REAL PROPERTY TAX a.
Must enhance the value of the property
Real property taxation covers the administration, appraisal,
assessment, levy and collection of RPT
I. LOCAL GOVERNMENT UNITS
SEC. 232. Power to Levy Real Property Tax. - A province or city
or a municipality within the Metropolitan Manila Area may levy
an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter
specifically exempted.
- Of the 4 LGUs, only the following has a right to impose
RPT:
1. Provinces
2. Cities
3. Municipalities within the MM area
- So barangays and municipalities outside the MM area have
no right to impose RPT.
- However, municipalities outside the MM area have the
right to impose special levy.
II. DEFINITION OF TERMS
A. REAL PROPERTY
The LGC does not provide for an exact definition of what
comprises Real Property for RPT purposes. SC decisions
direct us to look at the definition of Art. 415 (but not all)
under the NCC of what comprises Real Property.
What comprises RP for RPT purposes is:
1. Land
2. Building
3. Machineries
4. And other improvements
B. IMPROVEMENT
"Improvement" is a valuable addition made to a property
or an amelioration in its condition, amounting to more
than a mere repair or replacement of parts involving
capital expenditures and labor, which is intended to
enhance its value, beauty or utility or to adapt it for new
or further purposes.
A house is not an improvement of a land but represents a
separate property. Only those that enhance the value,
beauty or utility constitute improvement.
Requisites:
1 TAXATION 2 FINALS| maru.mhealler | 404
b. Must be permanently assessable
c. Can be treated independently from the main property
C. MACHINERY
"Machinery" embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus which
may or may not be attached, permanently or temporarily,
to the real property. It includes the physical facilities for
production, the installations and appurtenant service
facilities, those which are mobile, self-powered or self-
propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used
to meet the needs of the particular industry, business or
activity and which by their very nature and purpose are
designed for, or necessary to its manufacturing, mining,
logging, commercial, industrial or agricultural purposes.
Machinery for RPT tax purposes includes:
a. Machinery permanently attached to the RP
b. Machinery temporarily attached to the RP
c. Physical facilities for production, the installations and
appurtenant service facilities
d. Those which are mobile, self-powered or self-
propelled
e. Those not permanently attached to the real property
which are actually, directly, and exclusively used to
meet the needs of the particular industry, business or
activity
EXAMPLE: Bank bank vaults; Gas station gas tanks,
underground tanks, gas pumps, computing pumps,
water pumps, car washer pumps, etc
Note:
Machineries which are of general purpose use
including but not limited to office equipments,
typewriters, telephone equipment, breakable or
easily damaged containers, facsimile machines,
furniture and fixtures, refrigerators, display cases and
the like which are NOT directly and exclusively used
to meet the needs of a particular industry, business or
activity shall NOT be considered within the definition
of machinery.
III. CHARACTERISTICS OF REAL PROPERTY TAX
Characteristics (LIPAD):
1. Direct tax on the ownership of RP
However, such is no longer an accurate definition of
RPT because regardless of who the owner is, so long
as its actually used for a specific purpose by a certain
 person or taxpayer, he may be imposed RPT for the
usage or beneficial use of such RP.
It is a direct tax on ownership but the basis is actual
use.
2. Ad valorem tax
The tax base is the assessed value of the property, so
it may fluctuate
3. Proportionate
The tax is calculated on the basis of a certain
percentage of the value assessed
4. Indivisible single obligation
5. Local tax
IV. POWER TO LEVY REAL PROPERTY TAX BY LGUs
The power to levy RPT by LGUs includes only the (a)
provinces, (b) cities, and (c) municipalities within the MM
area imposing RPT to lands, buildings, machineries and
other improvements.
Sta. Lucia Realty & Devt Inc. vs. City of Pasig, GR No. 166838
(2011)
The authority to collect real property taxes is vested in the locality where
the property is situated.
While a local government unit is authorized under several laws to collect
real estate tax on properties falling under its territorial jurisdiction, it is
imperative to first show that these properties are unquestionably within
its geographical boundaries.
Clearly therefore, the local government unit must undoubtedly show
that the subject properties are situated within its territorial jurisdiction;
otherwise, it would be acting beyond the powers vested to it by law.
While we fully agree that a certificate of title is conclusive as to its
ownership and location, this does not preclude the filing of an action for
the very purpose of attacking the statements therein.
Mere reliance therefore on the face of the TCTs will not suffice as they
can only be conclusive evidence of the subject properties locations if
both the stated and described locations point to the same area. What
will prevail is the true location of the property.
A pending boundary dispute is a prejudicial question to where the RPT
will be paid. In the meantime, to avoid further animosity, Sta. Lucia is
directed to deposit the succeeding real property taxes due on the
subject properties, in an escrow account with the Land Bank of the
Philippines
V. LOCAL TAXING AUTHORITY
SEC. 275. General Assessment Revision; Expenses
Incident Thereto. - The sanggunian of provinces, cities and
municipalities within the Metropolitan Manila Area shall
provide the necessary appropriations to defray the
expenses incident to the general revision of real property
assessment. All expenses incident to a general revision of
2 TAXATION 2 FINALS| maru.mhealler | 404
real property assessments shall, by ordinance of the
sangguniang panlalawigan, be apportioned between the
province and the municipality on the basis of the taxable
area of the municipality concerned.
- The Sanggunian is the Local taxing authority
- No mandatory public hearing is required for enactment of
ordinances imposing RPT, unlike local taxes. What is only
required is the publication of the ordinance.
EXCEPT: Imposition of a special levy.
- LGUs having the power to impose RPT, through the
sanggunian, may also prescribe penalties for RPT violations
similar to the penalties for violations of local taxes.
PENALTY:
FINE - not less than 1k nor more than 5k or
IMPRISONMENT - not less than 1 month nor more
than 6 months (or both)
VI. EXEMPTIONS FROM REAL PROPERTY TAX, Proof of
Exemptions
A. SECTION 234, LGC
SEC. 234. Exemptions from Real Property Tax. - The
following are exempted from payment of the real property
tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions
EXCEPT: when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person;
- RPs held by the government in its proprietary
capacity, such as those acquired by the government
in execution sales, tax delinquency sales, escheat
proceedings, falls within the exemption since any RP
owned by the Republic of the Phils., its political
subdivision, or its instrumentalities is exempt.
- REASON: Exemption is the rule for RPT and taxation is
the exemption insofar as the government is
concerned.
- Only EXCEPTION is:
Beneficial use is granted to a taxable person, whether
its for a consideration or for no consideration
(gratuitous or onerous)
Beneficial use means actual use, which refers to the
purpose for which the property is principally or
predominantly utilized by the person in possession
thereof, as to the taxable person.
 If the government leases out a RP to a taxable entity,
the LESSEE (the taxable entity) is obligated to pay the
RPT
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, nonprofit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively (ADE)
used for religious, charitable or educational purposes;
- Only lands, buildings and improvements. Buildings
not exempt even if ADE used.
NOTE: The basis for the exemption is the use
and not the ownership. So regardless of who owns
the property so long as its used by either of these
institutions for religious, charitable, or educational
purposes, its exempt.
- EXAMPLE: If the government or even a taxable person
leases out land, buildings and improvements to such
institutions, its exempt, so long as its actually,
directly and exclusively (ADE) used.
- EXAMPLE: If the Province of Cebu leases out its land
in favor of a religious institution for a fee, is this
subject to RPT?
NO, because the beneficial use of the land is granted
to a non-taxable person the religious institution and
a religious institution actually, directly, and
exclusively using land for religious purposes is tax
exempt.
- SAMPLE: If the Province of Cebu leases out its
machinery to the religious institution, subject to RPT?
YES, the exemption only applies to lands, buildings
and improvements. Machineries are taxable.
- In short, the exemption of the beneficial user extends
only to land, buildings and improvements.
(c) All machineries and equipment that are actually,
directly and exclusively used by:
c.1 local water districts and
c.2 government-owned or -controlled corporations
engaged in the supply and distribution of water and/or
generation and transmission of electric power;
- only machineries and equipments
- General rule: GOCCs are now taxable unless they fall
under the exemptions in letter (c) and if provided in
their special charters (provided after LGC became
effective).
- The entities involved are:
1. Local water districts
2. GOCCs engaged in the supply AND distribution of
water
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3. GOCCs engaged in the generation AND
transmission of electric power
- NOTE: Exempt only on machineries and
equipments that are ADE used. It does not include the
land, buildings and improvements.
(d) All real property owned by duly registered
cooperatives as provided for under R. A. No. 6938
- NOTE: The exemption extends to all RPs land,
buildings, improvements, and machineries, so long as
theyre duly registered under RA 6938.
(e) Machinery and equipment used for pollution control
and environmental protection.
- does not include land, building and other
improvements
- NOTE: Theyre exempt from RPT as well as VAT.
Except as provided herein, any exemption from payment of
real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical,
including all government-owned or -controlled
corporations are hereby withdrawn upon the effectivity of
this Code.
- WITHDRAWAL of RPT exemption
B. CONDONATION OR REDUCTION OF REAL PROPERTY TAX
AND INTEREST; CONDONATION OR REDUCTION OF TAX
BY THE PRESIDENT OF THE PHILIPPINES
SEC. 276. Condonation or Reduction of Real Property Tax
and Interest. - In case of a general failure of crops or
substantial decrease in the price of agricultural or
agribased products, or calamity in any province, city, or
municipality, the sanggunian concerned, by ordinance
passed prior to the first (1st) day of January of any year
and upon recommendation of the Local Disaster
Coordinating Council, may condone or reduce, wholly or
partially, the taxes and interest thereon for the succeeding
year or years in the city or municipality affected by the
calamity.
SEC. 277. Condonation or Reduction of Tax by the
President of the Philippines. - The President of the
Philippines may, when public interest so requires, condone
or reduce the real property tax and interest for any year in
any province or city or a municipality within the
Metropolitan Manila Area.
- General rule: The LGC does not expressly empower
the LGUs to exempt RPs from taxation. Although, as
an exception, the LGC itself provides for a list of what
RPs are not covered by RPT.
- The LGUs can grant condonation, which is not exactly
exemption but has the same effect as giving the TP a
reprieve from the payment of RPT for a certain year.
1. In the following instances:
 a. There is general failure of crops; or
b. There is substantial decrease in the price of
agricultural or agri-based products; or
c. There is natural calamity
Based on circumstances affecting the RP.
st
2. By an ordinance passed prior to the 1 day of
January, meaning it becomes effective only the
following year.
3. Upon recommendation of the Local Disaster
Coordinating Council (LDCC)
- In exemption, youre not really liable for tax, while in
condonation, you are liable but youre condoned or
forgiven or reprieved of payment for that particular
year or not really condonation of taxes but only
reduction of taxes.
- The President may also condone or reduce the RPT
liability when public interest so requires.
C. PROOF OF EXEMPTIONS
SEC. 206. Proof of Exemption of Real Property from
Taxation. - Every person by or for whom real property is
declared, who shall claim tax exemption for such property
under this Title shall:
A. File with the provincial, city or municipal assessor
B. Within thirty (30) days from the date of the declaration
of real property
C. Sufficient documentary evidence in support of such claim
(including corporate charters, title of ownership, articles of
incorporation, bylaws, contracts, affidavits, certifications
and mortgage deeds, and similar documents)
- if GOCC present charter
If the required evidence is not submitted within the period
herein prescribed, the property shall be listed as taxable in
the assessment roll. However, if the property shall be
proven to be tax exempt, the same shall be dropped from
the assessment roll.
- Hence, RPT Exemption is NOT automatic. You need to
declare your property for purposes of securing a tax
declaration, within 30 days, and you must provide the
city assessor or provincial assessor a copy of the
documentary evidence of your exemption. It may be
the Articles of Incorporation, the Charter, or an
affidavit that you have executed the title to the
property. This is for purposes of delisting you or
dropping out your property from the list of
assessment rolls that are taxable.
- Once you failed to submit the documentary evidence
within 30 days from declaring your property as part of
the RP you own, its automatic that it becomes a
taxable RP.
4 TAXATION 2 FINALS| maru.mhealler | 404
City of Pasig vs. RP, GR No. 185023 (2011)
Section 234(a) of LGC states that properties owned by the Republic
of the Philippines are exempt from real property tax except when
the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person. Thus, the portions of the properties
not leased to taxable entities are exempt from real estate tax while
the portions of the properties leased to taxable entities are subject
to real estate tax. The law imposes the liability to pay real estate tax
on the Republic of the Philippines for the portions of the properties
leased to taxable entities. It is, of course, assumed that the Republic
of the Philippines passes on the real estate tax as part of the rent to
the lessees.
Article 420 of the Civil Code classifies as properties of public
dominion those that are intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads and those that are intended for some
public service or for the development of the national wealth.
Properties of public dominion are not only exempt from real estate
tax, they are exempt from sale at public auction. MPLDC leases
portions of the properties to different business establishments.
Thus, the portions of the properties leased to taxable entities are not
only subject to real estate tax, they can also be sold at public auction
to satisfy the tax delinquency.
Philippine Fisheries Devt Auth. vs. CBAA, GR No. 178030
(2010)
The Court rules that the Authority [PFDA] is not a GOCC but an
instrumentality of the national government which is generally
exempt from payment of real property tax. However, said exemption
does not apply to the portions of the IFPC which the Authority
leased to private entities. With respect to these properties, the
Authority is liable to pay property tax. Nonetheless, the IFPC, being a
property of public dominion cannot be sold at public auction to
satisfy the tax delinquency.
Indeed, the Authority is not a GOCC but an instrumentality of the
government. The Authority has a capital stock but it is not divided
into shares of stocks. Also, it has no stockholders or voting shares.
Hence it is not a stock corporation. Neither is it a non-stock
corporation because it has no members.
The Authority is actually a national government instrumentality
which is defined as an agency of the national government, not
integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. When the law
vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not
only governmental but also corporate powers.
The Lucena Fishing Port Complex is a property of public dominion
intended for public use, and is therefore exempt from real property
tax under Section 234(a)11 of the Local Government Code.
Properties of public dominion are owned by the State or the
Republic of the Philippines.
MIAA vs. CA, GR No. 155650 (2006)

Key Points in this case:

a. MIAA is a govt instrumentality

b. As an instrumentality, MIAA is not subject to RPT

c. Airports are part of public dominion and not subject to RPT generally.

d. Beneficial use of property owned by the State may be transferred to govt instrumentality (non-taxable person), hence, still tax exempt

e. Beneficial use transferred to private entities (taxable persons) is subject to RPT

MIAA is Not a Government-Owned or Controlled Corporation.

A government-owned or controlled corporation must be organized as a stock or non-stock corporation. MIAA is not organized as a stock or
non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as
one where no part of its income is distributable as dividends to its members, trustees or officers. A non-stock corporation must have members. Even if we
assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to
the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation.

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with corporate powers.

Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions
or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a
charter. x x x

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers.

Airport Lands and Buildings of MIAA are Owned by the Republic. Airport Lands and Buildings are of Public Dominion. They are therefore owned by
the State or the Republic of the Philippines.

Properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the
State, are owned by the State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by
the State.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and
transportation.

MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.

Real Property Owned by the Republic is Not Taxable

The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the
National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the
national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when
title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption.

Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person.
MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume
that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real
estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the
land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of
such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax.

5 TAXATION 2 FINALS| maru.mhealler | 404


Lung Center of the Phils. vs. Quezon City, GR No. 144104 (2004)
As a general principle, a charitable institution does not lose its character
as such and its exemption from taxes simply because it derives income
from paying patients, whether out-patient, or confined in the hospital,
or receives subsidies from the government, so long as the money
received is devoted or used altogether to the charitable object which it
is intended to achieve; and no money inures to the private benefit of the
persons managing or operating the institution.
The tax exemption for charitable institutions under the constitution
property taxes only. What is exempted is not the institution itself. Those
exempted from real estate taxes are lands, buildings and improvements
actually, directly and exclusively used for religious, charitable or
educational purposes.
In order to be entitled to the exemption, the petitioner is burdened to
prove, by clear and unequivocal proof, that:
(a) it is a charitable institution; and
(b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for
charitable purposes.
Exclusive is defined as possessed and enjoyed to the exclusion of
others; debarred from participation or enjoyment; and exclusively is
defined, in a manner to exclude; as enjoying a privilege exclusively.
If real property is used for one or more commercial purposes, it is not
exclusively used for the exempted purposes but is subject to taxation.
The words dominant use or principal use cannot be substituted for subject machineries (the user is the owner)
the words used exclusively without doing violence to the Constitutions
and the law. Solely is synonymous with exclusively.
ADE Explained
What is meant by actual, direct and exclusive use of the property for
charitable purposes is the direct and immediate and actual application
of the property itself to the purposes for which the charitable institution
is organized. It is not the use of the income from the real property that
is determinative of whether the property is used for tax-exempt
purposes.
The petitioner failed to discharge its burden to prove that the entirety of
its real property is actually, directly and exclusively used for charitable
purposes. While portions of the hospital are used for the treatment of
patients and the dispensation of medical services to them, whether
paying or non-paying, other portions thereof are being leased to private
individuals for their clinics and a canteen. Further, a portion of the land
is being leased to a private individual for her business enterprise under
the business name Elliptical Orchids and Garden Center.
The portions of the land leased to private entities as well as those parts
of the hospital leased to private individuals are not exempt from such
taxes. On the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients, whether
paying or non-paying, are exempt from real property taxes.
(Note that only land, buildings and improvements are exempt under this
provision, machineries are not exempt)
6 TAXATION 2 FINALS| maru.mhealler | 404
NPC vs. CBAA, LBAA, GR No. 171470 (2009)
Napocor is a GOCC but the machineries and equipments were not ADE
used by Napocor instead they were ADE used by the private
corporation under the BOTC (Build-Operate-Transfer Contract).
Napocor would not fall under the exemption because the user of the
machineries and equipments is the private corporation and moreover,
such machineries and equipments were used in the generation alone of
electric power, not in the generation AND transmission of electric
power.
Tax exemption cannot be subject to a contract between the parties. Tax
exemption is personal. Even if Napocor assumed the liability of the
payment of the RPT under the BOTC, the private corporation is still
required to pay. Napocor cannot extend its tax exemption status to
private corporation through entering into contracts with them. Such
agreement is invalid as against the LGU because it would amount to
circumvention of the law by depriving the LGUs right to collect RPT.
NPC vs. Province of Quezon & Mun. of Pagbilao, GR No.
171586 (2009)
NPC cannot use its tax exemption to benefit taxable enitites
The test of exemption is the nature of the use, not ownership, of the
As applied to the present case, the government-owned or controlled
corporation claiming exemption must be the entity actually, directly,
and exclusively using the real properties, and the use must be devoted
to the generation and transmission of electric power. Neither the NPC
nor Mirant satisfies both requirements.
Although the plants machineries are devoted to the generation of
electric power, by the NPCs own admission and as previously pointed
out, Mirant a private corporation uses and operates them. That
Mirant operates the machineries solely in compliance with the will of
the NPC only underscores the fact that NPC does not actually, directly,
and exclusively use them. The machineries must be actually, directly,
and exclusively used by the government-owned or controlled
corporation for the exemption under Section 234(c) to apply.
Nor will NPC find solace in its claim that it utilizes all the power plants
generated electricity in supplying the power needs of its customers.
Based on the clear wording of the law, it is the machineries that are
exempted from the payment of real property tax, not the water or
electricity that these machineries generate and distribute.
Even the NPCs claim of beneficial ownership is unavailing. The test of
exemption is the use, not the ownership of the machineries devoted to
generation and transmission of electric power. The nature of the NPCs
ownership of these machineries only finds materiality in resolving the
NPCs claim of legal interest in protesting the tax assessment on Mirant.
As we discussed above, this claim is inexistent for tax protest purposes.
VII. FUNDAMENTAL PRINCIPLES
SEC. 198. Fundamental Principles. - The appraisal, assessment,
levy and collection of real property tax shall be guided by the
following fundamental principles:
(a) Real property shall be appraised at its current and fair
market value;
- "Appraisal" is the act or process of determining the value
of property as of a specific date for a specific purpose.
- "Fair Market Value" is the price at which a property may
be sold by a seller who is not compelled to sell and bought
by a buyer who is not compelled to buy.
- NOTE: Absolute rule is that all RPs declared to the LGU and
those found out by the LGU to be undeclared shall be
appraised at its current and FMV, regardless of whether it
has a status of being taxable or exempt RP.
(b) Real property shall be classified for assessment purposes on
the basis of its actual use;
- "Actual Use" refers to the purpose for which the property
is principally or predominantly utilized by the person in
possession thereof. (But not necessarily that it should be
directly and exclusively used)
(c) Real property shall be assessed on the basis of a uniform
classification within each local government unit;
- Per LGU basis
- Meaning it does not have to be comparative to what the
other LGUs are basing on the assessment so long as it is in
compliance with the provisions of the LGC and uniformly
applied within the same LGU.
(d) The appraisal, assessment, levy and collection of real
property tax shall not be let to any private person; and
(e) The appraisal and assessment of real property shall be
equitable.
- RPT is equitable in a sense that the assessment levels of
RPs are differently classified to differ from one type to the
other based on use.
- EXAMPLE: Residential properties are given a lower
assessment level than those that are used for commercial
purposes, which are profitable activities.
- Hence, it is not really on the tax rate insofar as equity is
concerned but rather on how it is assessed.
VIII. BASIS FOR ASSESSMENT OF REAL PROPERTY
TAX
The basis for assessment of RPT is based on the actual use of
the property.
7 TAXATION 2 FINALS| maru.mhealler | 404
SEC. 217. Actual Use of Real Property as Basis for Assessment.
- Real property shall be classified, valued and assessed on the
basis of its actual use regardless of where located, whoever
owns it, and whoever uses it.
IX. TYPES AND RATES OF REAL PROPERTY TAX
A. BASIC REAL PROPERTY TAX
SEC. 233. Rates of Levy. - A province or city or a
municipality within the Metropolitan Manila Area shall fix
a uniform rate of basic real property tax applicable to their
respective localities as follows:
(a) In the case of a province, at the rate not exceeding one
percent (1%) of the assessed value of real property; and
(b) In the case of a city or a municipality within the
Metropolitan Manila Area, at the rate not exceeding two
percent (2%) of the assessed value of real property.
- G.R.: Every RP, when not exempt, is subject to the
basic RPT at the following rate:
Province not exceeding 1% of the assessed
value of the RP
City or municipality within the MM area not
exceeding 2% of the assessed value of the RP
Special Levies
These are the additional taxes imposed in addition to the
basic RPT.
B. SPECIAL EDUCATION FUND
1% additional RPT to finance the SEF
SEC. 235. Additional Levy on Real Property for the Special
Education Fund. - A province or city, or a municipality
within the Metropolitan Manila Area, may levy and collect
an annual tax of one percent (1%) on the assessed value of
real property which shall be in addition to the basic real
property tax. The proceeds thereof shall exclusively accrue
to the Special Education Fund (SEF).
- NOTE: The additional levy for the SEF would be
indiscriminately applied to all properties so long as
that RP is subject to the basic RPT.
- So, if the collecting LGU is a province, automatically
RPT is not only the 1% basic RPT but plus 1% for SEF,
so you get to pay 2% total RPT, regardless of what
kind or what classification of property is being subject
to RPT.
- If the collecting LGU is a city or a municipality within
the MM area, automatically what you will pay as RPT
is not only the 2% basic RPT but plus 1% for SEC, so
you get to pay 3% total RPT, regardless of what kind
of property is subjected to RPT.
C. AD VALOREM TAX ON IDLE LANDS
not exceeding 5% of assessed value of RP
SEC. 236. Additional Ad Valorem Tax on Idle Lands. - A
province or city, or a municipality within the Metropolitan
Manila Area, may levy an annual tax on idle lands at the
rate not exceeding five percent (5%) of the assessed value
of the property which shall be in addition to the basic real
property tax.
- "Ad Valorem Tax" is a levy on real property
determined on the basis of a fixed proportion of the
value of the property.
- It is based on the value of the RP that is not utilized or
becomes idle
- So if the property is classified as agricultural, and if
you dont utilize it for agricultural purposes, you may
be added-on with an additional RPT called the Ad
Valorem Tax on Idle Lands (AVTIL).
- RATE: Not exceeding 5% of the assessed value of the
property
- NOTE: Tax on idle LANDS, not idle buildings.
Idle lands, coverage
SEC. 237. Idle Lands, Coverage. - For purposes of real
property taxation, idle lands shall include the
following:
(a) "Agricultural lands, more than one (1) hectare in
area, suitable for cultivation, dairying, inland fishery,
and other agricultural uses, one-half (1/2) of which
remain uncultivated or unimproved by the owner of
the property or person having legal interest therein."
Agricultural lands planted to permanent or perennial
crops with at least fifty (50) trees to a hectare shall
not be considered idle lands. Lands actually used for
grazing purposes shall likewise not be considered idle
lands.
(b) Lands, other than agricultural, located in a city or
municipality, more than one thousand (1,000) square
meters in area, one-half (1/2) of which remain
unutilized or unimproved by the owner of the
property or person having legal interest therein.
Regardless of land area, this Section shall likewise
apply to residential lots in subdivisions duly approved
by proper authorities, the ownership of which has
been transferred to individual owners, who shall be
liable for the additional tax: Provided, however, That
individual lots of such subdivisions, the ownership of
which has not been transferred to the buyer shall be
considered as part of the subdivision, and shall be
subject to the additional tax payable by subdivision
owner or operator.
1. For agricultural lands more than 1 hectare in
area, for which at least of it remains uncultivated
or unimproved for agricultural purposes, EXCEPT:
8 TAXATION 2 FINALS| maru.mhealler | 404
a. Agricultural lands planted to permanent or
perennial crops with at least 50 trees to a
hectare
b. Lands actually used for grazing purposes
2. For lands of whatever classification, other than
agricultural, located in a city or municipality more
than 1k square meters in area, for which at least
of it remains unutilized or unimproved
3. Residential lots in subdivisions, regardless of land
area, duly approved by proper authorities, the
ownership of which has been transferred to
individual owners
However, individual lots of
subdivisions, regardless of land area, the
ownership of which has not been transferred to
the buyer shall be considered as part of the
subdivision, and shall be subject to additional tax
payable by the subdivision owner or operator.
rd
NOTE: To be covered by this 3
category of idle lands, the land must be a
residential lot IN SUBDIVISIONS, not outside
subdivisions. If residential lots outside
subdivisions, to be considered idle lands, it must
nd
comply with the requisites of the 2 category of
idle lands, which are that the land is more than
1k square meters in area, for which at least of
it remains unutilized or unimproved.
Exempt idle lands
SEC. 238. Idle Lands Exempt from Tax. - A province or
city or a municipality within the Metropolitan Manila
Area may exempt idle lands from the additional levy
by reason of force majeure, civil disturbance, natural
calamity or any cause or circumstance which
physically or legally prevents the owner of the
property or person having legal interest therein from
improving, utilizing or cultivating the same.
Idle lands exempt from tax by reason of:
a. Force majeure
b. Civil disturbance
c. Natural calamity
d. Any cause or circumstance which physically or
legally prevents the owner of the property or
person having legal interest therein from
improving, utilizing, or cultivating the same
D. SPECIAL LEVY
- not exceed sixty percent (60%) of the actual cost of
such projects and improvements
SEC. 240. Special Levy by Local Government Units. - A
province, city or municipality may impose a special levy
on the lands comprised within its territorial jurisdiction
specially benefited by public works projects or
improvements funded by the local government unit
 concerned: Provided, however, That the special levy
shall not exceed sixty percent (60%) of the actual cost
of such projects and improvements, including the costs
of acquiring land and such other real property in
connection therewith: Provided, further, That the special
levy shall not apply to lands exempt from basic real
property tax and the remainder of the land portions of
which have been donated to the local government unit
concerned for the construction of such projects or
improvements.
- RATE: Not exceeding 60% of the actual cost of the
projects and improvements, including the costs of
acquiring land and such other RP in connection
therewith
- May be imposed even by municipalities outside MM
- Procedure in validly imposing a special levy for public
works or improvements:
Through a tax ordinance and its publication
Ordinance & its publication
SEC. 241. Ordinance Imposing a Special Levy. - A tax
ordinance imposing a special levy shall describe with
reasonable accuracy the nature, extent, and location
of the public works projects or improvements to be
undertaken, state the estimated cost thereof, specify
the metes and bounds by monuments and lines and
the number of annual installments for the payment of
the special levy which in no case shall be less than five
(5) nor more than ten (10) years. The sanggunian
concerned shall not be obliged, in the apportionment
and computation of the special levy, to establish a
uniform percentage of all lands subject to the
payment of the tax for the entire district, but it may
fix different rates for different parts or sections
thereof, depending on whether such land is more or
less benefited by the proposed work.
SEC. 242. Publication of Proposed Ordinance
Imposing a Special Levy. - Before the enactment of an
ordinance imposing a special levy, the sanggunian
concerned shall conduct a public hearing thereon;
notify in writing the owners of the real property to be
affected or the persons having legal interest therein
as to the date and place thereof and afford the latter
the opportunity to express their positions or
objections relative to the proposed ordinance.
- NOTE: Public hearing is required. A public
hearing shall be conducted to afford the affected
owners the opportunity to object or to raise
their positions.
- No public hearing, no special levy can be validly
imposed through an ordinance. This is the
exception to the rule that RPT ordinances would
not require a public hearing.
- EXAMPLE: If a project work or improvement such
as a TUNNEL is undertaken in Liloan and it will
9 TAXATION 2 FINALS| maru.mhealler | 404
increase the value of the land. May the
sanggunian of Liloan invite the owners for a
public hearing through a notice in writing for the
imposition of the special levy?
- YES, even municipalities, ordinary ones,
outside MM area can impose special levy so
long as it follows the procedure of due
process of notice in writing, public hearing
before an ordinance is enacted and
published, provided that the special levy
among all the owners specifically benefited
(not only to a particular owner) shall not
exceed 60% of the actual cost of such
projects and improvements, including the
costs of acquiring land and such other real
property in connection therewith.
- So if total cost is 1B, then, the Municipality
of Liloan can collect up to 600m (60%) as
special levy distributed among all the
owners affected by the improvements or
public works.
- If the public works or improvements do not
increase the valuation of the land, then
theres no sense of imposing the special
levy.
- EXAMPLE: If the TUNNEL project resulted to
benefits to 4 owners surrounding it (a)
school, (b) shopping mall, (c) religious
institution, and (d) subdivision. Will these 4
owners affected by the government project
share to the cost of 60% special levy?
- NO. Only the subdivision and the shopping
mall share to the cost of 60% special levy
since the school and the religious institution
are exempt from the basic RPT, provided or
on a condition that the land is ADE used for
educational or religious purposes.
Exemption
- Special levies cannot be imposed on lands
exempt from the basic RPT.
- So, if it turns out that although the land is owned
by the school but it is:
a. leased out to another taxable person, who is
the one currently using it, or
b. the school used it for another purpose other
than for an educational purpose,
Then, the land will not be exempt from the basic
RPT and will not be exempt as well from the
special levy.
- NOTE: The subdivision can be exempt from the
special levy if portions of the land owned by the
subdivision are donated to the LGU concerned
 for the construction of the project or
improvements, then, the remainder of the land
portions donated shall be exempt from the
special levy.
X. CLASSES OF REAL PROPERTY
SEC. 215. Classes of Real Property for Assessment Purposes. -
For purposes of assessment, real property shall be classified as:
Residential, Agricultural, Commercial, Industrial, Mineral,
Timberland or Special (MR-SICAT or CARMITS)
The city or municipality within the Metropolitan Manila Area,
through their respective sanggunian, shall have the power to
classify lands as residential, agricultural, commercial, industrial,
mineral, timberland, or special in accordance with their zoning
ordinances.
- RPs are classified on the basis of its actual use.
A. COMMERCIAL LAND
"Commercial Land" is land devoted principally for the
object of profit and is not classified as agricultural,
industrial, mineral, timber, or residential land.
B. AGRICULTURAL LAND
"Agricultural Land" is land devoted principally to the
planting of trees, raising of crops, livestock and poultry,
dairying, salt making, inland fishing and similar
aquacultural activities, and other agricultural activities,
and is not classified as mineral, timber, residential,
commercial or industrial land.
C. RESIDENTIAL LAND
"Residential Land" is land principally devoted to
habitation.
D. MINERAL LAND
"Mineral Lands" are lands in which minerals, metallic or
non-metallic, exist in sufficient quantity or grade to justify
the necessary expenditures to extract and utilize such
materials.
E. INDUSTRIAL LAND
"Industrial Land" is land devoted principally to industrial
activity as capital investment and is not classified as
agricultural, commercial, timber, mineral or residential
land
F. TIMBERLAND
G. SPECIAL CLASS (lands, buildings and other improvements)
SEC. 216. Special Classes of Real Property. - All lands,
buildings, and other improvements thereon actually,
directly and exclusively used for:
10
A. hospitals,
B. cultural, or
C. scientific purposes, and
D. those owned and used by local water districts, and
E. those owned and used by government-owned or -
controlled corporations rendering essential public services
in:
E.1 the supply and distribution of water and/or
E.2 generation and transmission of electric
power
NOTE: Machineries and equipments used by the local
water districts, GOCCs engaged in the supply and
distribution of water and/or generation and transmission
of electric power are exempt from RPT.
But the lands, buildings and other improvements used by
such entities are subject to RPT. However, the special
classes of RP are given preferential assessment level,
meaning, the lands, buildings and improvements of these
entities are still partially exempt because they will be given
a lower assessment level for the payment of RPT so long as
its ADE for such purpose together with the hospitals,
cultural or scientific purposes.
NOTE: Classification of lands is made by the respective
sanggunian in accordance with zoning ordinances.
Reclassification of property from agricultural land to
commercial land (Fortich v. Corona)
- LGUs need not obtain the necessary approval of the
DAR to convert or reclassify parcels of land from
agricultural to non-agricultural. The power to classify
or reclassify or convert is authorized under Sec. 20 of
the LGC.
SEC. 20. Reclassification of Lands. - (a) A city or
municipality may, through an ordinance passed by the
sanggunian after conducting public hearings for the
purpose, authorize the reclassification of agricultural lands
and provide for the manner of their utilization or
disposition in the following cases:
(1) when the land ceases to be economically feasible and
sound for agricultural purposes as determined by the
Department of Agriculture or
(2) where the land shall have substantially greater
economic value for residential, commercial, or industrial
purposes, as determined by the sanggunian concerned:
Provided, That such reclassification shall be limited to the
following percentage of the total agricultural land area at
the time of the passage of the ordinance:
(1) For highly urbanized and independent component
cities, fifteen percent (15%);
TAXATION 2 FINALS| maru.mhealler | 404
 (2) For component cities and first to third class
municipalities, ten percent (10%); and
(3) For fourth to sixth class municipalities, five percent
(5%):
Provided, further, That agricultural lands distributed to
agrarian reform beneficiaries pursuant R.A. No. 6657
(CARL) shall not be affected by the said reclassification and
the conversion of such lands into other purposes shall be
governed by Section 65 of said Act.
(b) The President may, when public interest so requires
and upon recommendation of the National Economic and
Development Authority, authorize a city or municipality to
reclassify lands in excess of the limits set in the next
preceding paragraph.
(c) The local government units shall, in conformity with
existing laws, continue to prepare their respective
comprehensive land use plans enacted through zoning
ordinances which shall be the primary and dominant bases
for the future use of land resources:
Provided, That the requirements for food production,
human settlements, and industrial expansion shall be
taken into consideration in the preparation of such plans.
(d) Where approval by a national agency is required for
reclassification, such approval shall not be unreasonably
withheld. Failure to act on a proper and complete
application for reclassification within three (3) months
from receipt of the same shall be deemed as approval
thereof.
(e) Nothing in this Section shall be construed as repealing,
amending, or modifying in any manner the provisions of
R.A. No. 6657.
- ILLUSTRATION: In a certain area, once a residential
district, theres a residential building. Through the
years, commercial establishments have sprouted in
such area. If the LGUs would reclassify the zoning of
that area into commercial, would the payment of RPT
of that owner of the residential building in such area
be converted to commercial as well for RPT purposes
or would it remain as residential and pay the lower
RPT?
- It would be converted to commercial, even if its
actual use is residential, because the zoning is an
exercise of police power, which is superior to
taxation. Even if the building was declared for tax
purposes as residential, once a LGU has reclassified
the total area as commercial, the classification for
zoning purposes must prevail as an exercise of police
power.
11
Patalinghug vs. CA, GR No. 104786 (1994)
Mr. Tepoot's building was used for a dual purpose both as a dwelling
and as a place where a laundry business was conducted. While its
commercial aspect has been established by the presence of
machineries and laundry paraphernalia, its use as a residence, other
than being declared for taxation purposes as such, was not fully
substantiated.
A tax declaration is not conclusive of the nature of the property for
zoning purposes. A property may have been declared by its owner as
residential for real estate taxation purposes but it may well be within a
commercial zone.
Consequently, even if Tepoot's building was declared for taxation
purposes as residential, once a local government has reclassified an
area as commercial that determination for zoning purposes must
prevail.
The declaration of the said area as a commercial zone thru a municipal
ordinance is an exercise of police power to promote the good order
and general welfare of the people in the locality.
XI. PROCEDURE IN THE ADMINISTRATION OF REAL
PROPERTY TAX
PROCEDURE
STEP 1: DECLARATION OF REAL PROPERTY
Declaration by Owner or Administrator (Sec. 202-203)
File a sworn declaration with the assessor
- once every 3 years during the period from January 1 to
June 30.
For newly acquired property
WHEN: Must file with the assessor within 60 days from
date of transfer
WHAT: Sworn statement containing the fair market value
and description of the property.
For improvement on property
WHEN: Must file within 60 days upon completion or
occupation (whichever comes earlier)
WHAT: Sworn statement containing the fair market value
and description of the property.
Declaration by Provincial / City / Municipal Assessor (Sec. 204)
WHEN: Only when the person under Sec. 202 refuses or
fails to make a declaration within the prescribed time.
No oath by the assessor is required.
WHO: By any person or for whom real property is
declared.
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 Claim for exemption must be filed with the assessor
together with sufficient documentary evidence to support
claim
WHEN: within 30 days from the date of declaration of
property.
If Property is Declared for the First Time (Sec.222)
- If Declared for the first time, real property shall be
assessed for back taxes:
For not more than 10 years prior to date of initial
assessment
Taxes shall be computed on the basis of applicable
schedule of values in force during the corresponding period.
Liability for Interest (Sec. 255)
- If the back taxes are paid on or before the end of the
quarter following the date the notice of assessment was
received by the owner or his representative, no interest
for delinquency shall be imposed
- Otherwise, such taxes shall be subject at the rate of two
percent (2%) per month or a fraction thereof from the
date of the receipt of the assessment until such taxes are
fully paid provided however that in no case shall the total
interest on the unpaid tax or portion thereof exceed 36
months.
- EXAMPLE: You received the assessment for 10-year back
taxes today, Mar. 3, 2011. Up to when are you allowed to
pay these taxes without interest?
Up to June 30, 2011, which is the end of the quarter
following the date the notice of assessment was
received.
But if youre not able to settle it within the period wherein
interest may be condoned, you will be liable for interest at
2% per month or a fraction thereof but not exceeding 36
months
STEP 2: LISTING OF REAL PROPERTY IN THE ASSESSMENT ROLLS
(SECS. 205, 207)
- All declarations shall be kept and filed under a uniform
classification system to be established by the provincial, city
or municipal assessor.
- NOTE: Exempt RPs would form part in the assessment rolls.
- Once all RPs have been declared, the assessor will list all these
taxable and exempt RPs in the assessment rolls.
- Once its listed in the assessment rolls, the GR is that all of
these properties, whether taxable or exempt, will be included
in the list. Once you are able to prove that its an exempt
property, then, upon proving that the RP is exempt from RPT,
the RP will be dropped from the assessment roll. So what will
proceed on to be subjected to RPT and assessed of RPT would
only be those taxable RPs.
Individuals required to aid and notify the assessor in determining
RPs for declaration purposes
12
1. Duty of any person transferring RP
SEC. 208. Notification of Transfer of Real Property
Ownership. - Any person who shall transfer real
property ownership to another shall notify the
provincial, city or municipal assessor concerned within
sixty (60) days from the date of such transfer. The
notification shall include the mode of transfer, the
description of the property alienated, the name and
address of the transferee.
2. Duty of RD to apprise assessor
SEC. 209. Duty of Registrar of Deeds to Apprise
Assessor of Real Property Listed in Registry. - (a) To
ascertain whether or not any real property entered in
the Registry of Property has escaped discovery and
listing for the purpose of taxation, the Registrar of
Deeds shall prepare and submit to the provincial, city
or municipal assessor, within six (6) months from the
date of effectivity of this Code and every year
thereafter, an abstract of his registry, which shall
include brief but sufficient description of the real
properties entered therein, their present owners, and
the dates of their most recent transfer or alienation
accompanied by copies of corresponding deeds of
sale, donation, or partition or other forms of
alienation.
(b) It shall also be the duty of the Registrar of Deeds
to require every person who shall present for
registration a document of transfer, alienation, or
encumbrance of real property to accompany the same
with a certificate to the effect that the real property
subject of the transfer, alienation, or encumbrance, as
the case may be, has been fully paid of all real
property taxes due thereon. Failure to provide such
certificate shall be a valid cause for the Registrar of
Deeds to refuse the registration of the document.
3. Duty of Official issuing building permit or certificate of
registration of machinery
SEC. 210. Duty of Official Issuing Building Permit or
Certificate of Registration of Machinery to Transmit
Copy to Assessor. - Any public official or employee
who may now or hereafter be required by law or
regulation to issue to any person a permit for the
construction, addition, repair, or renovation of a
building, or permanent improvement on land, or a
certificate of registration for any machinery, including
machines, mechanical contrivances, and apparatus
attached or affixed on land or to another real
property, shall transmit a copy of such permit or
certificate within thirty (30) days of its issuance, to the
assessor of the province, city or municipality where
the property is situated.
4. Duty of Geodetic Engineers
SEC. 211. Duty of Geodetic Engineers to Furnish Copy
of Plans to Assessor. - It shall be the duty of all
geodetic engineers, public or private, to furnish free of
charge to the assessor of the province, city or
municipality where the land is located with a white or
blue print copy of each of all approved original or
subdivision plans or maps of surveys executed by
TAXATION 2 FINALS| maru.mhealler | 404
 them within thirty (30) days from receipt of such plans
from the Lands Management Bureau, the Land
Registration Authority, or the Housing and Land Use
Regulatory Board, as the case may be.
NOTE: Even lawyers are required to file with the local assessors
once they notarize RP.
STEP 3: APPRAISAL AND VALUATION OF REAL PROPERTY (SECS.
212-214, 224-225)
Determination of fair market value (FMV)
For land
Assessor of the province/city or municipality may summon
the owners of the properties to be affected and may take
depositions concerning the property, its ownership,
amount, nature and value (Sec. 213, LGC)
Assessor prepares a schedule of FMV for different classes
of properties.
Sanggunian enacts an ordinance
The schedule of FMV is published in a newspaper of
general circulation in the province, city or municipality
concerned or in the absence thereof, shall be posted in the
provincial capitol, city or municipal hall and in two other
conspicuous public places therein (Sec. 212, LGC)
For machinery
1. For Brand new machinery: FMV is the acquisition cost
2. In all other cases: FMV
= Remaining eco. life X Replacement Cost
Estimated Eco.Life
3. For imported machinery: FMV is acquisition cost, but
acquisition cost includes freight, insurance, bank and
other charges, brokerage, arrastre and handling, duties
and taxes, plus cost of inland transportation, handling,
and installation charges at the present site.
NOTE: Machineries would depreciate in value. To what
extent would the owner of machinery be allowed to reduce
the value of its machinery every time it is required to pay
RPT?
At a rate not exceeding five percent (5%) of its original cost
or its replacement or reproduction cost, as the case may
be, for each year of use: Provided, however, That the
remaining value for all kinds of machinery shall be fixed at
not less than twenty percent (20%) of such original,
replacement, or reproduction cost for so long as the
machinery is useful and in operation
EXAMPLE: You have a machinery and purchased it brand
new. Its valued at 1m. Estimated life is only 10 years. 1
st
year, it was appraised at 1m, which is the acquisition cost. 2
nd
year, how much would the assessor expect of you to declare
as FMV of the machinery?
13
950k, because it should be at a rate not exceeding 5% of
its original cost.
th
How about on the 10 year?
500k.
Every machinery, although it has different economic life or
useful life, but for RPT purposes, we stick to the 5%
depreciation every year up to the extent that its useful.
So, even if it has only an estimated life of 10 years, which
has 10% depreciation every year, or if it has an estimated
life of 5 years, which has 20% depreciation every year, it
will only reduce the machinery, for RPT purposes, by 5%
up to the extent that its useful.
What if its no longer useful or it has fully retired or youre no
longer using it?
Its no longer declared for RPT purposes.
But even if you have consumed all the values, like every
year, you depreciate it by 5%, and its still useful, meaning,
you can use it for something else, you always stop at 20%
of its value. You can never declare a machinery less than
20% of its acquisition cost or replacement cost.
STEP 4: DETERMINE ASSESSED VALUE (SEC. 218)
Determine Assessed Value
Procedure
1. Take the schedule of FMV
2. Assessed Value = FMV x Assessment level
3. Tax = Assessed value x Tax rate
- It is the local assessor who is the one to prepare the schedule of
FMVs and submit it to the sanggunian. The sanggunian will
enact an ordinance and this ordinance will be published in a
newspaper of general circulation for purposes of notifying RP
owners, and such schedule of FMVs shall be valid for at least 3
years.
- But if ever there is a mistake in the FMV, the assessor may
recommend for amendments or correction of errors of the
ordinance to the sanggunian concerned.
SEC. 214. Amendment of Schedule of Fair Market Values. - The
provincial, city or municipal assessor may recommend to the
sanggunian concerned amendments to correct errors in
valuation in the schedule of fair market values. The sanggunian
concerned shall, by ordinance, act upon the recommendation
within ninety (90) days from receipt thereof.
- Assuming theres nothing wrong with the ordinance, the
schedule of FMVs may be revised every three (3) years
SEC. 219. General Revision of assessments and Property
Classification. - The provincial, city or municipal assessor shall
undertake a general revision of real property assessments
within two (2) years after the effectivity of this Code and every
three (3) years thereafter.
TAXATION 2 FINALS| maru.mhealler | 404
 SEC. 223. Notification of New or Revised Assessment. - When
real property is assessed for the first time or when an existing
assessment is increased or decreased, the provincial, city or
municipal assessor shall within thirty (30) days give written
notice of such new or revised assessment to the person in
whose name the property is declared. The notice may be
delivered personally or by registered mail or through the
assistance of the punong barangay to the last known address of
the person to be served.
- Exceptions to the rule on 3-year revision?
Reassessment of RP due to:
1. Its partial or total destruction; or
2. A major change in its actual use; or
3. Any great and sudden inflation or deflation of RP values;
or
4. The gross illegality of the assessment when made; or
5. New improvements substantially increasing the value of
said property
6. Any other abnormal cause
In these instances, revision shall be made within 90 days from
the date any such cause or causes occurred.
General reappraisal means all properties within the
LGUs of its class, meaning parcels of land, have been
generally affected by a particular cause.
EXAMPLE: Any great and sudden abrupt inflation or
deflation of RP values, it can cause a reassessment of
generally all the RPs within the LGU.
Partial reappraisal it depends.
EXAMPLE: If probably, a particular zone of the LGU has
been changed from residential to commercial, it can
happen that there will be partial reassessment of those
properties affected.
Individual reappraisal
EXAMPLE: A RP of an individual that was partially or totally
destroyed and a property that has been affected due to
major change in its actual use or gross illegality of the
assessment or to any other abnormal cause.
SEC. 221. Date of Effectivity of Assessment or Reassessment. -
All assessments or reassessments made after the first (1st) day
of January of any year shall take effect on the first (1st) day of
January of the succeeding year: Provided, however, That the
reassessment of real property due to its partial or total
destruction, or to a major change in its actual use, or to any
great and sudden inflation or deflation of real property values,
or to the gross illegality of the assessment when made or to any
other abnormal cause, shall be made within ninety (90) days
from the date any such cause or causes occurred, and shall take
effect at the beginning of the quarter next following the
reassessment.
14
STEP 5: PAYMENT AND COLLECTION OF TAX
(a) Accrual of Tax:
GR: January of every year and such will constitute as a
superior lien. (Sec. 246)
EXC:
1. Reassessment of RP the new RPT shall accrue the
quarter next following the reappraisal or
reassessment
2. Special levy on the quarter next following the
effectivity of the ordinance imposing the special levy
(b) Time and Manner of Payment: (Sec. 250)
1. basic real property tax in 4 equal installments (March 31,
June 30, September 30, December 30)
2. special levy governed by ordinance
(c) Interest for Late Payment (Sec. 255)
1. two percent (2%) for each month on unpaid amount until
the delinquent amount is paid
2. provided in no case shall the total interest exceed thirty-
six (36) months.
(d) For Advance and Prompt Payment
Formula of RPT due
FMV x ASSESSMENT LEVELS (fixed in the LGC) = ASSESSED
VALUE
ASSESSED VALUE x % RPT rate = RPT due
1. Advance payment discount not exceeding 20% of annual
tax (Sec. 251, LCG)
2. Prompt payment discount not exceeding 10% of annual
tax due (Art 342 IRR)
(e) 0% Assessment Level
- for residential buildings only whose FMV is not over 175k
(175k or less), meaning, it has 0 liability for RPT.
COLLECTION OF TAX (SEC. 247)
It shall be the responsibility of the city or municipal treasurer
concerned.
The city or municipal treasurer may deputize the barangay
treasurer to collect all taxes on real property located in the
barangay; provided, the barangay treasurer is properly bonded.
PERIOD TO COLLECT (SEC. 270)
1. within five (5) years from the date they become due
2. within ten (10) years from discovery of fraud, in case there
is fraud or intent to evade
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SUSPENSION OF PRESCRIPTIVE PERIOD (SEC. 270)
1. local treasurer is legally prevented to collect tax.
2. the owner or property requests for reinvestigation and
writes a waiver before expiration of period to collect.
3. the owner of property is out of the country or cannot be
located.
Allied Banking Corp. vs. Quezon City GR No. 154126 (2005)
Accordingly, this Court holds that the proviso directing that the real
property tax be based on the actual amount reflected in the deed of
conveyance or the prevailing BIR zonal value is invalid not only because
it mandates an exclusive rule in determining the fair market value but
more so because it departs from the established procedures stated in
the Local Assessment Regulations No. 1-92 and unduly interferes with
the duties statutorily placed upon the local assessor by completely
dispensing with his analysis and discretion which the Code and the
regulations require to be exercised. An ordinance that contravenes any
statute is ultra vires and void.
Further, it is noted that there is nothing in the Charter of Quezon City
and the Quezon City Revenue Code of 1993 that authorize public
respondents to appraise property at the consideration stated in the
deed of conveyance.
Using the consideration appearing in the deed of conveyance to assess
or appraise real properties is not only illegal since the appraisal,
assessment, levy and collection of real property tax shall not be let to
any private person, but it will completely destroy the fundamental
principle in real property taxation that real property shall be
classified, valued and assessed on the basis of its actual use regardless
of where located, whoever owns it, and whoever uses it. Necessarily,
allowing the parties to a private sale to dictate the fair market value of
the property will dispense with the distinctions of actual use stated in
the Code and in the regulations.
The invalidity of the assessment or appraisal system adopted by the
proviso is not cured even if the proviso mandates the comparison of
the stated consideration as against the prevailing BIR zonal value,
whichever is higher, because an integral part of that system still permits
valuing real property in disregard of its actual use.
Callanta vs. Office of the Ombudsman, GR No. 1152533-74
(1998)
[T]he same Code is equally clear that the aggrieved owners should have
brought their appeals before the LBAA. Unfortunately, despite the
advice to this effect contained in their respective notices of assessment,
the owners chose to bring their requests for a review/readjustment
before the city assessor, a remedy not sanctioned by the law. To allow
this procedure would indeed invite corruption in the system of
appraisal and assessment. It conveniently courts a graft-prone situation
where values of real property may be initially set unreasonably high,
and then subsequently reduced upon the request of a property owner.
In the latter instance, allusions of a possible covert, illicit trade-off
cannot be avoided, and in fact can conveniently take place. Such
occasion for mischief must be prevented and excised from our system.
15
XII. GOVERNMENT REMEDIES FOR COLLECTION OF TAX
DELINQUENCIES, FEES, CHARGES AND OTHER
REVENUES
A. LOCAL GOVERNMENTS LIEN
Real Property tax lien (Secs. 257, LGC) superior to all
liens, charges or encumbrances;
B. ASSESSMENT PERIOD
Within 5 years from the date they become due or within
10 years, in case of fraud or intent to evade payment,
from the discovery of the fraud or intent to evade
payment
For back taxes within 10 years from the date they
become due even in the absence of fraud
C. COLLECTION PERIOD
SEC. 266. Collection of Real Property Tax Through the
Courts. - The local government unit concerned may enforce
the collection of the basic real property tax or any other
tax levied under this Title by civil action in any court of
competent jurisdiction. The civil action shall be filed by the
local treasurer within the period prescribed in Section 270
of this Code.
SEC. 270. Periods Within Which To Collect Real Property
Taxes. - The basic real property tax and any other tax
levied under this Title shall be collected within five (5) years
from the date they become due. No action for the
collection of the tax, whether administrative or judicial,
shall be instituted after the expiration of such period. In
case of fraud or intent to evade payment of the tax, such
action may be instituted for the collection of the same
within ten (10) years from the discovery of such fraud or
intent to evade payment. The period of prescription within
which to collect shall be suspended for the time during
which:
(1) The local treasurer is legally prevented from
collecting the tax;
(2) The owner of the property or the person having
legal interest therein requests for reinvestigation and
executes a waiver in writing before the expiration of
the period within which to collect; and
(3) The owner of the property or the person having
legal interest therein is out of the country or
otherwise cannot be located.
D. CIVIL REMEDIES
1. Administrative Action
Distraint
SEC. 254. Notice of Delinquency in the Payment
of the Real Property Tax. - (a) When the real
property tax or any other tax imposed under this
Title becomes delinquent, the provincial, city or
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 municipal treasurer shall immediately cause a
notice of the delinquency to be posted at the
main entrance of the provincial capitol, or city or
municipal hall and in a publicly accessible and
conspicuous place in each barangay of the local
government unit concerned. The notice of
delinquency shall also be published once a week
for two (2) consecutive weeks, in a newspaper of
general circulation in the province, city, or
municipality.
(b) Such notice shall specify the date upon which
the tax became delinquent and shall state that
personal property may be distrained to effect
payment. It shall likewise state that at any time
before the distraint of personal property,
payment of the tax with surcharges, interests
and penalties may be made in accordance with
the next following Section, and unless the tax,
surcharges and penalties are paid before the
expiration of the year for which the tax is due
except when the notice of assessment or special
levy is contested administratively or judicially
pursuant to the provisions of Chapter 3, Title II,
Book II of this Code, the delinquent real property
will be sold at public auction, and the title to the
property will be vested in the purchaser, subject,
however, to the right of the delinquent owner of
the property or any person having legal interest
therein to redeem the property within one (1)
year from the date of sale.
Levy
SEC. 258. Levy on Real Property. - After the
expiration of the time required to pay the basic
real property tax or any other tax levied under
this Title, real property subject to such tax may
be levied upon through the issuance of a warrant
on or before, or simultaneously with, the
institution of the civil action for the collection of
the delinquent tax. The provincial or city
treasurer, or a treasurer of a municipality within
the Metropolitan Manila Area, as the case may
be, when issuing a warrant of levy shall prepare
a duly authenticated certificate showing the
name of the delinquent owner of the property or
person having legal interest therein, the
description of the property, the amount of the
tax due and the interest thereon. The warrant
shall operate with the force of a legal execution
throughout the province, city or a municipality
within the Metropolitan Manila Area. The
warrant shall be mailed to or served upon the
delinquent owner of the real property or person
having legal interest therein, or in case he is out
of the country or cannot be located, to the
administrator or occupant of the property. At the
same time, written notice of the levy with the
attached warrant shall be mailed to or served
upon the assessor and the Registrar of Deeds of
the province, city or a municipality within the
Metropolitan Manila Area where the property is
located, who shall annotate the levy on the tax
16
declaration and certificate of title of the
property, respectively. The levying officer shall
submit a report on the levy to the sanggunian
concerned within ten (10) days after receipt of
the warrant by the owner of the property or
person having legal interest therein.
SEC. 259. Penalty for Failure to Issue and
Execute Warrant. - Without prejudice to criminal
prosecution under the Revised Penal Code and
other applicable laws, any local treasurer or his
deputy who fails to issue or execute the warrant
of levy within one (1) year from the time the tax
becomes delinquent or within thirty (30) days
from the date of the issuance thereof, or who is
found guilty of abusing the exercise thereof in an
administrative or judicial proceeding shall be
dismissed from the service.
SEC. 260. Advertisement and Sale. - Within
thirty (30) days after service of the warrant of
levy, the local treasurer shall proceed to publicly
advertise for sale or auction the property or a
usable portion thereof as may be necessary to
satisfy the tax delinquency and expenses of sale.
The advertisement shall be effected by posting a
notice at the main entrance of the provincial, city
or municipal building, and in a publicly accessible
and conspicuous place in the barangay where the
real property is located, and by publication once
a week for two (2) weeks in a newspaper of
general circulation in the province, city or
municipality where the property is located. The
advertisement shall specify the amount of the
delinquent tax, the interest due thereon and
expenses of sale, the date and place of sale, the
name of the owner of the real property or person
having legal interest 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
property or person having legal interest therein
may stay the proceedings by paying the
delinquent tax, the interest due thereon and the
expenses of sale. The sale shall be held 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 specified in the notice of
the sale. Within thirty (30) days after the sale,
the local treasurer or his deputy shall make a
report of the sale to the sanggunian concerned,
and which shall form part of his records. The
local treasurer shall likewise prepare and deliver
to the purchaser a certificate of sale which shall
contain the name of the purchaser, a description
of the property sold, the amount of the
delinquent tax, the interest due thereon, the
expenses of sale and a brief description of the
proceedings: Provided, however, That proceeds
of the sale in excess of the delinquent tax, the
interest due thereon, and the expenses of sale
shall be remitted to the owner of the real
property or person having legal interest therein.
The local treasurer may, by ordinance duly
approved, advance an amount sufficient to
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 defray the costs of collection thru the remedies
provided for in this Title, including the expenses
of advertisement and sale.
SEC. 261. Redemption of Property Sold. - Within
one (1) year from the date of sale, the owner of
the delinquent real property or person having
legal interest therein, or his representative, shall
have the right to redeem the property upon
payment to the local treasurer of the amount of
the delinquent tax, including the interest due
thereon, and the expenses of sale from the date
of delinquency to the date of sale, plus interest of
not more than two percent (2%) per month on
the purchase price from the date of sale to the
date of redemption. Such payment shall
invalidate the certificate of sale issued to the
purchaser and the owner of the delinquent real
property or person having legal interest therein
shall be entitled to a certificate of redemption
which shall be issued by the local treasurer or his
deputy. From the date of sale until the expiration
of the period of redemption, the delinquent real
property shall remain in the possession of the
owner or person having legal interest therein
who shall be entitled to the income and other
fruits thereof. The local treasurer or his deputy,
upon receipt from the purchaser of the certificate
of sale, shall forthwith return to the latter the
entire amount paid by him plus interest of not
more than two percent (2%) per month.
Thereafter, the property shall be free from the
lien of such delinquent tax, interest due thereon
and expenses of sale.
SEC. 262. Final Deed to Purchaser. - In case the
owner or person having legal interest therein
fails to redeem the delinquent property as
provided herein, the local treasurer shall execute
a deed conveying to the purchaser said property,
free from lien of the delinquent tax, interest due
thereon and expenses of sale. The deed shall
briefly state the proceedings upon which the
validity of the sale rests.
Purchase of property by local treasurer for want
of bidder
SEC. 263. Purchase of Property By the Local
Government Units for Want of Bidder. - In case
there is no bidder for the real property advertised
for sale as provided herein, or if the highest bid is
for an amount insufficient to pay the real
property tax and the related interest and costs of
sale the local treasurer conducting the sale shall
purchase the property in behalf of the local
government unit concerned to satisfy the claim
and within two (2) days thereafter shall make a
report of his proceedings which shall be reflected
upon the records of his office. It shall be the duty
of the Registrar of Deeds concerned upon
registration with his office of any such
declaration of forfeiture to transfer the title of
the forfeited property to the local government
unit concerned without the necessity of an order
17
from a competent court. Within one (1) year
from the date of such forfeiture, the taxpayer or
any of his representative, may redeem the
property by paying to the local treasurer the full
amount of the real property tax and the related
interest and the costs of sale. If the property is
not redeemed as provided herein, the ownership
thereof shall be fully vested on the local
government unit concerned.
Note:
Notice to the correct owner or the
right owner of the property is an essential and
indispensable requirement of law. Non-
compliance of which renders the auction sale as
invalid and void
2. Judicial Action
- Civil Action ( Sec. 266, 270 LGC)
SEC. 266. Collection of Real Property Tax Through
the Courts. - The local government unit concerned
may enforce the collection of the basic real property
tax or any other tax levied under this Title by civil
action in any court of competent jurisdiction. The civil
action shall be filed by the local treasurer within the
period prescribed in Section 270 of this Code.
XIII. TAXPAYERS REMEDIES
A. PROTEST BY MEANS OF APPEAL TO THE SECRETARY OF
JUSTICE
- Any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on
appeal within thirty (30) days from the effectivity
thereof to the SOJ who shall render a decision within
sixty (60) days from the date of receipt of the appeal:
Provided, however, That such appeal shall not have
the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax,
fee, or charge levied therein (Sec. 187, LGC)
B. PROTEST AGAINST REAL PROPERTY TAX DEFICIENCY
- Payment under protest is required within 30 days to
provincial, city, or municipal treasurer. No protest
shall be entertained unless the tax is first paid.
- Payment under protest is only required where the
taxpayer contest the correctness of the amount. And
it is necessary as well when you contest the amount
imposed as a special levy.
- Payment under protest shall not be necessary when
your questioning classification of property, at that
point, you dont need to pay RPT because its not as
yet the amount that is assessed
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NPC vs. Province of Quezon & Mun. of Pagbilao, supra. C. PROTEST AGAINST ASSESSMENT

- Any owner or person having legal interest in the

Apart from Napocors failure to prove that it has sufficient legal interest,
a further review of the records revealed another basis for disregarding
Napocors protest against the assessment.
The LBAA dismissed Napocors petition for exemption for its failure to
comply with Section 252 of the LGC requiring payment of the assailed tax
before any protest can be made. Although the CBAA ultimately
dismissed Napocors appeal for failure to meet the requirements for tax
exemption, it agreed with Napocors position that the protest
contemplated in Section 252 (a) is applicable only when the taxpayer is
questioning the reasonableness or excessiveness of an assessment. It
presupposes that the taxpayer is subject to the tax but is disputing the
correctness of the amount assessed. It does not apply where, as in this
case, the legality of the assessment is put in issue on account of the
taxpayers claim that it is exempt from tax.
Napocor, by claiming exemption from realty taxation, is simply raising a
question of the correctness of the assessment. A claim for tax
exemption, whether full or partial, does not question the authority of
local assessor to assess real property tax as may be inferred from Section
206 of the Local Government Code.
By providing that real property not declared and proved as tax-exempt
shall be included in the assessment roll, the above-quoted provision
implies that the local assessor has the authority to assess the property for
realty taxes, and any subsequent claim for exemption shall be allowed
only when sufficient proof has been adduced supporting the claim. Since
Napocor was simply questioning the correctness of the assessment, it
should have first complied with Section 252, particularly the requirement
of payment under protest. Napocors failure to prove that this
requirement has been complied with thus renders its administrative
protest under Section 226 of the LGC without any effect. No protest shall
be entertained unless the taxpayer first pays the tax.
property who is not satisfied with the action of the
provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days
from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment
appeals of the province or city by filing a petition
under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such
affidavits or documents submitted in support of the
appeal (Sec. 226, LGC).
Remedy against the Assessment/Appeal
st
1 : within 60 days from notice of assessment of
provincial, city or municipal assessor to LBAA (Sec.
226 LGC)
nd
2 : within 30 days from receipt of decision of LBAA to
CBAA (Sec. 230 LGC)
rd
3 : within 30 days from receipt of decision of CBAA to
Court of Tax Appeals en banc
th
4 : within 15 days from receipt of decision of Court of
Tax Appeals en banc to the Supreme Court
D. CLAIM FOR REFUND AND TAX CREDIT
a) The taxpayer may file a written claim for refund
or credit with the provincial or city treasurer within two
years from the date the taxpayer is entitled to such
reduction or adjustment.
b) In case of denial of refund or credit, appeal to
LBAA as in protest case.

E. REDEMPTION OF PROPERTY (Sec. 261, LGC)

City Govt of QC vs. Bayan Telecommunications, GR No. 162015

QC Mayor, City Treasurer, City Assessor vs. RCBC, GR No.
(2006)
171033 (2010)
xxx. Although as a rule, administrative remedies must first be exhausted
In cases involving redemption, the law protects the original owner. It is
before resort to judicial action can prosper, there is a well-settled
the policy of the law to aid rather than to defeat the owners right.
exception in cases where the controversy does not involve questions of
Therefore, redemption should be looked upon with favor and where no
fact but only of law. xxx.
injury will follow, a liberal construction will be given to our redemption
Lest it be overlooked, an appeal to the LBAA, to be properly considered, laws, specifically on the exercise of the right to redeem.
required prior payment under protest of the amount of P43,878,208.18, a
To harmonize the provisions of the two laws and to maintain the policy
figure which, in the light of the then prevailing Asian financial crisis, may
of the law to aid rather than to defeat the owners right to redeem his
have been difficult to raise up. Given this reality, an appeal to the LBAA
property, Section 14 (a), Paragraph 7 of City Ordinance No. SP-91, S-93
may not be considered as a plain, speedy and adequate remedy. It is thus
should be construed as to define the phrase one (1) year from the
understandable why Bayantel opted to withdraw its earlier appeal with
date of sale as appearing in Section 261 of R.A. No. 7160, to mean
the LBAA and, instead, filed its petition for prohibition with urgent
one (1) year from the date of the annotation of the sale of the
application for injunctive relief in Civil Case No. Q-02-47292. The remedy
property at the proper registry.
availed of by Bayantel under Section 2, Rule 65 of the Rules of Court must
be upheld.
Consequently, the counting of the one (1) year redemption period of
property sold at public auction for its tax delinquency should be
(not the main issue in this case. Point is, although as a rule, payment under
counted from the date of annotation of the certificate of sale in the
protest is required, the SC allowed Bayantel to avail of another remedy
proper Register of Deeds.
since payment under protest was not feasible.)

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 F. JUDICIAL REMEDY ASSAILING THE VALIDITY OF THE SALE

If you question the validity of a public auction sale, you

have to deposit the amount for which the property was
sold together with interest of 2% per month from the time
of sale until you have instituted the action.
In what cases can you question the validity of an auction
sale?
1. Although the law says that the court cannot declare a
public auction invalid simply by reason of
irregularities or informalities on the conduct of the
sale, it requires for invalidity when a substantive right
of the RP owner has been impaired.
2. When you say substantive right, it includes there
failure to give a personal notice of the public auction
to the RP owner.

APPEAL PROCEDURE

Provincial, City or Municipal Assessor

within 60 days
Owner/Person with legal interest
must file:
1) Written Petition under Oath
2) With Supporting Documents

Local Board Of Assessment Appeals

(LBAA SHOULD DECIDE WITHIN 120 DAYS

within 30 days

Central Board Of Assessment Appeals

within 30 days

Court of Tax Appeals (En Banc)

within 15 days

Supreme Court

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PROTEST AGAINST RPT DEFICIENCY
CLAIM FOR REFUND/CREDIT FROM LOCAL TREASURER
Assessment

Payment under protest** Claim for Refund/Credit from Local

- annotated receipt Treasurer (within 2 years)
30 days

Written protest to
Local Treasurer Denied Granted
(60 days to decide)

Favorable Unfavorable No Decision

(F) (U) (ND)

60 days

LBAA
(120 days to
decide)

F U ND

30 days

CBAA
(no req. # of days to
decide)

F U
30 days

CTA en banc
Motion for
Reconsideration or
Motion for New Trial
F U
(within 15 days)

SC

F U

**Payment under protest only required if the correctness or accuracy of the assessment is questioned.

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