the taxpayer will wait for petition for review before the CTA en Banc.
120 days for the CIR to decide. If there is a decision within Still the decision is adverse; you file a petition for
that period then good. If the decision is adverse then the review on certiorari before the SC under Rule 45 of
taxpayer will just file an appeal with the CTA division. the Rules of Court.
Q: But what if the CIR does not do anything? TWO What if the resolution or decision any BIR, or any appropriate
OPTIONS: regular courts for that matter, would say okay you are
1. you wait for the decision; or entitled for refund, what will the BIR do? Its either:
2. appeal within 30 days after the lapse of the 120-day The BIR will issue a refund check or probably a
period. refund warrant.
Take note, in either case the taxpayer must be able to file his Kung tax credit ka man, iissue niya sa iyo TCC.
appeal with the CTA. In other words the claim for refund But this refund check or TCCs have an expiry date, its 5
whether administrative or judicial must be made within the 2 years. For the tax refund you must be able to claim the
year period. actual cash within 5 years otherwise it will be forfeited in
What if mag-file ako ng claim ko first day pa lang, wala pang favor of the government.
120 day period. Bukas matapos na ang 2 years. Last day With respect to the TCCs, you must be able to use the TCC
bukas. Ano gawin ko? Is it possible that I should file within the 5 year period, unless revalidated.
simultaneously? Yes. Number one it is mandatory that you
will have to file sa administrative. Second, you must file it Q: What is a Tax Credit Certificate (TCC)? A TCC is
within the 2-year period. The law is clear, Section 229. defined under Section 1 of Revenue Regulation (RR) No. 5-
2000, issued by the BIR on 15 August 2000.
In any case, no such suit or proceeding shall be filed after
Tax Credit Certificate means a certification, duly
the expiration of 2 years from the date of payment of the tax
issued to the taxpayer named therein, by the
[Page 31 of 79]
Commissioner or his duly authorized representative, Whenever a tax credit certificate (TCC) is issued to a
reduced in a BIR Accountable Form in accordance taxpayer to acknowledge the existence of a valid tax credit,
with the prescribed formalities, acknowledging that such TCC may be used by the grantee or his assignee in the
the grantee-taxpayer named therein is legally payment of his direct internal revenue tax liability, such as
entitled a tax credit, the money value of which may income tax, documentary stamp tax, excise tax, VAT,
be used in payment or in satisfaction of any of his percentage tax and other internal revenue taxes.
internal revenue tax liability (except those
Pambayad mo siya sa internal revenue taxes, yon lang. Its
excluded), or may be converted as a cash refund, or
strictly for internal revenue taxes.
may otherwise be disposed of in the manner and in
accordance with the limitations, if any, as may be Except for the following:
prescribed by the provisions of these Regulations.
(The TCC in no case, shall be used in the following)
It is a certification duly issued by the BIR or his duly-
authorized representative, there is a form, acknowledging 1. Payment or remittance for any kind of withholding
that the grantee-taxpayer named therein is legally entitled a tax.
tax credit. The revenue regulation would say that money You cannot apply TCC for withholding taxes. Maybe
value of which may be used in payment ok forget about it, because he is not a taxpayer to begin with. Diba
I lost it--. (Just read the definition of TCC above, under RR 5- withholding agent lang siya. Holding the money in
2000) trust for the government.
Q: What are the sources of tax credit? (From Casasola 2. Payment arising from the availment of tax amnesty
pg 1280) A tax credit is being granted for the following: declared under a legislative enactment.
1. At the option of the taxpayer, excess quarterly 3. Payment of deposits on withdrawal of excisable
income taxes paid reflected in the FAR. articles.
ito yong section 76. Before you withdraw your excisable article you have
2. At the option of the taxpayer, overwithholding at to post a bond. You are required to post a bond you
source of income taxes to the extent that the cannot use a TCC. Because a deposit on a bank is
amount of such overpayment was not deducted or not tax.
applied against income tax due. 4. Payment of taxes not administered or collected by
3. Input taxes: the BIR.
a. Attributed to zero-rated sales made by Basically TCC is only available with-in the realms of
VAT-registered taxpayer, including export the BIR.
sales by a VAT-registered exporter; 5. Payment of compromise penalty.
b. Attributed to effectively zero-rated sales For the reason that the compromise penalty is NOT
made by VAT-registered taxpayer; a tax. It is some sort of an agreed monetary
You have the VAT zero-rated saka effectively zero- consideration agreed upon by the taxpayer with the
rated. BIR for purposes of compromise. Hindi siya tax so
hindi mo ma-aaply.
4. Unused input taxes resulting from cancellation of
VAT registration due to retirement from or cessation Of course a TCC may be converted into a Refund. Conversion
of business, or due to changes in our cessation of is allowed.
status as a VAT taxable taxpayer under Sec. 106(C) Q: What about Revalidation?
of the Tax Code.
You can revalidate prior to its expiry date. You make an
5. Excise taxes paid on: application with the BIR and the BIR will revalidate the same.
a. Petroleum products sold to tax-exempt Q: Can a TCC be assigned to another person?
entities and international carriers
Although the NIRC contains no prohibition, existing revenue
b. Goods locally produced or manufactured regulations would say that a TCC cannot be assigned or
and actually exported without returning to transferred to another person. It is exclusive to the grantee
the Philippines; as stated in the TCC. It is not a negotiable instrument.
6. Taxes erroneously or illegally paid or penalties Were done with NIRC. Thank God! Next topic is Local
imposed without authority. Government Taxation.
Ito young section 204
Q: What is the use of the TCC?
February 16, 2016 (KDC)
[Page 32 of 79]
What do you understand by local government taxes Let us now go to the fundamental principles. The
(LGT)? fundamental principles of LG taxation is laid down in Sec
130.
LGT are enforced contributions generally payable in money
proportionate in character levied on persons, property or Section 130. Fundamental Principles. - The following
exercise of a right or privilege by an LGU having jurisdiction fundamental principles shall govern the exercise of the taxing
for its legislature for public purpose levied at regular and other revenue-raising powers of local government units:
intervals.
(a) Taxation shall be uniform in each local government unit;
Simply speaking, these are taxes that are imposed and
collected by LGUs for public purpose to raise revenues to (b) Taxes, fees, charges and other impositions shall:
enable them to perform their functions. (1) be equitable and based as far as practicable on the
Thats the simplest definition that I can give you. Pwede nyo taxpayer's ability to pay;
yan isulat sa Bar if you do not want to be technical about it. (2) be levied and collected only for public purposes;
Total, maintindihan man natin lahat.
(3) not be unjust, excessive, oppressive, or confiscatory;
Another term for LGT is municipal taxes. These are imposed
under constitutional or statutory authority delegated to it on (4) not be contrary to law, public policy, national economic
persons or property within the corporate limits to support the policy, or in the restraint of trade;
local governments debts and liabilities. (c) The collection of local taxes, fees, charges and other
LGT is the primary source of its revenues. impositions shall in no case be let to any private person;
What is the extent of the taxing powers of the local (d) The revenue collected pursuant to the provisions of this
government? Code shall inure solely to the benefit of, and be subject to
the disposition by, the local government unit levying the tax,
Section 128. Scope. - The provisions herein shall govern fee, charge or other imposition unless otherwise specifically
the exercise by provinces, cities, municipalities, and provided herein; and
barangays of their taxing and other revenue-raising powers.
(e) Each local government unit shall, as far as practicable,
From this definition, we can actually deduce that the power evolve a progressive system of taxation.
of the local government is not only with respect to the
imposition of taxes. It includes other revenue-raising powers If you go by this provision, you would realize that the terms
like fees, charges, etc. are already familiar. Most of the items listed here were
actually discussed during your Tax 1. Sana meron kayong
If you read the next section, maalala because the general principles that you have learned
in Tax 1 with respect to the NIRC is also applicable here in
Section 129. Power to Create Sources of Revenue. - Each LG taxation. Same lang yan sila.
local government unit shall exercise its power to create its
own sources of revenue and to levy taxes, fees, and charges 1) It must be uniform and equitable;
subject to the provisions herein, consistent with the basic
I would always tell my Tax 1 class that as of now,
policy of local autonomy. Such taxes, fees, and charges shall
there is seemingly no difference between the
accrue exclusively to the local government units.
principles of uniformity and equitability of taxation.
Mas klaro sya. But if you want to be technical about it, when you
say equity/equitability of taxation, this refers to ones
LGU has the power to create its own sources of revenue by ability to pay. When it comes to uniformity, most SC
levying: decisions would say that uniformity of taxation has
1) Taxes; something to do with equal protection clause. Dito
papasok yung requirement of valid classification. A
2) Fees; and tax satisfies the uniformity principle when it operates
3) Charges . with the same force and effect within the territorial
boundaries of the taxing authority, without any
If you go back to your Tax 1, what is the difference between discrimination whatsoever.
fees and charges?
What are the 4 requirements of a valid classification
When you say tax, the primary purpose is to raise income under the Constitution?
but if you talk about fees, its more of police power, more of
the regulation aspect. But of course, you all know that you a) There must be a substantial distinction;
can actually exercise the power to tax and police power at b) It must be germane to the purpose;
the same time. They can complement each other.
c) Applies to future conditions; and
[Page 33 of 79]
d) It must be equally applicable to the same inure solely to the benefit of the LGU levying the tax
class. unless otherwise provided by the LGC.
GR: Kung meron kang income dito sa Davao City, you
Ormoc Sugar case can use it only within Davao City.
There was an ordinance in Ormoc City. There was a [May issue to eh. I dont know if tapos na ba. There was
corporation named Ormoc Sugar Corp (OSC) and there was a money from LGU of Digos tapos ginamit yung pera for a
local city ordinance by Ormoc City imposing tax on OSC. This public purpose which is paggawa ng public school pero
was challenged. Sabi kasi ng batas, the tax is imposed on all the school is located here in Davao. So there was
and any production of centrifugal sugar milled at OSC. something wrong. Bakit mo gagamitin ang funds ng LGU
Did this violate the equal protection clause and the rule on of Digos sa Davao City?]
uniformity of taxation? 3) Not unjust, oppressive, or confiscatory;
SC said, YES. What is the missing requirement here? This has something to do with substantive due process
1) It was singled out. It was not even a class to begin requirements in enacting laws.
with. GR: The power to impose tax is general and plenary
2) It does not apply to future conditions because because it is the strongest inherent power in the
anybody can put up a sugar corporation and not be government. The government can actually tax
subject to the same tax. everything under the sun.
EXC: It has limitations inherent, constitutional, and
Associations of Customs Brokers vs statutory. If you do not follow these limitations, local tax
Municipal Board laws can be struck down using this fundamental
The ordinance passed by the City of Manila goes this way: principle.
the ordinance confers upon the municipal board the power Who determines the validity or invalidity of a tax measure?
"to tax motor and other vehicles operating within the City of
Manila the provisions of any existing law to the contrary Generally, it is the courts.
notwithstanding." The word operating here was defined as
registered within the City of Manila. An example of an unjust measure is the case of Matalin
Coconut vs Mun of Malabang (GR No L-28138,
Is it violative of the equal protection clause? 08/13/1986).
SC said it violates the EPC. What is the purpose of the The Municipality of Malabang enacted: "AN ORDINANCE
enactment of the ordinance? The purpose of the ordinance, IMPOSING A POLICE INSPECTION FEE OF P.30 PER SACK OF
actually, was to raise funds for the City of Manila to have CASSAVA STARCH PRODUCED AND SHIPPED OUT OF THE
money to fix and maintain the roads, bridges, etc. within the MUNICIPALITY OF MALABANG AND IMPOSING PENALTIES
city. FOR VIOLATIONS THEREOF."
But the question is, sino lang ba ang tina-tax ng ordinance So, the municipality was going to tax the transportation of
dito? It says registered vehicles within Manila. Why is there a cassava starch or flour. Ang tawag nila sa tax na to is police
violation? Kasi diba, meron namang sasakyan from the inspection fee. Oh diba? Char kaayo.
outside of Manila traversing Manila City? Bakit sila hindi i- Who pays this? It is the shipper before it is transported or
tax? They are also contributing to the gradual depreciation of shipped out of the municipality. This was challenged.
these roads. So the SC is saying that the tax is not germane
to the purpose of the law. Mag-raise ka ng funds for Ground for challenging was: it is unreasonable and
maintenance but why single out those vehicles registered oppressive. It would kill our business.
within Manila?
Issues:
2) Public purpose;
1) Is it a tax or is it for regulatory purposes?
Sec 130. xxx 2) If it is indeed a tax, is it a valid exercise of the LGUs

power to tax?
(b) xxx
Ruling:
(2) be levied and collected only for public purposes;
1) SC said that even if you label it as police inspection
xxx fee, the collection is not for regulatory purpose. It is
a tax because the primary purpose is to raise
This is basic tax but there is one more requirement, it revenues. Ano ba purpose ng mga police dito? They
requires that the tax or the revenues collected shall cannot even determine whether the cassava starch
[Page 34 of 79]
or flour is fit for human consumption. Dili man na magwithhold ako tapos yun ang ibayad ko sa
nila abrihan ug tilawan (na murag drugs. LOL). The government. Private person man yan actually.
only purpose of the police officers here is just to
Ano pa ibang example sa NIRC? Where do you pay
open the box and check if it is cassava starch or
your taxes?
not. Yan lang. no other purpose but just to raise
revenues. So, established na ang fact that it is a 1) RDO;
tax.
2) Authorized agent banks (private yan sila).
2) Is it oppressive? YES because of the factual
circumstances. It is no longer commensurate to the Walang ganyang concept sa LGT, thats why if you
business of the taxpayer. You will actually kill the pay your RPT, saan ka magbayad? City treasurer.
business. How much is the tax? 0.30 per sack and Pati business taxes nyo, sa kanila kayo magbayad.
the petitioners here are only earning 0.40 per sack. Dako kaayo na sila ug trabaho dinha. It is because
So, 0.10 nalang mabilin. Bayad pa ka sa imong mga of this prohibition in the LGC. They are not allowed
tao, sa kargador, sa imong shipping fee, wala nay to empower any private person to collect the taxes.
mabilin sa imoha. Thats why the SC struck down 6) Progressive system of taxation.
this ordinance.
What do you understand by progressive system of
taxation?
4) It must not be contrary to law, public policy,
national economic policy, or in the restraint of trade; It is a system of taxation where there are more
indirect taxes than indirect taxes. Thats the same
You correlate this with Section 133 of the LGC:
concept in Tax 1.
Section 133. Common Limitations on the Taxing
Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the February 18, 2015 (FJB)
taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the NATURE AND SOURCE OF THE TAXING POWER
following: Let us go now to the nature and source of the taxing power
xxx of Local Government Units (LGUs). The main basis of the
LGUs power to tax is based on section 5, article 10 of the
(e) Taxes, fees, and charges and other impositions 1987 Constitution.
upon goods carried into or out of, or passing
through, the territorial jurisdictions of local Section 5. Each local government unit shall have the power
government units in the guise of charges for to create its own sources of revenues and to levy taxes, fees
wharfage, tolls for bridges or otherwise, or other and charges subject to such guidelines and limitations as the
taxes, fees, or charges in any form whatsoever Congress may provide, consistent with the basic policy of
upon such goods or merchandise; local autonomy. Such taxes, fees, and charges shall accrue
xxx exclusively to the local governments.
So, bawal daw mag impose ang LGU of any tax or I do not think that this provision is alien to you because you
charges upon those goods carried into or out of, or have discussed this, first, in your constitutional you, and,
passing through one LGU to another. Otherwise, it second, we had an extensive discussion [on this] way back in
is already considered as a restraint of trade. Dili Tax I.
nalang ta muagi diri kay naa tay bayran nga tax.
Thats the essence of it. First point, this provision is not self-executing. This means
that there must be an enabling law which would provide for
5) Collection not let to any private person; and the taxing powers of the LGU. Second, if you read section 3
Sec 130 of article 10, the Congress is actually mandated to enact a
Local Government Code (RA 7160).
(c) The collection of local taxes, fees, charges and
other impositions shall in no case be let to any Section 3. The Congress shall enact a local government
private person; code which shall provide for a more responsive and
accountable local government structure instituted through a
To let is to award. You cannot award the collection
system of decentralization with effective mechanisms of
of LGT to any private persons. This is one of the
recall, initiative, and referendum, allocate among the
differences between the NIRC and LGT. Sa NIRC,
different local government units their powers,
we have the concept of withholding taxes, diba?
responsibilities, and resources, and provide for the
Sino ang withholding agent? Its the income payor
qualifications, election, appointment and removal, term,
(kung sino magbayad). Magbayad ako sa yo,
salaries, powers and functions and duties of local officials,
[Page 35 of 79]
and all other matters relating to the organization and Constitution, thus:
operation of the local units.
"What is the effect of Section 5 on the fiscal position of
municipal corporations? Section 5 does not change the
Furthermore, if you read section 5 itself, it provides that doctrine that municipal corporations do not possess inherent
LGUs, while having the power to tax, are subject to such powers of taxation. What it does is to confer municipal
guidelines and limitations as the Congress may provide. corporations a general power to levy taxes and otherwise
Therefore, because of these constitutional provisions, there create sources of revenue. They no longer have to wait for a
must be a LGC to be enacted which would define and limit statutory grant of these powers. The power of the legislative
the powers of the LGUs. authority relative to the fiscal powers of local governments
What is the nature of the taxing power of the LGU? Is it a has been reduced to the authority to impose limitations on
delegated power or is it a direct grant? Basically, it is a direct municipal powers. Moreover, these limitations must be
grant simply because the constitution [itself] grants the LGU "consistent with the basic policy of local autonomy." The
the power to tax. To be honest about it, there are two (2) important legal effect of Section 5 is thus to reverse the
conflicting views on the matter but if we follow principle that doubts are resolved against municipal
jurisprudence, the latest jurisprudence would say that this is corporations. Henceforth, in interpreting statutory provisions
actually a direct grant of the power to tax on the LGU. on municipal fiscal powers, doubts will be resolved in
favor of municipal corporations. It is understood,
Previously, in Manila Electric Company v. Province of Laguna however, that taxes imposed by local government must be
(1999), the Supreme Court (SC) said that all taxing powers for a public purpose, uniform within a locality, must not be
are lodged in the national legislature and the grant to confiscatory, and must be within the jurisdiction of the local
anybody is merely a delegation. The SC was saying that unit to pass."
when there is a constitutional provision providing for the
taxing power of the LGUs, there is still a need of an enabling
So, if the Constitution grants the LGU the direct power to
law. So, whatever taxing power that the LGU would exercise
tax, what is the purpose then of the LGC? Again, the purpose
later on comes from the law itself. If there is no law, there is
the LGC is merely to set the guidelines and limitations of the
no taxing power.
power to tax of these municipal corporations. Like for
But in subsequent cases such as in the case of Batangas instance, normally, if the tax is already found in the NIRC, a
Power Corporation v. Batangas City (2004) and in Quezon national law, this taxing power is no longer available to the
City v. ABS-CBN (2008), the SC said that the taxing power of LGUs. Again, while the LGUs have the power to tax, it is
the LGU is a direct grant and not merely a delegated power. subject to limitations [set forth in the LGC]. It is not as
The SC went on saying that the power to tax is no longer strong as the power to tax of the national government.
vested exclusively on the Congress. The LGUs are now given
Let us go now to Tax Exemptions. As a basic principle, the
direct authority to levy taxes, fees, and other charges
power to tax includes the power to provide for exemptions-
pursuant to the constitutional provisions.
to exempt certain persons from the burden of paying taxes.
Considering that the power to tax is a direct grant, do the Pretty much the same with the LGUs. This is actually
LGUs have the inherent power to tax? No. The basic principle provided under section 192 of the LGC.
is that it is the state through the legislature (in the case of
LGUs, the local legislature) which has the inherent power to Section 192. Authority to Grant Tax Exemption Privileges. -
tax. What is the nature of the LGU? Is it an agency [of the Local government units may, through ordinances duly
State]? The LGU is a municipal corporation. It is not a approved, grant tax exemptions, incentives or reliefs under
government in itself. That is why it has no inherent power to such terms and conditions as they may deem necessary.
tax. You need the Constitution and an enabling law so that
the LGUs power to tax will come into being. Now, if you look at the LGC, it provides for the withdrawal of
What is the implication of this principle of direct grant of the exemption in section 193.
taxing powers? What is the significance of that? It has
something to do with statutory construction because Section 193. Withdrawal of Tax Exemption Privileges. -
previously, if you consider that the power to tax is merely Unless otherwise provided in this Code, tax exemptions or
delegated [to the LGU], in case of any doubt of whether or incentives granted to, or presently enjoyed by all persons,
not the municipal corporation has the power to tax, doubts whether natural or juridical, including government-owned or
will be resolved against municipal corporations but right now, controlled corporations, except local water districts,
since it is already a direct grant as per the case of: cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are
Quezon City v. ABS-CBN, the principle means that: hereby withdrawn upon the effectivity of this Code.
This new perspective is best articulated by Fr. Joaquin G. Meaning, when the LGC took effect, whatever exemptions
Bernas, S.J., himself a Commissioner of the 1986 that these entities have is automatically withdrawn. The LGC
Constitutional Commission which crafted the 1987 took effect on January 1, 1992.
[Page 36 of 79]
3. Provisions providing for tax exemptions must be

Smart Communications v. Davao City
clear and categorical.
G.R. No. 155491, July 21, 2009
The in lieu of all taxes clause in R.A. No. 7294 does not
Smart is a telecom company. It claimed that it is exempt
distinguish whether it is a local tax or national tax.
from franchise tax imposed by Davao City pursuant to an
Ordinance. At first, Smart was paying the franchise taxes From the full text:
until they challenged the provisions of the Ordinance
The uncertainty in the in lieu of all taxes clause in R.A. No.
because of the enactment of Republic Act No. 7294, which is
7294 on whether Smart is exempted from both local and
the law under which Smart took its franchise. It was enacted
national franchise tax must be construed strictly against
on a date later than the LGC. So, Smart is questioning the
Smart which claims the exemption. Smart has the burden of
authority of the City Government to collect franchise tax
proving that, aside from the imposed 3% franchise tax,
based on the LGC when it took its franchise not under the
Congress intended it to be exempt from all kinds of franchise
LGC but under Republic Act No. 7294, which took effect after
taxes whether local or national. However, Smart failed in this
the enactment of the LGC. According to Smart, withdrawal of
regard.
exemptions to telecom companies only affects those whose
franchises were taken prior to the enactment of the LGC Tax exemptions are never presumed and are strictly
[and not those taken subsequent to it]. In the new law (RA construed against the taxpayer and liberally in favor of the
7294), there is this "in lieu of all taxes" clause. taxing authority. They can only be given force when the
grant is clear and categorical The surrender of the power to
Section 9 of RA 7294 and Section 23 of RA 7925 are once
tax, when claimed, must be clearly shown by a language that
again put in issue. Section 9 of Smarts legislative franchise
will admit of no reasonable construction consistent with the
contains the contentious "in lieu of all taxes" clause. The
reservation of the power. If the intention of the legislature is
Section reads:
open to doubt, then the intention of the legislature must be
Section 9. Tax provisions. The grantee, its successors or resolved in favor of the State.
assigns shall be liable to pay the same taxes on their real
In this case, the doubt must be resolved in favor of the City
estate buildings and personal property, exclusive of this
of Davao. The in lieu of all taxes clause applies only to
franchise, as other persons or corporations which are now or
national internal revenue taxes and not to local taxes.
hereafter may be required by law to pay. In addition thereto,
the grantee, its successors or assigns shall pay a franchise
tax equivalent to three percent (3%) of all gross receipts of Also, in relation to our discussion earlier about the principle
the business transacted under this franchise by the grantee, on LGUs power to tax, any doubt should be resolved in favor
its successors or assigns and the said percentage shall be in of LGUs power to tax. Pretty much the same. If it (tax
lieu of all taxes on this franchise or earnings thereof: exemption) is not clear and categorical, the LGUs power to
Provided, That the grantee, its successors or assigns shall tax must be upheld.
continue to be liable for income taxes payable under Title II Caveat: I do not think that this in lieu of all taxes clause
of the National Internal Revenue Code pursuant to Section 2 under RA 7294 is still applicable. Smart, while previously not
of Executive Order No. 72 unless the latter enactment is liable to pay VAT, is now liable because of the Expanded VAT
amended or repealed, in which case the amendment or Law. So, I do not know yet the applicability of this provision
repeal shall be applicable thereto. of RA 7294 as to current settings. Just take note of the
xxx principles enunciated in this case.
Issue: Is Smart exempt from franchise tax? No. Smart is Included in the LGUs power to tax is the power to provide
liable. penalties for violations found under section 516.
Held: Section 516. Penalties for Violation of Tax Ordinances. -

The argument of the SC is that it is admitted the LGC has a The Sanggunian of a local government unit is authorized to
prospective effect and the withdrawal of tax exemption prescribe fines or other penalties for violation of tax
applies only to those telecom franchises granted before its ordinances but in no case shall such fines be less than One
enactment but the "in lieu of all taxes" clause does not apply thousand pesos (P1,000.00) nor more than Five thousand
to local taxation. The SC went back again to the statutory pesos (P5,000.00), nor shall imprisonment be less than one
construction of tax provisions. (1) month nor more than six (6) months. Such fine or other
penalty, or both, shall be imposed at the discretion of the
1. Tax exemptions are strictly construed against the court. The Sangguniang barangay may prescribe a fine of not
taxpayer; less than One hundred pesos (P100.00) nor more than One
2. The taxpayer must be able to prove that there is a thousand pesos (P1,000.00).
law exempting the taxpayer from tax or that the
taxpayer is included in the exempted persons or LGUs can enact Ordinances providing for penalties and, of
transactions; and, course, LGUs may also adjust local tax rates under section
191.
[Page 37 of 79]
municipality, and barangay. So, the barangay can impose

Section 191. Authority of Local Government Units to Adjust taxes.
Rates of Tax Ordinances. - Local government units shall have
the authority to adjust the tax rates as prescribed herein not What is the form of local taxes? It is through Ordinances.
oftener than once every five (5) years, but in no case shall What is the difference between an Ordinance and a
such adjustment exceed ten percent (10%) of the rates fixed Resolution? An Ordinance is a legislative action of a general
under this Code. and permanent character. Resolution is for temporary
purposes only.
This is more on the collection aspect. We will discuss this Let us go now to the procedure for the approval and
later after we have discussed the individual taxes of these effectivity of tax Ordinance. How does a tax law come into
LGUs. being? The basic law is found in section 187 of the LGC but
Lastly, we have residual taxing powers. Is the LGU limited on the details are found in the Rules and Regulations
the imposition of taxes listed under the LGC? We said that Implementing the LGC (IRR).
the LGC provides for the guidelines limiting the power to tax
of the LGU. So, what if the power is not found in the LGC? LGC, Section 187. Procedure for Approval and Effectivity of
Can the LGU impose such taxes by enacting the appropriate Tax, Ordinances and Revenue Measures; Mandatory Public
ordinance? This is answered under section 186. Hearings. - The procedure for approval of local tax
ordinances and revenue measures shall be in accordance
Section 186. Power To Levy Other Taxes, Fees or Charges. with the provisions of this Code: Provided, That public
- Local government units may exercise the power to levy hearings shall be conducted for the purpose prior to the
taxes, fees or charges on any base or subject not otherwise enactment thereof: Provided, further, That any question on
specifically enumerated herein or taxed under the provisions the constitutionality or legality of tax ordinances or revenue
of the National Internal Revenue Code, as amended, or other measures may be raised on appeal within thirty (30) days
applicable laws: Provided, That the taxes, fees, or charges from the effectivity thereof to the Secretary of Justice who
shall not be unjust, excessive, oppressive, confiscatory or shall render a decision within sixty (60) days from the date of
contrary to declared national policy: Provided, further, That receipt of the appeal: Provided, however, That such appeal
the ordinance levying such taxes, fees or charges shall not shall not have the effect of suspending the effectivity of the
be enacted without any prior public hearing conducted for ordinance and the accrual and payment of the tax, fee, or
the purpose. charge levied therein: Provided, finally, That within thirty
(30) days after receipt of the decision or the lapse of the
Based on the provision, yes, it may impose the same subject sixty-day period without the Secretary of Justice acting upon
to the limitations that taxes, fees, or charges shall not be the appeal, the aggrieved party may file appropriate
unjust, excessive, oppressive, confiscatory or contrary to proceedings with a court of competent jurisdiction.
declared national policy and, of course, that there must be
compliance with the requirement of public hearing.
IRR, ARTICLE 107. Ordinances and Resolutions. The
following rules shall govern the enactment of ordinances and
LOCAL TAXING AUTHORITY resolutions:
To whom is the local taxing power lodged? In the national (a) Legislative actions of a general and permanent character
setting, it will be the Congress, but in LGUs, the local taxing shall be enacted in the form of ordinances, while those which
power is lodged in the appropriate Sanggunian. Same are of temporary character shall be passed in the form of
principle applies. It is legislative in character. This is provided resolutions. Matters relating to proprietary functions and to
in section 48 in relation section 132 of the LGC. private concerns shall also be acted upon by resolution.
(b) Proposed ordinances and resolutions shall be in writing
Section 48. Local Legislative Power. - Local legislative and shall contain an assigned number, a title or caption, an
power shall be exercised by the Sangguniang panlalawigan enacting or ordaining clause, and the date of its proposed
for the province; the Sangguniang panlungsod for the city; effectivity. In addition, every proposed ordinance shall be
the Sangguniang bayan for the municipality; and the accompanied by a brief explanatory note containing the
Sangguniang barangay for the barangay. justification for its approval. It shall be signed by the author
or authors and submitted to the secretary to the Sanggunian
Section 132. Local Taxing Authority. - The power to impose
who shall report the same to the Sanggunian at its next
a tax, fee, or charge or to generate revenue under this Code
meeting.
shall be exercised by the Sanggunian of the local
government unit concerned through an appropriate (c) A resolution shall be enacted in the same manner
ordinance. prescribed for an ordinance, except that it need not go
through a third reading for its final consideration unless
So, take note of the term appropriate legislative body decided otherwise by a majority of all the Sanggunian
because there are several LGUs. We have province, city,
[Page 38 of 79]
members. This involves the Municipality of San Juan. The Sangguniang

Bayan (SB) of San Juan implemented a lot of Ordinances.
(d) No ordinance or resolution shall be considered on second
The petitioners here filed an appeal before the DOJ assailing
reading in any regular meeting unless it has been reported
the constitutionality of the Ordinances. They claimed that
out by the proper committee to which it was referred or
there were no public hearings conducted when the said
certified as urgent by the local chief executive.
Ordinances were made but the DOJ eventually dismissed the
(e) Any legislative matter duly certified by the local chief appeal of the petitioners because the same was filed out of
executive as urgent, whether or not it is included in the time. CA upheld the dismissal.
calendar of business, may be presented and considered by
Issue: Did the SB comply with the requirement of hearing?
the body at the same meeting without need of suspending
the rules. Held: Since there was no hearing involved, supposedly the
Ordinances enacted by the SB are invalid because public
(f) The secretary to the Sanggunian of the province, city or
hearings are mandatory in character when you enact tax
municipality shall prepare copies of the proposed ordinance
Ordinances. Here, the petition was nevertheless dismissed by
or resolution in the form it was passed on second reading,
the SC because of [lack of] proof. The burden is on the
and shall distribute to each Sanggunian member a copy
taxpayer to prove that there were no public hearings
thereof, except that a measure certified by the local chief
conducted. The principle behind that is simple. The basic rule
executive concerned as urgent may be submitted for final
in evidence is that there is a presumption of regularity, so it
voting immediately after debate or amendment during the
is the burden of the other party to prove otherwise.
second reading.
From the full text:
(g) No ordinance or resolution passed by the Sanggunian in a
regular or special session duly called for the purpose shall be Clearly, the law requires that the dissatisfied taxpayer who
valid unless approved by a majority of the members present, questions the validity or legality of a tax ordinance must file
there being a quorum. Any ordinance or resolution his appeal to the Secretary of Justice, within 30 days from
authorizing or directing the payment of money or creating effectivity thereof. In case the Secretary decides the appeals,
liability, shall require the affirmative vote of a majority of all a period also of 30 days is allowed for an aggrieved party to
the Sanggunian members for its passage. go to court. But if the Secretary does not act thereon, after
the lapse of 60 days, a party could already proceed to seek
(h) Upon the passage of all ordinances and resolutions
relief in court. These three separate periods are clearly given
directing the payment of money or creating liability, and at
for compliance as a prerequisite before seeking redress in a
the request of any member, of any resolution or motion, the
competent court. Such statutory periods are set to prevent
Sanggunian shall record the ayes and nays. Each approved
delays as well as enhance the orderly and speedy discharge
ordinance or resolution shall be stamped with the seal of the
of judicial functions. 5 For this reason the courts construct
Sanggunian and recorded in a book kept for the purpose.
these provisions of statutes as mandatory.
Let us just walk this through. xxx
1. Proposal- The first is that there must be a proposal Petitioners have not proved in the case before us that the
just like in the Senate. There will be someone who Sangguniang Bayan of San Juan failed to conduct the
will propose called the author. The proposal will be required public hearings before the enactment of Ordinance
in writing and it will be submitted to the secretary Nos. 87, 91, 95, 100 and 101. Although the Sanggunian had
and it will be distributed among the members of the the control of records or the better means of proof regarding
Sanggunian for review. the facts alleged, petitioner as not relieved from the burden
of proving their averments. 10 Proof that public hearings
2. Public hearing- After that, there is a requirement were not held falls on petitioner' shoulders. For failing to
of public hearing. Normally, when you enact an discharge that burden, their petition was properly dismissed.
Ordinance, public hearing is not necessary but when
you enact a tax Ordinance or revenue Ordinance, or In any event, for the purpose of securing certainty where
any Ordinance for that matter which involves paying doubt would be intolerable, it is a general rules that the
out of money, public hearing is required. That is regularity of the enactment of an officially promulgated
specified in the LGC section 186 which states that statute or ordinance may not be impeached by parol
the ordinance levying such taxes, fees or charges evidence or oral testimony either of individual officers and
shall not be enacted without any prior public members, or of strangers who may be interested in nullifying
hearing conducted for the purpose. When should legislative action. 11 This rules supplements the presumption
the public hearing be made? That is answered in in favor of the regularity of official conduct which we have
the case of Reyes v. CA. upheld repeatedly, absent a clear showing to the contrary.
Reyes, et al., v. CA
G.R. No. 118233, December 10, 1999 Ongsuco v. Malones
[Page 39 of 79]
G.R. No. 182065, October 27, 2009 (g) Charges refer to pecuniary liability, as rents or fees
against persons or property.
Petitioners here are stall holders in the public market.
Respondent is the mayor of the Municipality of Maasin. In a Evidently, the revenues of a local government unit do not
letter dated 6 August 1998, the Office of the Municipal Mayor consist of taxes alone, but also other fees and charges. And
informed petitioners of a meeting scheduled on 11 August rentals and goodwill fees, imposed by Municipal Ordinance
1998 concerning the municipal public market. Revenue No. 98-01 for the occupancy of the stalls at the municipal
measures were discussed during the said meeting, including public market, fall under the definition of charges.
the increase in the rentals for the market stalls and the
Therefore, since it involves money, there must still be a
imposition of "goodwill fees" in the amount of P20,000.00,
public hearing.
payable every month. After the meeting or on 17 August
1998, the Sangguniang Bayan of Maasin approved Municipal On the argument that the lack or defective public hearing
Ordinance No. 98-01, entitled "The Municipal Revised was cured by the subsequent public hearing conducted after
Revenue Code." The Code contained a provision for the enactment of the Ordinance, the SC ruled:
increased rentals for the stalls and the imposition of goodwill
fees. The defect in the enactment of Municipal Ordinance No. 98
was not cured when another public hearing was held on 22
Only a month later, on 18 September 1998, the Sangguniang January 1999, after the questioned ordinance was passed by
Bayan of Maasin approved Resolution No. 68, series of 1998, the Sangguniang Bayan and approved by respondent on 17
moving to have the meeting dated 11 August 1998 declared August 1998. Section 186 of the Local Government Code
inoperative as a public hearing, because majority of the prescribes that the public hearing be held prior to the
persons affected by the imposition of the goodwill fee failed enactment by a local government unit of an ordinance
to agree to the said measure. However, Resolution No. 68, levying taxes, fees, and charges.
series of 1998, of the Sangguniang Bayan of Maasin was
vetoed by respondent on 30 September 1998. Since no public hearing had been duly conducted prior to the
enactment of Municipal Ordinance No. 98-01, said ordinance
After Municipal Ordinance No. 98-01 was approved on 17 is void and cannot be given any effect. Consequently, a void
August 1998, another purported public hearing was held on and ineffective ordinance could not have conferred upon
22 January 1999. respondent the jurisdiction to order petitioners stalls at the
municipal public market vacant.
On 9 June 1999, respondent wrote a letter to petitioners
informing them that they were occupying stalls in the newly
renovated municipal public market without any lease 3. Readings- Of course, there will be three (3)
contract, as a consequence of which, the stalls were readings. Then, the Ordinance will be approved.
considered vacant and open for qualified and interested 4. Approval by the Sanggunian- How is it
applicants. approved? Normally, to approve an Ordinance, you
According to the petitioners, public hearing is mandatory only need two (2) things: quorum, and, majority of
because the Ordinance involves rental and goodwill fees. the quorum. However, if the Ordinance involves the
According to the LGC, the initial public hearing must be made authorizing or directing the payment of money or
not earlier than 10 days from the sending out of the notice creating liability, it shall require the affirmative vote
or notices, or the last day of publication, or date of posting of a majority of all the Sanggunian members for its
thereof, whichever is later. In this case, the meeting was passage.
conducted five days after the notice was given. 5. Approval by the local chief executive (LCE)-
According to the respondents, public hearing is not necessary After the approval, it will be sent to the LCE for
because the Ordinance is not concerned about taxes but on review and approval.
the exercise of the Municipality of its own proprietary
function. LGC, Section 54. Approval of Ordinances. -
Held: The SC said that the revenues of the LGUs are not (a) Every ordinance enacted by the Sangguniang
merely composed of taxes but also of surcharges, fees, panlalawigan, Sangguniang panlungsod, or Sangguniang
among others. Rental and goodwill fees fall under the bayan shall be presented to the provincial governor or
definition of charges under article 221(g) of the LGC. city or municipal mayor, as the case may be. If the local
chief executive concerned approves the same, he shall
From the full text: affix his signature on each and every page thereof;
Article 221(g) of the Local Government Code of 1991 defines otherwise, he shall veto it and return the same with his
"charges" as: objections to the Sanggunian, which may proceed to
reconsider the same. The Sanggunian concerned may
Article 221. Definition of Terms. override the veto of the local chief executive by two-
xxxx thirds (2/3) vote of all its members, thereby making the
ordinance or resolution effective for all legal intents and
[Page 40 of 79]
purposes. What if the LCE did not veto the Ordinance within
these periods? The ordinance will be deemed
(b) The veto shall be communicated by the local chief approved as if he has signed it.
executive concerned to the Sanggunian within fifteen
(15) days in the case of a province, and ten (10) days in What are the limitations on the power to veto of the
the case of a city or a municipality; otherwise, the LCE? The limitations are as follows:
ordinance shall be deemed approved as if he had signed
a. The LCE may veto only once; and,
it.
b. The Sanggunian can override the veto by
(c) Ordinances enacted by the Sangguniang barangay
2/3 votes of all its members.
shall, upon approval by the majority of all its members,
be signed by the punong barangay.
Section 55. Veto Power of the Local Chief Executive. - 6. Review- After the LCE approves the Ordinance, it
will be subjected to a review by higher
(a) The local chief executive may veto any ordinance of
Sanggunians. This is applicable if the Sanggunian
the Sanggunian panlalawigan, Sangguniang panlungsod,
involved is a Sangguniang bayan or Sangguniang
or Sanggunian bayan on the ground that it is ultra vires
panglusod of component cities.
or prejudicial to the public welfare, stating his reasons
therefor in writing.
LGC, Section 56. Review of Component City and
(b) The local chief executive, except the punong Municipal Ordinances or Resolutions by the
barangay, shall have the power to veto any particular Sangguniang Panlalawigan.
item or items of an appropriations ordinance, an
ordinance or resolution adopting a local development (a) Within three (3) days after approval, the
plan and public investment program, or an ordinance secretary to the Sanggunian panlungsod or
directing the payment of money or creating liability. In Sangguniang bayan shall forward to the
such a case, the veto shall not affect the item or items Sangguniang panlalawigan for review, copies of
which are not objected to. The vetoed item or items approved ordinances and the resolutions approving
shall not take effect unless the Sanggunian overrides the the local development plans and public investment
veto in the manner herein provided; otherwise, the item programs formulated by the local development
or items in the appropriations ordinance of the previous councils.
year corresponding to those vetoed, if any, shall be (b) Within thirty (30) days after the receipt of
deemed reenacted. copies of such ordinances and resolutions, the
(c) The local chief executive may veto an ordinance or Sangguniang panlalawigan shall examine the
resolution only once. The Sanggunian may override the documents or transmit them to the provincial
veto of the local chief executive concerned by two-thirds attorney, or if there be none, to the provincial
(2/3) vote of all its members, thereby making the prosecutor for prompt examination. The provincial
ordinance effective even without the approval of the attorney or provincial prosecutor shall, within a
local chief executive concerned. period of ten (10) days from receipt of the
documents, inform the Sangguniang panlalawigan
in writing of his comments or recommendations,
If the LCE approves the same, it becomes an
which may be considered by the Sangguniang
effective Ordinance. The sangguanian will have it
panlalawigan in making its decision.
published and comply with the posting
requirements. After several days, it will come into a (c) If the Sangguniang panlalawigan finds that such
law. If, however, the LCE does not agree with the an ordinance or resolution is beyond the power
approved proposal, it can veto the same. The LCE conferred upon the Sangguniang panlungsod or
has the power to veto the proposed Ordinance on Sangguniang bayan concerned, it shall declare such
two (2) grounds: ordinance or resolution invalid in whole or in part.
The Sangguniang panlalawigan shall enter its action
a. The Ordinance enacted is ultra vires; or,
in the minutes and shall advise the corresponding
b. It is prejudicial to the public welfare. city or municipal authorities of the action it has
taken.
What is the effect of veto? The veto shall not affect
the item/s not objected to. (d) If no action has been taken by the Sangguniang
panlalawigan within thirty (30) days after
When should the veto be communicated? For submission of such an ordinance or resolution, the
provinces, 15 days. For cities and municipalities, 10 same shall be presumed consistent with law and
days. therefore valid.
[Page 41 of 79]
Who will review? The Sangguniang panlalawigan consecutive days in a newspaper of local circulation:
review the following: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of
a. Component cities;
local circulation, the same may be posted in at least
b. Ordinances of Municipalities; and, two (2) conspicuous and publicly accessible places.
c. Resolutions of Municipalities.
Take note also of the posting requirements. Where
When is this done? Within three (3) days after the do you post? Normally, it is in the bulletin board at
approval by the LCE. There will be comments and the entrance of the capitol, city hall, or municipal
recommendations that will be done by the hall. Aside from that, posting must also be made in
Sanggunian panlalawigan, If the Sangguniang at least two (2) conspicuous places in the LGU
panlalawigan finds that such an ordinance or concerned. In highly urbanized cities, publication
resolution is beyond the power conferred upon the and posting must also be complied.
Sangguniang panlungsod or Sangguniang bayan
When does an Ordinance take effect?
concerned, it shall declare such ordinance or
resolution invalid in whole or in part.
LGC, Section 59. Effectivity of Ordinances or
What about barangay ordinances? It will be Resolutions. -
reviewed by the Sangguniang Panlungsod
concerned or the Sanggauniang bayan within 10 (a) Unless otherwise stated in the ordinance or the
days after enactment. resolution approving the local development plan and
public investment program, the same shall take
effect after ten (10) days from the date a copy
LGC, Section 57. Review of Barangay Ordinances
thereof is posted in a bulletin board at the entrance
by the Sangguniang Panlungsod or Sangguniang
of the provincial capitol or city, municipal, or
Bayan.
barangay hall, as the case may be, and in at least
(a) Within ten (10) days after its enactment, the two (2) other conspicuous places in the local
Sangguniang barangay shall furnish copies of all government unit concerned.
barangay ordinances to the Sangguniang
(b) The secretary to the Sanggunian concerned
panlungsod or Sangguniang bayan concerned for
shall cause the posting of an ordinance or resolution
review as to whether the ordinance is consistent
in the bulletin board at the entrance of the
with law and city or municipal ordinances.
provincial capitol and the city, municipal, or
(b) If the Sangguniang panlungsod or Sangguniang barangay hall in at least two (2) conspicuous places
bayan, as the case may be, fails to take action on in the local government unit concerned not later
barangay ordinances within thirty (30) days from than five (5) days after approval thereof.
receipt thereof, the same shall be deemed
The text of the ordinance or resolution shall be
approved.
disseminated and posted in Filipino or English and in
(c) If the Sangguniang panlungsod or Sangguniang the language understood by the majority of the
bayan, as the case may be, finds the barangay people in the local government unit concerned, and
ordinances inconsistent with law or city or municipal the secretary to the Sanggunian shall record such
ordinances, the Sanggunian concerned shall, within fact in a book kept for the purpose, stating the
thirty (30) days from receipt thereof, return the dates of approval and posting.
same with its comments and recommendations to
(c) The gist of all ordinances with penal sanctions
the Sangguniang barangay concerned for
shall be published in a newspaper of general
adjustment, amendment, or modification; in which
circulation within the province where the local
case, the effectivity of the barangay ordinance is
legislative body concerned belongs. In the absence
suspended until such time as the revision called for
of any newspaper of general circulation within the
is effected.
province, posting of such ordinances shall be made
in all municipalities and cities of the province where
the Sanggunian of origin is situated.
7. Publication and posting- It must be made within (d) In the case of highly urbanized and independent
10 days after the approval. component cities, the main features of the
ordinance or resolution duly enacted or adopted
Section 188. Publication of Tax Ordinances and shall, in addition to being posted, be published once
Revenue Measures. - Within ten (10) days after in a local newspaper of general circulation within
their approval, certified true copies of all provincial, the city: Provided, That in the absence thereof the
city, and municipal tax ordinances or revenue ordinance or resolution shall be published in any
measures shall be published in full for three (3)
[Page 42 of 79]
newspaper of general circulation. Cagayan, G.R. No. 191761, November 14, 2012
The Sangguniang Panlungsod of Cagayan de Oro (City
Council) passed Ordinance No. 9503-2005 imposing a tax on
8. Review by the DOJ- The DOJ has the power to the lease or rental of electric and/or telecommunication
review the Ordinances enacted by the appropriate posts, poles or towers by pole owners to other pole users at
Sanggunian. ten percent (10%) of the annual rental income derived from
such lease or rental.
How is this done? Is it automatic? No. The persons
concerned must file an appeal to the DOJ. This is Cagayan Electric Power and Light Company filed a petition
one of the remedies of a taxpayer or those who are for declaratory relief assailing the validity of Ordinance with
affected by the Ordinance passed by the the RTC. The City argued that the petition must be dismissed
appropriate Sanggunian. They will file an appeal to in view of the failure to exhaust administrative remedies.
the DOJ. This is what we call as administrative The Supreme Court held:
appeal.
CEPALCO ignored our ruling in Reyes v. Court of Appeals on
Section 187. Procedure for Approval and the mandatory nature of the statutory periods:
Effectivity of Tax, Ordinances and Revenue Clearly, the law requires that the dissatisfied taxpayer who
Measures; Mandatory Public Hearings. - The questions the validity or legality of a tax ordinance must file
procedure for approval of local tax ordinances and his appeal to the Secretary of Justice, within 30 days from
revenue measures shall be in accordance with the effectivity thereof. In case the Secretary decides the appeal,
provisions of this Code: Provided, That public a period also of 30 days is allowed for an aggrieved party to
hearings shall be conducted for the purpose prior to go to court. But if the Secretary does not act thereon, after
the enactment thereof: Provided, further, That any the lapse of 60 days, a party could already proceed to seek
question on the constitutionality or legality of tax relief in court. These three separate periods are clearly given
ordinances or revenue measures may be raised on for compliance as a prerequisite before seeking redress in a
appeal within thirty (30) days from the effectivity competent court. Such statutory periods are set to prevent
thereof to the Secretary of Justice who shall render delays as well as enhance the orderly and speedy discharge
a decision within sixty (60) days from the date of of judicial functions. For this reason the courts construe
receipt of the appeal: Provided, however, That such these provisions of statutes as mandatory.
appeal shall not have the effect of suspending the
effectivity of the ordinance and the accrual and A municipal tax ordinance empowers a local government unit
payment of the tax, fee, or charge levied therein: to impose taxes. The power to tax is the most effective
Provided, finally, That within thirty (30) days after instrument to raise needed revenues to finance and support
receipt of the decision or the lapse of the sixty-day the myriad activities of local government units for the
period without the Secretary of Justice acting upon delivery of basic services essential to the promotion of the
the appeal, the aggrieved party may file appropriate general welfare and enhancement of peace, progress, and
proceedings with a court of competent jurisdiction. prosperity of the people. Consequently, any delay in
implementing tax measures would be to the detriment of the
When should the appeal be made? Within thirty public. It is for this reason that protests over tax ordinances
(30) days from the date of effectivity of the are required to be done within certain time frames. In the
Ordinance concerned. The Secretary of Justice instant case, it is our view that the failure of petitioners to
(SOJ) shall render a decision within sixty (60) days appeal to the Secretary of Justice within 30 days as required
from the date of receipt of the appeal. If the SOJ by Sec. 187 of R.A. 7160 is fatal to their cause.
will not do anything about it, then the taxpayer may But even if there was failure to follow the 30-day period, the
then go to the court for a judicial relief. In other SC nevertheless decided on the subject matter of the case.
words, there must first be an exhaustion of The rules were relaxed.
administrative remedies.
What is the nature of this 30-day period? This is Note: Section 190 was not discussed but was included in the
mandatory in nature. If you do not follow this 30- outline.
day period, your petition will be dismissed.
Moreover, the SOJ can immediately dismiss the Section 190. Attempt to Enforce Void or Suspended Tax
petition on the following grounds: Ordinances and revenue measures. - The enforcement of any
tax ordinance or revenue measure after due notice of the
a. Legality of the Ordinance; and,
disapproval or suspension thereof shall be sufficient ground
b. Constitutionality of the Ordinance. for administrative disciplinary action against the local officials
and employees responsible therefor.
Cagayan Electric Power and Light Company v. City of
[Page 43 of 79]
Feb. 25, 2015 (AS) Now the question is what about the FMV of the property?
Anong gagamitin? Is it the assessed value or the zonal
LOCAL GOVERNMENT CODE value? Kung sa capital gains taxation pa yan diba 6% of the
assessed value or zonal value. When I asked my friend in the
The specific taxing powers of the LGUs. For this matter, I City Assessors Office they use the assessed value.
think the codal provisions are very important. So familiarize
the codal. What are the transactions exempt under this provision?
1. Transfers under CARL Yung mga na-CARL na lupa diba
Section 134. Scope of Taxing Powers. - Except as otherwise nililipat na yan from hacinederos to the mag-uuma.
provided in this Code, the province may levy only the taxes,
fees, and charges as provided in this Article. 2. Transfers to the National Govt and LGU This is one of
the inherent limitations. The government cannot tax
itself unless there is a provision of law that provides for
The next question there is what are the taxes allowed under
the taxation of a certain government agency.
the provinces? If run down the LGC you have these:
3. Transfers to foreign governments For example India
Transfer of real property ownership
would like to establish an embassy here in Davao. Ano
Business tax on printing or publication man yan? That is the principle of international comity.
Franchise taxes
Sec 135. xxx (b) For this purpose, the Register of Deeds of
Tax on sand, gravel and other quarry resources the province concerned shall, before registering any deed,
require the presentation of the evidence of payment of this
Professional tax tax. The provincial assessor shall likewise make the same
Amusement tax requirement before cancelling an old tax declaration and
issuing a new one in place thereof, Notaries public shall
Annual fixed tax for every delivery van or truck furnish the provincial treasurer with a copy of any deed
transferring ownership or title to any real property within
I. Transfer of Real Property thirty (30) days from the date of notarization. xxx
Ownership:
Sec 134 (b) actually deals with administrative matters. The
Section 135. Tax on Transfer of Real Property Ownership. ROD before recording the transfer must require the CAR
(Certificate Authorizing Registration) from the BIR. On top of
(a) The province may impose a tax on the sale , donation, that, they will ask for an official receipt from the City
barter, or on any other mode of transferring ownership or Treasurer. Also, it is not enough that you will have to effect
title of real property at the rate of not more than fifty the transfer of the titles name in the ROD. Siyempre
percent (50%) of the one percent (1%) of the total papalitan mo din yung real property tax declaration niyo from
consideration involved in the acquisition of the property or the old owner to the new owner. Before the local assessor
of the fair market value in case the monetary consideration will actually do something about it you must also present the
involved in the transfer is not substantial, whichever is OR from the City Treasurer showing that you have paid the
higher. The sale, transfer or other disposition of real the transfer taxes.
property pursuant to R.A. No. 6657 shall be exempt from
this tax. Now, as to notaries public. When you become lawyers, that
is actually the first petition that you will file in courts. The
Lets outline this provision. What are the transactions taxed first case that you will have for yourself. But even if the law
in this section? You have: would require notaries public to submit before the provincial
treasurer a copy of any deed transferring ownership, in
sale actual practice that is not done. Usually, the notary public
donation will provide an extra copy to the parties and the parties
themselves would submit it to the City Treasurers Office.
barter, or
When should the real property transfer tax be paid?
on any other mode of transferring ownership or title
of real property xxx It shall be the duty of the seller, donor, transferor,
This would mean that even if the property is transferred executor or administrator to pay the tax herein imposed
through succession, you have to pay this transfer tax. within sixty (60) days from the date of the execution of the
deed or from the date of the decedent's death.
What is the tax rate? It is not more than 50% of 1%
What is the tax base? If it is with consideration then you look So 60 days ang binigay. Unlike sa capital gains tax diba 30
at the consideration or the FMV of the property whichever is days lang. If you pay late of course there will be penalties
higher. and surcharges.
[Page 44 of 79]
II. Tax on Business of Printing and What happened was that the City required CASURECO to
submit its book of accounts for the purpose of the imposition
Publication of franchise taxes. Siyempre ang CASURECO ayaw niyang
magbayad ng franchise tax. Sabi niya it is an electrive
Section 136. Tax on Business of Printing and Publication. - cooperative and is provisionally registered with the CDA
The province may impose a tax on the business of persons (Cooperative Devt Authority) and it is exempt from the local
engaged in the printing and/or publication of books, cards, taxes. CASURECO also argued that granting it is liable for
posters, leaflets, handbills, certificates, receipts, pamphlets, local taxes, it would only include the distribution made within
and others of similar nature, at a rate not exceeding fifty the city and exclude neighboring provinces.
percent (50%) of one percent (1%) of the gross annual
Issues:
receipts for the preceding calendar year.
1. WON electric cooperatives registered under not
What is the nature of this tax? It is an EXCISE TAX. It is a under the CDA is liable for local taxes?
tax on the privilege of conducting printing and publication
2. What is the situs of franchise tax?
business.
Ruling: CASURECO is liable for local taxes for two reasons:
What is the tax base? GROSS ANNUAL RECEIPTS of the
preceeding calendar year 1. The enactment of LGC effectively removed the tax
exemption of CASURECO.
What is the tax rate? GR is: 50% of 1% of GAR.
Before pag cooperative ka exempt ka from local
The exception is: Not exceeding 1/20 of 1% of capital
taxes. But right now, wala na yan. Ang naiwan
investment
nalang is if you are a cooperative registered under
the CDA. But sabi ni CASURECO, Okay liable kami
In the case of a newly started business, the tax shall not but you still cannot impose taxes on us because
exceed one-twentieth (1/20) of one percent (1%) of the franchise tax is in the nature of a business tax. We
capital investment. In the succeeding calendar year, are a non-profit entity.
regardless of when the business started to operate, the tax
shall be based on the gross receipts for the preceding SC said: It does not matter if you are non-profit.
calendar year, or any fraction thereof, as provided herein. Franchise is a tax on the privilege of transacting
business in the state exercising corporate franchise
Now is there an exemption? YES. School texts or references granted by the state. It is on the EXERCISE of the
prescribed by DepEd. franchise and not on the BUSINESS per se.
2. A franchise tax is in the nature of an excise tax.
The receipts from the printing and/or publishing of books or The situs is where the privilege is exercised. It does
other reading materials prescribed by the Department of not matter who the end consumers are.
Education, Culture and Sports as school texts or references CASURECOs main office is in the City of Iriga and it
shall be exempt from the tax herein imposed receives money within the same city. Therefore,
since it is operating within the territorial limits of
III. Franchise Tax Iriga, it is liable for franchise taxes not only for the
distributed electricity within the city but also with
respect to other provinces. Because again, THE
Section 137. Franchise Tax. - Notwithstanding any
SITUS OF FRANCHISE TAX IS WHERE THE
exemption granted by any law or other special law, the
FRANCHISE IS EXERCISED.
province may impose a tax on businesses enjoying a
franchise, at the rate not exceeding fifty percent (50%) of
The nature of a franchise tax is of course it is an excise tax.
one percent (1%) of the gross annual receipts for the
It is a tax on transacting business by virtue of a government
preceding calendar year based on the incoming receipt, or
franchise.
realized, within its territorial jurisdiction.
What are the requirements before a person may be
What is a franchise? A franchise is a tax on the privilege of subjected to franchise tax? (From CASURECO CASE):
transacting business in a state and exercising corporate
Thus, to be liable for local franchise tax, the following
franchises granted by the state.
requisites should concur:
CITY OF IRIGA, vs. (1) That one has a "franchise" in the sense of a secondary
CAMARINES SUR III ELECTRIC COOPERATIVE, INC. or special franchise; and
(CASURECO III)
(2) That it is exercising its rights or privileges under this
Facts: CASURECO is an electric cooperative. It distributes franchise within the territory of the pertinent local
electricity in the City of Iriga and the neighboring provinces. government unit
[Page 45 of 79]
Lets go now to the tax rate and tax base. ten percent (10%) of fair market value in the locality per
cubic meter of ordinary stones, sand, gravel, earth, and
The tax rate is: 50% of 1%
other quarry resources, as defined under the National
The tax base: Gross annual receipts for the preceeding Internal Revenue Code, as amended, extracted from public
annual year lands or from the beds of seas, lakes, rivers, streams, creeks,
and other public waters within its territorial jurisdiction.
In lieu of all taxes provision
When the government issues a franchise, usually kasali yan. What is the tax rate? Not more than 10% of FMV in the
locality per cubic meter of subject
SMART COMMUNICATIONS, INC., Petitioner, vs. What is the tax base? Gross Output
THE CITY OF DAVAO, represented herein by its Mayor
Hon. RODRIGO DUTERTE, and the SANGGUNIANG Who issues the permit?
PANLUNSOD OF DAVAO CITY
xxx The permit to extract sand, gravel and other quarry
Facts: This started as a declaratory relief case. Smart filed a
resources shall be issued exclusively by the provincial
case against the City Government and Mayor Duterte.
governor, pursuant to the ordinance of the sangguniang
Ruling: panlalawigan.xxx
Three principles:
LEPANTO CONSOLIDATED MINING
1. The LGC is prospective in application. Since its COMPANY, Petitioner,
enactment, most of the exemption were withdrawn. vs.
Therefore, the franchises granted after the HON. MAURICIO B. AMBANLOC, in his capacity as the
effectivity of the LGC so long as there is a specific Provincial Treasurer of Benguet
tax exemption remains.
Facts: Lepanto has a mining agreement with the government
In the case of Smart, since its franchise is granted and it included its filing all the mineral resources. It inquired
after the enactment of the LGC supposedly it can with the LGU kung kailangan niya pa magbayad ng additional
claim the tax exemption because its not covered fees if it intends to extract sand and gravel to be used for its
under the withdrawal of tax exemptions in the LGC. own business. Now here comes the City Treasure asking for
But the SC said NO. Smart is still liable for franchise the payment of quarry resources tax.
taxes. This brings me to my next principle.
Ruling: Two Principles
2. The In lieu of all taxes clause is construed strictly
1. The SC said that the LGC is merely a general law that
against the taxpayer and in favor of the
government. delegates to the provinces its authority to tax the extraction
of quarry resources. It is not a tax provision but its the
This is an effect of giving a tax exemption to the power authorizing a province to enact an ordinance to
grantee. All the principles on tax exemption should impose such kind of taxes.
apply in this case. As a taxpayer, you must show
Therefore, if there are questions pertaining to the liability for
that there is a specific provision providing for a tax
exemptions. the payment of taxes, you dont look at the LGC but you look
at the ordinance. Now if it is a question of delegation, or the
Now the problem with In lieu of all taxes clause is authority of the LGU to impose such tax, then thats the time
it does not distinguish what type of taxes is Smart you look at the LGC.
exempt from. So in case of doubt, the doubt is to
be resolved in favor of the City of Davao. 2. The SC said that the sand and gravel extraction tax is an
excise tax. It is imposed on the privilege of extracting sand
3. In lieu of all taxes clause extends only to NIRC taxes and and gravel. It is settled that provincial governments can levy
not the local taxes. this tax independently from the National Govt.
But anyway right now that provision is rendered nugatory
because of the New VAT Law (RA 9337). It withdrew all
exemptions kaya pag naka-receive kayo ng billing ng Province of Bulacan v. Court of Appeals
Globe/Smart may VAT component.
Facts: There was an ordinance imposed by the province of
Bulacan imposing a sand and gravel extraction tax. The
IV. Tax on Sand, Gravel and Other provincial treasurer assessed the corporation so much of this
Quarry Resources extraction tax but the corporation refused to pay. Sabi ng
corporation We are extracting from a private land. Your
ordinance is defective to begin with because the provincial
Section 138. Tax on Sand, Gravel and Other Quarry
government is only authorized to impose taxes on extraction
Resources. The province may levy and collect not more than
[Page 46 of 79]
of quarry resources done on public land, river beds etc. 2. The second reason is:
Issue: Can the province impose sand and gravel extraction
xxx. Any person subject to the professional tax shall write in
tax on quarry resources extracted on private lands?
deeds, receipts, prescriptions, reports, books of account,
Ruling: plans and designs, surveys and maps, as the case may be,
the number of the official receipt issued to him xxx
The LGU cannot impose such tax. The province has no
authority to tax the extraction of stones, sand and gravel on
private land. There is another provision which provides for a VI. Amusement Tax.
limitation of the taxing powers. Under the NIRC, if an excise
tax is already imposed on a certain economic activity, then Section 140. Amusement Tax (a) The province may levy an
the province or LGUs can no longer impose such kind of amusement tax to be collected from the proprietors, lessees,
taxes. or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement at a rate of
V. Professional Tax not more than thirty percent (30%) of the gross receipts
from admission fees.
Section 139. Professional Tax. -
Let us first define amusement:
(a) The province may levy an annual professional tax on
each person engaged in the exercise or practice of his Sec 131. (b) "Amusement" is a pleasurable diversion and
profession requiring government examination at such entertainment. It is synonymous to relaxation, avocation,
amount and reasonable classification as the sangguniang pastime, or fun;
panlalawigan may determine but shall in no case exceed
Three hundred pesos (P300.00). What about amusement places?
Lets outline: (c) "Amusement Places" include theaters, cinemas, concert

Anong transaction? The exercise or practice of his profession halls, circuses and other places of amusement where one
requiring government examination seeks admission to entertain oneself by seeing or viewing the
show or performances;
What is the tax rate? 300 pesos
What is the tax base? To be determined by the Sanggunian What is the tax rate? Not more than 30%
What if an individual has two professions? What is the tax base? Gross receipts
Ex: Accountant and lawyer ako. Paano yan? The law says A Who are the persons liable? They are:
line of profession does not become exempt even if conducted Proprietors, lessees, or operators of:
with some other profession for which the tax has been paid.
In other words as long as you exercise those professions, theaters,
you are mandated to pay the corresponding professional tax.
cinemas,
What if the professional exercises his profession not only in
concert halls,
Davao City but in other provinces?
circuses,
xxx (b) Every person legally authorized to practice his
boxing stadia,
profession shall pay the professional tax to the province
where he practices his profession or where he maintains his and other places of amusement
principal office in case he practices his profession in several
How about night clubs? Can the LGU impose amusement
places: Provided, however, That such person who has paid
taxes on them? NO. The LGU cannot impose because they
the corresponding professional tax shall be entitled to
are already taxed under the NIRC.
practice his profession in any part of the Philippines without
being subjected to any other national or local tax, license, or What about cockpits? Pretty much the same. They are taxed
fee for the practice of such profession. xxx under the NIRC.
Kung marami siyang raket, the tax must paid in the LGU Philippine Basketball Association v.
where his principal office is located. Court of Appeals
Why is it necessary for you to pay your professional tax? Issue: The amusement tax on admission tickets of PBA
games is subject to local and national taxes?
1. The payment of professional tax is required by an
individual or corporation which intends to hire a professional. Ruling: The SC said national taxes lang. No longer covered
[Page 47 of 79]
by LGC. It is the use of Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers in, Certain
PELIZLOY REALTY CORPORATION Products.
vs. THE PROVINCE OF BENGUET
For what purpose?
Facts: Pelizloy is a realty corporation which owns a resort.
But then the province of Benguet sent them a demand letter To deliver or distribute to sales outlets, or consumers,
asking them to pay amusement tax because of its ordinance whether directly or indirectly, within the province.
imposing the same on the admission fees in pools and the
like. What are the products involved here?
The point of Pelizloy is this: Benguet cannot impose taxes Distilled spirits, fermented liquors, soft drinks, cigars and
because it is ulta vires. A local governments power to collect cigarettes, and other products as may be determined by the
taxes cannot extend to the power of the National sangguniang panlalawigan.
Government to collect taxes.
Issue: Can Benguet impose amusement taxes on admission What is the tax rate? It must not be exceeding Five
fees on resorts, pools etc? hundred pesos (P500.00).
Ruling: The SC said NO. Using the principle of ejusdem Take note of the last paragraph:
generis, when there is a general word or phrase followed by
specific words, it is understood that the general word is b) The manufacturers, producers, wholesalers, dealers and
related to the specific words. If you look at the listing retailers referred to in the immediately foregoing
provided by the LGC you have theaters, cinemas, concert paragraph shall be exempt from the tax on peddlers
halls, circuses, boxing stadia What is the common prescribed elsewhere in this Code.
characteristic of this? They are venues primarily for staging
shows and performances. Now, will resorts and pools fall Lets jump to Article III.
under the term amusement places? Hindi na. Because the
principle of ejusdem generis, you dont go there to view CITIES
exhibitions. It is not primarily for viewing.
Section 151. Scope of Taxing Powers. - Except as
You know the Philippine Eagle? Diba parang amusement otherwise provided in this Code, the city, may levy the
place man siya? The City of Davao sent them a demand taxes, fees, and charges which the province or municipality
letter to pay amusement tax. Di ba its pretty much the same may impose: xxx
with Pelizloy case.
So when you talk about cities, the scope or coverage for
taxation is actually broader. It may impose those which the
March 1 (DJG) municipality or province are granted to impose.
We start with Section 141. Does this apply to all kinds of cities?
Section 141. Annual Fixed Tax For Every Delivery The LGC does not provide for any distinction so as long as it
Truck or Van of Manufacturers or Producers, is a city (regardless of classification), then the taxing power
Wholesalers of, Dealers, or Retailers in, Certain under section 151 will apply.
Products. -
What about the tax rate?
a) The province may levy an annual fixed tax for every
The rates of taxes that the city may levy may exceed the
truck, van or any vehicle used by manufacturers,
maximum rates allowed for the province or municipality by
producers, wholesalers, dealers or retailers in the
not more than fifty percent (50%) except the rates of
delivery or distribution of distilled spirits, fermented
professional and amusement taxes.
liquors, soft drinks, cigars and cigarettes, and other
products as may be determined by the sangguniang Lets go back to Article II.
panlalawigan, to sales outlets, or consumers, whether
directly or indirectly, within the province in an amount MUNICIPALITIES
not exceeding Five hundred pesos (P500.00). xxx
Section 142. Scope of Taxing Powers. - Except as
What is the transaction that is being taxed by this otherwise provided in this Code, municipalities may levy
provision? taxes, fees, and charges not otherwise levied by provinces.
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So, if you come to think of it, if it is not provided in the Section 133. Common Limitations on the Taxing
province then more or less, the municipalities may impose Powers of Local Government Units. - Unless
such kind of taxes. otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
Lets take one by one the taxing powers of a municipality. barangays shall not extend to the levy of the following:
Section 143. Tax on Business. - The municipality may xxx
impose taxes on the following businesses: xxx (Sir: kahaba- (h) Excise taxes on articles enumerated under the
haba ng provision na to, pero walang kwenta.) national Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products; xxx
To sum it up, the municipality has the power to impose
business taxes on establishments within its territorial Now, we go to Section 146.
jurisdiction.
Section 146. Payment of Business Taxes.
What is the nature of a business tax?
(a) The taxes imposed under Section 143 shall be payable
It is an excise tax because it is imposed on the privilege to for every separate or distinct establishment or place where
engage business in a particular locality. business subject to the tax is conducted and one line of
Distinguish from income taxes. Both of them are excise business does not become exempt by being conducted with
taxes but business has more of a regulatory function, more some other business for which such tax has been paid. The
of an exercise of the police power. The failure to pay tax on a business must be paid by the person conducting the
business tax will normally render the business illegal. same. xxx
YAMANE CASE (no citation given). These are the rules on the payment of business taxes.
This case involved a condominium corporation. It collects Who pays the business taxes? The tax on a business
dues from its unit owners. According to its articles of must be paid by the person conducting the business.
incorporation and by-laws, it is not allowed to conduct What is the situation under Section 146(a)? The
project-oriented activities. So it collects money for situation is that the taxpayer has many businesses. Now,
operational expenses, maintenance of buildings etc. Now, the what are the effects as to the payment of business
City Treasurer sent them a notice of assessment assessing taxes? The payment shall be or every separate or distinct
business taxes. It was questioned why he was assessed establishment or place where business subject to the tax is
business taxes when it is not engaged in business in the first conducted. Hindi porket bayad ka sa isa, that will
place. The corporation was not for profit. The primary automatically exempt you from payment. Iba-iba and bayad.
purpose of the condominium corporation is to hold the land
and, of course, maintenance. So it is not profit-oriented. The (b) In cases where a person conducts or operates two (2) or
issue hence is whether the LGU may tax the corporation. more of the businesses mentioned in Section 143 of this
The SC held that LGU cannot compel a corporation to pay Code which are subject to the same rate of tax, the tax shall
business taxes. Section 143 allows the imposition of business be computed on the combined total gross sales or receipts of
taxes but it must be those businesses which fall under the the said two (2) or more related businesses.
definition as provided under the LGC. Under the LGC,
"Business" means trade or commercial activity regularly The situation here is that there are two or more businesses
engaged in as a means of livelihood or with a view to profit. but these are subjected to the same tax rate. Example,
taxpayer is engaged in the manufacture of agricultural
So under the LGC, the business must be geared for profit. fertilizer and at the same time of poultry feeds. These are
The corporation in the case, as provided under its by-laws different business but practically subjected to the same tax
and AOI, is not geared for profit. It was even proven that the under the LGC.
money collected as used ONLY for maintenance purposes.
(c) In cases where a person conducts or operates two (2) or
PETRON CASE (no citation given). more businesses mentioned in Section 143 of this Code
which are subject to different rates of tax, the gross sales or
Petron was assessed business taxes for the sale of diesel
receipts of each business shall be separately reported for the
fuel. The SC was categorical in pronouncing here that
purpose of computing the tax due from each business.
business taxes cannot be imposed on petroleum products.
This is based on Section 33(h) of the LGC which provides This time there are two or more separate types of business
that, and are subjected to different rates of tax. What is the rule?
You compute the gross sales separately because anyway
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they will be subjected to different types of tax. Example: The situation is that there is a principal office tapos meron
distributor of cement and at the same time construction siyang factory/plantation at some other place. In this case,
contractor. the sales have to be allocated as follows: (1)Thirty percent
(30%) of all sales recorded in the principal office shall be
Let;s go to Section 150 on the Situs of the Tax. taxable by the city or municipality where the principal office
This is pretty helpful because the taxpayer may have is located; and (2) Seventy percent (70%) of all sales
different businesses in different places and branches, and at recorded in the principal office shall be taxable by the city or
the same time it is also possible that a taxpayer may have a municipality where the factory, project office, plant, or
principal office in one place, a factory in another place and a plantation is located.
plantation in yet another place. So Section 150 lays down the Lets take a simple problem.:
rules on situs.
Banana business with plantation in Tagum and a principal
Lets outline this: office in Davao which distributes and sells the product. If the
gross sales is around 1M, 300k will be taxable in Davao City
(a) For purposes of collection of the taxes under Section 143
and the remaining 700k will be taxable in Tagum.
of this Code, manufacturers, assemblers, repackers, brewers,
distillers, rectifiers and compounders of liquor, distilled spirits Does it matter if Tagum also sells banana? Look at last
and wines, millers, producers, exporters, wholesalers, paragraph:
distributors, dealers, contractors, banks and other financial
institutions, and other businesses, maintaining or operating (e) The foregoing sales allocation shall be applied
branch or sales outlet elsewhere shall record the sale in the irrespective of whether or not sales are made in the locality
branch or sales outlet making the sale or transaction, and where the factory, project office, plant, or plantation is
the tax thereon shall accrue and shall be paid to the located.
municipality where such branch or sales outlet is located. In
cases where there is no such branch or sales outlet in the So in others words, you aggregate and then allocate the
city or municipality where the sale or transaction is made, gross sales.
the sale shall be duly recorded in the principal office and the
(c) In case of a plantation located at a place other than the
taxes due shall accrue and shall be paid to such city or
place where the factory is located, said seventy percent
municipality.
(70%) mentioned in subparagraph (b) of subsection (2)
The situation here is that there is a principal office with no above shall be divided as follows:
branch office/s and a principal office with one or more
(1) Sixty percent (60%) to the city or municipality where the
branch office/s. Where do you record these?
factory is located; and
If principal office only, no problem. The sale shall be duly
(2) Forty percent (40%) to the city or municipality where the
recorded in the principal office and the taxes due shall accrue
plantation is located.
and shall be paid to such city or municipality.
Example is cigarettes. Iba man ang plantation ng tabacco sa
If there are several sale outlets, the sale shall be recorded in
factory na pagawaan ng yosi. For instance, plantation is in
the branch or sales outlet making the sale or transaction,
Nabunturan, factory in Tagum and principal office in Davao.
and the tax thereon shall accrue and shall be paid to the
How are supposed to allocate? First, divide the gross sales
municipality where such branch or sales outlet is located.
70-30. So, automatic in 1M gross sale, 300k taxable in
(b) The following sales allocation shall apply to principal office: Davao. Since there is a separate factory and
manufacturers, assemblers, contractors, producers, and plantation, that 70% will be further divided 60% (Factory:
exporters with factories, project offices, plants, and Tagum) and 40% (Plantation: Nabunturan).
plantations in the pursuit of their business:
What about if the situation is like this: principal office is in
(1) Thirty percent (30%) of all sales recorded in the principal Davao, two plantation in Nabunturan and Mati, and a factory
office shall be taxable by the city or municipality where the in Tagum. That is covered under Section 150(d).
principal office is located; and
(d) In cases where a manufacturer, assembler, producer,
(2) Seventy percent (70%) of all sales recorded in the exporter or contractor has two (2) or more factories, project
principal office shall be taxable by the city or municipality offices, plants, or plantations located in different localities,
where the factory, project office, plant, or plantation is the seventy percent (70%) sales allocation mentioned in
located. subparagraph (b) of subsection (2) above shall be prorated
among the localities where the factories, project offices,
[Page 50 of 79]
plants, and plantations are located in proportion to their (2) On places of recreation which charge
respective volumes of production during the period admission fees; and
for which the tax is due.
(3) On billboards, signboards, neon signs, and
Lets take the 1M gross sales again. 30% (300k) automatic in outdoor advertisements.
principal office. In the remaining 70% of the gross sales,
60% of which will go to the factory in Tagum and the
remaining 40% will go to the plantations. The problem is March 3, 2016 (Frances Yaphockun)
there are two plantations. How do you divide further the
40%? The same will be prorated in proportion to their Common revenue-raising powers of
respective volumes of production. Local Government Units
When you say common, these are the powers which are
The principle is the same if you have one plantation and two
exercised by all types of LGUs i.e. province, cities,
factories. You divide the 60% base on the volume of municipalities, and barangays. As we have said earlier, their
production. taxing power is actually limited. The province has a broader
scope than the cities. Municipalities and barangays
Lets go to Article IV.
respectively have lesser scope than the foregoing. But at
least, with respect to these common taxing powers, all of
BARANGAYS these types of LGUs can exercise the same. What are these
common powers? There are at least 3 which are as follows:
Section 152. Scope of Taxing Powers. - The barangays
may levy taxes, fees, and charges, as provided in this Article, 1. Service fees and charges;
which shall exclusively accrue to them: 2. Public utility charges; and,
(a) Taxes - On stores or retailers with fixed business 3. Toll fees and charges.
establishments with gross sales of receipts of the preceding
Let us start with service fees found under section 153 of
calendar year of Fifty thousand pesos (P50,000.00) or less, in the LGC.
the case of cities and Thirty thousand pesos (P30,000.00) or
less, in the case of municipalities, at a rate not exceeding Section 153. Service Fees and Charges. - Local government
one percent (1%) on such gross sales or receipts. units may impose and collect such reasonable fees and
charges for services rendered.
Kung meron ka sari-sari store then maka-abot ka ng 50k a
month, you have to pay these taxes if there is a barangay
If you come to think about it, this is actually the power of
ordinance.
taxation. This is more of a police power imposed by the LGUs
for the services they rendered for the public. Pretty much the
(b) Service Fees or Charges. - Barangays may collect
same when you transact with the city or the barangay.
reasonable fees or charges for services rendered in
connection with the regulations or the use of barangay- The next is the public utility charges under section 154.
owned properties or service facilities such as palay, copra, or
tobacco dryers. Section 154. Public Utility Charges. - Local government
units may fix the rates for the operation of public utilities
(c) Barangay Clearance. - No city or municipality may issue owned, operated and maintained by them within their
any license or permit for any business or activity unless a jurisdiction.
clearance is first obtained from the barangay where such
business or activity is located or conducted. For such Take note that they can only impose public utility charges
clearance, the sangguniang barangay may impose a when it is operating within its jurisdiction.
reasonable fee. The application for clearance shall be acted
Then, we have toll fees and charges under section 155.
upon within seven (7) working days from the filing thereof.
In the event that the clearance is not issued within the said
Section 155. Toll Fees or Charges. - The sanggunian
period, the city or municipality may issue the said license or concerned may prescribe the terms and conditions and fix
permit. the rates for the imposition of toll fees or charges for the use
of any public road, pier, or wharf, waterway, bridge, ferry or
(d) Other fees and Charges. - The barangay may levy
telecommunication system funded and constructed by the
reasonable fees and charges: local government unit concerned: Provided, That no such toll
fees or charges shall be collected from officers and enlisted
(1) On commercial breeding of fighting cocks,
men of the Armed Forces of the Philippines and members of
cockfights and cockpits;
the Philippine National Police on mission, post office
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personnel delivering mail, physically-handicapped, and What are the requirements before an individual may be liable
disabled citizens who are 65 years or older. to pay community tax?
When public safety and welfare so requires, the sanggunian a. He must be an inhabitant of the Philippines but
concerned may discontinue the collection of the tolls, and not necessarily a citizen;
thereafter the said facility shall be free and open for public
b. He must be at least 18 years old; and,
use.
c. He must either be one who:
A requirement under this section is that the public road, pier,
i. Has been regularly employed on a
or wharf, waterway, bridge, ferry or telecommunication
wage or salary basis for at least thirty
system is funded and constructed by the local government
(30) consecutive working days during
unit concerned. That is the time that they can impose toll
any calendar year;
fees. It is like an exemption because they are not supposed
to impose tolls for the passage of vehicles or goods that ii. Is engaged in business or occupation;
traverse through the jurisdiction of the LGU concerned. This
iii. Owns real property with an aggregate
is one of the exemptions.
assessed value of P1,000.00 or more;
Take note also of the persons exempt from the imposition of or
toll fees. You have the AFP, PNP, post office, and physically-
iv. Is required by law to file an income
handicapped, and disabled citizens who are 65 years or
tax return. When you are required to
older.
file an ITR, normally you have to pay
This imposition of toll fees, by the way, can be suspended by for a cedula.
the Sanggunian when public safety and welfare so requires.
2. Juridical persons.
Let us go now to COMMUNITY TAX under section 156.
Section 158. Juridical Persons Liable to Community Tax. -
Section 156. Community Tax. - Cities or municipalities may Every corporation no matter how created or organized,
levy a community tax in accordance with the provisions of whether domestic or resident foreign, engaged in or doing
this Article. business in the Philippines shall pay an annual community
tax of Five hundred pesos (P500.00) and an annual
What do you understand by community tax? It is a poll tax. additional tax, which, in no case, shall exceed Ten thousand
If you fail to pay the same, you will not be imprisoned unlike pesos (P10,000.00) in accordance with the following
other kinds of tax wherein you will be held criminally liable if schedule:
you had an intention to evade paying tax. A community tax is (1) For every Five thousand pesos (P5,000.00) worth of real
a tax imposed upon the residents of a municipality or a city.
property in the Philippines owned by it during the preceding
Who are liable for these taxes? These are: year based on the valuation used for the payment of real
property tax under existing laws, found in the assessment
1. Natural persons (human beings); and, rolls of the city or municipality where the real property is
situated - Two pesos (P2.00); and
Section 157. Individuals Liable to Community Tax. - Every
inhabitant of the Philippines eighteen (18) years of age or (2) For every Five thousand pesos (P5,000.00) of gross
over who has been regularly employed on a wage or salary receipts or earnings derived by it from its business in the
basis for at least thirty (30) consecutive working days during Philippines during the preceding year - Two pesos (P2.00).
any calendar year, or who is engaged in business or The dividends received by a corporation from another
occupation, or who owns real property with an aggregate corporation however shall, for the purpose of the additional
assessed value of One thousand pesos (P1,000.00) or more, tax, be considered as part of the gross receipts or earnings
or who is required by law to file an income tax return shall of said corporation.
pay an annual additional tax of Five pesos (P5.00) and an
annual additional tax of One peso (P1.00) for every One There are also persons who are exempt from community
thousand pesos (P1,000.00) of income regardless of whether
tax under section 159.
from business, exercise of profession or from property which
in no case shall exceed Five thousand pesos (P5,000.00).
Section 159. Exemptions. - The following are exempt from
In the case of husband and wife, the additional tax herein the community tax:
imposed shall be based upon the total property owned by
(1) Diplomatic and consular representatives; and,
them and the total gross receipts or earnings derived by
them. (2) Transient visitors when their stay in the Philippines does
not exceed three (3) months.
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Where should payment be made? What is the significance of the Community Tax Certificate
(CTC)? It bears significance on some transactions.
Section 160. Place of Payment. - The community tax shall
be paid in the place of residence of the individual, or in the Section 163. Presentation of Community Tax Certificate On
place where the principal office of the juridical entity is Certain Occasions.
located.
(a) When an individual subject to the community tax
acknowledges any document before a notary public, takes
When should it be paid? the oath of office upon election or appointment to any
position in the government service; receives any license,
Section 161. Time for Payment; Penalties for Delinquency. certificate. or permit from any public authority; pays any tax
(a) The community tax shall accrue on the first (1st) day of or free; receives any money from any public fund; transacts
January of each year which shall be paid not later than the other official business; or receives any salary or wage from
last day of February of each year. If a person reaches the any person or corporation with whom such transaction is
age of eighteen (18) years or otherwise loses the benefit of made or business done or from whom any salary or wage is
exemption on or before the last day of June, he shall be received to require such individual to exhibit the community
liable for the community tax on the day he reaches such age tax certificate.
or upon the day the exemption ends. However, if a person The presentation of community tax certificate shall not be
reaches the age of eighteen (18) years or loses the benefit of required in connection with the registration of a voter.
exemption on or before the last day of March, he shall have
twenty (20) days to pay the community tax without (b) When, through its authorized officers, any corporation
becoming delinquent. subject to the community tax receives any license,
certificate, or permit from any public authority, pays any tax
Persons who come to reside in the Philippines or reach the or fee, receives money from public funds, or transacts other
age of eighteen (18) years on or after the first (1st) day of official business, it shall be the duty of the public official with
July of any year, or who cease to belong to an exempt class whom such transaction is made or business done, to require
or after the same date, shall not be subject to the such corporation to exhibit the community tax certificate.
community tax for that year.
(c) The community tax certificate required in the two
(b) Corporations established and organized on or before the preceding paragraphs shall be the one issued for the current
last day of June shall be liable for the community tax for that year, except for the period from January until the fifteenth
year. But corporations established and organized on or (15th) of April each year, in which case, the certificate issued
before the last day of March shall have twenty (20) days for the preceding year shall suffice.
within which to pay the community tax without becoming
delinquent. Corporations established and organized on or For example, in notarization of documents, under section
after the first day of July shall not be subject to the 163, when an individual subject to the community tax
community tax for that year. acknowledges any document before a notary public, he must
If the tax is not paid within the time prescribed above, there first present a CTC. But right now, the presentation of CTC is
shall be added to the unpaid amount an interest of twenty- no longer the practice because the SC now only requires a
four percent (24%) per annum from the due date until it is competent evidence of identity. This is not strictly imposed
paid. unless, for example, in an application to incorporate before
the SEC, the SEC will require the TIN and the CTC.
For individuals, the tax accrues on January 1 but you can pay When is it required to present the CTC?
it on or before the last day of February. Normally, you get
your cedula on or before the last day of February. After the 1. When an individual subject to the community tax
last day of February, you can still get a cedula but this time, acknowledges any document before a notary public;
you can be imposed surcharges and penalties. Again, you will 2. Takes the oath of office upon election or
not be imprisoned for nonpayment. appointment to any position in the government
For corporations, it is pretty much the same. service;
3. Receives any license, certificate, or permit from any
Section 162. Community Tax Certificate. A community tax public authority;
certificate shall be issued to every person or corporation
upon payment of the community tax. A community tax 4. Pays any tax or free;
certificate may also be issued to any person or corporation 5. Receives any money from any public fund;
not subject to the community tax upon payment of One peso
(P1.00). 6. Transacts other official business; or,
7. Receives any salary or wage from any person or
corporation with whom such transaction is made or
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business done or from whom any salary or wage is That is why, as a general rule, the LGU cannot impose
received. income tax on individuals and juridical entities. The exception
is when it is levied on banks and other financial institutions.
Why is it distributed? What is the importance here? When
The definition of banks is founder under section 131 (e).
you get your CTC, I suggest that you get it at the barangay
where you actually reside.
Section 131. Definition of Terms. When used in this Title,
How is the proceeds distributed? the term: xxx
(e) "Banks and other financial institutions" include non-bank
Section 164. Printing of Community Tax Certificates and
financial intermediaries, lending investors, finance and
Distribution of Proceeds.
investment companies, pawnshops, money shops, insurance
(a) The Bureau of Internal Revenue shall cause the printing companies, stock markets, stock brokers and dealers in
of community tax certificates and distribute the same to the securities and foreign exchange, as defined under applicable
cities and municipalities through the city and municipal laws, or rules and regulations thereunder; xxx
treasurers in accordance with prescribed regulations.
Can LGUs impose income taxes on pawnshops? You have to
The proceeds of the tax shall accrue to the general funds of
take note of the definition of banks and financial institutions.
the cities, municipalities and barangays except a portion
thereof which shall accrue to the general fund of the national
government to cover the actual cost of printing and (b) Documentary stamp tax;
distribution of the forms and other related expenses. The city (c) Taxes on estates, inheritance, gifts, legacies and other
or municipal treasurer concerned shall remit to the national acquisitions mortis causa, except as otherwise provided
treasurer the said share of the national government in the herein;
proceeds of the tax within ten (10) days after the end of
each quarter. As a general rule, the LGU cannot impose transfer taxes.
(b) The city or municipal treasurer shall deputize the What is the exception? Section 133 (c) on transfers on real
barangay treasurer to collect the community tax in their property ownership. If you remember in our previous
respective jurisdictions: Provided, however, That said discussion, there is this real property transfer tax that you
barangay treasurer shall be bonded in accordance with have to pay before you can effectively transfer ownership
existing laws. from one person to another. That is the exception. When it
comes to sale, barter, exchange, or any disposition of real
(c) The proceeds of the community tax actually and directly property, provinces and cities may impose these taxes at the
collected by the city or municipal treasurer shall accrue rate of of 1% based on the assessed value of the property
entirely to the general fund of the city or municipality or the selling price, whichever is higher.
concerned. However, proceeds of the community tax
collected through the barangay treasurers shall be (d) Customs duties, registration fees of vessel and wharfage
apportioned as follows: on wharves, tonnage dues, and all other kinds of customs
(1) Fifty percent (50%) shall accrue to the general fund of fees, charges and dues except wharfage on wharves
the city or municipality concerned; and constructed and maintained by the local government unit
concerned;
(2) Fifty percent (50%) shall accrue to the barangay where
the tax is collected. (e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in the guise
of charges for wharfage, tolls for bridges or otherwise, or
Common Limitations on the Taxing Powers other taxes, fees, or charges in any form whatsoever upon
of Local Government Units such goods or merchandise;
These are limitations on the power to tax on all types of
LGUs. This is called as the exclusionary rule or the rule on Take note that under letter (e), it only includes taxes, fees,
pre-emption (?) in local government taxation. and charges and other impositions upon goods. If the tax is
imposed on the vehicle, that is okay as long as it is not
imposed on the goods.
Section 133. Common Limitations on the Taxing Powers of
Local Government Units. Unless otherwise provided herein,
the exercise of the taxing powers of provinces, cities, (f) Taxes, fees or charges on agricultural and aquatic
municipalities, and barangays shall not extend to the levy of products when sold by marginal farmers or fishermen;
the following: (g) Taxes on business enterprises certified to by the Board of
(a) Income tax, except when levied on banks and other Investments as pioneer or non-pioneer for a period of six (6)
financial institutions; and four (4) years, respectively from the date of registration;
[Page 54 of 79]
(h) Excise taxes on articles enumerated under the national You have taxes, fees, or charges for the registration of motor
Internal Revenue Code, as amended, and taxes, fees or vehicles; and for reinsurance; taxes, fees or charges for the
charges on petroleum products; registration of motor vehicles and for the issuance of all
kinds of licenses or permits for the driving thereof, except
What is the coverage of excise under the NIRC, if you tricycle. Then, the last two you just read them, that is
remember? actually codal.
1. Alcoholic liquors; (l) Taxes, fees or charges for the registration of motor vehicles
2. Tobacco products; and for the issuance of all kinds of licenses or permits for the
driving thereof, except tricycles;
3. Manufactured oils and fuels;
(m) Taxes, fees, or other charges on Philippine products
4. Miscellaneous articles such as automobiles, non- actually exported, except as otherwise provided herein;
essential products, among others.
(n) Taxes, fees, or charges, on Countryside and Barangay
An exception is found in mineral products as when you talk Business Enterprises and cooperatives duly registered under
about quarry resources. The provinces and cities may levy R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred
taxes on the extraction of quarry resources when the thirty-eight (R.A. No. 6938) otherwise known as the
extraction is done in public land, water, etcetera. "Cooperative Code of the Philippines" respectively; and,
(i) Percentage or value-added tax (VAT) on sales, barters or (o) Taxes, fees or charges of any kind on the National
exchanges or similar transactions on goods or services Government, its agencies and instrumentalities, and local
except as otherwise provided herein; government units.
In short, the LGUs are not allowed to impose percentage Let us go now to COLLECTION AND REMEDIES.
taxes except when the LGC itself allows [the same] like in Let us start with Collection.
the following instances:
1. Tax on the business of printing and publication; Section 165. Tax Period and Manner of Payment. - Unless
otherwise provided in this Code, the tax period of all local
2. Franchise tax based on gross receipts; and, taxes, fees and charges shall be the calendar year. Such
3. Amusement Tax. taxes, fees and charges may be paid in quarterly
installments.
What is percentage tax? According to a Supreme Court case,
a percentage tax is what is imposed as a fixed ratio between So, the rule is it is always the calendar year. The taxes will
the gross sales or the gross receipts and the burden imposed accrue on the calendar year. The type of accounting period
upon the taxpayer. So, it is just the percentage of the gross employed by the taxpayer is immaterial. Now, what about
sales or the gross income. the accrual of the tax?
(j) Taxes on the gross receipts of transportation contractors Section 166. Accrual of Tax. - Unless otherwise provided in
and persons engaged in the transportation of passengers or this Code, all local taxes, fees, and charges shall accrue on
freight by hire and common carriers by air, land or water, the first (1st) day of January of each year. x x x
except as provided in this Code;
So, local taxes will accrue on January 1. But, what about if
Then, you have taxes on gross receipts of transportation there are new tax ordinances which impose new local taxes,
contractors. I think one of the exception here is Section 143, when will it take effect? Let us say, there is a new tax
yung sa MUNICIPALITIES. ordinance which taxes any type of article or business or
there is there is a change in rate, when will it start to accrue?
Section 143. Tax on Business. - The municipality may
impose taxes on the following businesses: x x x Section 166. x x x
(e) On contractors and other independent contractors, in However, new taxes, fees or charges, or changes in the rates
accordance with the following schedule: x x x thereof, shall accrue on the first (1st) day of the quarter next
following the effectivity of the ordinance imposing such new
Then you have insurance. levies or rates.
(k) Taxes on premiums paid by way or reinsurance or For example, if there is a new tax ordinance, changing the
retrocession; rate or increasing the rate to be effective on June 15, so
kelan man ang following quarter? So, on July 1, such new
tax liabilities brought about by the change in rate will start to
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accrue. Does that mean that the taxpayer will immediately deputies must also be public officials because of the
pay? Mag-accrue siya July 1, kailangan niya ba bayaran on prohibition that the assessment and collection of taxes must
July 1 kaagad? Take note that that accrual of the tax is not be left in the hands of private persons.
different from payment thereof. Accrual means the time or
the start of computing the tax or when the amount of tax to Section 170. Collection of Local Revenue by Treasurer. - All
be paid is determined. Payment, on the other hand, is the local taxes, fees, and charges shall be collected by the
period of payment without surcharges, penalties, interests. I provincial, city, municipal, or barangay treasurer, or their
think we have discussed this last time when weve discussed duly authorized deputies.
about estate taxation. When will the liability to pay estate
tax accrue? Upon death, diba? But you pay it 6 months The provincial, city or municipal treasurer may designate the
thereafter. barangay treasurer as his deputy to collect local taxes, fees,
or charges. In case a bond is required for the purpose, the
So, when is the time for payment? provincial, city or municipal government shall pay the
premiums thereon in addition to the premiums of bond that
Section 167. Time of Payment. Unless otherwise provided may be required under this Code.
in this Code, all local taxes, fees, and charges shall be paid
within the first twenty (20) days of January or of each For this matter, the local treasurer has also other powers
subsequent quarter, as the case may be. The sanggunian related to the collection of taxes, pretty much like the
concerned may, for a justifiable reason or cause, extend the Commissioner of Internal Revenue. The treasurer has the
time for payment of such taxes, fees, or charges without power to examine book and records, as mentioned in Section
surcharges or penalties, but only for a period not exceeding 171, not just limited to the books of accounts of the taxpayer
six (6) months. concerned but he may also get that information from third-
party sources, which is for the payment of taxes.
Let us outline this, kasi magulo ang 167 eh.
a. If there is the specific provision under the LGC for Section 171. Examination of Books of Accounts and
the payment of taxes, then you apply that specific Pertinent Records of Businessmen by Local Treasurer. The
provision. An example is Community Tax, when do provincial, city, municipal or barangay treasurer may, by
you pay this? You pay it on or before the last day of himself or through any of his deputies duly authorized in
February. writing, examine the books, accounts, and other pertinent
records of any person, partnership, corporation, or
b. If there is no provision under this code, you apply association subject to local taxes, fees and charges in order
on or before January 20 or 20 days after each to ascertain. assess, and collect the correct amount of the
subsequent quarter. You are allowed to pay the tax, fee, or charge. Such examination shall be made during
taxes quarterly naman. So, the LGC itself gives the regular business hours, only once for every tax period, and
taxpayers such leeway. shall be certified to by the examining official. Such certificate
shall be made of record in the books of accounts of the
The time of payment may be extended for justifiable reasons
taxpayer examined.
by the sanggunian concerned. There must be another tax
ordinance made by the sangguninan. The extension should In case the examination herein authorized is made by a duly
not exceed 6 months. authorized deputy of the local treasurer, the written authority
of the deputy concerned shall specifically state the name,
Take note of the Surcharges and Penalties:
address, and business of the taxpayer whose books,
accounts, and pertinent records are to be examined, the date
Section 168. Surcharges and Penalties on Unpaid Taxes, and place of such examination and the procedure to be
Fees, or Charges. The sanggunian may impose a surcharge followed in conducting the same.
not exceeding twenty-five (25%) of the amount of taxes,
fees or charges not paid on time and an interest at the rate For this purpose, the records of the revenue district office of
not exceeding two percent (2%) per month of the unpaid the Bureau of Internal Revenue shall be made available to
taxes, fees or charges including surcharges, until such the local treasurer, his deputy or duly authorized
amount is fully paid but in no case shall the total thirty-six representative.
(36%) months.
So, if the local treasurer finds out that there is a tax
If you are not able to pay on time, meron yang surcharges of deficiency, or the taxpayer failed to pay his taxes, the first
25% based on the tax liability and of course interest will be thing that the local treasurer would do is to make an
imposed at the rate of 2% per month, but in no case shall it assessment. You will first notify the taxpayer that there is a
exceed 36 months of interest. tax deficiency.
Now, who collects the tax in behalf of the local government Now, lets go first to PRESCRIPTIVE PERIODS FOR
unit? It is the local treasurer or the authorized deputies of ASSESSMENT AND COLLECTION.
the local treasurer. But take note that these authorized
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I like the LGC better because this is simpler, mas magulo ang Can the prescriptive period be suspended? Yes, it can be
sa NIRC. Alam niyo naman sa NIRC is 3 years to assess and suspended only in three instances:
payment within 5 years or 3 years or 10 years kung
(1) The treasurer is legally prevented from making
fraudulent or failure to file and then 5 years to collect all
the assessment of collection.
throughout. Although, several authors have several
interpretations also but we will follow Mamalateo, whether or I am thinking of an injunction kasi we have a no
not it is ordinary or extraordinary, it is just 5 years to collect; injunction rule unless the CTA will grant the injunction
it is either administrative or judicial. Lets just look at Sec. on the basis that it will jeopardize the government or
194. the taxpayer.
Next is, one book would say what if there is insurgency
Section 194. Periods of Assessment and Collection.
on that LGU? The author said that that is a legal ground
(a) Local taxes, fees, or charges shall be assessed within five to suspend the assessment of collection because the
(5) years from the date they became due. No action for the local treasurer cannot collect due to the insurgency.
collection of such taxes, fees, or charges, whether
(2) The taxpayer requests for a reinvestigation and
administrative or judicial, shall be instituted after the
executes a waiver in writing before expiration of
expiration of such period: Provided, That. taxes, fees or
the period within which to assess or collect;
charges which have accrued before the effectivity of this
Code may be assessed within a period of three (3) years Take not that there are 3 requirements:
from the date they became due.
(a) There must be a request for reinvestigation;
Again, the LGU has 5 years to assess the local tax, when do (b) The waiver must be in writing; and,
you reckon it? On the date that they became due. So,
(c) It must be before the expiration of the period
normally, it is January 20.
to which to assess or collect because there is
nothing to extend if the period has already
(b) In case of fraud or intent to evade the payment of taxes, lapse.
fees, or charges, the same may be assessed within ten (10)
years from discovery of the fraud or intent to evade (3) The taxpayer is out of the country or otherwise
payment. cannot be located.
Now, suppose the taxpayer receives a tax assessment for the
It is just the same as the NIRC. local treasurer, what must the taxpayer do? If the taxpayer
Now, as to the collection, it shall prescribe within 5 years agrees with the assessment, then it is good. If he does not
from the date of assessment by administrative or judicial agree, this time he must be able to challenge it through a
action. After that 5-year period, the government can no written protest following Sec. 195 of the LGC:
longer make any assessment or collect the taxes.
Section 195. Protest of Assessment. - When the local
(c) Local taxes, fees, or charges may be collected within five treasurer or his duly authorized representative finds that
(5) years from the date of assessment by administrative or correct taxes, fees, or charges have not been paid, he shall
judicial action. No such action shall be instituted after the issue a notice of assessment stating the nature of the tax,
expiration of said period: Provided, however, That, taxes, fee, or charge, the amount of deficiency, the surcharges,
fees or charges assessed before the effectivity of this Code interests and penalties. Within sixty (60) days from the
may be collected within a period of three (3) years from the receipt of the notice of assessment, the taxpayer may file a
date of assessment. written protest with the local treasurer contesting the
assessment; otherwise, the assessment shall become final
(d) The running of the periods of prescription provided in the and executory. The local treasurer shall decide the protest
preceding paragraphs shall be suspended for the time during within sixty (60) days from the time of its filing. If the local
which: treasurer finds the protest to be wholly or partly meritorious,
(1) The treasurer is legally prevented from making he shall issue a notice cancelling wholly or partially the
the assessment of collection; assessment. However, if the local treasurer finds the
assessment to be wholly or partly correct, he shall deny the
(2) The taxpayer requests for a reinvestigation and protest wholly or partly with notice to the taxpayer. The
executes a waiver in writing before expiration of the taxpayer shall have thirty (30) days from the receipt of the
period within which to assess or collect; and denial of the protest or from the lapse of the sixty (60) day
(3) The taxpayer is out of the country or otherwise period prescribed herein within which to appeal with the
cannot be located. court of competent jurisdiction otherwise the assessment
becomes conclusive and unappealable.
How will the government collect? Through administrative or
judicial action, which we will discuss later on.
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The assessment is like the assessment in the NIRC, that it SOJ, if there is a new tax measure and the taxpayer wants to
must contain the facts, the laws and jurisprudence, or the challenge it before the SOJ, the SOJ has certain amount of
rules and regulations which the assessment is made, days to decide.]
otherwise it is void. It is a notice informing the taxpayer that
Next is REFUND.
he has tax deficiency or he had failed to pay the correct
taxes and therefore must pay the LGU.
Section 196. Claim for Refund of Tax Credit. No case or
When the taxpayer receives the assessment, he has two proceeding shall be maintained in any court for the recovery
options: of any tax, fee, or charge erroneously or illegally collected
(1) He would agree and therefore pay the tax; or, until a written claim for refund or credit has been filed with
the local treasurer. No case or proceeding shall be
(2) If he disagrees, he can challenge it through a written entertained in any court after the expiration of two (2) years
protest. The protest must specifically request for a from the date of the payment of such tax, fee, or charge, or
reconsideration or a reinvestigation and must also from the date the taxpayer is entitled to a refund or credit.
contain the facts, the law and jurisprudence on which
the protest is based. First requirement is a written claim, the same requirement in
What happens if the taxpayer will not protest? Take note the NIRC. When should you file it?
that the PAN and FAN ha, kaisa lang ito. If he does not 1. Within 2 years from the date of payment of tax, fee or
challenge or protest, then the assessment becomes final and charge; or,
executory and the LGU may now avail of its own remedies to
collect the local taxes due. 2. Within 2 years from the date the taxpayer is entitled to a
refund or credit.
Suppose, the taxpayer will protest in writing and follow the
form and there are supporting documents, what happens If the local treasurer denied the protest, then the taxpayer
next? There are three possibilities: has 30 days within which to appeal the same to the RTC or
the MTC, as the case may be, depending on the jurisdictional
1. Upon the receipt of the protest, he has 60 days to amount.
decide. Three things can happen:
But what if the local treasurer will not act? If you look at the
a) The local treasurer may agree with the taxpayer, so codal there is no period within which the local treasurer
meaning that good na ang taxpayer and wala na would decide. But nevertheless, in any case that the 2 year
siyang bayaran. period is running out, the next step is you go the RTC or
b) The local treasurer would disagree. Its either he will MTC. You treat it as if it is a DENIAL, because if you go
deny the protest in part or in whole. beyond the 2-year period, then the claim will prescribe.
Same rule sa NIRC. Ang medyo na-deviate lang man sa rule
c) The local treasurer will not do anything. O diba, on refund is sa VAT, because sa VAT, the 120+30 day period
parang BIR. is mandatory and jurisdictional.
2. If the treasurer denies the protest, the taxpayer has 30 Supposing the assessment is now final and executory, the
days from the receipt of the denial to appeal the same in LGU may now use its remedies to collect. What are the
a court of competent jurisdiction. If there is inaction, remedies available to the LGU?
after the lapse of the 60-day period, the taxpayer has 30
days within which to file an appeal before the RTC. Not 1. Local Government Tax Bill; and,
just the RTC but also the MTC, depending on the 2. Civil Remedies which is composed of either
jurisdictional amount. So, follow BP 129. administrative or judicial.
3. What if the taxpayer fails to appeal? The decision is final Now, let us go to Sec. 173.
and executory, and the LGU can collect the taxes
already. Section 173. Local Government's Lien. - Local taxes, fees,
Again, if you talk about a court of competent jurisdiction, it is charges and other revenues constitute a lien, superior to all
either the RTC or MTC depending on the amount being liens, charges or encumbrances in favor of any person,
claimed or contested by the taxpayer. After that, if the case enforceable by appropriate administrative or judicial action,
is already before the RTC and the RTC would still deny your not only upon any property or rights therein which may be
cause, the next step will be to go to the CTA in division subject to the lien but also upon property used in business,
within 30 days from the receipt of decision. And then go to occupation, practice of profession or calling, or exercise of
en banc and then after that, you go to the SC if the CTA en privilege with respect to which the lien is imposed. The lien
banc renders an adverse decision against the taxpayer. So, may only be extinguished upon full payment of the
that is the entirety of things, medyo mas maikli siya. delinquent local taxes fees and charges including related
surcharges and interest.
[Sir talks about the book of Recalde containing a table
outlining the taxpayers remedies, the remedies before the
[Page 58 of 79]
Let us proceed with the CIVIL REMEDIES. time and place of sale, and the articles distrained. The time
of sale shall not be less than twenty (20) days after the
Section 174. Civil Remedies. - The civil remedies for the notice to the owner or possessor of the property as above
collection of local taxes, fees, or charges, and related specified and the publication or posting of the notice. One
surcharges and interest resulting from delinquency shall be: place for the posting of the notice shall be at the office of the
chief executive of the local government unit in which the
(a) By administrative action thru distraint of goods, chattels, property is distrained.
or effects, and other personal property of whatever
character, including stocks and other securities, debts, (d) Release of distrained property upon payment prior to sale
credits, bank accounts, and interest in and rights to personal - If at any time prior to the consummation of the sale, all the
property, and by levy upon real property and interest in or proper charges are paid to the officer conducting the sale,
rights to real property; the goods or effects distrained shall be restored to the
owner.
(b) By judicial action.
(e) Procedure of sale - At the time and place fixed in the
Either of these remedies or all may be pursued concurrently notice, the officer conducting the sale shall sell the goods or
or simultaneously at the discretion of the local government effects so distrained at public auction to the highest bidder
unit concerned. for cash. Within five (5) days after the sale, the local
treasurer shall make a report of the proceedings in writing to
So, it is either ADMINISTRATIVE or JUDICIAL action. the local chief executive concerned.
If it is administrative action, it is either distraint or levy. If Should the property distrained be not disposed of within one
you read the provisions, it is similar to the NIRC because if hundred and twenty (120) days from the date of distraint,
you read the codal, there seems to be a remedy of forfeiture the same shall be considered as sold to the local government
din available to the LGU. unit concerned for the amount of the assessment made
So, lets go to DISTRAINT. thereon by the Committee on Appraisal and to the extent of
the same amount, the tax delinquencies shall be cancelled.
Section 175. Distraint of Personal Property. - The remedy Said Committee on Appraisal shall be composed of the city or
by distraint shall proceed as follows: municipal treasurer as chairman, with a representative of the
Commission on Audit and the city or municipal assessor as
(a) Seizure - Upon failure of the person owing any local tax,
members.
fee, or charge to pay the same at the time required, the local
treasurer or his deputy may, upon written notice, seize or (f) Disposition of proceeds - The proceeds of the sale shall
confiscate any personal property belonging to that person or be applied to satisfy the tax, including the surcharges,
any personal property subject to the lien in sufficient interest, and other penalties incident to delinquency, and the
quantity to satisfy the tax, fee, or charge in question, expenses of the distraint and sale. The balance over and
together with any increment thereto incident to delinquency above what is required to pay the entire claim shall be
and the expenses of seizure. In such case, the local treasurer returned to the owner of the property sold. The expenses
or his deputy shall issue a duly authenticated certificate chargeable upon the seizure and sale shall embrace only the
based upon the records of his office showing the fact of actual expenses of seizure and preservation of the property
delinquency and the amounts of the tax, fee, or charge and pending the sale, and no charge shall be imposed for the
penalty due. Such certificate shall serve as sufficient warrant services of the local officer or his deputy. Where the
for the distraint of personal property aforementioned, subject proceeds of the sale are insufficient to satisfy the claim,
to the taxpayer's right to claim exemption under the other property may, in like manner, be distrained until the
provisions of existing laws. Distrained personal property shall full amount due, including all expenses, is collected.
be sold at public auction in the manner hereon provided for.
(b) Accounting of distrained goods. - The officer executing The distraint here is similar to the NIRC. The only difference
the distraint shall make or cause to be made an account of is there is no constructive distraint. Basta sa LGU, walang
the goods, chattels or effects distrained, a copy of which constructive distraint. It is actual seizure.
signed by himself shall be left either with the owner or What are the properties involved? [wala na answer kay
person from whose possession the goods, chattels or effects nilabalik ang electricity and he discussed the issues regarding
are taken, or at the dwelling or place or business of that power shortage but naa man sa Sec. 175 (a)]
person and with someone of suitable age and discretion, to
which list shall be added a statement of the sum demanded Distraint of personal property, how is it effected? Of course
and a note of the time and place of sale. seizure pa rin. Its pretty much the same. There is an
authenticated certificate. The deputy will be sent armed with
(c) Publication - The officer shall forthwith cause a that certificate which shall be served to the taxpayer, then
notification to be exhibited in not less than three (3) public the property will be seized and there shall be an inventory
and conspicuous places in the territory of the local which shall be given also to the taxpayer. The goods will also
government unit where the distraint is made, specifying the be sold through a public auction, but before the sale will take
[Page 59 of 79]
place, there will be posting and publication, how is it done? operate with the force of a legal execution throughout the
The officer shall forthwith cause a notification to be exhibited Philippines. Levy shall be effected by writing upon said
in not less than three (3) public and conspicuous places in certificate the description of the property upon which levy is
the territory of the local government unit where the distraint made. At the same time, written notice of the levy shall be
is made, specifying the time and place of sale, and the mailed to or served upon the assessor and the Register of
articles distrained. Of the three conspicuous places, one of Deeds of the province or city where the property is located
those must be at the office of the local chief executive. (Sec. who shall annotate the levy on the tax declaration and
175c) certificate of title of the property, respectively, and the
delinquent taxpayer or, if he be absent from the Philippines,
When should the sale be made? It must made not be less
to his agent or the manager of the business in respect to
than twenty (20) days after the notice to the owner or
which the liability arose, or if there be none, to the occupant
possessor of the property as above specified and the
of the property in question.
publication or posting of the notice. (Sec. 175c) So, there is
notice for 20 days and there is publication. You have to finish In case the levy on real property is not issued before or
everything first before you can start selling, you have to wait simultaneously with the warrant of distraint on personal
for at least 20 days. property, and the personal property of the taxpayer is not
sufficient to satisfy his delinquency, the provincial, city or
Can the properties distrained be released before the sale? Of
municipal treasurer, as the case may be, shall within thirty
course it can. It is upon payment of all tax liabilities imposed
(30) days after execution of the distraint, proceed with the
and the expenses of the distraint.
levy on the taxpayer's real property.
The procedure of the sale is pretty much the same. Through
A report on any levy shall, within ten (10) days after receipt
public auction and payment shall be in cash and the local
of the warrant, be submitted by the levying officer to the
treasurer shall make a report to the local chief executive for
sanggunian concerned.
whatever proceeding that has been done during the auction.
If the property distrained is not disposed of within one
hundred and twenty (120) days from the date of distraint, Levy is the same, it is still personal property. The local
the same shall be considered as sold to the local government assessor will prepare a certificate showing the amount of tax.
unit concerned for the amount of the assessment made This notice will be served to the taxpayer involved, the
thereon by the Committee on Appraisal and to the extent of registry of deeds, and the local city assessors or the local
the same amount, the tax delinquencies shall be cancelled. If assessor where the property is located. That is the time na
there is no buyer or the property distrained is not enough, malevy siya.
there will be forfeiture in favor of the government. If there is After the levy, there must be an advertisement. This is
a forfeiture of personal property, it will be appraised by the mandatory process because:
Committee on Appraisal for that matter and there will be a
set-off of tax liabilities only to the extent of the agreed value (1) Process xxx may invalidate the sale.
(Sec. 175e).
Section 178. Advertisement and Sale. - Within thirty (30)
What about the disposition of proceeds? Kunyari nabenta days after the levy, the local treasurer shall proceed to
[ang property]. You will not have a problem if it is equal to publicly advertise for sale or auction the property or a usable
the tax liabilities. But if there is an excess, the excess will be portion thereof as may be necessary to satisfy the claim and
returned to the taxpayer or the property owner. If kulang pa cost of sale; and such advertisement shall cover a period of
din and hindi nasatisfy ang tax liabilities, then the LGU will at least thirty (30) days. It shall be effected by posting a
do further distraint of personal properties against the notice at the main entrance of the municipal building or city
taxpayer just to settle all tax liabilities or the LGU will hall, and in a public and conspicuous place in the barangay
proceed with distraint. Take note that when the government where the real property is located, and by publication once a
will avail of these collection remedies, there is still no prior week for three (3) weeks in a newspaper of general
claim of remedies to be taken. Pretty much the same as with circulation in the province, city or municipality where the
NIRC. So, it is either simultaneous or successive. property is located. The advertisement shall contain the
What about LEVY? amount of taxes, fees or charges, and penalties due thereon,
and the time and place of sale, the name of the taxpayer
Section 176. Levy on Real Property. - After the expiration against whom the taxes, fees, or charges are levied, and a
of the time required to pay the delinquent tax, fee, or short description of the property to be sold. At any time
charge, real property may be levied on before, before the date fixed for the sale, the taxpayer may stay the
simultaneously, or after the distraint of personal property proceedings by paying the taxes, fees, charges, penalties
belonging to the delinquent taxpayer. To this end, the and interests. If he fails to do so, the sale shall proceed and
provincial, city or municipal treasurer, as the case may be, shall be held either at the main entrance of the provincial,
shall prepare a duly authenticated certificate showing the city or municipal building, or on the property to be sold, or at
name of the taxpayer and the amount of the tax, fee, or any other place as determined by the local treasurer
charge, and penalty due from him. Said certificate shall conducting the sale and specified in the notice of sale.
[Page 60 of 79]
Within thirty (30) days after the sale, the local treasurer or upon payment to the local treasurer of the total amount of
his deputy shall make a report of the sale to the sanggunian taxes, fees, or charges, and related surcharges, interests or
concerned, and which shall form part of his records. After penalties from the date of delinquency to the date of sale,
consultation with the sanggunian, the local treasurer shall plus interest of not more than two percent (2%) per month
make and deliver to the purchaser a certificate of sale, on the purchase price from the date of purchase to the date
showing the proceeding of the sale, describing the property of redemption. Such payment shall invalidate the certificate
sold, stating the name of the purchaser and setting out the of sale issued to the purchaser and the owner shall be
exact amount of all taxes, fees, charges, and related entitled to a certificate of redemption from the provincial, city
surcharges, interests, or penalties: Provided, however, That or municipal treasurer or his deputy.
any excess in the proceeds of the sale over the claim and
The provincial, city or municipal treasurer or his deputy,
cost of sales shall be turned over to the owner of the
upon surrender by the purchaser of the certificate of sale
property.
previously issued to him, shall forthwith return to the latter
The local treasurer may, by ordinance duly approved, the entire purchase price paid by him plus the interest of not
advance an amount sufficient to defray the costs of collection more than two percent (2%) per month herein provided for,
by means of the remedies provided for in this Title, including the portion of the cost of sale and other legitimate expenses
the preservation or transportation in case of personal incurred by him, and said property thereafter shall be free
property, and the advertisement and subsequent sale, in from the lien of such taxes, fees, or charges, related
cases of personal and real property including improvements surcharges, interests, and penalties.
thereon.
The owner shall not, however, be deprived of the possession
of said property and shall be entitled to the rentals and other
How long shall the advertisement take? For a period of the income thereof until the expiration of the time allowed for its
30 days after the levy. redemption.
How is it done? By posting and publication, it must go
together. The posting of notice must be at the main entrance Redemption price, how much? The total amount of taxes,
of the municipal building or city hall, and in a public and fees, or charges, and related surcharges, interests or
conspicuous place in the barangay where the real property is penalties from the date of delinquency to the date of sale,
located, and by publication once a week for three (3) weeks plus interest of not more than two percent (2%) per month
in a newspaper of general circulation in the province, city or on the purchase price from the date of purchase to the date
municipality where the property is located. of redemption.
What are the contents of the ad? The advertisement shall Where do you give the redemption price? You give it to the
contain the: local treasurer and he will be the one to give the redemption
price plus 2% interest to the winning bidder.
1. Amount of taxes, fees or charges, and penalties due
thereon; Supposing there are no bidders or the bid price is lower that
the amount of tax liabilities, what will happen? There will be
2. The time and place of sale, the name of the taxpayer
forfeiture in effect. The local treasurer conducting the sale
against whom the taxes, fees, or charges are levied;
shall purchase the property in behalf of the local government
and,
unit concerned to satisfy the claim and within two (2) days
3. A short description of the property to be sold. thereafter shall make a report of his proceedings which shall
be reflected upon the records of his office. If this happens,
The taxpayer can stall the proceeding by paying the taxes even if it is forfeiture under that matter, the taxpayer still has
including the interest and charges. It not, the sale will 1 year period of redemption still reckoned from the date of
proceed as per advertisement. sale.
Where will the sale be held? It is either at the main entrance
of the provincial, city or municipal building, or on the
property to be sold, or at any other place as determined by March 8, 2016 EAE
the local treasurer in the advertisement. So okay lang if the
Lets begin with Real Property Taxation. The last time we
local treasurer goes in and say that this sale of the property
talked about taxation in general or the taxing powers of the
will take place in this place as long as it is within the
different LGUs. This time our focus now is on Real Property
jurisdiction of the LGC and specifically provided for in the
Taxation, which is also granted to the LGU. The National
advertisement, there is no legal impediment.
Government has no right to impose Real Property tax unlike
Since it involves a real property, there is a right of other countries.
redemption. How long? 1 year from the time of sale.
What is the basis for our Real Property Taxation here? There
are two:
Section 179. Redemption of Property Sold. - Within one (1)
year from the date of sale, the delinquent taxpayer or his
representative shall have the right to redeem the property
[Page 61 of 79]
1. Constitutional same basis na gidiscuss natin last From that assessment you will get the percentage of real
time pertaining to local government taxation, property tax, and then you will get the tax.
Section 5 Article X.
Then you have the concept of actual use. Under Section 217,
2. Local Government Code Book II, Title II the real property shall be classified, valued and assessed on
the basis of its actual value regardless of where located,
The LGUs have the power of administration,
whoever owns it, and whoever uses it.
appraisal, assessment, levy and collection of real
property taxes. That is under Section 197 of the Apart from ownership, sometimes the ownership is
Local Government Code. That is the essential important. But what is more important in real property
provision which provides LGUs the power to impose taxation is the actual use. Just remember actual use of the
real property taxes upon real properties which are real property because this has also a bearing on the
located in their territorial jurisdiction. assessment of real property for real property taxation
purposes, and also later on when we will be discussing about
Now lets go to fundamental principles.
the exceptions from real property purposes.
Section 198. Real property shall be assessed
Let us go now to the case of Allied Banking vs. Quezon
Most of these are actually familiar to you already. The
City.
assessment of real properties must be based on a uniform
classification within each local government unit; There is a city ordinance. Sabi ng city ordinance if there will
be a conveyance of real property, there will be a real
and theres also the prohibition that legislation, assessment
property tax which is based on the BIR zonal value or the
and levy of real property taxes cannot be left to a private
total consideration whichever is higher. Then CAP bought a
person. Which is why you have the City Treasurer, the local
property from a person. What did Quezon city do? There was
assessors, those people who administer the authority of the
an assessment for real property taxes. And what did CAP do?
local government to assess real property for real property tax
Diba CAP entered its protest and paid under protest.
purposes.
One of the contentions of CAP here is that the ordinance is
There is also the principle that the appraisal and assessment
null and void because the ordinance violates Section 130 of
of real property must also be equitable.
the Local Government Code. What is the ruling of the
In one case, this involves Pasig City, what happened was Supreme Court on that issue? According to the Supreme
that there is this city ordinance increasing the appraisal value Court, the real properties shall be appraised at the current
of the real property and the increase was around 400-500%. and fair market value prevailing in the locality where the
So sobrang laki. In this case the Supreme Court struck down property is located and classified for assessment purposes on
the ordinance saying that this is actually unjust, oppressive the basis of actual use.
and this is no longer equitable, it violates the fundamental
Why did the Supreme Court say that there was a violation?
principles of real property taxation under the Local
Ano palang basis ng appraisal dito? Sabi ng Supreme Court,
Government Code.
the real properties shall be appraised at the current and fair
But in these fundamental principles, they are all important, market value prevailing in the locality where the property is
but what is something new here is the appraisal and located and classified for assessment purposes on the basis
assessment. of actual use. In this case, it violates Section 130 of the Local
Government Code mainly because the fundamental principles
1. The appraisal must be at the real propertys current would say that real property should be appraised at its
fair market value in the local government unit current and fair market value, and classified for assessment
where the property is located purposes on the basis of actual use. Ano bang sinasabi ng
2. The real property must be assessed on the basis of ordinance dito? Its based on what? Its based on the zonal
actual use value. On top of that, aside from violating Section 130 of the
Local Government Code, it undermines the authority of the
So appraisal, and then you have actual use. What does local assessors, because ultimately the local assessors should
appraisal mean? Appraisal of real property. be the one to determine the appraised value of the property
What happens when you appraise something? You determine and make assessment levels on the basis of these two
the value, right? What is the basis for the appraisal as principles: fair market value and on the basis of its actual
provided in the Local Government Code? Fair market value. use.
What is the significance of this appraisal? What happens How do you define a real property tax?
after there is an appraisal? Before payment of taxes, what
happens first? Appraisal is important because it has Real property tax is said to be a direct tax on the ownership
something to do with the assessment. You value the real of the land and buildings and other improvements thereon
property, at diyan kukunin ang assessment ng real property. not specifically exempted and is payable regardless of
whether the property is used or not.
[Page 62 of 79]
So this definition given by other authors is not actually meet the needs of the particular industry, business or activity
accurate, because you must consider not just the ownership and which by their very nature and purpose are designed for,
but also actual use of the property. or necessary to its manufacturing, mining, logging,
commercial, industrial or agricultural purposes; xxx
What are the characteristics of real property tax?
1. It is a direct tax. But take note in Article 415 particularly Section 5, lets
correlate this first with the definition of machinery. If you
The impact and incidence of the tax falls upon the same
look at the definition n of machinery here, to be considered
person.
as real property under 415, it is necessary that the
2. It is imposed on use and not necessarily on the machinery is placed by the owner of the property; but under
ownership of the property. real property taxation, walang nakaspecify. So sometimes its
easy to determine whether its real property or not because
We will see this later on when we deal with real property tax
you look at 415. But what about those seemingly personal
exemption.
properties? For this we must look at several cases for us to
3. It is an ad valorem tax. understand this.
Ad valorem, based on value. It is based on the assessed

Mindanao Bus Company. What is the business of the
value of the property.
petitioner here? Engaged in transportation of passengers and
4. Proportionate in character. cargo by motor vehicles. Describe their business premises of
Mindanao Bus. It maintains a garage, repair shop, blacksmith
5. Progressive in character. or carpentry shops. The machineries are placed thereon on
6. It creates a single and indivisible obligation. wooden platforms and cement.
7. It is a local tax. So what did the City Assessors do? What is their contention,
why did they assess a property tax on these equipment and
Of course, real property taxation nga, subject of real machineries? What is the legal basis of the City Assessors
property taxation are real properties. But take note that the here?
Local Government Code itself does not define what real
property is. It gives you the definition of improvements, it The City Assessors contend that the equipment although
gives you the definition of machineries, but it does not give movable are immobilized by destination. Now the issue here
you a definition of real property. That is why the first thing is whether or not Mindanao Bus Line is liable for the taxes
you will have to determine is whether or not the property is assessed? To determine the taxability of the properties
real property and therefore subject to RPT. You look at the assessed, you must first determine whether these equipment
provisions of the Civil Code. You look at Article 415. and machineries are considered as real properties.
Basically the discussions and principles of real property in the Supreme Court said that the machineries could not be
Civil Code applies also in the Local Government Code or in considered as immobilized. These equipment are clearly
real property taxation. However, you will notice that there incidental.
are some concepts which are seemingly personal properties Lets simplify: the machineries placed on those wooden and
in the Civil Code, but for real property taxation purposes, cemented platforms are not considered as real properties.
they are considered as real properties. For instance, the Number one, they can be removed easily; and number two,
definition of improvements and machineries, look at the they are merely incidentals.
Local Government Code.
Article 415 of the New Civil Code, for it to be immobilized,
Section 199. xxx these platforms on which the machinery were placed, they
(m) "Improvement" is a valuable addition made to a property must be essential and principal elements of the business.
or an amelioration in its condition, amounting to more than a What happens here, these equipment, these machineries are
mere repair or replacement of parts involving capital merely incidentals because the bus company can go on even
expenditures and labor, which is intended to enhance its if the machineries and equipment are not existing.
value, beauty or utility or to adapt it for new or further
purposes; Compare it to the case of Board of Assessment Appeals
vs. Manila Electric Company.
(o) "Machinery" embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus which MERALCO is engaged in the business of providing electricity,
may or may not be attached, permanently or temporarily, to generated by its hydroelectric plant. This is transmitted by
the real property. It includes the physical facilities for means of electric transmission wires, which are fastened to
production, the installations and appurtenant service insulators attached on steel towers constructed by MERALCO.
facilities, those which are mobile, self-powered or self- Quezon City assessed MERALCO with real property taxes.
propelled, and those not permanently attached to the real
The issue in this case if whether or not MERALCO should be
property which are actually, directly, and exclusively used to
[Page 63 of 79]
subject to real property tax. underground tanks. These properties were then assessed for
real property taxes.
In determining the classification of these steel towers, the
Supreme Court held that these towers do not count as real The equipment were considered as real properties because if
properties under Article 415(1) because they do not adhere you remove them, the gas station will be useless. If you dig
to the soil. Second, they cannot be included under (3) up the tanks, where will you store the gasoline? If you dig up
because they are movable. the pumps, what will you use in order to make tubil the
sasakyan?
Now what about Meralco Securities Industrial
Corporation vs. CTA? What is that case all about? Compare it with the Mindanao Bus case. Yes there are
equipment and machineries necessary for the repair of the
The property involved here are oil pipelines. These pipelines
bus, but if you remove it, can Mindanao Bus continue their
are buried underground. If something happens to the
business? Yes of course. Transportation man sila.
pipeline, MERALCO will have to dig it up and they will use a
certain special equipment to cut the pipeline because its The last case is about power barges. (Gidescribe lang man
made of steel. Theres a difficulty in moving and repairing niya ang power barge, wala may discussion.)
those pipelines.
If it so happens that you forget these cases, there is some
sort of trick which I found in a book. There are two questions
that you have to ask yourself:
These oil pipelines are treated real property because they are
considered as construction adhering to the soil and attached 1. Is the real property among the properties listed in
to the land in such a way that it cannot be separated without 415? If the answer is yes, then it is a real property
dismantling the steel pipes. subject to real property tax. But what if its not
among the 415?
Lets compare this with the case of Manila Electric 2. Is the property essential and principal to the
Company vs. Central Board of Assessment Appeals. conduct of business? If yes, most likely it is a real
The properties involved her are storage tanks. These tanks property subject to real property taxation. Why? If
are connected to Manila Enterprise Industrial Corporation. you look at the definition of improvement and
The local government required MERALCO to pay tax and machineries, that is the legal basis for that.
penalties on said storage tanks. Ginagamit mo sa business mo, it is some sort of
utility, if you take it out your business will not
The Supreme Court held that the two storage tanks may be function anymore, then it is considered as real
considered as improvements on the land, hence it was property. If your answer to the second question is
deemed to be real property for the purposes of taxation. Its no, that is considered as a personal property which
considered as improvements on the land and is being used in is already outside the ambit of real property
its business. taxation.
The case of Board of Assessment Appeals vs. Manila Electric
Company, 119 Phil. 328, wherein Meralco's steel towers were
held not to be subject to realty tax, is not in point because in March 15, 2016 (AL)
that case the steel towers were regarded as poles and under CHAPTER II
its franchise Meralco's poles are exempt from taxation. Appraisal and Assessment of Real Property
Moreover, the steel towers were not attached to any land or
building. They were removable from their metal frames. Were almost done with appraisal. Were almost done with
assessment.
Nor is there any parallelism between this case and Mindanao
Bus Co. vs. City Assessor, 116 Phil. 501, where the tools and Section 201. Appraisal of Real Property. - All real property,
equipment in the repair, carpentry and blacksmith shops of a whether taxable or exempt, shall be appraised at the current
transportation company were held not subject to realty tax and fair market value prevailing in the locality where the
because they were personal property. property is situated. The Department of Finance shall
promulgate the necessary rules and regulations for the
As to the storage tanks, the Supreme Court described the
classification, appraisal, and assessment of real property
two tanks to have been installed with some degree of
pursuant to the provisions of this Code.
permanence as receptacles for the considerable quantities of
oil needed by Meralco for its operations. We have mentioned last time that when you talk about
assessment in the context of real property taxation, it is not
Now, Caltex vs. CBAA G.R. No. L-50466 May 31, 1982. This the same assessment that we have learned before.
is still about machineries and equipment, pretty much the
same with the Mindanao Bus case, but this time what is When you talk about taxes under the NIRC or Local
involved is a gasoline station. Diba meron silang pumps, Government taxes, when you say assessment this is actually
a demand from the Government for you to pay the tax. But
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under real property, assessment has something to do with NO he cannot xxx that. Because if the person/owner, or the
property, theres still valuation but it has something to do administrator does not declare the real property or any of the
with property valuation for the computation of tax later on. improvement the assessor may declare it. There is no need
for a sworn statement for that matter.
Another important aspect of real property assessment is the
declaration of real property. Tax declarations, who does this Section 204. Declaration of Real Property by the Assessor. -
declaration of real property? Of course, normally it is done by When any person, natural or juridical, by whom real property
the owner or administrator. is required to be declared under Section 202 hereof, refuses
or fails for any reason to make such declaration within the
The General Rule in the declaration of real property is found
in section 202 of your LGC. time prescribed, the provincial, city or municipal assessor
shall himself declare the property in the name of the
Section 202. Declaration of real Property by the Owner or defaulting owner, if known, or against an unknown owner, as
Administrator. - It shall be the duty of all persons, natural or the case may be, and shall assess the property for taxation
juridical, owning or administering real property, including the in accordance with the provision of this Title. No oath shall
improvements therein, within a city or municipality, or their be required of a declaration thus made by the provincial, city
duly authorized representative, to prepare, or cause to be or municipal assessor.
prepared, and file with the provincial, city or municipal
assessor, a sworn statement declaring the true value of their Q: What is the purpose of tax declaration?
property, whether previously declared or undeclared, taxable The main purpose of tax declaration is not actually to
or exempt, which shall be the current and fair market value determine ownership of property but its for taxation
of the property, as determined by the declarant. Such purposes. The purpose of this is to determine the
declaration shall contain a description of the property assessment levels of the property. The owner declares the
sufficient in detail to enable the assessor or his deputy to value of the property; supposedly that is the fair market
identify the same for assessment purposes. The sworn value (FMV) of the property because that is the price the
declaration of real property herein referred to shall be filed owner of the property is willing to sell. But then the city or
with the assessor concerned once every three (3) years local assessor is not bound by the declaration of the
during the period from January first (1st) to June thirtieth owner/declarant. Why? Because the local assessor can make
(30th) commencing with the calendar year 1992. its own inspection, in fact nagacensus na yan sila from time
to time, tingnan nila yong property. If there will be a new
Take note you have to declare the property even if the
building that will be erected or declared that it will be made
property is exempt for real property purposes. When it is
on a certain period kailangan mo pa dumaan sa city
done by the owner of the property or his representative or
assessors. They will have an inspection. Supposedly when
the administrator of the property the declaration must be in
you buy real property there will be an inspection that will
the form of a sworn statement.
occur especially if you will declare that the property is
Under section 203 when a person acquires real property he without any improvements. Pero usually pinapalusot man yan
must also declare the condition of the real property to the kasi matagal ang mag inspection. Mag schedule ka pa,
local assessor. When will he do this? He will do this within magpila ka pa. So what they do is pinapalusot na lang. Diba
sixty (60) days after the acquisition of the property. If the facilitation fees, to speed up the process you do those things.
person builds an improvement on the property he must also
Q: What is the nature of tax declaration?
make a declaration of such improvement. Thats why if you
take a look at the tax declaration, if the property is a land at As a rule tax declarations are evidence of the declarations
the same time may building, nakalagay yan siya. If there is a only or probably evidence of the payment of the real
single owner, there will be a land and a Building in the tax property taxes. Thats about it. At least the main purpose of
declaration. It is possible that the owner of the building is a tax declaration has something to do with tax. It is not
different person so that is why there can be a separate tax conclusive evidence of ownership because anyone can
declaration for those properties. declare that the property belong to that person. Matingala ka
ang uban squatter naa silay tax declaration sa property.
Section 203. Duty of Person Acquiring Real Property or
Making Improvement Thereon. - It shall also be the duty of Even if it is not a conclusive evidence of ownership of course
any person, or his authorized representative, acquiring at you all know that it is indicative of ownership of certain real
any time real property in any municipality or city or making property especially if it is coupled with other types of
any improvement on real property, to prepare, or cause to evidence.
be prepared, and file with the provincial, city or municipal
assessor, a sworn statement declaring the true value of Like for example in this case, (no citation given)
subject property, within sixty (60) days after the acquisition
Although tax declarations or realty tax payment of property
of such property or upon completion or occupancy of the
are not conclusive evidence of ownership, nevertheless, they
improvement, whichever comes earlier.
are good indicia of possession in the concept of owner for no
Q: What if the taxpayer does not want to declare the one in his right mind would be paying taxes for a property
property? May tax ba siya? that is not in his actual or at least constructive possession.
[Page 65 of 79]
They constitute at least proof that the holder has a claim of industrial, mineral, timberland, or special in accordance with
little over the property. The voluntary declaration of a piece their zoning ordinances.
of property for taxation purposes manifest not only one's
sincere and honest desire to obtain title to the property and First is residential, there is a definition given under section
announces his adverse claim against the State and all other 199.
interested parties, but also the intention to contribute (u) "Residential Land" is land principally devoted to
needed revenues to the government. Such an act habitation.
strengthens one's bona fide claim of acquisition of
ownership. Second you have Agricultural
(d) "Agricultural Land" is land devoted principally to the
And another thing, its a good indicator of possession in the planting of trees, raising of crops, livestock and poultry,
concept of an owner. Thats why it is also very important to dairying, salt making, inland fishing and similar aquacultural
declare the property for tax purposes, there must be Real activities, and other agricultural activities, and is not
property taxes etc. classified as mineral, timber, residential, commercial or
The next is Declaration of the Schedules of FMV. industrial land;
After gathering all those documents necessary for him to You also have commercial
evaluate and assess the value of the real property, the (i) "Commercial Land" is land devoted principally for the
assessor will now prepare schedules for the FMV of the Real object of profit and is not classified as agricultural, industrial,
Property. mineral, timber, or residential land;
Maggawa siya ng schedule. There will be a listing and there (n) "Industrial Land" is land devoted principally to industrial
would be a schedule of the fair market value activity as capital investment and is not classified as
Ano gagawin ng local assessor ditto? The local assessor will agricultural, commercial, timber, mineral or residential land;
now submit this listing together with the schedule of the FMV Then you have timberland. This is quite peculiar because
of the property to the Sanggunian. This is for the the LGC does not provide for any definition. Check section
Sanggunian to prepare the appropriate ordinance that it will 199 parang wala ata siya sa definition eh. Lastly you have
enact later on for the imposition of real property taxes. This special lands as provided under Section 216 of LGC
schedule will be published in the newspaper of general
circulation in the LGU concerned. This is important because Section 216. Special Classes of Real Property. - All lands,
later on when there will be an assessment of the real buildings, and other improvements thereon actually, directly
property, the taxpayer or the property owner, or the people and exclusively used for hospitals, cultural, or scientific
who are affected by that assessment can now avail of the purposes, and those owned and used by local water districts,
remedies provided to them under the LGC. Meron yan siyang and government-owned or controlled corporations rendering
appeal process. This is entirely a different matter; it is not essential public services in the supply and distribution of
about the collection of taxes. water and/or generation and transmission of electric power
shall be classified as special.
But in case that there is an improper valuation of real
property for real property tax purposes then the taxpayer, Lets just simplify. There are two main types of special lands.
even before the taxes have been imposed, the taxpayers can
1. Those which are used for hospitals, cultural, or
now challenge the assessment of that real property.
scientific purposes;
Classification of Real Property
2. GOCCs and LWD and their business is supply and
After that, you have the classification of the property. You distribution of water and/or generation and
have to classify the real property after the tax declaration, transmission of electric power.
declaration of FMV of the property, assessment and
Q: Who has the power to classify these lands?
appraisal. One thing that will be done by the local assessor is
the classification of the property Again, it is the duty of the local assessor concerned.
Q: What are the classifications? This is found in Section Q: What is the basis of the classification of this land?
215
You go back to our basic principle it will be classified based
Section 215. Classes of Real Property for Assessment on its actual use. Normally, when you go back to the tax
Purposes. - For purposes of assessment, real property shall declaration, the land-owner or administrator would declare
be classified as residential, agricultural, commercial, the income for income tax purposes. Included in the
industrial, mineral, timberland or special. declaration is the actual use of the property. Is it residential?
OO, pag residential siya. But then again the local assessor is
The city or municipality within the Metropolitan Manila Area, not bound by the declaration of that person.
through their respective sanggunian, shall have the power to
classify lands as residential, agricultural, commercial,
[Page 66 of 79]
Q: If there is a discrepancy between the declaration

of the land owner as against the opinion of the local Commercial 50%
assessor which is controlling?
To be honest about it, I could say that what is controlling is Industrial 50%
actually how is that particular property being used. It is not
actually its uses, but its actually how is that property being
Mineral 50%
used. Case in point is Patalinghug vs. CA, this is a Davao
city case. There was a zoning ordinance enacted by Davao
City. That ordinance by the way is -- there is a specific place Timberland 20%
particularly in Agdao area that was declared to be
commercial and was available for industrial use. So zoning
(b) On Buildings and Other Structures:
siya, classification of real property. In the same ordinance
what happened was that it was included that, okay it is
commercial and industrial provided that nobody can make a
funeral parlor within 50 meters from residential area and 50 (1) Residential
meters from churches or hospital. May malapit man dyan na Fair market Value
Iglesia, nagreklamo ang Iglesia. Im not talking about the
religion but the people who are actually there, the residence.
Over Not Over Assessment Levels
Makatakot man jud kung meron funeral parlor business
nearby. Can you imagine?
P175,000.00 0%
When this case went to the RTC, of course the RTC went
there to have an ocular inspection. What they found out was
this: the funeral home kung baktason nimo siya paingon sa P175,000.00 300,000.00 10%
Iglesia ni Kristo address its around 63 meters daw so pasok
siya sa 50 meters na rule. But what about the residential
property exactly beside the funeral home? According to the 300,000.00 500,000.00 20%
residence, there is a residential property right beside the
funeral home. In fact it is owned by a certain person; he
500,000.00 750,000.00 25%
declared it as a residential house. Tax declaration and yet
when the judge went there he noticed that although the
property for tax purposes was declared to be residential, it 750,000.00 1,000,000.00 30%
was being used as a laundry shop. Probably being used to
wash the barongs na ginamit ng patay. The RTC dismissed,
CA reversed but the SC said the declaration that the building 1,000,000.00 2,000,000.00 35%
is for residential purposes is not conclusive. The property
may be declared as residential for real property tax purposes 2,000,000.00 5,000,000.00 40%
but it may be considered as for commercial purposes
depending on its actual use.
5,000,000.00 10,000,000.00 50%
Lets go back to Assessment level.
Section 218. Assessment Levels. - The assessment levels to 10,000,000.00 60%

be applied to the fair market value of real property to
determine its assessed value shall be fixed by ordinances of
(2) Agricultural
the sangguniang panlalawigan, sangguniang panlungsod or Fair Market Value
sangguniang bayan of a municipality within the Metropolitan
Manila Area, at the rates not exceeding the following:
(a) On Lands:
CLASS ASSESSMENT LEVELS P300,000.00 25%
Residential 20% P300,000.00 500,000.00 30%
Agricultural 40% 500,000.00 750,000.00 35%
[Page 67 of 79]
750,000.00 1,000,000.00 40% Class Assessment Levels
1,000,000.00 2,000,000.00 45% Agricultural 40%
2,000,000.00 50% Residential 50%
(3) Commercial / Industrial Commercial 80%

Fair Market Value
Industrial 80%
(d) On Special Classes: The assessment levels for all lands buildings,
machineries and other improvements;
P300,000.00 30%
Actual Use Assessment Level

P300,000.00 500,000.00 35%
Cultural 15%
500,000.00 750,000.00 40%
Scientific 15%
750,000.00 1,000,000.00 50%
Hospital 15%
1,000,000.00 2,000,000.00 60%
Local water districts 10%

2,000,000.00 5,000,000.00 70%
Government-owned or controlled 10%

5,000,000.00 10,000,000.00 75% corporations engaged in the supply and
distribution of water and/or generation
and transmission of electric power
10,000,000.00 80%
Q: What about assessment level? How is this different

(4) Timberland from assessment?
Fair Market Value
An assessment level is not the value of the property because
when you talk about assessment level this is the percentage
Over Not Over Assessment Levels as declared in the city ordinance that is to be applied as FMV
to determine the taxable value of the property. There is a
FMV, there is certain percentage which we call as the
P300,000.00 45%
assessment level. You will multiply them; you arrive at the
taxable value of the property. From this taxable value of the
P300,000.00 500,000.00 50% property that is the tax base of your real property tax.
If you read Section 218 its a bunch of figures.
500,000.00 750,000.00 55% For example residential. Magkano ba ang assessment level
ng residential? 20% diba?
750,000.00 1,000,000.00 60% FMV 1Million
Assessment Level x 20%
5,000,000.00 2,000,000.00 65%
Taxable value 200,000
2,000,000.00 70% TAX x 2%

40,000 (RPT)
(c) On Machineries
[Page 68 of 79]
Lets say the FMV of the property is 1Million you multiply it of the assessment when made or to any other abnormal
by 20% kasi yan man ang assessment level. Meron kang cause, shall be made within ninety (90) days from the date
200k (1M x .20) that is the taxable value of the property. any such cause or causes occurred, and shall take effect at
Supposing tax is 2%. (200k x 2%) 40k ang tax. Ganun ang the beginning of the quarter next following the
pagcompute ng RPT. Its entirely a different thing. Its weird reassessment.
to compute marami kang isipin. Thats about it. Mauna ka sa
FMV, then you have assessment, assessment level, you xxx Exception, the reassessment must be made 90 days within
the taxable value for you to arrive at the RPT. the occurrence of the grounds. And such reassessment takes
effect at the beginning of the quarter next following
We all know the value of real property, especially land, reassessment.
appreciates over time or machineries, depreciates over time.
There has to be reassessment of these properties. On top of Based on the following grounds:
that the use of these certain properties may change 1. Reassessment of real property due to its partial or
overtime. For example, Ecoland area. Ano man siya dati? total destruction
Diba its a Subdivision. Sabi nila ecoland was proposed to be
a high end subdivision, I dont know what happened. But Naay building nasunog, so there has to be a change of the
right now, Ano ba meron dyan mga school, SM. So overtime assessment of the real property. Kasi nagdepreciate na ang
it changes thats why there has to be a reassessment or value niyan.
reclassification of the real properties situated in the particular 2. To a major change in its actual use
LGU.
Dati residential but now ginawa na siyang laundry shop. Its
Q: How often should it be made? for commercial purposes already. The assessment for
The law says it should be made every three years. commercial property is higher. Mas malaki ang tax na
bayaran nyan.
Section 219. General Revision of Assessment and Property
Classification. - The provincial, city or municipal assessor 3. To any great and sudden inflation or deflation of
shall undertake a general revision of real property real property values
assessments within two (2) years after the effectivity of this I think this is very difficult to imagine especially within Davao
Code and every three (3) years thereafter. city
Section 220. Valuation of Real Property. - In cases where 4. To the gross illegality of the assessment when made
(a) real property is declared and listed for taxation purposes or
for the first time; (b) there is an ongoing general revision of
property classification and assessment; or (c) a request is 5. To any other abnormal cause.
made by the person in whose name the property is declared, If any of these things exist it would take effect in the
the provincial, city or municipal assessor or his duly following quarter next following the assessment.
authorized deputy shall, in accordance with the provisions of
this Chapter, make a classification, appraisal and assessment CHAPTER VI
or taxpayer's valuation thereon: Provided, however, That the Collection of Real Property Tax
assessment of real property shall not be increased oftener
Q: When does real property tax and special levies
than once every three (3) years except in case of new accrue? Section 246.
improvements substantially increasing the value of said
property or of any change in its actual use. Section 246. Date of Accrual of Tax. - The real property tax
for any year shall accrue on the first day of January and from
Q: When does the assessment/reassessment take
that date it shall constitute a lien on the property which shall
into effect?
be superior to any other lien, mortgage, or encumbrance of
The GR on assessments or reassessments made after the any kind whatsoever, and shall be extinguished only upon
first day of every year shall take effect on January 1 of the the payment of the delinquent tax.
succeeding year. That is the GR. Yearly siya supposedly mag
So the RPT accrues every Jan 1, so with the special levies.
take effect. Next year pa siya mag apply that is under
From that day also, from Jan 1, there will be a lien on the
Section 221.
property which shall be superior to any other liens or
Section 221. Date of Effectivity of Assessment or encumbrances. How is that extinguished? Of course through
Reassessment. - All assessments or reassessments made the payment of your delinquent taxes.
after the first (1st) day of January of any year shall take
Q: Who collects the RPT?
effect on the first (1st) day of January of the succeeding
year: Provided, however, That the reassessment of real Of course the collection lies with the local treasurer.
property due to its partial or total destruction, or to a major Remember when it comes to RPT, different personalities are
change in its actual use, or to any great and sudden inflation involved.
or deflation of real property values, or to the gross illegality
1. There is one which is for the assessment
[Page 69 of 79]
2. There is for the collection of the RPT payment of which shall be governed by ordinance of the
sanggunian concerned.
The city or municipal treasurer can also deputize the Brgy.
Treasurer to collect the RPT. The date for the payment of any other tax imposed under
this Title without interest shall be prescribed by the
Section 247. Collection of Tax. - The collection of the real sanggunian concerned.
property tax with interest thereon and related expenses, and
the enforcement of the remedies provided for in this Title or Payments of real property taxes shall first be applied to prior
any applicable laws, shall be the responsibility of the city or years delinquencies, interests, and penalties, if any, and only
municipal treasurer concerned. after said delinquencies are settled may tax payments be
credited for the current period.
The city or municipal treasurer may deputize the barangay
treasurer to collect all taxes on real property located in the According to section 250, you can pay RPT in four equal
barangay: Provided, That the barangay treasurer is properly installments, without an interest. You are allowed four
bonded for the purpose: Provided, further, That the premium quarterly installments. So for one year pwede mong itingi-
on the bond shall be paid by the city or municipal tingi hanggang matapos and you will still not be considered
government concerned. as delinquent basta di ka late magbayad. Pay it quarterly,
you will not become delinquent. When? Calendar year. You
Section 248. Assessor to Furnish Local Treasurer with
pay on or before the end of March, June, September,
Assessment Roll. - The provincial, city or municipal assessor
December. For special levies, it depends on the time
shall prepare and submit to the treasurer of the local
provided for or prescribed by the Sanggunian.
government unit, on or before the thirty-first (31st) day of
December each year, an assessment roll containing a list of What if there are Tax delinquencies, nalate ka nagbayad. Its
all persons whose real properties have been newly assessed like first in first out basis. Everytime you pay, the payment
or reassessed and the values of such properties. will be applied in your old delinquent taxes including
surcharges and penalties before the payment will be applied
Section 249 is Time of collection: to the current RPT liability. One peculiar thing about the RPT
Section 249. Notice of Time for Collection of Tax. - The city is you can actually pay it in advance. If you pay in advance,
or municipal treasurer shall, on or before the thirty-first you can avail of a discount depending on what is provided
(31st) day of January each year, in the case of the basic real for in the ordinance concerned. This is actually found in
property tax and the additional tax for the Special Education Section 251. Pag early ka magbayad meron kang discount.
Fund (SEF) or any other date to be prescribed by the Section 251. Tax Discount for Advanced Prompt Payment. -
sanggunian concerned in the case of any other tax levied If the basic real property tax and the additional tax accruing
under this title, post the notice of the dates when the tax to the Special Education Fund (SEF) are paid in advance in
may be paid without interest at a conspicuous and publicly accordance with the prescribed schedule of payment as
accessible place at the city or municipal hall. Said notice shall provided under Section 250, the sanggunian concerned may
likewise be published in a newspaper of general circulation in grant a discount not exceeding twenty percent (20%) of the
the locality once a week for two (2) consecutive weeks. annual tax due.
Notice of time for collection of taxes and levies or RPT must Lets go now to prescriptive period.
be made by the city or municipality concerned. Notice lang.
There will just be a notice for the payment of taxes. Q: How long is given to the LGU to collect the RPT
before the period to collect expires?
Q: When is this posting made? Because the notices are
posting and publication. It must be made on or before Section 270 provides for the prescriptive periods. When you
January 31 of each year or any other date as prescribed by read it, it is actually almost the same with what is provided in
the Sanggunian in case of other taxes imposed under the the Local Government Taxation we discussed before. The
code. period is 5 years from the date they become due.
Q: When should taxes be paid? Section 250

Section 270. Periods Within Which to Collect Real Property
Section 250. Payment of Real Property Taxes in Taxes. The basic real property tax and any other tax levied
Installments. - The owner of the real property or the person under this Title shall be collected within five (5) years from
having legal interest therein may pay the basic real property the date they become due. No action for the collection of the
tax and the additional tax for Special Education Fund (SEF) tax, whether administrative or judicial, shall be instituted
due thereon without interest in four (4) equal installments; after the expiration of such period. In case of fraud or intent
the first installment to be due and payable on or before to evade payment of the tax, such action may be instituted
March Thirty-first (31st); the second installment, on or for the collection of the same within ten (10) years from the
before June Thirty (30); the third installment, on or before discovery of such fraud or intent to evade payment. The
September Thirty (30); and the last installment on or before period of prescription within which to collect shall be
December Thirty-first (31st), except the special levy the suspended for the time during which:
[Page 70 of 79]
(1) The local treasurer is legally prevented from person having legal interest therein to redeem the property
collecting the tax; within one (1) year from the date of sale.
(2) The owner of the property or the person having So from January 1 you pay the RPT without interest. If you
legal interest therein requests for reinvestigation pay late the interest will come then you will be considered as
and executes a waiver in writing before the tax delinquent.
expiration of the period within which to collect; and
Prior to that notice of delinquency, wag muna kayo matakot
(3) The owner of the property or the person having kasi di pa yan kukunin ng gobyerno. You wait for the Notice
legal interest therein is out of the country or of Delinquency and that notice of delinquency will not be
otherwise cannot be located. immediately issued by the local treasurer because the local
treasurer will still make a listing. Magbuhat pa na siya ug list
Exception: within ten (10) years from the discovery. based on the assessment clause and then the local treasurer
will compute the RPT for these properties within its territorial
Q: What are the grounds? jurisdiction. And the local treasurer will still submit that to
The grounds are: Sanggunian. I dont know whats the purpose of that,
magsubmit pa siya sa SAnggunian with the request that the
1. fraud or Sanggunian helps(?) them in the collection of these RPT
2. Intent to evade payment of taxes. delinquencies. Then you will have your Notice of Delinquency
Take note also of the grounds the prescriptive period to Q: Can the RPT be condoned? Yes it can be condone.
collect will be tolled or suspended. There are three instances There are two personalities.
(see section 270).
1. Condoned by the Sanggunian
If the taxpayer becomes tax delinquent the LGU may now
start to avail its own remediates to collect the RPT 2. Condoned by the President of the Philippines
The first thing that a taxpayer will receive when it comes to For the Sanggunian there is Section 276. There must be an
RPT is the Notice of Delinquency. Ano ba ang matanggap ordinance passed prior to the first day of the year. There
natin sa income? For example delinquent na income tax, must be an ordinance passed prior to the first day of January
merong assessment diba. Tapos pag babayarin ka niya, you of any year and then the condonation will take effect on the
receive a xxx or a PAN. For RPT purposes una mo following year. On top of that there is also a requirement
matanggap is the notice of delinquency, this is provided for that there must be Recommendation of the Local disaster
Section 254 of the LGC. Coordinating Council for the condonation of RPT. This has
something to do with the grounds for condonation, they are
Sec. 254. Notice of Delinquency in the Payment of the Real as follows:
Property Tax. (a) When the real property tax or any other
tax imposed under this Title becomes delinquent, the 1. General failure of crops
provincial, city or municipal treasurer shall immediately cause 2. Substantial decrease in the price of agricultural or
a notice of the delinquency to be posted at the main hall and agri-based products
in a publicly accessible and conspicuous place in each
barangay of the local government unit concerned. The notice 3. Calamity
of delinquency shall also be published once a week for two e.g Pablo, Yolanda (story about Yolanda)
(2) consecutive weeks, in a newspaper of general circulation
in the province, city, or municipality. Section 276. Condonation or Reduction of Real Property
Tax and Interest. - In case of a general failure of crops or
(b) Such notice shall specify the date upon which the tax
substantial decrease in the price of agricultural or agribased
became delinquent and shall state thatpersonal property may
products, or calamity in any province, city or municipality,
be distrained to effect payment. It shall likewise state that
the sanggunian concerned, by ordinance passed prior to the
any time before the distraint of personal property, payment
first (1st) day of January of any year and upon
of the tax with surcharges, interests and penalties may be
recommendation of the Local Disaster Coordinating Council,
made in accordance with the next following Section, and
may condone or reduce, wholly or partially, the taxes and
unless the tax, surcharges and penalties are paid before the
interest thereon for the succeeding year or years in the city
expiration of the year for which the tax is due except when
or municipality affected by the calamity.
the notice of assessment or special levy is contested
administratively or judicially pursuant to the provisions of The second is Condonation by the President of the PH. If you
Chapter 3, Title II, Book II of this Code, the delinquent real read Section 277 the President is given a wider latitude as to
property will be sold at public auction, and the title to the the reason for the condonation. When public interest so
property will be vested in the purchaser, subject, however, to requires, so mas marami siya. On top of that he may
the right of the delinquent owner of the property or any condone or reduce the RPT including the interest on any
province city or municipality within Metro Manila.
[Page 71 of 79]
Section 277. Condonation or Reduction of Tax by the extinguished upon payment of the tax and the related
President of the Philippines. - The President of the interests and expenses.
Philippines may, when public interest so requires, condone or Diba its pretty much the same, but this time I think this is a
reduce the real property tax and interest for any year in any superior lien because it already refers to the real property
province or city or a municipality within the Metropolitan involve which is subject to taxation. If you go back sa inyong
Manila Area. Civil Code meron pa siyang preference.
Lets just stop there, notice of delinquency. Then you have the Remedy of Distraint
The remedy of distraint is actually - if you read the provisions
there is no specific [law]. Unlike sa Local Government Tax,
March 19, 2016 (AL) the business taxes, the law is specific meron talagang
remedy of distraint to collect the tax. But when you look at
The discussion that we will have will be the last for the LGC.
RPT provisions there is nothing specific about distraint.
Thereafter we will be discussing a little bit about Tariff and
But if you look at section 254(B)
Custom Duties. We will not discuss all about TCD (Tariff and
Custom Duties) because baga kaayo ni siya. And most of the
items there involve mga rates sa tax. We will not deal with Section 254. Notice of Delinquency in the Payment of the
the rates, pero ano lang siya, kailan subject ang articles into Real Property Tax.
customs duties. Last is, kelangan ko lang siguro ng isang xxx
session for CTA, just the jurisdictional matters lang.
(b) Such notice shall specify the date upon which the tax
Lets go back. Tax collection na tayo diba? became delinquent and shall state that personal property
In Real Property Taxation, assessment refers to the valuation may be distrained to effect payment. It shall likewise state
of property for RPT purposes. But you do not receive a that any time before the distraint of personal property,
notice of assessment by the government or the LGU payment of the tax with surcharges, interests and penalties
requiring you to pay the taxes. But what you will receive is may be made in accordance with the next following Section,
the notice of delinquency in case you have been delinquent and unless the tax, surcharges and penalties are paid before
with your payment of the real property taxes. the expiration of the year for which the tax is due except
when the notice of assessment or special levy is contested
This notice of delinquency will just be posted in specific administratively or judicially pursuant to the provisions of
places. Sa city hall ba or sa public school. At the same time Chapter 3, Title II, Book II of this Code, the delinquent real
you will publish it in a newspaper of general circulation in the property will be sold at public auction, and the title to the
area where the property is located. property will be vested in the purchaser, subject, however, to
the right of the delinquent owner of the property or any
Na-discuss din natin ang condonation diba? Who are the
person having legal interest therein to redeem the property
personalities who would condone the RPT? You have
within one (1) year from the date of sale.
1. the President,
2. the Sanggunian concerned. Such notice shall specify the date upon which the tax
became delinquent and shall state that personal property
Take note also of the differences between them as to the may be distrained to effect payment
grounds. Because the grounds are different, the President is
provided for a bigger leeway in condoning the RPT.
Diba personal property sabi niya dito? One book would say
na, this is actually an authority given to the LGU in case that
Going back to notice of delinquency. there are delinquent taxes or taxes which are unpaid sought
to be collected by the government. Hindi lang levy ang
First is the notice may be post(?) in publication. This is quite
remedy, of course the LGU may resort to distraint of
true because di ka makatanggap na delinquent ka. What you
personal property and the basis is this first sentence.
will receive later on is the notice of assessment of the
Because if you read the entire provision this is very clear,
property involved.
personal property, at saka sa baba, real property will be sold
In case that you are not able to pay, the remedies are some at public auction pansinin nyo gud. So those are the nuances
sort of the same, pretty much the same as the LGT, you relating to that provision.
have tax lien, distraint, you also have levy. Section 257
the delinquent real property will be sold at public auction,
Section 257. Local Governments Lien. - The basic real Which to be followed? Im inclined to believe that the LGU is
property tax and any other tax levied under this Title allowed to have this remedy of distraint mainly because it is
constitutes a lien on the property subject to tax, superior to provided although pahapyaw lang sya. And the provisions in
all liens, charges or encumbrances in favor of any person, the Local Government Code pertaining to the local taxes can
irrespective of the owner or possessor thereof, enforceable also be used suppletorily when you apply the distraint
by administrative or judicial action, and may only be remedy of the LGU in collecting the taxes.
[Page 72 of 79]
LEVY the warrant by the owner of the property or person having

legal interest therein.
Then you have the levy, siyempre real property ito. I think
the more appropriate remedy for the LGU is the levy of real Section 259. Penalty for Failure to Issue and Execute
property. Warrant. - Without prejudice to criminal prosecution under
the Revised Penal Code and other applicable laws, any local
In fact all of the LGU exercises this right to levy to collect the
treasurer or his deputy who fails to issue or execute the
tax. Like for example, we have a client. Parang away pamilya
warrant of levy within one (1) year from the time the tax
although not really away pamilya, but may property involve.
becomes delinquent or within thirty (30) days from the date
Meron kasing administrator kaso napabayaan ng
of the issuance thereof, or who is found guilty of abusing the
admininistrator. They just want to save the property. Then
exercise thereof in an administrative or judicial proceeding
First time ko nahawakan ang kaso. Ang tanong ko sa kanya,
shall be dismissed from the service.
for auction na ba ito? Sabi nila, hindi ko alam pero
matagal na di nabayaran ang tax around 10 or 5 years. Buti Now with respect to the levy provisions under the RPT the
nalang nag aral ako nito. I told them you check sa municipal rules are practically the same.
hall kung merong notice that your property is included for
public auction. Ayon nga may lumabas, meron ng notice. First, is the levy proper? The issuance of the
certificate by whom?
Section 256. Remedies For The Collection Of Real Property
This is not the local assessor. This time, this is the local
Tax. - For the collection of the basic real property tax and
treasurer because this concerns already the collection of
any other tax levied under this Title, the local government
taxes. The Local Treasurer will issue a certificate of
unit concerned may avail of the remedies by administrative
delinquency and then he will mail this to the taxpayer
action thru levy on real property or by judicial action.
concerned or the person legally interested over the property
Section 257. Local Governments Lien. - The basic real involved. Also the local treasurer will send a certificate to the
property tax and any other tax levied under this Title ROD for annotation. After the annotation there will a
constitutes a lien on the property subject to tax, superior to publication and posting of advertisement of sale. Within
all liens, charges or encumbrances in favor of any person, thirty (30) days after service of the warrant of levy there will
irrespective of the owner or possessor thereof, enforceable be ads which will be posted and published.
by administrative or judicial action, and may only be
The posting will be done at the main entrance of the
extinguished upon payment of the tax and the related
municipal or provincial building and any publicly accessible
interests and expenses.
and conspicuous place in the barangay where the real
Section 258. Levy on Real Property. - After the expiration property is located, and by publication once a week for two
of the time required to pay the basic real property tax or any (2) weeks in a newspaper of general circulation in the
other tax levied under this Title, real property subject to such province, city or municipality where the property is located.
tax may be levied upon through the issuance of a warrant on During this interim period the taxpayer is allowed to pay the
or before, or simultaneously with, the institution of the civil delinquent taxes so that the sale will not proceed. Walang
action for the collection of the delinquent tax. The provincial problema, bayaran niya lang ang expenses ng publication,
or city treasurer, or a treasurer of a municipality within the also the tax due together with all the interest and Voila! the
Metropolitan Manila Area, as the case may be, when issuing property is free(?) from any lien or encumbrances. But if the
a warrant of levy shall prepare a duly authenticated taxpayer will not pay then the sale will proceed. The sale will
certificate showing the name of the delinquent owner of the be made after the publication of the advertisement and of
property or person having legal interest therein, the course the sale will be made in the City Hall or where the
description of the property, the amount of the tax due and property is located or at any place that was stated in the
the interest thereon. The warrant shall operate with the force notice of sale that was published and posted.
of a legal execution throughout the province, city or a
municipality, within the Metropolitan Manila Area. The Section 260. Advertisement and Sale. - Within thirty (30)
warrant shall be mailed to or served upon the delinquent days after service of the warrant of levy, the local treasurer
owner of the real property or person having legal interest shall proceed to publicly advertise for sale or auction the
therein, or in case he is out of the country or cannot be property or a usable portion thereof as may be necessary to
located, the administrator or occupant of the property. At the satisfy the tax delinquency and expenses of sale. The
same time, written notice of the levy with the attached advertisement shall be effected by posting a notice at the
warrant shall be mailed to or served upon the assessor and main entrance of the provincial, city or municipal building,
the Registrar of Deeds of the province, city or municipality and in a publicly accessible and conspicuous place in the
within the Metropolitan Manila Area where the property is barangay where the real property is located, and by
located, who shall annotate the levy on the tax declaration publication once a week for two (2) weeks in a newspaper of
and certificate of title of the property, respectively. general circulation in the province, city or municipality where
the property is located. The advertisement shall specify the
The levying officer shall submit a report on the levy to the amount of the delinquent tax, the interest due thereon and
sanggunian concerned within ten (10) days after receipt of expenses of sale, the date and place of sale, the name of the
[Page 73 of 79]
owner of the real property or person having legal interest decision in that case that states that:
therein, and a description of the property to be sold. At any
time before the date fixed for the sale, the owner of the real The date of sale is actually the date of annotation of
property or person having legal interest therein may stay the certificate of sale in the proper ROD. Thats the argument of
proceedings by paying the delinquent tax, the interest due the SC.
thereon and the expenses of sale. The sale shall be held From FT: Consequently, the counting of the one (1) year
either at the main entrance of the provincial, city or redemption period of property sold at public auction for its
municipal building, or on the property to be sold, or at any tax delinquency should be counted from the date of
other place as specified in the notice of the sale. annotation of the certificate of sale in the proper Register of
Within thirty (30) days after the sale, the local treasurer or Deeds. Applying the foregoing to the case at bar, from the
his deputy shall make a report of the sale to the sanggunian date of registration of the Certificate of Sale of Delinquent
concerned, and which shall form part of his records. The Property on February 10, 2004, respondent had until
local treasurer shall likewise prepare and deliver to the February 10, 2005 to redeem the subject properties. Hence,
purchaser a certificate of sale which shall contain the name its tender of payment of the subject properties tax
of the purchaser, a description of the property sold, the delinquencies and other fees on June 10, 2004, was well
amount of the delinquent tax, the interest due thereon, the within the redemption period, and it was manifest error on
expenses of sale and a brief description of the proceedings: the part of petitioners to have refused such tender of
Provided, however, That proceeds of the sale in excess of payment.
the delinquent tax, the interest due thereon, and the
expenses of sale shall be remitted to the owner of the real But when I look at the facts its a little bit peculiar, because
property or person having legal interest therein. meron tayong provision sa LGC sabi ang 1 year redemption
period should be from the date of sale kung kelan binenta.
The local treasurer may, by ordinance duly approved, Malaman mo man yan sa certificate of sale. You all know
advance an amount sufficient to defray the costs of collection that the date of sale is different from the date of recording
thru the remedies provided for in this Title, including the right?
expenses of advertisement and sale.
What is peculiar about this case is, the city ordinance of QC
If there is no sufficient bidder then the Local Government provided that the 1 year redemption period should be
can also purchase the property through the local treasurer. reckoned form the date of registration. Yan ang nakalagay sa
city ordinance. So theres a seeming conflict. They argued,
Section 263. Purchase of Property By the Local Government you dont have to redeem the property anymore because
Units for Want of Bidder. - In case there is no bidder for the that has already lapse. Do not follow the city ordinance
real property advertised for sale as provided herein, the real because The LGC says that the 1 year period is from the date
property tax and the related interest and costs of sale the of sale. Sabi naman ng kabila, Hindi, lets follow the city
local treasurer conducting the sale shall purchase the ordinance yan ang nakalagay eh. I am in good faith. What
property in behalf of the local government unit concerned to am I supposed to follow? Anyway The SC said na ok because
satisfy the claim and within two (2) days thereafter shall there is a discrepancy between the LGC and the city
make a report of his proceedings which shall be reflected ordinance, ordinarily you follow the LGC because that is the
upon the records of his office. It shall be the duty of the general law which is the basis of the city ordinances. Dyan
Registrar of Deeds concerned upon registration with his man nanggaling ang authority ng LGU.
office of any such declaration of forfeiture to transfer the title
of the forfeited property to the local government unit But then SC said that when you interpret provisions relating
concerned without the necessity of an order from a to right of redemption, it should be interpreted in favor of
competent court. the redemptioner. Even if there is a conflict lets just follow
the ordinance. Kaya nga sabi dito na the date of sale is the
Within one (1) year from the date of such forfeiture, the date of annotation on the certificate of sale.
taxpayer or any of his representative, may redeem the
property by paying to the local treasurer the full amount of
From FT: Verily, the ordinance is explicit that the one-year
the real property tax and the related interest and the costs of
redemption period should be counted from the date of the
sale. If the property is not redeemed as provided herein, the
annotation of the sale of the property at the proper
ownership thereof shall be vested on the local government
registry. At first glance, this provision runs counter to that of
unit concerned.
Section 261 of R.A. No. 7160 which provides that the one
In both options public auction and purchase by the year redemption period shall be counted from the date of
government the taxpayer is entitled to a right of redemption sale of the tax delinquent property. There is, therefore, a
one (1) year from the date of sale. That is the GR as need to reconcile these seemingly conflicting provisions of a
indicated in the LGC. general law and a special law.
A general statute is one which embraces a class of subjects
But there is a SC decision: City Mayor of Quezon City etc. or places and does not omit any subject or place naturally
vs. RCBC GR No. 171033 August 8, 2010 there is an SC belonging to such class. A special statute, as the term is
[Page 74 of 79]
generally understood, is one which relates to particular Q: What are the requirements?
persons or things of a class or to a particular portion or
There are specific requirements to challenge the validity of
section of the state only. In the present case, R.A. No. 7160
the sale from Section 267.
is to be construed as a general law, while City Ordinance No.
SP-91, S-93 is a special law, having emanated only from R.A. Section 267. Action Assailing Validity of Tax Sale. - No
No. 7160 and with limited territorial application inQuezon court shall entertain any action assailing the validity or any
City only. sale at public auction of real property or rights therein under
A general law and a special law on the same subject should this Title until the taxpayer shall have deposited with the
be accordingly read together and harmonized, if possible, court the amount for which the real property was sold,
with a view to giving effect to both. Where there are two together with interest of two percent (2%) per month from
acts, one of which is special and particular and the other the date of sale to the time of the institution of the action.
general which, if standing alone, would include the same The amount so deposited shall be paid to the purchaser at
matter and thus conflict with the special act, the special must the auction sale if the deed is declared invalid but it shall be
prevail, since it evinces the legislative intent more clearly returned to the depositor if the action fails.
than that of the general statute and must be taken as xxx
intended to constitute an exception to the rule. More so,
when the validity of the law is not in question. In other words you have to deposit first the said price before
you challenge the validity of the sale. On top of that your
In giving effect to these laws, it is also worthy to note that in ground would not just be a ground of formal irregularities
cases involving redemption, the law protects the original because the law says:
owner. It is the policy of the law to aid rather than to defeat
the owners right. Therefore, redemption should be looked xxx
upon with favor and where no injury will follow, a liberal
Neither shall any court declare a sale at public auction invalid
construction will be given to our redemption laws, specifically
by reason or irregularities or informalities in the proceedings
on the exercise of the right to redeem.To harmonize the
unless the substantive rights of the delinquent owner of the
provisions of the two laws and to maintain the policy of the
real property or the person having legal interest therein have
law to aid rather than to defeat the owners right to redeem
his property, Section 14 (a), Paragraph 7 of City been impaired.
Ordinance No. SP-91, S-93 should be construed as to define Remember there must be a violation of the substantive right
the phrase one (1) year from the date of sale as appearing of the land owner.
in Section 261 of R.A. No. 7160, to mean one (1) year from
the date of the annotation of the sale of the property at the And of course the purchaser of that property is entitled to a
proper registry. final certificate of sale as provided under Section 262 of the
LGC.
Consequently, the counting of the one (1) year redemption
period of property sold at public auction for its tax Section 262. Final Deed to Purchaser. - In case the owner
delinquency should be counted from the date of annotationof or person having legal interest fails to redeem the delinquent
the certificate of sale in the proper Register of property as provided herein, the local treasurer shall execute
Deeds. Applying the foregoing to the case at bar, from the a deed conveying to the purchaser said property, free from
date of registration of the Certificate of Sale of Delinquent lien of the delinquent tax, interest due thereon and expenses
Property on February 10, 2004, respondent had until of sale. The deed shall briefly state the proceedings upon
February 10, 2005 to redeem the subject properties. Hence, which the validity of the sale rests.
its tender of payment of the subject properties tax
delinquencies and other fees on June 10, 2004, was well Q: What if the sale proceeds during the auction is not
within the redemption period, and it was manifest error on enough.
the part of petitioners to have refused such tender of Of course the LGU may still conduct further levy or distraint.
payment.
Section 265. Further Distraint or Levy. - Levy may be
The facts are peculiar but if ever that you are asked of this repeated if necessary until the full amount due, including all
question in the bar just stick to the facts, everything else you expenses, is collected.
should follow the DATE OF SALE, thats the general rule.
Another action of the LGC to compel the payment of taxes is
Q: Can you question the validity of the sale through judicial action which is provided under Section 266.
conducted?
Section 266. Collection of Real Property Tax Through the
Yes, if there was a violation of due process especially the Courts. - The local government unit concerned may enforce
notice requirement because there are a lot of cases decided the collection of the basic real property tax or any other tax
by the SC that once the notices are not complied with then levied under this Title by civil action in any court of
the public auction conducted is also void. competent jurisdiction. The civil action shall be filed by the
[Page 75 of 79]
local treasurer within the period prescribed in Section 270 of the remedies as provided for in Chapter 3, Title
this Code. II, Book II of this Code.
If you remember there are real properties exempt from
The first thing that you are going to do is pay the tax.
taxation. e.g) Properties owned by the LGU is not subject to
Magbayad ka ng tax, but then you will say, I will pay this
RPT, at the same time owned by the Local Government or
tax under protest. Then they will issue a receipt nakatala
the Republic of PH is not subject to levy. But what about if
payment under protest. Or I think there is a check box there.
the issue is, Okay, I am the Government. I have the same
After payment you have 30 days within which to file your
property then I will just have this property used by a taxable
protest in writing to the Local Treasurer.
person. What is the effect? The government is exempt from
taxation but the person who has the beneficial use of that Q: When is a Protest required?
property is subject to tax right? Supposing ang tao na yon
hindi magbayad, definitely the government cannot levy. A protest is required when there is a question on
Cannot levy because that property is government owned, it is reasonableness of the amount assessed.
exempt from levy. Q: What if you have legal question?
Q: Ano ang remedy ng government? This is the remedy If the questions raised is on the very authority or power of
of the government, file a collection suit. the assessor to impose the assessment or the treasurer to
Q: Where will the case be filed? collect the tax then Payment under protest is not required.
Legally speaking, if its just a legal question regarding the
It really depends on the jurisdictional amounts. Its either, authority of the person collecting the tax you dont have to
the MTC, RTC, or CTA. You file it with the MTC if the value is pay under protest because you are not challenging the
300k outside Metro Manila, 400k pag Manila. If it exceeds figures to begin with.
the 300k, 400k, but not exceeding 1M you file it with the
RTC. 1M and above sa CTA. But in practice I would suggest that you pay under protest
just to remove any doubts. Anyway if later on if it was really
Refund and Credit found out by the court that the person or the local
government has no authority to collect the tax then you are
The first is, Payment under protest. Section 252.
entitled to a refund
For Real Property Taxation there must have to be a payment
Q: How is a refund initiated? That is found under
under protest everytime the taxpayer challenges the tax
Section253
sought to be collected by the local government.
Take note collection, pera na to siya ha. Pag pera, kelangan Section 253. Repayment of Excessive Collections. - When
mo magbayad muna bago mag protest. an assessment of basic real property tax, or any other tax
levied under this Title, is found to be illegal or erroneous and
the tax is accordingly reduced or adjusted, the taxpayer may
Section 252. Payment Under Protest. -
file a written claim for refund or credit for taxes and interests
(a) No protest shall be entertained unless the with the provincial or city treasurer within two (2) years from
taxpayer first pays the tax. There shall be the date the taxpayer is entitled to such reduction or
annotated on the tax receipts the words "paid adjustment.
under protest". The protest in writing must be
The provincial or city treasurer shall decide the claim for tax
filed within thirty (30) days from payment of
refund or credit within sixty (60) days from receipt thereof.
the tax to the provincial, city treasurer or
In case the claim for tax refund or credit is denied, the
municipal treasurer, in the case of a
taxpayer may avail of the remedies as provided in Chapter 3,
municipality within Metropolitan Manila Area,
Title II, Book II of this Code.
who shall decide the protest within sixty (60)
days from receipt Q: What is the ground?
(b) The tax or a portion thereof paid under protest, If the tax paid is found to be illegal or erroneous and the tax
shall be held in trust by the treasurer is accordingly reduced or adjusted.
concerned.
After the filing of the application for refund, the city treasurer
(c) In the event that the protest is finally decided has 60 days to decide w/n to grant the refund. If the
in favor of the taxpayer, the amount or portion decision is adverse to the taxpayer, the taxpayer goes to the
of the tax protested shall be refunded to the RTC under its original jurisdiction and file a xxx for refund. If
protestant, or applied as tax credit against his the RTC decision is still adverse, then you go up to the CTA
existing or future tax liability. division within 30 days from receipt of the adverse decision.
(d) In the event that the protest is denied or upon After that you go up to the CTA en banc, and from the CTA
the lapse of the sixty day period prescribed in en banc to the SC.
subparagraph (a), the taxpayer may avail of Taxpayers Remedies
[Page 76 of 79]
Kanina pinag-usapan natin is the collection of money. This case may be.
time, this pertains to the assessment of the property, the
valuation of the property. Q: Who composes the LBAA?
To summarize everything, the appeal process with respect to 1. Its the Register of deeds as the chairman and
assessment there are four things to remember
2. then two members
1. The first appeal through a petition before the Local
Board of Assessment Appeals (LBAA) a. One, we have the city prosecutor,
provincial prosecutor.
2. Appeal to the CBAA (Central Board of Assessment
Appeals) b. Second, you have the provincial or the city
engineer.
3. Petition for review before the CTA en banc
3. Meron pang extra they can have secretary which
4. Lastly petition for review on certiorari before the SC will be appointed by the chairman of the board
Lets start with the LBAA: So mag-appeal ka. The appeal is found in Section 226:
Lets go back muna sa process natin. Diba meron man SEC. 226. Local Board of Assessment Appeals. Any owner
tayong mga tax declaration etc then isubmit sa Sanggunian or person having legal interest in the property who is not
etc. When the local assessor has already made its own satisfied with the action of the provincial, city or municipal
assessment ang matatanggap ng taxpayer is a notice of assessor in the assessment of his property may, within sixty
assessment. Its not to collect the taxes but that is to inform (60) days from the date of receipt of the written notice of
the taxpayer that there is already a valuation of the property assessment, appeal to the Board of Assessment Appeals of
which will be the basis for the RPT later on. That mode the province or city by filing a petition under oath in the form
pwede yan siya ma-appeal. In the end ang analysis natin is prescribed for the purpose, together with copies of the tax
there are two modes of appealing here. declarations and such affidavits or documents submitted in
First, you take the remedies for the support of the appeal.
collection and
Q: Now, so how is it done?
Ito for the assessment of the tax.
Ang sabi is petition under oath. In other words it must be
Q: Where do you go first? You go first to the LBAA. through a verified petition. From that verified petition you
will attach your supporting documents probably in the form
The Organization, Powers, Duties, and Functions of the LBAA of affidavits and also the tax declaration for that matter.
is found in Section 227.
Q: Who may appeal? Its the owner or the Person who has
Section 227. Organization, Powers, Duties, and Functions an interest in the property. This is the person legally
of the Local Board of Assessment Appeals. - burdened with obligation to pay the tax imposed on the
property, not necessarily the owner.
(a) The Board of Assessment Appeals of the province or city
shall be composed of the Registrar of Deeds, as Chairman, The taxpayer is given sixty (60) days from the date of receipt
the provincial or city prosecutor and the provincial, or city of the written notice of assessment to appeal.
engineer as members, who shall serve as such in an ex Supposing the City of Davao reassess the values of property
officio capacity without additional compensation. within its jurisdiction? And you are among those who are
(b) The chairman of the Board shall have the power to affected. Nakatanggap ka ng notice of assessment. Will you
designate any employee of the province or city to serve as still file a motion for reconsideration before the local assessor
secretary to the Board also without additional compensation. before you can go to the LBAA?
(c) The chairman and members of the Board of Assessment Q: Is a filing a MR before the local assessor a
Appeals of the province or city shall assume their respective prerequisite before you can go to the LBAA?
positions without need of further appointment or special This is actually answered in the case of Fels Energy vs.
designations immediately upon effectivity of this Code. They Batangas, Yong powerbarge.
shall take oath or affirmation of office in the prescribed form.
There is no need for a MR you can immediately proceed to
(d) In provinces and cities without a provincial or city the LBAA for the appeal because the last action of the local
engineer, the district engineer shall serve as member of the assessor on a particular assessment shall be the notice of
Board. In the absence of the Registrar of Deeds, or the assessment. Wala ng iba. There is no order, there is no
provincial or city prosecutor, or the provincial or city decision. Pag may notice of assessment, you immediately go
engineer, or the district engineer, the persons performing to LBAA
their duties, whether in an acting capacity or as a duly
designated officer-in-charge, shall automatically become the Q: What will happen if you file an MR?
chairman or member, respectively, of the said Board, as the
[Page 77 of 79]
The filing of MR will not toll the 60-day period to appeal The LBAA has 120 days to decide an appeal from receipt.
before the LBAA During that period the LBAA will conduct a hearing. If you
will look at the provisions there meron siyang powers dito.
Q: What will happen if the taxpayer fails to file an
appeal on time? xxx shall have the power to summon witnesses, administer
oaths, conduct ocular inspection, take depositions, and issue
The taxpayers failure to question the assessment before the
subpoena and subpoena duces tecum.
LBAA renders the assessment of the local assessor final,
executory and demandable. In other words, the taxpayer is Just to determine w/n there is some sort of basis on the
precluded from questioning the correctness of the appeal made by the taxpayer. The quantum of proof or the
assessment. Or from invoking any defense that would evidence required here is just substantial evidence. Take
question on its liability on the merits. Wala na siyang note proceeding under LBAA is not subject to the rigid rules
magawa. That is one of the remedies there mag appeal ka. of technicalities. After that, the LBAA will render a decision.
The taxpayer will receive the decision. And if upon receipt of
Fels Energy vs. Batangas the decision, if its adverse the taxpayer will now go to the
CBAA, the Central Board of Assessment Appeals. So galing sa
From FT: To reiterate, if the taxpayer fails to appeal in due assessor, punta sa LBAA then now the CBAA. This is provided
course, the right of the local government to collect the taxes under Section 230 of the LGC.
due with respect to the taxpayers property becomes
absolute upon the expiration of the period to appeal. It also Section 230. Central Board of Assessment Appeals. - The
bears stressing that the taxpayers failure to question the Central Board of Assessment Appeals shall be composed of a
assessment in the LBAA renders the assessment of the local chairman, and two (2) members to be appointed by the
assessor final, executory and demandable, thus, precluding President, who shall serve for a term of seven (7) years,
the taxpayer from questioning the correctness of the without reappointment. Of those first appointed, the
assessment, or from invoking any defense that would reopen chairman shall hold office for seven (7) years, one member
the question of its liability on the merits. for five (5) years, and the other member for three (3) years.
Appointment to any vacancy shall be only for the unexpired
Action by the LBAA for the appeals is provided in Section portion of the term of the predecessor. In no case shall any
229. member be appointed or designated in a temporary or acting
capacity. The chairman and the members of the Board shall
Section 229. Action by the Local Board of Assessment be Filipino citizens, at least forty (40) years old at the time of
Appeals. - their appointment, and members of the Bar or Certified
Public Accountants for at least ten (10) years immediately
(a) The Board shall decide the appeal within one hundred preceding their appointment. The chairman of the Board of
twenty (120) days from the date of receipt of such appeal. Assessment Appeals shall have the salary grade equivalent to
The Board, after hearing, shall render its decision based on the rank of Director III under the Salary Standardization Law
substantial evidence or such relevant evidence on record as a exclusive of allowances and other emoluments. The
reasonable mind might accept as adequate to support the members of the Board shall have the salary grade equivalent
conclusion. to the rank of Director II under the Salary Standardization
(b) In the exercise of its appellate jurisdiction, the Board Law exclusive of allowances and other emoluments. The
Board shall have appellate jurisdiction over all assessment
shall have the power to summon witnesses, administer
oaths, conduct ocular inspection, take depositions, and issue cases decided by the Local Board of Assessment Appeals.
subpoena and subpoena duces tecum. The proceedings of There shall be Hearing Officers to be appointed by the
the Board shall be conducted solely for the purpose of Central Board of Assessment Appeals pursuant to civil service
ascertaining the facts without necessarily adhering to laws, rules and regulations, one each for Luzon, Visayas and
technical rules applicable in judicial proceedings. Mindanao, who shall hold office in Manila, Cebu City and
Cagayan de Oro City, respectively, and who shall serve for a
(c) The secretary of the Board shall furnish the owner of the
term of six (6) years, without reappointment until their
property or the person having legal interest therein and the
successors have been appointed and qualified. The Hearing
provincial or city assessor with a copy of the decision of the
Officers shall have the same qualifications as that of the
Board. In case the provincial or city assessor concurs in the
Judges of the Municipal Trial Courts.
revision or the assessment, it shall be his duty to notify the
owner of the property or the person having legal interest The Central Board Assessment Appeals, in the performance
therein of such fact using the form prescribed for the of its powers and duties, may establish and organize staffs,
purpose. The owner of the property or the person having offices, units, prescribe the titles, functions and duties of
legal interest therein or the assessor who is not satisfied with their members and adopt its own rules and regulations.
the decision of the Board, may, within thirty (30) days after
receipt of the decision of said Board, appeal to the Central Unless otherwise provided by law, the annual appropriations
Board of Assessment Appeals, as herein provided. The for the Central Board of Assessment Appeals shall be
decision of the Central Board shall be final and executory.
[Page 78 of 79]
included in the budget of the Department of Finance in the

corresponding General Appropriations Act.
The CBAA has jurisdiction to hear appeals of the decision of

the LBAA.
Q: Who may appeal before the CBAA?
a. The owner,
b. the person having an interest on the property,
c. the local assessor.
Q: What if the decision of the CBAA is still adverse to
the taxpayer?
The next remedy is to appeal the decision to the CTA en
banc. Wala ng CTA division dito, deretso na sa en banc. This
is somehow different from our previous remedies that we
have discussed. The appeal must be made before the CTA
division, dito diretso ka na. The CTA en banc has the
exclusive appellate jurisdiction to review by appeal the
decisions of CBAA.
Take note section 231 the effect of Appeal on the Payment
of Real Property Tax. Even if you have appealed before the
CBAA it will really not affect the payment of RPT. Kelangan
mo pa siya bayaran. If later on the CBAA, or the CTA or the
SC will decide in your favor you will be entitled to a refund.
Section 231. Effect of Appeal on the Payment of Real

Property Tax. - Appeal on assessments of real property made
under the provisions of this Code shall, in no case, suspend
the collection of the corresponding realty taxes on the
property involved as assessed by the provincial or city
assessor, without prejudice to subsequent adjustment
depending upon the final outcome of the appeal.
Q: So what if the decision of the CTA en banc is still

adverse to the TaxPayer?
Then the taxpayer will have to go up to the SC through a
Petition for review on certiorari under Rule 45 within 15 days
from receipt of decision.
I think thats it last na talaga yan siya for LGC. YEY!
KILLER COVERAGE. COMPLETE. T_T
[Page 79 of 79]

TAX II 3rd Exam TSN

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TAXATION LAW 2 TRANSCRIPT

From the lectures of Atty. Percy Donalvo, CPA

constitution, the final arbiter which determines the

provided the following information to demonstrate the Exceptions:

has already paid the taxes based on such you.

Next is who issues this letter of authority?

2. It shall state the facts, the law, the rules and

interrupt the prescriptive period you read the case

So the properties are not actually seized. 4) Bank accounts

1. Posting a notice at the main entrance of the Section 214.

any one for hi. order from a competent court.

What are the grounds? What is financial incapacity?

3) The taxpayer failed to file an administrative protest Section 204. xxx

Philippine Phosphate vs. CIR GR No. 141973: The

Q: When is the prescriptive period to file a 4. Section 229

Sec 130. xxx 2) If it is indeed a tax, is it a valid exercise of the LGUs

3. Provisions providing for tax exemptions must be

Held: Section 516. Penalties for Violation of Tax Ordinances. -

municipality, and barangay. So, the barangay can impose

members. This involves the Municipality of San Juan. The Sangguniang

Let us just walk this through. xxx

Lets outline: (c) "Amusement Places" include theaters, cinemas, concert

by LGC. It is the use of Delivery Truck or Van of Manufacturers or

Ad valorem, based on value. It is based on the assessed

Q: If there is a discrepancy between the declaration

Section 218. Assessment Levels. - The assessment levels to 10,000,000.00 60%

CLASS ASSESSMENT LEVELS P300,000.00 25%

Residential 20% P300,000.00 500,000.00 30%

Agricultural 40% 500,000.00 750,000.00 35%

750,000.00 1,000,000.00 40% Class Assessment Levels

1,000,000.00 2,000,000.00 45% Agricultural 40%

2,000,000.00 50% Residential 50%

(3) Commercial / Industrial Commercial 80%

Actual Use Assessment Level

Local water districts 10%

Government-owned or controlled 10%

Q: What about assessment level? How is this different

2,000,000.00 70% TAX x 2%

Q: When should taxes be paid? Section 250

LEVY the warrant by the owner of the property or person having

included in the budget of the Department of Finance in the

The CBAA has jurisdiction to hear appeals of the decision of

Section 231. Effect of Appeal on the Payment of Real

Q: So what if the decision of the CTA en banc is still

KILLER COVERAGE. COMPLETE. T_T

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