Local Taxation
General Principles, Definitions, and Limitations
Palma Development Corp. v.
Zamboanga Del Sur (October 16,
2003)
The Municipality of Malangas,
Zamboanga passed an ordinance
which under Sec. 5G.01 imposed
fees for the use of the municipal
roads/streets leading to the wharf
and to any point along the shorelines
and for police surveillance. Palma
paid the fees under protest and,
thereafter, assailed the validity of
Sec. 5.G01, in light of prohibition
under RA 7160 (LGC). SC held that
this imposition of such service fee is
null and void as Section 133(e) of
RA 7160 prohibits the imposition,
in the guise of wharfage, of fees
as well as all other taxes or
charges in any form whatsoever
on goods or merchandise.
Palma Development Corporation is engaged in milling and
selling rice and corn to wholesalers in Zamboanga City.
It uses the municipal port of Malangas, Zamboanga del Sur
as transshipment point for its goods.
The port, as well as the surrounding roads leading to it,
belong to and are maintained by Malangas, Zamboanga del
Sur.
Jan 16 1994: The municipality of Zamboanga passed
Municipal Revenue Code No. 09, Series of 1993, which
was subsequently approved by the Sangguniang
Panlalawigan of Zamboanga del Sur in a Resolution.
The subject of contention in this case is Section 5G.01 of
the said Revenue Code which reads:
Section 5G.01. Imposition of fees. There shall be
collected service fee for its use of the municipal roads or
streets leading to the wharf and to any point along the
shorelines within the jurisdiction of the municipality and for
police surveillance onall goods and all equipment harbored
or sheltered in the premises of the wharf and other within
the jurisdiction of this municipality in the following
schedule
Accordingly, the service fees imposed by Sec. 5G.01 was
paid by Palma under protest.
Palma contended that under RA 7160, municipal
governments did not have authority to tax goods and
vehicles that passed through their jurisdictions.
Palma filed before the RTC an action for declaratory relief
assailing the validity of Sec. 5G.01 of the municipal
ordinance.
RTC: Declared the entire Municipal Revenue Code No. 09
as ultra vires and, hence, null and void
CA:
o Held that LGUs already had revenue-raising
powers as provided for under Secs. 153 and 155 of
RA 7160.
o Ruled that within the purview of these provisions
(and therefore valid) is Sec. 5G.01, wc provides for
a service fee for the use of the municipal road or
streets leading to the wharf and to any point along
the shorelines within the jurisdiction of the
municipality and for police surveillance on all
goods and all equipment harbored or sheltered in
the premises of the wharf and other within the
jurisdiction of this municipality.
o However, since both parties had submitted the
case to the RTC for decision on a pure question of
1. WON Section 5G.01 of Municipal Revenue Code No. 09 is valid?
NO
Palma argues that while the Municipality has the power to tax or
impose fees on vehicles using its roads, it CANNOT tax the
goods that are transported by the vehicles.
On the other hand, the Municipality maintains that the subject
fees are intended for services rendered, the use of municipal
roads and police surveillance.
By express language of Secs 153 and 155 of RA 7160, LGUs,
through their Sangguinan, may prescribe the terms and
conditions for the imposition of toll fees or charges for the use of
any public road, pier, or wharf funded and constructed by them.
A service fee imposed on vehicles using municipal roads
leading to the wharf is thus valid.
However, Sec 133(e) of RA 7160 prohibits the imposition, in the
guise of wharfage, of feesas well as all other taxes or
chargers in any form whatsoeveron goods or merchandise.
It is therefore IRRELEVANT if the fees imposed are actually for
police surveillance on the goods, because any other form of
imposition on goods passing through the territorial jurisdiction of
the municipality is clearly prohibited by Sec 133(e).
Under Sec 131(y) of RA 7160, wharfage is defined as a fee
assessed against the cargo of a vessel engaged in foreign or
domestic trade based on quantity, weight or measure received
and/or discharged by vessel.
A wharfage does NOT lose its basic character by being labeled
as a service fee for police surveillance on all goods,
HELD: Petition GRANTED. Decision of CA SET ASIDE.
The imposition of a service fee for police surveillance on all
goods harbored or sheltered in the premises of the municipal
port of Malangas under Sec 5G.01 of the Malangas Municipal
Revenue Code is declared NULL AND VOID for being violative
of RA 7160.
1

Taxing Powers of LGUs
Yamane v. BA Lepanto
Condominium (October 25, 2005)
BA-Lepanto Condominium
Corporation is a duly organized
condominium corporation constituted
in accordance with the Condominium
Act, which owns and holds title to the
common and limited common areas
of the BA-Lepanto Condominium in
Paseo de Roxas, Makati City. The
Corporation received a Notice of
Assessment signed by the City
Treasurer stated that the
Corporation is liable to pay the
correct city business taxes, fees and
charges. However, it was silent as
to the statutory basis of the business
taxes assessed. Our issues in this
case are whether the RTC, in
deciding an appeal taken from a
denial of a protest by a local
treasurer under Section 195 of the
Local Government Code, exercises
original jurisdiction or appellate
jurisdiction and whether the City of
Makati may collect business taxes
on condominium corporations. The
jurisdiction exercised by the RTC is
original in character and the proper
remedy of the Corporation from the
RTC judgment is an ordinary appeal
under Rule 41 to the Court of
Appeals. Our careful examination of
the record reveals a highly
disconcerting fact. At no point has
the City Treasurer been candid
law without a full-blown trial on the merits, the CA
should not determine whether the facts of the case
were within the ambit of the aforecited sections of
RA 7160.
o Ruled that Palma still had to adduce evidence to
substantiate its allegations that the assailed
ordinance had imposed fees on the movement of
goods within the Municipality in the guise of a toll
fee for the use of municipal roads and a service fee
for police surveillance.
o Case REMANDED.
BA-Lepanto Condominium Corporation is a duly organized
condominium corporation constituted in accordance with the
Condominium Act, which owns and holds title to the
common and limited common areas of the BA-Lepanto
Condominium in Paseo de Roxas, Makati City.
Under its Amended By-Laws, Lepanto collects regular
assessments from its members for operating expenses,
capital expenditures on the common areas, and other
special assessments as provided for in the Master Deed
with Declaration of Restrictions of the Condominium.
The Corporation received a Notice of Assessment signed by
the City Treasurer. The Notice of Assessment stated that
the Corporation is liable to pay the correct city business
taxes, fees and charges, computed as
totalingP1,601,013.77 for the years 1995 to 1997. The
Notice of Assessment was silent as to the statutory basis of
the business taxes assessed.
The Corporation responded with a written tax protest. It was
evident in the protest that the Corporation was perplexed on
the statutory basis of the tax assessment.
With due respect, we submit that the Assessment has no
basis as the Corporation is not liable for business taxes and
surcharges and interest thereon, under the Makati Revenue
Code (MRC) or even under the Local Government Code
(LGC).
The MRC and the LGC do not contain any provisions on
which the Assessment could be based. One might argue
that Sec. 3A.02(m) of the MRC imposes business tax on
owners or operators of any business not specified in the
said code. We submit, however, that this is not applicable to
the Corporation as the Corporation is not an owner or
operator of any business in the contemplation of the MRC
and even the LGC.
Proceeding from the premise that its tax liability arose from
Section 3A.02(m) of the MRC , the Corporation proceeded
to argue that under both the MRC and the LGC, business
is defined as trade or commercial activity regularly engaged
1. Whether the RTC, in deciding an appeal taken from a denial of a
protest by a local treasurer under Section 195 of the Local
Government Code, exercises original jurisdiction or appellate
jurisdiction. ORIGINAL JURISDICTION
2. Whether the City of Makati may collect business taxes on
condominium corporations. NO
Procedural Issue: Whether the RTC, in deciding an appeal taken
from a denial of a protest by a local treasurer under Section 195 of
the Local Government Code, exercises original jurisdiction or
appellate jurisdiction.
There are discernible conflicting views on the issue.
o The first, as expressed by the Court of Appeals, holds
that the RTC, in reviewing denials of protests by local
treasurers, exercises appellate jurisdiction. This
position is anchored on the language of Section 195 of
the LGC which states that the remedy of the taxpayer
whose protest is denied by the local treasurer is to
appeal with the court of competent
jurisdiction. Apparently though, the LGC does not
elaborate on how such appeal should be undertaken.
o The other view, as maintained by the City Treasurer, is
that the jurisdiction exercised by the RTC is original in
character. This is the first time that the position has
been presented to the court for adjudication. Still, this
argument does find jurisprudential mooring in our
ruling in Garcia v. De Jesus, where the Court proffered
the following distinction between original jurisdiction
and appellate jurisdiction: Original jurisdiction is the
power of the Court to take judicial cognizance of a
case instituted for judicial action for the first time under
conditions provided by law. Appellate jurisdiction is the
authority of a Court higher in rank to re-examine the
final order or judgment of a lower Court which tried the
case now elevated for judicial review.
From these premises, it is evident that the stance of the
City Treasurer is correct as a matter of law, and that the
2
enough to inform the Corporation,
the RTC, the Court of Appeals, or
this Court for that matter, as to what
exactly is the precise statutory basis
under the Makati Revenue Code for
the levying of the business tax on
petitioner. Hence, the assailed tax
assessment has no basis under the
Local Government Code or the
Makati Revenue Code, and the
insistence of the city in its collection
of the void tax constitutes an attempt
at deprivation of property without
due process of law.
in as a means of livelihood or with a view to profit.
It was submitted that the Corporation, as a condominium
corporation, was organized not for profit, but to hold title
over the common areas of the Condominium, to manage the
Condominium for the unit owners, and to hold title to the
parcels of land on which the Condominium was located.
Neither was the Corporation authorized, under its articles of
incorporation or by-laws to engage in profit-making
activities. The assessments it did collect from the unit
owners were for capital expenditures and operating
expenses.
The protest was rejected by the City Treasurer in a letter
dated 4 March 1999. She insisted that the collection of dues
from the unit owners was effected primarily to sustain and
maintain the expenses of the common areas, with the end in
view of getting full appreciative living values for the
individual condominium occupants and to command better
marketable prices for those occupants who would in the
future sell their respective units. Thus, she concluded since
the chances of getting higher prices for well-managed
common areas of any condominium are better and more
effective that condominiums with poor managed common
areas, the corporation activity is a profit venture making.
Substantive Issue: Whether the City of Makati may collect business
taxes on condominium corporations.
proper remedy of the Corporation from the RTC judgment
is an ordinary appeal under Rule 41 to the Court of
Appeals.
o However, we make this pronouncement subject to two
important qualifications. First, in this particular case
there are nonetheless significant reasons for the Court
to overlook the procedural error and ultimately uphold
the adjudication of the jurisdiction exercised by the
Court of Appeals in this case. Second, the doctrinal
weight of the pronouncement is confined to cases and
controversies that emerged prior to the enactment of
Republic Act No. 9282, the law which expanded the
jurisdiction of the Court of Tax Appeals.
Republic Act No. 9282 definitively proves in its Section 7(a)(3)
that the CTA exercises exclusive appellate jurisdiction to review
on appeal decisions, orders or resolutions of the Regional Trial
Courts in local tax cases original decided or resolved by them in
the exercise of their originally or appellate jurisdiction.
Moreover, the provision also states that the review is triggered
by filing a petition for review under a procedure analogous to
that provided for under Rule 42 of the 1997 Rules of Civil
Procedure.
o RA No. 9282, however, would not apply to this case
simply because it arose prior to the effectivity of that
law. To declare otherwise would be to institute a
jurisdictional rule derived not from express statutory
grant, but from implication.
Moreover, we recognize that the Corporations error in elevating
the RTC decision for review via Rule 42 actually worked to the
benefit of the City Treasurer. There is wider latitude on the part
of the Court of Appeals to refuse cognizance over a petition for
review under Rule 42 than it would have over an ordinary
appeal under Rule 41.
Evidently, by employing the Rule 42 mode of review, the
Corporation faced a greater risk of having its petition rejected by
the Court of Appeals as compared to having filed an ordinary
appeal under Rule 41. This was not an error that worked to the
prejudice of the City Treasurer.
The power of local government units to impose taxes within its
territorial jurisdiction derives from the Constitution, which
recognizes the power of these units to create its own sources
of revenue and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. The
significant limitations are enumerated in Section 133, which
include a prohibition on the imposition of income taxes except
when levied on banks and other financial institutions. None of
3
 the general limitations under Section 133 find application to the
case at bar.
Under Section 151 of the Code, cities such as Makati are
authorized to levy the same taxes fees and charges as
provinces and municipalities.
The coverage of business taxation particular to the City of
Makati is provided by the MRC. The MRC remains in effect as
of this writing. Article A, Chapter III of the Revenue Code
governs business taxes in Makati, and it is quite specific as to
the particular businesses which are covered by business taxes.
Other provisions of the Revenue Code likewise subject hotel
and restaurant owners and operators, real estate dealers, and
lessors of real estate to business taxes.
Should the comprehensive listing not prove encompassing
enough, there is also a catch-all provision similar to that under
the Local Government Code. This is found in Section 3A.02(m)
of the Revenue Code, which provides:
o (m) On owners or operators of any business not
specified above shall pay the tax at the rate of two
percent (2%) for 1993, two and one-half percent (2
%) for 1994 and 1995, and three percent (3%) for
1996 and the years thereafter of the gross receipts
during the preceding year.
Our careful examination of the record reveals a highly
disconcerting fact. At no point has the City Treasurer been
candid enough to inform the Corporation, the RTC, the Court of
Appeals, or this Court for that matter, as to what exactly is the
precise statutory basis under the Makati Revenue Code for the
levying of the business tax on petitioner. We have examined all
of the pleadings submitted by the City Treasurer in all the
antecedent judicial proceedings, as well as in this present
petition, and also the communications by the City Treasurer to
the Corporation which form part of the record. Nowhere therein
is there any citation made by the City Treasurer of any provision
of the Revenue Code which would serve as the legal authority
for the collection of business taxes from condominiums in
Makati.
Ostensibly, the notice of assessment, which stands as the first
instance the taxpayer is officially made aware of the pending tax
liability, should be sufficiently informative to apprise the
taxpayer the legal basis of the tax.
o Section 195 of the Local Government Code does not
go as far as to expressly require that the notice of
assessment specifically cite the provision of the
ordinance involved but it does require that it state the
nature of the tax, fee or charge, the amount of
deficiency, surcharges, interests and penalties.
o In this case, the notice of assessment sent to the
Corporation did state that the assessment was for
business taxes, as well as the amount of the

4
 assessment. There may have been prima
facie compliance with the requirement under Section
195. However in this case, the Revenue Code
provides multiple provisions on business taxes, and at
varying rates. Hence, we could appreciate the
Corporations confusion, as expressed in its protest, as
to the exact legal basis for the tax.
o Reference to the local tax ordinance is vital, for the
power of local government units to impose local taxes
is exercised through the appropriate ordinance
enacted by the sanggunian, and not by the Local
Government Code alone. What determines tax liability
is the tax ordinance, the Local Government Code
being the enabling law for the local legislative body.
Moreover, a careful examination of the Revenue Code shows
that while Section 3A.02(m) seems designed as a catch-all
provision, Section 3A.02(f), which provides for a different tax
rate from that of the former provision, may be construed to be of
similar import. While Section 3A.02(f) is quite exhaustive in
enumerating the class of businesses taxed under the provision,
the listing, while it does not include condominium-related
enterprises, ends with the abbreviation etc., or et cetera.
o We do note our discomfort with the unlimited breadth
and the dangerous uncertainty which are the twin
hallmarks of the words et cetera. Certainly, we
cannot be disposed to uphold any tax imposition that
derives its authority from enigmatic and uncertain
words such as et cetera. For example, if it is based
on et cetera under Section 3A.02(f), we would have
to examine whether the Corporation faces analogous
comparison with the other businesses listed under that
provision.
Local tax on businesses is authorized under Section 143 of the
LGC. The word business itself is defined under Section 131(d)
of the Code as trade or commercial activity regularly engaged
in as a means of livelihood or with a view to profit. This
definition of business takes on importance, since Section 143
allows local government units to impose local taxes on
businesses other than those specified under the provision.
Moreover, even those business activities specifically named in
Section 143 are themselves susceptible to broad interpretation.
o It is thus imperative that in order that the Corporation
may be subjected to business taxes, its activities must
fall within the definition of business as provided in the
Local Government Code. And to hold that they do is to
ignore the very statutory nature of a condominium
corporation.
The creation of the condominium corporation is sanctioned by
Republic Act No. 4726 or the Condominium Act. Under the law,
a condominium is an interest in real property consisting of a

5
 separate interest in a unit in a residential, industrial or
commercial building and an undivided interest in common,
directly or indirectly, in the land on which it is located and in
other common areas of the building.
We can elicit from the Condominium Act that a condominium
corporation is precluded by statute from engaging in corporate
activities other than the holding of the common areas, the
administration of the condominium project, and other acts
necessary, incidental or convenient to the accomplishment of
such purposes. Neither the maintenance of livelihood, nor the
procurement of profit, fall within the scope of permissible
corporate purposes of a condominium corporation under the
Condominium Act.
Obviously, none of these stated corporate purposes are geared
towards maintaining a livelihood or the obtention of profit. Even
though the Corporation is empowered to levy assessments or
dues from the unit owners, these amounts collected are not
intended for the incurrence of profit by the Corporation or its
members, but to shoulder the multitude of necessary expenses
that arise from the maintenance of the Condominium Project.
These would include the salaries of the employees of the
Corporation, and the cost of maintenance and ordinary repairs
of the common areas.
The City Treasurer nonetheless contends that the collection of
these assessments and dues are with the end view of getting
full appreciative living values for the condominium units, and as
a result, profit is obtained once these units are sold at higher
prices. The Court cites with approval the two counterpoints
raised by the Court of Appeals in rejecting this contention.
o First, if any profit is obtained by the sale of the units, it
accrues not to the corporation but to the unit owner.
o Second, if the unit owner does obtain profit from the
sale of the corporation, the owner is already required
to pay capital gains tax on the appreciated value of the
condominium unit.
Moreover, the logic on this point of the City Treasurer is baffling.
By this rationale, every Makati City car owner may be
considered as being engaged in business, since the repairs or
improvements on the car may be deemed oriented towards
appreciating the value of the car upon resale. There is an
evident distinction between persons who spend on repairs and
improvements on their personal and real property for the
purpose of increasing its resale value, and those who defray
such expenses for the purpose of preserving the property. The
vast majority of persons fall under the second category, and it
would be highly specious to subject these persons to local
business taxes. The profit motive in such cases is hardly the
driving factor behind such improvements, if it were
contemplated at all. Any profit that would be derived under such
circumstances would merely be incidental, if not accidental.

6
 Besides, we shudder at the thought of upholding tax liability on
the basis of the standard of full appreciative living values, a
phrase that defies statutory explication, commonsensical
meaning, the English language, or even definition from
Google. The exercise of the power of taxation constitutes
a deprivation of property under the due process clause, and the
taxpayers right to due process is violated when arbitrary or
oppressive methods are used in assessing and collecting
taxes. The fact that the Corporation did not fall within the
enumerated classes of taxable businesses under either the
Local Government Code or the Makati Revenue Code already
forewarns that a clear demonstration is essential on the part of
the City Treasurer on why the Corporation should be taxed
anyway. Full appreciative living values is nothing but blather in
search of meaning, and to impose a tax hinged on that standard
is both arbitrary and oppressive.
The City Treasurer also contends that the fact that the
Corporation is engaged in business is evinced by the Articles of
Incorporation, which specifically empowers the Corporation to
acquire, own, hold, enjoy, lease, operate and maintain, and to
convey, sell, transfer mortgage or otherwise dispose of real or
personal property.
o What the City Treasurer fails to add is that every
corporation organized under the Corporation Code is
so specifically empowered. Section 36(7) of the
Corporation Code states that every corporation
incorporated under the Code has the power and
capacity to purchase, receive, take or grant, hold,
convey, sell, lease, pledge, mortgage and otherwise
deal with such real and personal property . . . as the
transaction of the lawful business of the
corporation may reasonably and necessarily requi
re . . . . Without this power, corporations, as juridical
persons, would be deprived of the capacity to engage
in most meaningful legal relations.
Accordingly, and with a significant degree of comfort, we hold
that condominium corporations are generally exempt from local
business taxation under the Local Government Code,
irrespective of any local ordinance that seeks to declare
otherwise.
Still, we can note a possible exception to the rule. It is not
unthinkable that the unit owners of a condominium would band
together to engage in activities for profit under the shelter of the
condominium corporation. Such activity would be prohibited
under the Condominium Act, but if the fact is established, we
see no reason why the condominium corporation may be made
liable by the local government unit for business taxes. Even
though such activities would be considered as ultra vires, since
they are engaged in beyond the legal capacity of the
condominium corporation, the principle of estoppel would

7

Philippine Basketball Association
v. Court of Appeals
PBA received an assessment from
CIR for deficiency amusement tax.
PBA protested the same claiming
that they should be taxed local tax
and not national tax. SC held that
under the Local Tax Code, the
province can only impose a tax on
admission from the proprietors,
lessees, or operators of theaters,
cinematographs, concert halls,
circuses and other places of
amusement. The authority to tax
professional basketball games is not
therein included. Thus, as it was not
included in the enumeration, and as
provided by the examination of the
history of the laws concerning
amusement taxes, the same is
subject to national tax.
June 21, 1989: PBA received an assessment letter from the
CIR for the payment of deficiency amusement tax
July 18, 1989: PBA contested the assessment by filing a
protest with the CIR who denied the same
January 8, 1990: PBA filed a petition for review with the CTA
questioning the denial by the CIR of its protest
CTA: Dismissed the petition
CA: Affirmed the decision of the CTA and dismissing
petitioners appeal
preclude the corporation or its officers and members from
invoking the void nature of its undertakings for profit as a means
of acquitting itself of tax liability.
Still, the City Treasurer has not posited the claim that the
Corporation is engaged in business activities beyond the
statutory purposes of a condominium corporation. The
assessment appears to be based solely on the Corporations
collection of assessments from unit owners, such assessments
being utilized to defray the necessary expenses for the
Condominium Project and the common areas. There is no
contemplation of business, no orientation towards profit in this
case. Hence, the assailed tax assessment has no basis
under the Local Government Code or the Makati Revenue
Code, and the insistence of the city in its collection of the
void tax constitutes an attempt at deprivation of property
without due process of law.
1. Whether amusement tax on admission tickets to PBA games a
national or local tax NATIONAL
2. Whether cession of advertising and streamer spaces to Vintage
Enterprises, Inc. subject to payment of amusement tax YES
3. Whether PBA is liable to pay 75% surcharge on the deficiency
amount due YES
1. AMUSEMENT TAX ON ADMISSION TICKETS: NATIONAL TAX
PBA:
PBA contends that PD 231 (Local Tax Code) transferred the power
and authority to levy and collect amusement taxes form the sale of
admission tickets to places of amusement from the national
government to the local governments.
o BIR Memorandum Circular No. 49-73 provided that the
power to levy and collect amusement tax on admission
tickets was transferred to the local governments by virtue of
the Local Tax Code.
o BIR Ruling No. 231-86 held that the jurisdiction to levy
amusement tax on gross receipts from admission tickets to
places of amusement was transferred to local governments
under PD 231.
Even assuming arguendo that CIR revoked BIR Ruling No. 231-86,
the reversal, modification or revocation cannot be given retroactive
effect since even as late as 1988 (BIR MC No. 8-88), CIR still
recognized the jurisdiction of local governments to collect
amusement taxes.
SC:
Sec 13 of the Local Tax Code indicated that the province can ONLY
impose a tax on admission from the proprietors, lessees, or
operators of theaters, cinematographs, concert halls, circuses,
and other places of amusement.
The authority to tax professional basketball games is not
included.
Based on Sec 44, PD 1959, it is clear that the proprietor, lessee or
8
 operator of professional basketball games is required to pay an
amusement tax equivalent to 15% of their gross receipts to the BIR,
which payment is a national tax.
The said payment of amusement tax is in lieu of all other percentage
taxes of whatever nature and description.
While Sec 13 of the Local Tax Code mentions other places of
amusement, professional basketball games are definitely NOT
within its scope.
o Under the principle of ejusdem generis, where general
words follow an enumeration of persons or things, by words
of a particular and specific meaning, such general words
are not to be construed in their widest extent, but are to be
held as applying only to persons or things of the same kind
or class as those specifically mentioned.
o Thus, in determining the meaning of the phrase other
places of amusement, one must refer to the prior
enumeration of theaters, cinematographs, concert halls and
circuses with artistic expression of their common
characteristic.
o Professional basketball games do not fall under the
same category as theaters, cinematographs, concert
halls and circuses as the latter basically belong to
artistic forms of entertainment while the former caters
to sports and gaming.
A historical analysis of pertinent laws does reveal the legislative
intent to place professional basketball games within the ambit
of a national tax.
Likewise erroneous is the reliance on the BIR Rulings cited by PBA.
o It is a well-known rule that erroneous application and
enforcement of the law by public officers do not preclude
subsequent correct application of the statute, and that the
Government is never estopped by mistake or error on the
part of its agents.
2. INCOME FROM THE CESSION OF ADVERTISING SUBJECT TO
AMUSEMENT TAX
Gross receipts as defined in PD 1456 is broad enough to embrace
the cession of advertising and streamers spaces as the same
embraces ALL the receipts of the proprietor, lessee or operator of
the amusement place.
The law being clear, there is no need for an extended interpretation.

4. PBA LIABLE TO SURCHARGE

PBA:
It is not liable, as it acted in good faith, having relied upon the
issuances of the respondent Commissioner.
SC:
This issue must necessarily fail as the same has never been posed
as an issue before the respondent court. Issues not raised in the
court a quo cannot be raised for the first time on appeal.
Exemption from Local Taxes
9
Sections 192-193, Local Government Code

Section 192. Authority to Grant Tax Exemption Privileges. - Local government units may, through ordinances duly approved, grant tax exemptions,
incentives or reliefs under such terms and conditions as they may deem necessary.
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the
effectivity of this Code.

Art. 282-283, Rules and Regulations Implementing the Local Government Code

ARTICLE 282. Authority to Grant Tax Exemption Privileges or Incentives.

(a) While sanggunians may grant tax exemption, tax incentive, or tax relief, such grant shall not apply to regulatory fees which are levied under the
police power of LGUs. Tax exemptions shall be conferred through the issuance of a tax exemption certificate, which shall be non-transferable.
(b) The sanggunians granting tax exemptions, tax incentives and tax reliefs may be guided by the following:

(1) On the grant of tax exemptions or tax reliefs:

(i) Tax exemption or tax relief may be granted in cases of natural calamities, civil disturbance, general failure of crops, or adverse economic
conditions such as substantial decrease in the prices of agricultural or agri-based products;
(ii) The grant of exemption or relief shall be through an ordinance.
(iii) Any exemption or relief granted to a type or kind of business shall apply to all business similarly situated; and
(iv) Any exemption or relief granted shall take effect only during the next calendar year for a period not exceeding twelve (12) months as may be
provided in the ordinance. In the case of shared revenues, the exemption or relief shall only extend to the LGU granting such exemption or relief.

(2) On the grant of tax incentives:

(i) The tax incentive shall be granted only to new investments in the locality and the ordinance shall prescribe the terms and conditions therefore;
(ii) The grant of the tax incentive shall be for a definite period not exceeding one (1) calendar year;
(iii) The grant of tax incentives shall be by ordinance passed prior to the first (1st) day of January of any year; and
(iv) Any tax incentive granted to a type or kind of business shall apply to all businesses similarly situated.

ARTICLE 283. Withdrawal of Tax Exemption Privileges or Incentives.

Unless otherwise provided in this Rule, beginning January 1, 1992, all local tax exemption privileges or incentives granted to and presently enjoyed
by any person, whether natural or juridical, including GOCCs, are considered withdrawn, except the following:
(a) Local water districts;
(b) Cooperatives duly registered under RA 6938, otherwise known as the Cooperative Code of the Philippines;
(c) Non-stock and non-profit hospitals and educational institutions;
(d) Business enterprises certified by the Board of Investments (BOI) as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively,
from the date of registration;
(e) Business entity, association, or cooperatives registered under RA 6810; and
(f) Printer and/or publisher of books or other reading materials prescribed by DECS as school texts or references, insofar as receipts from the
printing and/or publishing thereof are concerned. Unless otherwise repealed by law, business and economic enterprises operating within export

10
processing zones administered by the Export Processing Zone Authority shall continue to enjoy the tax exemption privileges and tax incentives
granted in PD 66, as amended.
Manila Electric Company v.
Province of Laguna (May 5, 1999)
Meralco is paying franchise tax
pursuant to PD 551. LGC was
passed and allowed local
governments to levy taxes. Meralco
was then taxed by the Province of
Laguna for franchise tax. Meralco
paid such taxes in protest saying
that it is already paying franchise tax
pursuant to PD 551 and such
franchise tax imposed by the local
government should be already
included there. Meralco now
contends that such imposition of
local taxes is violative of the non-
impairment clause of the
Constitution and Sec. of PD 551.
The Court has held that Meralco is
enjoying a tax exemption granted by
a franchise and not a contractual tax
exemption. Contractual tax
exemptions may not be revoked
without impairing the obligations of
contracts. These contractual tax
exemptions, however, are not to be
confused with tax exemptions
granted under franchises. A capital investment. In the succeeding calendar year, regardless of when
franchise partakes the nature of a
grant which is beyond the purview of
the non-impairment clause of the
Constitution.
Certain municipalities of the Province of Laguna, including,
Bian, Sta. Rosa, San Pedro, Luisiana, Calauan and
Cabuyao, issued resolutions through their respective
municipal councils granting franchise in favor of petitioner
Manila Electric Company ("MERALCO") for the supply of
electric light, heat and power within their concerned areas.
Republic Act No. 7160, "Local Government Code of 1991,"
was enacted enjoining local government units to create
their own sources of revenue and to levy taxes, fees
and charges, subject to the limitations expressed therein,
consistent with the basic policy of local autonomy.
Respondent province enacted Laguna Provincial
Ordinance No. 01-92
Sec. 2.09. Franchise Tax. There is hereby imposed a
tax on businesses enjoying a franchise, at a rate of fifty
percent (50%) of one percent (1%) of the gross annual
receipts, which shall include both cash sales and sales on
account realized during the preceding calendar year within
this province, including the territorial limits on any city
located in the province.
Respondent Provincial Treasurer sent a demand letter to
MERALCO for the corresponding tax payment.
MERALCO paid under protest
Petitioner MERALCO paid the tax, which then amounted to
P19,520.628.42, under protest.
A formal claim for refund was thereafter sent by MERALCO
to the Provincial Treasurer of Laguna claiming that the
franchise tax it had paid and continued to pay to the
National Government pursuant to P.D. 551 already
included the franchise tax imposed by the Provincial
Tax Ordinance.
MERALCO, contended that the imposition of a franchise tax
contravened the provisions of Section 1 of P.D. 551
Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of
franchises to generate, distribute and sell electric current for
light, heat and power shall be two per cent (2%) of their
gross receipts received from the sale of electric current and
from transactions incident to the generation, distribution and
sale of electric current.
Such franchise tax shall be payable to the Commissioner of
Internal Revenue or his duly authorized representative on or
before the twentieth day of the month following the end of
each calendar quarter or month, as may be provided in the
respective franchise or pertinent municipal regulation and
1. Whether Republic Act No. 7160, otherwise known Local
Government Code of 1991, has repealed, amended or modified
Presidential Decree No. 551. YES
2. Whether the imposition of a franchise tax under Section 2.09 of
Laguna Provincial Ordinance No. 01-92, insofar as petitioner is
concerned, is violative of the non-impairment clause of the
Constitution and Section 1 of Presidential Decree No. 551. NO
ISSUE 1
Presently, under Article X of the 1987 Constitution, a general
delegation of that power has been given in favor of local
government units.
Sec. 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments.
The 1991 Code explicitly authorizes provincial governments,
notwithstanding "any exemption granted by any law or other
special law, . . . (to) impose a tax on businesses enjoying a
franchise."
Sec. 137. Franchise Tax Notwithstanding any exemption
granted by any law or other special law, the province may impose a
tax on businesses enjoying a franchise, at a rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized,
within its territorial jurisdiction. In the case of a newly started business,
the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the
the business started to operate, the tax shall be based on the gross
receipts for the preceding calendar year, or any fraction thereof, as
provided herein.
The Local Government Code has effectively withdrawn tax
exemptions or incentives enjoyed by certain entities.
Sec. 193. Withdrawal of Tax Exemption Privileges Unless
otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
The Code contains a general repealing clause in its Section
534:
Sec. 534. Repealing Clause. . . .
(f) All general and special laws, acts, city charters, decrees,
executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this
11

NPC vs. City of Cabanatuan (April
9, 2003)
NPC sells electric power to the
residents of Cabanatuan City,
posting a gross income of
P107,814,187.96 in 1992. Pursuant
to section 37 of Ordinance No. 165-
92, the respondent assessed the
petitioner a franchise tax.
Respondent filed a collection suit.
W/N the NPC a public non-profit
corporation, is liable to pay a
shall, any provision of the Local Tax Code or any other
law to the contrary notwithstanding, be in lieu of all
taxes and assessments of whatever nature imposed by
any national or local authority on earnings, receipts,
income and privilege of generation, distribution and sale of
electric current.
The claim for refund was denied in a letter signed by
Governor Jose D. Lina, relying on a more recent law, i.e.
Republic Act No. 7160 or the Local Government Code of
1991.
Petitioner MERALCO filed with the RTC of Sta. Cruz,
Laguna, a complaint for refund, with a prayer for the
issuance of a writ of preliminary injunction and/or temporary
restraining order.
Aside from the amount of P19,520,628.42 for which
petitioner MERALCO had priorly made a formal request for
refund, petitioner thereafter likewise made additional
payments under protest on various dates totaling
P27,669,566.91.
For many years now, petitioner sells electric power to the
residents of Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992. Pursuant to section 37 of
Ordinance No. 165-92, the respondent assessed the
petitioner a franchise tax amounting to P808,606.41,
representing 75% of 1% of the latter's gross receipts for the
preceding year.
Petitioner, whose capital stock was subscribed and paid
wholly by the Philippine Government, refused to pay the tax
assessment. It argued that the respondent has no authority
to impose tax on government entities. Petitioner also
contended that as a non-profit organization, it is exempted
from the payment of all forms of taxes, charges, duties or
Code are hereby repealed or modified accordingly.
In the recent case of the City Government of San Pablo, etc.,
et al. vs. Hon. Bienvenido V. Reyes, et al.:
o The phrase in lieu of all taxes "have to give way to the
peremptory language of the Local Government Code
specifically providing for the withdrawal of such
exemptions, privileges."
o "Upon the effectivity of the Local Government
Code all exemptions except only as provided
therein can no longer be invoked by MERALCO to
disclaim liability for the local tax."
ISSUE 2 Non-impairment
While the Court has, not too infrequently, referred to tax
exemptions contained in special franchises as being in the
nature of contracts and a part of the inducement for carrying on
the franchise, these exemptions, nevertheless, are far from
being strictly contractual in nature.
Contractual tax exemptions - in the real sense of the term and
where the non-impairment clause of the Constitution can rightly
be invoked, are those agreed to by the taxing authority in
contracts, such as those contained in government bonds or
debentures, lawfully entered into by them under enabling laws
in which the government, acting in its private capacity, sheds its
cloak of authority and waives its governmental immunity.
Truly, tax exemptions of this kind may not be revoked without
impairing the obligations of contracts.
These contractual tax exemptions, however, are not to be
confused with tax exemptions granted under franchises.
A franchise partakes the nature of a grant which is beyond the
purview of the non-impairment clause of the Constitution.
Indeed, Article XII, Section 11, of the 1987 Constitution is
explicit that no franchise for the operation of a public utility shall
be granted except under the condition that such privilege shall
be subject to amendment, alteration or repeal by Congress as
and when the common good so requires.
1. W/N the NPC a public non-profit corporation, is liable to pay a
franchise tax? YES.
2. W/N NPCs exemption has been repealed by the provision of the
LGC? YES.
It is beyond dispute that the respondent city government has the
authority to issue Ordinance No. 165-92 and impose an annual tax
on "businesses enjoying a franchise," pursuant to section 151 in
relation to section 137 of the LGC
The power to tax is no longer vested exclusively on Congress; local
legislative bodies are now given direct authority to levy taxes, fees
and other charges pursuant to Article X, section 5 of the 1987
Constitution.
12
franchise tax? YES.
W/N NPCs exemption has been
repealed by the provision of the
LGC? YES. It is beyond dispute that
the respondent city government has
the authority to issue Ordinance No.
165-92 and impose an annual tax on
"businesses enjoying a franchise,"
pursuant to section 151 in relation to
section 137 of the LGC. One of the
most significant provisions of the
LGC is the removal of the blanket
exclusion of instrumentalities and
agencies of the national government
from the coverage of local taxation.
Although as a general rule, LGUs
cannot impose taxes, fees or
charges of any kind on the National
Government, its agencies and
instrumentalities, this rule now
admits an exception, i.e., when
specific provisions of the LGC
authorize the LGUs to impose taxes,
fees or charges on the
aforementioned entities. Petitioner is
covered by the franchise tax
because it fulfils the 2 requisites: (1)
NPC has a "franchise" in the sense
of a secondary or special franchise;
and (2) NPC is exercising its rights
or privileges under this franchise
within the territory of the respondent
city government. Petitioner insists
that it is excluded from the coverage
of the franchise tax simply because
its stocks are wholly owned by the
National Government, and its charter
characterized it as a "non-profit"
organization. Petitioner was created
to "undertake the development of
hydroelectric generation of power
and the production of electricity from
nuclear, geothermal and other
sources, as well as the transmission
of electric power on a nationwide
basis." They are purely private and
commercial undertakings, albeit
imbued with public interest.
fees.
The respondent filed a collection suit in the Regional Trial
Court of Cabanatuan City, demanding that petitioner pay the
assessed tax due, plus a surcharge equivalent to 25% of the
amount of tax, and 2% monthly interest. Respondent alleged
that petitioner's exemption from local taxes has been
repealed by section 193 of Rep. Act No. 7160.
Trial court: tax exemption privileges granted to petitioner
subsist despite the passage of Rep. Act No. 7160
CA reversed the trial court's Order on the ground that
section 193, in relation to sections 137 and 151 of the LGC,
expressly withdrew the exemptions granted to the
petitioner.
This paradigm shift results from the realization that genuine
development can be achieved only by strengthening local autonomy
and promoting decentralization of governance. The only way to
shatter this culture of dependence is to give the LGUs a wider role in
the delivery of basic services, and confer them sufficient powers to
generate their own sources for the purpose.
Considered as the most revolutionary piece of legislation on local
autonomy, the LGC effectively deals with the fiscal constraints faced
by LGUs. The LGC likewise provides enough flexibility to impose tax
rates in accordance with their needs and capabilities. It does not
prescribe graduated fixed rates but merely specifies the minimum
and maximum tax rates and leaves the determination of the actual
rates to the respective sanggunian.
One of the most significant provisions of the LGC is the
removal of the blanket exclusion of instrumentalities and
agencies of the national government from the coverage of local
taxation.
Although as a general rule, LGUs cannot impose taxes, fees or
charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e., when
specific provisions of the LGC authorize the LGUs to impose
taxes, fees or charges on the aforementioned entities:
"Section 133. Common Limitations on the Taxing Powers of the
Local Government Units.- Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
x x x
(o) Taxes, fees, or charges of any kind on the National Government,
its agencies and instrumentalities, and local government units."
In enacting the LGC, Congress exercised its prerogative to tax
instrumentalities and agencies of government as it sees fit.
In the case at bar, section 151 in relation to section 137 of the LGC
clearly authorizes the respondent city government to impose on the
petitioner the franchise tax in question.
In its general signification, a franchise is a privilege conferred by
government authority, which does not belong to citizens of the
country generally as a matter of common right. In its specific sense,
a franchise may refer to a general or primary franchise, or to a
special or secondary franchise.
o The former relates to the right to exist as a corporation, by
virtue of duly approved articles of incorporation, or a charter
pursuant to a special law creating the corporation. The right
under a primary or general franchise is vested in the individuals
who compose the corporation and not in the corporation itself.
o The latter refers to the right or privileges conferred upon an
existing corporation such as the right to use the streets of a
municipality to lay pipes of tracks, erect poles or string wires.
o The rights under a secondary or special franchise are vested in
the corporation and may ordinarily be conveyed or mortgaged
under a general power granted to a corporation to dispose of its
13
 property, except such special or secondary franchises as are
charged with a public use.
In section 131 (m) of the LGC, Congress unmistakably defined a
franchise in the sense of a secondary or special franchise.
As commonly used, a franchise tax is "a tax on the privilege of
transacting business in the state and exercising corporate franchises
granted by the state."
It is not levied on the corporation simply for existing as a
corporation, upon its property or its income, but on its exercise of
the rights or privileges granted to it by the government.

To determine whether the petitioner is covered by the franchise tax in

question, the following requisites should concur:
(1) that petitioner has a "franchise" in the sense of a secondary or special
franchise;
(2) that it is exercising its rights or privileges under this franchise within
the territory of the respondent city government.

Petitioner fulfills the first requisite.

Commonwealth Act No. 120, as amended by Rep. Act No. 7395,
constitutes petitioner's primary and secondary franchises. It serves
as the petitioner's charter, defining its composition, capitalization,
the appointment and the specific duties of its corporate officers, and
its corporate life span.
With the powers granted to NPC, petitioner eventually had the
monopoly in the generation and distribution of electricity. This
monopoly was strengthened with the issuance of Pres. Decree No.
40, nationalizing the electric power industry. Although Exec. Order
No. 215 thereafter allowed private sector participation in the
generation of electricity, the transmission of electricity remains the
monopoly of the petitioner.
Petitioner also fulfills the second requisite.
It is operating within the respondent city government's territorial
jurisdiction pursuant to the powers granted to it by Commonwealth
Act No. 120, as amended. From its operations in the City of
Cabanatuan, petitioner realized a gross income of P107,814,187.96
in 1992. Fulfilling both requisites, petitioner is, and ought to be,
subject of the franchise tax in question.

Petitioner, however, insists that it is excluded from the coverage of

the franchise tax simply because its stocks are wholly owned by the
National Government, and its charter characterized it as a "non-
profit" organization. SC: NPCs contentions must necessarily fail.
To stress, a franchise tax is imposed based not on the ownership
but on the exercise by the corporation of a privilege to do business.
The taxable entity is the corporation which exercises the franchise,
and not the individual stockholders.
To be sure, the ownership by the National Government of its entire
capital stock does not necessarily imply that petitioner is not
engaged in business.
14
 Governmental functions are those pertaining to the administration of
government, and as such, are treated as absolute obligation on the
part of the state to perform.
Proprietary functions are those that are undertaken only by way of
advancing the general interest of society, and are merely optional on
the government.
Included in the class of GOCCs performing proprietary functions are
"business-like" entities such as the National Steel Corporation
(NSC), the National Development Corporation (NDC), the Social
Security System (SSS), the Government Service Insurance System
(GSIS), and the National Water Sewerage Authority
(NAWASA), among others.
Petitioner was created to "undertake the development of
hydroelectric generation of power and the production of electricity
from nuclear, geothermal and other sources, as well as the
transmission of electric power on a nationwide basis." They are
purely private and commercial undertakings, albeit imbued with
public interest.
The public interest involved in its activities, however, does not
distract from the true nature of the petitioner as a commercial
enterprise. A closer reading of its charter reveals that even the
legislature treats the character of the petitioner's enterprise as a
"business," although it limits petitioner's profits to twelve percent
(12%)
It is worthy to note that all other private franchise holders receiving
at least sixty percent (60%) of its electricity requirement from the
petitioner are likewise imposed the cap of twelve percent (12%) on
profits.
The main difference is that the petitioner is mandated to devote "all
its returns from its capital investment, as well as excess revenues
from its operation, for expansion" while other franchise holders have
the option to distribute their profits to its stockholders by declaring
dividends. We do not see why this fact can be a source of difference
in tax treatment.
Section 193 of the LGC withdrew, subject to limited exceptions, the
sweeping tax privileges previously enjoyed by private and public
corporations. Contrary to the contention of petitioner, section 193 of
the LGC is an express, albeit general, repeal of all statutes granting
tax exemptions from local taxes.
City Government of San Pablo, Laguna v. Reyes, MERALCO's
exemption from the payment of franchise taxes was brought as an
issue before this Court. The same issue was involved in the
subsequent case of Manila Electric Company v. Province of
Laguna. Ruling in favor of the local government in both instances,
we ruled that the franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special laws.
It is worth mentioning that section 192 of the LGC empowers the
LGUs, through ordinances duly approved, to grant tax exemptions,
initiatives or reliefs. But in enacting section 37 of Ordinance No. 165-
92 which imposes an annual franchise tax "notwithstanding any
15
 exemption granted by law or other special law," the respondent city
government clearly did not intend to exempt the petitioner from the
coverage thereof.

Sections 194-196, Local Government Code

Section 194. Periods of Assessment and Collection. -

(a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. No action for the collection of such taxes,
fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such period: Provided, That. taxes, fees or charges
which have accrued before the effectivity of this Code may be assessed within a period of three (3) years from the date they became due.
(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years from discovery of the
fraud or intent to evade payment.
(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such
action shall be instituted after the expiration of said period: Provided, however, That, taxes, fees or charges assessed before the effectivity of this
Code may be collected within a period of three (3) years from the date of assessment.
(d) The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during which:
(1) The treasurer is legally prevented from making the assessment of collection;
(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be located.
Section 195. Protest of Assessment. - When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have
not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests
and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer
contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty
(60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly
or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or
partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty
(60) day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and
unappealable.
Section 196. Claim for Refund of Tax Credit. - No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge
erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be
entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer
is entitled to a refund or credit.

Art. 284-287, Rules and Regulations Implementing the Local Government Code

ARTICLE 284. Period of Assessment and Collection. (a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they become due. No action for the
collection of such taxes, fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such period provided that taxes, fees or charges which have
accrued before the effectivity of the Code may be assessed within a period of three (3) years from the date they became due.

(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years from discovery of the fraud or intent to evade
payment.

16
(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such action shall be instituted after the
expiration of said period provided that taxes, fees, or charges assessed before the effectivity of the Code may be collected within a period of three (3) years from the date of
assessment.

(d) The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during which:

(1) The treasurer is legally prevented from making the assessment of collection;
(2) The taxpayer requests re-investigation and executes a waiver in writing before expiration of the period within which to assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be located.

ARTICLE 285. Protest on Assessment. When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue
a notice of assessment stating the nature of the tax, fee, or charge the amount of deficiency, the surcharges, interests, and penalties. Within sixty (60) days from receipt of the notice
of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local
treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice
cancelling wholly or partially the assessment. If the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the
taxpayer.

The taxpayer shall have thirty (30) days from receipt of the denial of the protest or from the lapse of the sixty-day period prescribed in this Article within which to appeal with the court
of competent jurisdiction; otherwise, the assessment becomes conclusive and unappealable.

ARTICLE 286. Claim for Refund or Tax Credit. All taxpayers entitled to a refund or tax credit provided in this Rule shall file with the local treasurer a claim in writing duly
supported by evidence of payment (e.g., official receipts, tax clearance, and such other proof evidencing overpayment within two (2) years from payment of the tax, fee, or charge.
No case or proceeding shall be entertained in any court without this claim in writing, and after the expiration of two (2) years from the date of payment of such tax, fee, or charge, or
from the date the taxpayer is entitled to a refund or tax credit.

The tax credit granted a taxpayer shall not be refundable in cash but shall only be applied to future tax obligations of the same taxpayer for the same business. If a taxpayer has paid
in full the tax due for the entire year and he shall have no other tax obligation payable to the LGU concerned during the year, his tax credits, if any, shall be applied in full during the
first quarter of the next calendar year on the tax due from him for the same business of said calendar year. Any unapplied balance of the tax credit shall be refunded in cash in the
event that he terminates operation of the business involved within the locality.

ARTICLE 287. Authority of the Secretary of Finance. The Secretary of Finance shall, in consultation with the leagues of LGUs formulate and prescribe, from time to time,
procedures and guidelines as may be necessary for the proper, efficient, and effective implementation of this Rule.

17